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TMI Blog2025 (1) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... that though there is merit in the ld DR arguments that MAP resolution applies to the particular assessee for particular year, taxation of business profit of the assessee in line with MAP would bring tax certainty as well as consistency, for both the Revenue and the assessee, in making assessment. We find that the Revenue itself has accepted the taxation of assessee receipts of Advertisement and Distribution on the basis of MAP resolutions in earlier as well as the subsequent years. We therefore are of the view that there should be tax certainty in the assessment of the assessee in the impugned assessment year for assessing the income of the assessee in a consistent manner. Since the issue pertain to AY 2013-14 and the assessee itself has adopted/accepted MAP resolution of DALLC of 24.08.2017, for AYs 2004-05 to 2012-13 and AYs 2017-18 to 2019-20, following the principle of certainty and consistency, we direct that the income of the assessee (DNAP) for the impugned AY be taxed as per resolution of MAP of DALLC i.e., (i) 10% of gross advertising revenues to be taxed @40% and (ii) Net Distribution revenues to be taxed @10% + surcharge and Cess. Penalty u/s 271(1)(c) - As the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income at INR 186,14,66,184 as against NIL income as per return. Grounds relating to taxability of advertisement revenues 2. The Ld. AO and Ld. DRP have grossly erred in not appreciating that payment of an arm's length remuneration by the appellant to its Permanent Establishment ('PE') (le Discovery Communications India) extinguishes the tax liability of the appellant in India. 2.1 That on the facts and circumstances of the case and in law, the Ld. AO and Ld DRP have grossly erred in holding a sum of INR 23,20,62,658 (being 15% of the gross advertisement revenues) attributable to PE. 2.2 That on the facts and in the circumstances of the case and in law, the Ld. AO and Ld DRP have erred in inferring that transfer pricing study and certification of the PE of appellant in India, for the subject AY, adequately captures Functions, Assets and Risk ('FAR') analysis of the PE. 2.3 That the Ld. AO and Ld DRP have erred in not following the transfer pricing order passed for AY 2013-14 by Ld. Transfer Pricing Officer ('TPO') wherein no adjustments were made in respect of the arm's length price received by appellant's PE in India.. 2.4 The Ld. AO and Ld DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under Section 234A, 2348, 234C, 234D and 244A of the Act 5.1 The Ld. AD erred in levying and the Hon'ble DRP erred in confirming the interest under section 234B of the Act as all receipts of the assessee were subject to deduction of tax at source and hence the provisions of Section 234B are not applicable in this case. 5.2 The Ld. AO erred in levying interest under Section 234A of the Act. Initiation of penalty proceedings under Section 271(1)(c) of the Act 5. That on the facts and circumstances of the case and in law, the Ld. AO has erred in proposing to initiate penalty proceedings under section 271(1)(c) of the Act. Grant of credit for taxes deducted at source ('TDS') 6. That on the facts and circumstances of the case and in law, the Ld. AO has erred in granting TDS credit amounting to only INR 121,264,507 as against INR 165,660,362 claimed by the appellant in its revised return of income. 5. Briefly stated, the facts of the case are that Discovery Networks Asia Pacific Pte Ltd [DNAP for short] is a tax resident company of Singapore within the meaning of Article 4 of the India-Singapore Double Taxation Avoidance Agreement ('the Treaty'). It is engaged in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not taxable in India. It has also claimed that it has PE in India. 9. For F.Y 2012-13, the assessee has carried out its business from Singapore under the name DNAP with PAN: AAECD1880C. In the earlier years, the assessment of the Indian Operations of Discovery Asia LLC (DALLC) i.e for AY's 2004-2005 to 2012-13 have been completed u/s 143(3)/ 144C holding that the DALLC has a PE in India in the form of DCIN. The assessments for AY 2000-01 and AY 2001-02 have been decided under MAP by the Competent Authorities of India USA wherein it has been agreed that the assessee had a DAPE in the form of Discovery India. Even in AY 2002-03 and AY 2003-04, it has been held that DALLC has a DAPE in India in the form of Discovery India. 10. In the course of assessment proceedings for the impugned year, it was submitted that distribution revenues earned by DNAP from India do not qualify as 'Royalties' as defined under Article 12(3) of the Treaty and therefore these revenues cannot alternatively be taxed as 'Royalties in India. This is because DCIN has only received a Broadcasting Reproduction Right ('BRR') from DNAP and not a copyright. A BRR is a separate and distinct right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2024 in assessee's own case, wherein it has been agreed that 10% of the net advertisement and distribution revenues received by DNAP from India (i.e., post DCIN's share) shall be taxed as business profits of DNAP in India. The assessee made the above request with a view to achieve tax certainty in India and to avoid further litigation for subject AY. In this regard, the assessee submitted that there has been no change in the factual matrix/business operations of DNAP for AY 2013-14 vis-a-vis the AYs covered under the above MAP Resolution (ie. AY 2014-15 and A.Y 2015-16) and the same has also been explicitly mentioned by the Ld. AO in the final assessment orders passed for AY 2014-15 and AY 2015- 16. 15. The ld AR further drew our attention to DNAP's group companies wherein taxability of similar transactions pertaining to sale of advertisement airtime on channels and distribution of channels has been evaluated and agreed upon by the CA India and CA of United States of America in the case of Turner Broadcasting System Asia Pacific Inc (TBSAP ) for AY 2001-02 to AY 2004-05 and Cable News Network, Inc. (CNN') for AY 2003-04 (copy of MAP resolution of TBSAP and CNN has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. DCIT [2022] 141 taxmann.com 386 (Delhi - ITAT). 19. The ld AR further, without prejudice to above request for replication of MAP position to subject A.Y, also submitted to decide the said appeal on the basis of technical submission supporting NIL taxability claim in Revised ROI filed for the subject AY. The ld counsel of the assessee submitted that distribution revenues received by DNAP from distribution of the channels in India are not taxable as Royalties under Article 12 of the Treaty and are in the nature of business income relying on the decisions of the Hon'ble High Court ('HC') of Delhi in the case of CIT International Taxation vs. ESPN Star Sports (Mauritius) SNC et Compagnie [TS-173-HC-2024 (DEL HC)] and the Hon'ble HC of Bombay in the case of CIT v. MSM Satellite (Singapore) Pte. Ltd [2019] (106 taxmann.com 353) (Bombay HC). 20. The AR of the assessee submitted that DCIN has only received a Broadcasting Reproduction Right ('BRR') from DNAP and not a Copyright. A BRR is a separate and distinct right as recognized under the Copyright Act, 1957 and hence cannot be called a Copyright. Further, even where it is assumed that there is an element o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he MAP resolution applies only to the particular entity and for the particular year which is covered by such resolution. The ld DR however, did not controvert nor made any substantial disagreement with regard to the factual matrix of the case in hand with respect to the AO having assessed the assessee s income on the basis of MAP of DALLC in AYs 2004-05 to 2012-13 AYs 2017-18 to 2018-19 and on the basis of MAP with DNAP for AYs 2014-15 to 2016-17 and AYs 2020-21 to 2021-22. Further for AY 2019-20, which was not picked up for scrutiny, the assessee itself offered income as per MAP of DALLC. 25. We have heard the rival submissions and have perused the relevant material on record. Having heard the rival submission we find that the facts of the case shows that from A.Y 2004-05 till A.Y 2020-21, except for A.Y 2013-14, taxation of the assessee s business in India is on the basis of MAP either with DALLC or with itself. We find that there is no dispute that the factual matrix and business operations of DNAP for AY 2013-14 vis-a-vis the AYs covered under the above MAP Resolution (ie. AY 2014-15 and A.Y 2015-16) remains the same. The Ld. AO himself accepted this in the final assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned AY 2013-14 as well. We are fortified in our view by the decision of coordinate Bench of Delhi in the assessee s group company namely ADIT v. Animal Planet (Asia) LLC [I.T.A.No. 4840/ Del/2012 and I.T.A. No. 4841/Del/2012 (Delhi) which held as under: 10 .We are inclined to hold that the CIT(A) was right in granting relief for the assessee and in holding that to ensure the consistency of assessment over the years, by following the basis of taxability of the advertisement and subscription revenue constitute business income of the assessee in India and 10% of the advertisement and subscription revenue itself to be treated as taxable income of the assessee in India... 30. We also note that the similar plea of adopting the earlier resolution in MAP for subsequent years, have been granted by the coordinate bench of ITAT in the case of another assessee i.e., Turner Broadcasting System Asia Pacific Inc (TBSAP ). This decision has been accepted by the Hon'ble High Court of Delhi which while dismissing Revenue's appeal against the said ITAT order, held that distribution revenues received by TBSAP from WMIPL are to be taxed in line with its erstwhile MAP resolution. 31. In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands of Discovery Asia Inc. as Royalty @ 10% + surcharge and Cess. 35. The AO simultaneously initiated the penalty proceedings u/s 271(1)(c) for furnishing of inaccurate particulars and subsequently levied penalty of Rs 20,35,08,060/-. 36. Aggrieved, the assessee approached the CIT(A) who deleted the penalty. 37. Aggrieved, the revenue is before us for the impugned AYs. 38. The ld DR of the Revenue, submitted that the AO levied the penalty u/s 271(1)(c) on account of the fact that the assessee furnished inaccurate particulars of income. 39. With respect to ground no 3, the ld DR vehemently stated that the CIT(A) did not follow Hon'ble Supreme Court ('SC') decision in case of MAK Data (P) Ltd. v. CIT [2013] 38 taxmann.com 448 (SC) wherein it was held that even a voluntary disclosure does not release the assessee from the mischief of penal proceedings under section 271(1)(c) of the Act. 40. With respect to Ground 4, the ld DR argued that the assessee itself admitted additions made in the assessment order and penalty cannot be evaded on the premise that assessee is not contesting the matter further to buy peace and avoid litigation. In regard to Ground 5, the Ld. DR submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vy of penalty, stated that the issue/additions involved in the subject AY are capable of more than one opinion and are a debatable question of law. The ld AR relied on the decision of the Hon'ble SC of India in the case of Director of Income-tax (International Taxation) v. Morgan Stanley Co. [2007] 162 Taxman 165 (SC) and ADIT- 1 v. E-funds IT Solutions Inc. [2017] 86 taxmann.com 240 (SC) which have held that where PE is adequately remunerated at arms-length price, no further profits can be attributed to the assessee. It is submitted that in the instant case, DCIN constitutes a DAPE of DNAP, but the TPO has accepted that it has been adequately remunerated at arms-length price. 45. The ld AR stated that its arguments that revenues received by DNAP from distribution of the Channels in India are not taxable as Royalties under Article 12 of the Treaty and are in the nature of business income has been upheld by various Courts of India including the Hon'ble HC of Delhi in the case of CIT International Taxation vs. ESPN Star Sports (Mauritius) SNC et Compagnie [TS-173-HC-2024 (DEL HC)] and Hon'ble HC of Bombay in the case of CIT v. MSM Satellite (Singapore) Pte. Ltd [2019] (10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the facts of assessee's case are clearly distinguishable from the above, as in the instant case, the claim made by the assessee is based on judicial precedents (including the judgements of Hon'ble SC on the issues of attribution and royalty and the assessee has offered a bona fide explanation in respect of the position taken in the RoI. The ld AR reiterated that it has also been held by various courts that upon disclosure of facts before the Ld. AO, imposition of penalty is not justifiable. Reliance in this regard is place on judgement of Hon'ble HC of Delhi in case of CIT v. Nath Bros Exim International Ltd. [2007] 288 ITR 670 (Delhi HC) and Hon'ble HC of Delhi in case of Devsons (P) Ltd v. CIT [2011] 196 Taxman 21 (Delhi HC) and the Hon'ble Supreme Court in case of CIT v. Reliance Petroproducts (P) Ltd [2010] 189 Taxman 322 (SC). 50. We have heard the rival submissions and have carefully perused the orders of the authorities below. After hearing the rival submission, we find the ground no. 1 and 2 are general in nature. The facts of the substantive ground no 3 to 6 revolves around levy of penalty on the ground that the assessee has neither disclosed correc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c). We get support from the decision of the Hon'ble HC of Delhi in case of CIT v. Nath Bros Exim International Ltd. [2007] 288 ITR 670 (Delhi HC) wherein it was held as under: 5. What is required to be considered is whether there was any enquiry that was required to be made by the Assessing Officer before concluding that the assessee had furnished inaccurate or false particulars. In this case, we are of the view that no such enquiry was required to be made but there was only the need for application of the law. On the legal position, the Assessing Officer was not satisfied and did not agree with the assessee but that by itself is not a ground to invoke the penalty provision of the statute... 53. We fully endorse the reliance placed by the CIT(A) on the decision of the hon ble Supreme Court in the case of CIT v. Reliance Petroproducts (P) Ltd [2010] 189 Taxman 322 wherein it has held that mere making of a claim which is not sustainable in law will not amount to furnishing of inaccurate particulars and that the legislature does not intend to impose penalty on every assessee whose claim is rejected by the assessing officer . We are also aligned with the view of the CIT(A) that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submission of the ld AR that the decision of the Supreme Court in the case of MAK Data (supra) and Delhi Court in the case of Zoom Communications (supra) are distinguishable as they are based on different set of facts. We agree with the distinction elaborated by the AR and the same is not reproduced for the sake of brevity. To reiterate, the assessee has disclosed complete facts with respect to aforesaid receipts in the submissions filed during the course of assessment proceedings. We further find that the Assessment Order nowhere lays down that the information/details were not filed and/or the Company failed to offer any explanation in respect to claim made. We also find that the issues pertaining to taxability of the assessee revenue have different judicial views. We are satisfied that the explanation offered by the assessee are bona-fide and based on judicial precedents. Moreover, the taxability for the subject AYs has been recently resolved through MAP resolution agreed between the CA of India and Singapore and no mention of imposition of penalty has been made in aforesaid MAP resolution. Subsequently, the Assessing Officer passed an order giving effect to the MAP resolution ..... 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