TaxTMI 
TaxTMI 
2018 (10) TMI 1169
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of other software distribution companies namely, Empower Industries India Limited; and Trijal Industries Ltd. which was submitted by the assessee by way of fresh search for comparables before DRP; and lastly, upholding the benefit of working capital adjustment. He submitted that similar comparables and issues were involved in the appeal for the assessment year 2006- 07 wherein this issue has been decided by the Tribunal in ITA No. 1204 del 2018 vide order dated 18.6.2018. On the other hand Ld. DR strongly relied upon the order of the TPO. 3. Brief facts and background of the case are that assessee is a subsidiary of Turner Broadcasting System Asia Pacific, Inc. ('TBSAP'). The Assessee Company is primarily engaged in the business of distribution of subscription rights of satellite channels of Cartoon Network, WB, CNN POGO and HBO (collectively referred as 'V' Channels') and advertisement inventory to be telecasted on TV Channels. The activities of the assessee are primarily driven towards promoting the channels and associated proprietary intangible assets on the return of income. The key functions performed by the assessee were as under:- i. Sub-distribution of distributi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....41 8,523,542 140,555,830 6. The ALP of international transaction representing distribution on sales activities has been determined by applying TNMM as MAM and the operating profit of total sales ratio has been taken as PLI. The PLI of the assessee company was arrived at 2.85%, whereas the average PLI of the comparable was arrived at 1.32%. In so far as transaction of Promotional Licence Fee which was benchmarked by using CUP method, no adverse inference has been drawn by the TPO. The assessee's comparables with the updated margins as under:- S.No. Company Name Source OP/Sales(%) 1 Agro Tech Foods Ltd. P 3.51 2 Chloride International Ltd. P 1.42 3 Machino Techno Sales Ltd. P 1.99 4 SPS International Ltd. P -0.73 Mean 1.55 7. The TPO rejected the assessee's comparables and carried out own search and finally selected following comparable companies ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....luded and inclusion of two other comparables, namely, Empower Industries India Ltd. and Trijal Industries Ltd. are included then other comparables need not be adjudicated. In support reliance has been placed on the judgment of the Tribunal for the assessment year 2006-07. 11. We find that in so far as the inclusion of four comparable companies namely, Empower Industries India Ltd., Sonata Information Technology Ltd., Softcell Technologies Ltd. and Trijal Industries Ltd., the same has been accepted by the Tribunal after giving direction to give working capital adjustments. The relevant observation and the finding of the Tribunal reads as under:- "11. We have heard the rival submissions and also perused the relevant findings given in the impugned orders as well as the material referred to before us. From the stage of the DRP, ten comparables have been selected with an average mean of 11.95% and based on such comparables adjustment of Rs. 10,07,35,464/- has been made in the distribution segment. The details of these comparable companies with this average margin have already been incorporated above. Out of the said comparable companies, seven comparables have been sought to be ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be excluded. The other three comparables, namely, Empower Industries India Ltd. (56.65%), Sonata Information Technologies Ltd. (4.54%) and Softcell Technologies Ltd. (4.23%), have been accepted by the assessee. However, after working capital adjustment OP/OR of these three companies is as under:- S.No. Name of comparable Working capital adjusted OP/OR 1. Empower Industries India Ltd. 0.43% 2. Sonata Information Technologies Ltd. 0.67% 3. Softcell Technologies Ltd. 2.24% Mean 1.11% 12. In so far as the contention of the assessee that Trijal Industries Ltd. and Svam Software Ltd. should be included, the learned counsel first of all submitted that, these are software distribution companies and in the case of NGC India Ltd. (supra), the Tribunal has held that the companies engaged in distribution of software are also good comparables for benchmarking the distribution of TV channel companies. Further, in the subsequent years the DRP as well as the TPO have also accepted software distributors as a good comparable, therefore, it was contended th....