TaxTMI 
TaxTMI 
2015 (10) TMI 2433
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....e channels filed its return of income on 1. 11. 2004, declaring total income of Rs. 16. 35lacs. The AO completed the assessment u/s. 143(3) of the Act on 22/12/2006, determining the income of the assessee at Rs. 19. 39 crores. Subsequently, the matter was re-opened by the AO as per the provisions of section 147 of the Act. He completed the assessment u/s. 143 (3)r. w. s. 147 of the Act, on 5. 5. 2010 computing the total income of the assessee at Rs. 38. 42 crores. As per the AO during the course of assessment for AY 05-06 disallowance amounting to Rs. 32. 49 crores was made on account of selling and distribution charges. To verify as to whether similar issue existed in the year under appeal the AO issued a notice u/s. 148 of the Act. The assessee objected the re-opening of the assessment vide its letter dt. 28. 8. 2009. The issue of reopening travelled up to Hon'ble Supreme Court, who held that re-assessment proceedings were valid. 3. Effective Ground is about deleting the disallowance of 81. 25% of the expenditure incurred on advertisement and sales promotion amounting to Rs. 21. 74 crores. While completing the assessment, the AO mentioned that the amount of income escaping asses....
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.... the AO has legally erred in apportioning only 18. 75% of total expenditure of advertisement and sales promotion as allowable to the assessee. It was further submitted that the AO erred in disallowing the expenditure on advertisement and sales promotion amounting, to Rs. 32, 49, 91, 062/- merely on the basis of presumption and surmises and without appreciating that the expenditure was incurred wholly and exclusively for the purpose of business, and, therefore, the expenses are allowable in full. It was argued that the expenditure on advertisement and sales promotion amounting to Rs. 32, 49, 91, 062/- was disallowed without appreciating the fact that the Transfer Pricing Officer had examined the international transactions between the Appellant and its associated enterprises and had held that the margin arrived at as per the Transactional Net Margin Method is at arms' length and accordingly the said expenditure should also be considered be at arms length and not excessive and unreasonable. Reliance was placed on various case laws also including the decision of Third Member of the Tribunal in the case of Star India Private Limited, reported in 103 ITD 73 and also in the case of Ne....
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....ll the facts and no question of law arises out of the order of the Tribunal. Accordingly, the order of the Tribunal has been confirmed by the Hon'ble High Court which is binding in nature. 6. 1 In respect to distinguishing the facts by the CIT(A), learned counsel of the assessee has filed a chart mentioning the objection of the learned CIT(A) and mentioning the assessee's submissions. This chart contains two pages. It was further stated that even in the case of assessee itself, the Tribunal has allowed the issue in favour of assessee earlier. However, there was a divergent view among the members of the Tribunal in the case of Star India Pvt. Limited. The matter was referred to the Third Member and the Third Member after discussing the issue in detail, has allowed the issue in favour of the assessee. The order of the Tribunal has been reported in 103 ITD 73, which pertains to assessment year 1998-99 and 1999-2000. The facts are identically same in the case of the assessee and in the case of Star India Pvt. Limited. 7. Learned OR has placed reliance on the order of CIT(A). It was further submitted that the full documents were not filed before the CIT(A). In respect to d....
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....rned by the Net Margin Method (TNMM) is at arm's length. 9. 2 The second objection is that Star India was supplying programmes to Star Hong Kong at cost +5% whereas as per the Assessment order, appellant does this for a fixed fee. The assessee has filed explanation that the average mark-up earned by MSMI on content supplied during the period is 18. 75% which fact is accepted by the Assessing Officer in is order at page 17. Therefore, again we find that there is no distinguishable feature as to whether supplying programmes to Star Hong Kong at cost +5% or some other rates, but the fact is that method of doing business is the same. 9. 3 The next objection noted by the learned CIT(A) that the Star India was earning cable subscription charges for itself whereas the appellant is collecting gross distribution revenues for itself and the principal i. e. SET Singapore whose share is 75% of the gross. The stake of the principal in the appellant's case is large and critical and not merely incidental. In this regard, the explanation has been filed on behalf of the assessee that in subsequent year, though Star India had made payment to its principal in respect of its distribution inc....