Assessee's Appeals Partly Allowed, Revenue's Dismissed. Tribunal Directs Consistent Approach.

The appeals of the assessee were partly allowed, and the appeal of the Revenue was dismissed. The Tribunal directed the AO to follow the consistent view taken in earlier years for similar issues.

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Issues Involved:
1. Mechanical approval for referring the case to the TPO.
2. Transfer pricing analysis for international transactions of support services for distribution of television channels.
3. Transfer pricing analysis for international transactions under the broadcasting segment for franchise channels and merged entities.
4. International transaction of availing management services.
5. International transaction of payment of brand license fees.
6. Disallowance under Section 14A read with Rule 8D.
7. Deduction of property tax reimbursed.
8. Depreciation in relation to computer software.
9. Depreciation on cumulative additions to leasehold improvements.
10. Allowability of depreciation on computer peripherals.
11. Allowability of software expenses.
12. Disallowance of Channel Placement Fee expenses.

Issue-wise Detailed Analysis:

1. Mechanical approval for referring the case to the TPO:
The appellant raised the issue regarding the AO mechanically seeking approval from the CIT for referring the case to the TPO based on transaction value exceeding INR 15 Crores. However, this issue was considered academic and was not adjudicated.

2. Transfer pricing analysis for international transactions of support services for distribution of television channels:
The assessee provided services for the distribution of channels and was remunerated with a cost-plus 10% mark-up. The TPO did not dispute the functional role or FAR analysis but rejected the comparables selected by the assessee without providing reasons. The Tribunal directed the AO to exclude APITCO Ltd and TSR Darashaw Ltd from the list of comparables, as they were not functionally comparable.

3. Transfer pricing analysis for international transactions under the broadcasting segment for franchise channels and merged entities:
The TPO rejected four comparables selected by the assessee. The Tribunal directed the AO to include UTV Software Communications Ltd, IBN 18 Broadcast Ltd, and Raj Television Network Ltd as comparables, as they were functionally similar and not consistent loss-making companies. The Tribunal also applied the same reasoning for AY 2012-13.

4. International transaction of availing management services:
The TPO determined the ALP of management services availed from STAR Ltd to be 'NIL' and the DRP upheld this. The Tribunal, however, directed the AO to accept the assessee's valuation, noting that the management services were necessary for the business and the costs were allocated based on revenue, an accepted methodology.

5. International transaction of payment of brand license fees:
The TPO disallowed the depreciation claim on brand license fees, determining the ALP to be 'NIL'. The Tribunal directed the AO to accept the brand license fees as the valuation was done by an independent valuer and the payment was approved by the RBI. The Tribunal also applied the same reasoning for AY 2012-13.

6. Disallowance under Section 14A read with Rule 8D:
The Tribunal noted that the assessee had not earned any exempt income during the year and directed the AO to delete the disallowance, following the decision of the Hon’ble Bombay High Court in the case of Pr. CIT vs. Ballarpur Industries Limited.

7. Deduction of property tax reimbursed:
The Tribunal remanded the matter back to the AO for fresh examination, following the decision in the assessee's own case for AY 2006-07. The Tribunal also applied the same reasoning for AY 2012-13.

8. Depreciation in relation to computer software:
The DRP directed the AO to verify records and grant depreciation on the opening WDV of software expenses earlier held as capital expenditure. The Tribunal found no infirmity in this direction and applied the same reasoning for AY 2012-13.

9. Depreciation on cumulative additions to leasehold improvements:
The DRP directed the AO to verify if the additions made to leasehold improvements in earlier years were capitalized and, if so, to allow depreciation accordingly. The Tribunal found no infirmity in this direction and applied the same reasoning for AY 2012-13.

10. Allowability of depreciation on computer peripherals:
The Tribunal upheld the DRP's direction to allow depreciation at the rate of 60% on computer peripherals, following the decision in the assessee's own case for AY 2006-07. The Tribunal also applied the same reasoning for AY 2012-13.

11. Allowability of software expenses:
The DRP accepted the software expenses as revenue in nature, following earlier years' precedence. The Tribunal found no infirmity in this direction and applied the same reasoning for AY 2012-13.

12. Disallowance of Channel Placement Fee expenses:
The DRP deleted the disallowance under section 40(a)(ia) following the decision in the assessee's own case for AY 2009-10. The Tribunal found no infirmity in this direction and applied the same reasoning for AY 2012-13.

Conclusion:
The appeals of the assessee were partly allowed, and the appeal of the Revenue was dismissed. The Tribunal directed the AO to follow the consistent view taken in earlier years for similar issues.

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