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TMI Blog2023 (11) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... n the newspapers; that in such activities, the cost involved is too high and the effort required to buy such space is not much. On these reasoning, ld. CIT (A) held that they should be treated as pass through cost. From the above, we are of the opinion that ld. CIT (A) rightly held that other than these three items, all other items should be considered as part of the cost base of the appellant and should be marked up. Thus, we hold that the TPO s order in this regard has no cogent basis. The reference to ITAT order for AYs 2002-03 2003-04 [ 2019 (12) TMI 1221 - ITAT DELHI ] is also not germane as in those cases, ITAT found that the agreement was not before the authorities below. Accordingly, in the background of the aforesaid discussion, we uphold the order of the ld. CIT (A) in this regard. Foreign exchange loss being operational in nature - TPO opined that as the assessee company is a captive service provider all costs inclusive of any loss arising out of forex fluctuations and interest cost should have been marked up - assessee contended that the forex loss partakes the nature of interest cost and all the financial charges are excluded in the hands of the comparable co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. Therefore, such cost cannot be ignored and excluded for the purpose of computation of Arm s Length Price of Market support service fee. 4. At the outset, ld. DR for the Revenue submitted that the order of the Tribunal in other years of the same assessee s case should be followed for this year as facts are identical. 5. Per contra, ld. Counsel of the assessee strongly objected to the same and submitted that the matter may be decided on its own merits as the facts of the present year are different. 6. Upon careful consideration, we are inclined to decide the issue afresh pursuant the recall of the Tribunal order to decide the issue afresh. 7. Brief facts of the case are that the assessee, BBC World (India) Private Limited ('BWIPL ) formerly known as BBC Worldwide (India) Private Limited. During the year, 75% of the shareholding is with BBC World Limited and 25% with Worldwide Channel Investments Limited. The ultimate holding company is BBC Commercial Holding Company. BBC group is engaged in broadcasting international TV Channels throughout the world, production and distribution of TV Radio programs and other related activities including publication and mercanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Brokerage and commission 547820 Miscellaneous 428438 55981506 Personnel Expenses Salaries, wages and bonus 9330732 Contribution to provident fund 539540 Staff Welfare 797345 10667617 Depreciation 3721718 Total 70370841 TPO examined whether reimbursement of expenses without any mark-up is justified in this case. 9. According to the assessee, these expenses were not germane to the main services provided to the assessee. As per the agreement between the appellant and BBC World and BBC WDL, all cost incurred by the assessee on payment to third party vendor for marketing and research for the channel were reimbursed at cost, as these costs were incurred by the assessee on behalf of the channel and its principals. In the same way, all cost incurred under the division of finance, administration and direction w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to advertisement are on buying of advertisement space in the newspapers. In such activities the cost involved is too high and the effort required to buy such space is not much. Therefore, they should be treated as pass through cost. Other than these three items all other items should be considered as part of the cost base of the appellant and should be marked up. . In view of the above, the pass through cost to the extent which are directly relatable to third parties, namely, 1) advertisement and publicity, 2) business promotion and 3) participation in trade events only should be excluded from the cost base of the appellant. 12. We have heard both the parties and perused the records. We find that there was an agreement between the assessee and its AE which was examined by the authorities below. We find ourselves in agreement with the view and reasoning adopted by the ld. CIT (A). As found by the ld. CIT, there were certain expenses like advertisement publicity, business promotion and participation in trade events which were undertaken by the assessee at the request of the overseas entity. The budget in this regard is also controlled by the AE. The risk and outcome o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was subject matter of adjudication for the AY 2003-04. The Ld. predecessor of mine also has held that these expenses as non operating in nature. The relevant part of the order dated 29.03.2011 (Appeal No. 147/2006-07) for the AY 2003-04 is reproduced below.- 37. The appellant has raised an issue as to whether foreign exchange loss (being part of finance costs) is to be considered as operating expense. 1 have perused the reply of the appellant and I am of the view that foreign exchange loss is non-operating in nature as it partakes the nature of interest cost. The TPO has considered interest expense as a non-operating expenditure. Therefore, J consider foreign exchange loss to be non-operating in nature and exclude it from the calculation of PLI. In view of the above, I hold that these two items, namely, forex fluctuation loss and interest expenses should be excluded while computing the PLI of the assessee. 16. Against the above order, Revenue is in appeal before us. 17. We have heard both the parties and perused the records. Upon careful consideration, we find ourselves in agreement with the reasoning adopted by the ld. CIT (A). Furthermore, ld. Counsel of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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