AI Drafter 
TaxTMI 
TaxTMI 
2019 (1) TMI 636
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.... "On the facts, in law and in the peculiar circumstances of the case, the purported order under Section 143(3) read with Section 144C of the Income Tax Act, 1961 ('the Act') dated December 27, 2016 giving effect to Learned Dispute Resolution Panel's ('Ld. DRP') directions dated 23 November 2016 disposing off Appellant's rectification application dated 2 November 2016 is bad in law, void ab initio and deserves to be quashed without prejudice to ground no. 1 below. 1. On the facts, in law and in the peculiar circumstances of the case, the purported order dated December 27, 2016 under Section 143(3) read with Section 144C of the Act, is bad in law and deserves to be quashed as it is barred by limitation. 2. the Ld. AO / Ld. TPO / Ld. DRP has erred in making an addition of Rs. 33,91,01,488 to the total income on account of a transfer pricing adjustment to the distribution segment of the Appellant. 3. the Ld. AO / Ld. TPO / Ld. DRP has erred by not accepting the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Income Tax Rules, 1962 ("the Rules"). 4. the Ld. AO / Ld. TPO / Ld. DRP has erred in co....
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....arding the provisions of the Act and the judicial precedence. The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. The Appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case." 4. Ground No. 1 was not pressed and Ground No. 12 is raised pre-maturely, so these grounds do not require any comment on our part. 5. Ground Nos. 2 to 11 are co-related and relate to the addition of Rs. 33,91,01,488/- on account of transfer pricing adjustment to the distribution segment of the assessee. 6. Facts of the case in brief are that the assessee is a subsidiary of M/s Turner Broadcasting System Asia Pacific, Inc., and was engaged in the business of distribution of subscription rights of satellite channels of Cartoon Network, WB, CNN, POGO and HBO. The assessee was also engaged in the business of imports, promotion marketing, distribution and provision of sub-distribution rights to cable and broadcast entities. The assessee e-filed the return of income on 3011.2012 declaring an income of Rs. 5,58,4....
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....s Sonata Information Technology Ltd., M/s Softcell Technologies Ltd., M/s Advance Technologies Ltd., M/s Empower Industries India Ltd. and Integra Telecommunication & Software Ltd. in the final list of comparable companies, if those companies clear the filters applied by the TPO. The ld. DRP also directed to include the following three comparables if they pass all the filters: "1. M/s Advance Technologies Ltd. 2. M/s Empower Industries India Ltd. 3. M/s Integra Telecommunication and Software Ltd." The ld. DRP also directed the TPO to verify and use corrected margin in the final list of comparable. 8. The TPO, however, rejected the comparable M/s Softcell Technologies Ltd. by observing that it was engaged in the business of consultancy services, so, it was not comparable on the basis of functional dissimilarity. The TPO finally selected the following comparables and worked out the arithmetic mean at 9.48% in the following manner: S. No. Name of the company After DRP's OP/OR 1. Sonata Information Technology Ltd. -0.10% 2 India Vision Satellite Communication Ltd. -1.57% 3. Maa Television Netwo....
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.... M/s TV Today Network Ltd. and M/s Zee Media Corporation Ltd. had been selected by the TPO/ld. DRP in the final list of comparables, those deserve to be excluded (copy of the said order dated 18.06.2018 was furnished). 11. In his rival submissions, the ld. CIT DR supported the orders of the authorities below and reiterated the observations made by the TPO in para 8 of his order. 12. We have considered the submissions of both the parties and perused the material available on the record. It is noticed that on a similar issue relating to the selection of the comparable in assessee's own case, this Bench of the ITAT directed to exclude the 7 comparables vide aforesaid order dated 18.06.2018. The relevant findings have been given in para 11 of the said order which read 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 ....
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....e companies, namely, i) Malayalam Communications Ltd.; ii) Raj Television Network Ltd.; iii) TV Today Network Ltd. iv) Sun TV Network Ltd.; v) Zee Entertainment Enterprises Ltd.; vi) Zee Media Corporation Ltd.; and vii) UTV Software Communications Ltd.; are directed to be excluded. ---------------- ----------------" 13. For the year under consideration, the ld. Counsel for the assessee requested to exclude the 4 comparables, namely, M/s Malayalam Communications Ltd., M/s Raj Television Network Ltd., M/s TV Today Network Ltd. and M/s Zee Media Corporation Ltd. So, respectfully following the aforesaid referred to order dated 18.06.2018 in ITA No. 1204/Del/2018 for the assessment year 200607 in assessee's own case, we direct the AO/TPO to exclude the aforesaid 4 companies from the list of comparables. 14. The next issue vide Ground No. 10 relates to the benefit of economic adjustment on account of working capital, denied to the assessee by the AO. 15. As regards to this issue, the ld. Counsel for the assessee submitted that the ld. DRP in the directions has rejected the assessee's claim for granting working capital adju....
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....e and in compliance with the Act and Income Tax Rules 1962 ("the Rules"). 2.2. not appreciating the fact that the Appellant had selected uncontrolled comparable companies based on a detailed Functional Asset and Risk ("FAR") analysis following a methodical benchmarking process and completely disregarding the comparable companies identified by the Appellant. 2.3. rejecting the economic analysis conducted by the Appellant in respect of 'distribution segment' wherein distributors were selected as comparables and instead selecting the companies without appreciating that their FAR of these companies are different as compared to the Appellant under the distribution segment. 2.4. conducting a fresh comparability analysis based on application of additional/ revised filters in determining the Arm's Length Price ("ALP") for the Appellant's distribution segment. 2.5. disregarding the judicial precedence of NGC Network (India) Pvt. Ltd. (2011-TII-45-ITAT- MUMINTL), wherein companies engaged in trading of branded software were accepted as comparables to determine the arm's length price for the distribution of satellite television channel; and rejecting a similar s....
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....he year under consideration. The TPO selected the following comparables: S. No. Name of the company OP/Sales(%) 1. Cybermedia Media India Online Ltd. 7.12 2. Mahalaxmi Commercial Services Ltd. 36.54 3. Quandrant communications Ltd. 5.43 4. Sporting & Outdoor Ad-Agency Pvt. Ltd. 11.84 5. Synergy Adlabs Media Ltd. 20.70 6. Rockman Advertising & Marketing (India) Ltd. 0.26 7. Adbur Private Limited 0.41 Average 11.75 22. The TPO proposed an adjustment of Rs. 20,51,32,093/-. The AO made the aforesaid addition in the draft assessment order. Thereafter, the assessee filed the objection against the aforesaid adjustment before the ld. DRP who did not allow any relief to the assessee and sustained the adjustment made by the AO. 23. Now the assessee is in appeal. The ld. Counsel for the assessee submitted that the assessee had chosen following 5 comparables: S. No. Name of the comparable company Unadjusted OP/Sales(%) 1. Advance Technologies Ltd. 0.54 2. Axon Infotech Ltd. 1.17 3. Empower Industries India Ltd. -0.21 4. Rockon Fintech Ltd. -1.50 5. So....
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....the companies M/s Empower Industries India Ltd. and M/s Sonata Information Technologies Ltd. deserve to be included in the list of the comparables. This issue has been considered by the ITAT Delhi Bench 'I-2', New Delhi in assessees'own case for the assessment year 2006-07 wherein vide paras 13 & 14 of the order dated 18.06.2018, it has been directed that these two comparables with working capital adjustment should be taken and should be benchmarked with the assessee's margin. The relevant findings have been given in paras 13 & 14 which read as under: "13. In so far as the aforesaid contention of the learned counsel that Software Distribution Company should be accepted, we agree in principle that such companies can be taken for comparability analysis, when there are no direct comparable dealing with distribution of satellite channels are available. Such an acceptability of software distribution companies in the case of distribution of TV channels has found favour by the co-ordinate bench in the case of NGC India Pvt. Ltd. (supra). Thus, we hold that software companies can also be included for the purpose of comparability analysis, because in assessee's own case for the sub....