TaxTMI 
TaxTMI 
2020 (1) TMI 615
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....ejecting the supplemental benchmarking without providing any cogent reasons; 1.3. On the facts and circumstances of the case and in law, Hon'ble Dispute Resolution Panel erred in holding that the Assessee has rendered marketing services, incurred additional cost, and performed additional functions in negotiating placement charges on behalf of its related parties; 1.4. On the facts and in the circumstances of the case and in law, Hon'ble Dispute Resolution Panel erred in determining the arm's length price at 10% of the gross amount distributed to Associated Enterprise without following any of the prescribed methods/process; 1.5. Without Prejudice to the above ground, the Hon'ble Dispute Resolution Panel failed to note that the Appellant has retained arm's length consideration as determined in ground no. 1.4 and no further adjustment is warranted; 1.6. On the facts and in the circumstances of the case and in law, having held that the allocation of channel placement is fair and proper, the Hon'ble Dispute Resolution Panel erred in holding that the Appellant has rendered services of marketing of the channel placement rights an....
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....ccount of income distributed for the services rendered for marketing of channel placement rights. Facts in brief are that the assessee company operates as "multi system operator" (MSO) in distribution of television channels through analog and digital cable distribution network and internet services through cable. The assessee company operates as last mile cable operator for certain territories of the country. Over the years, it also acquired stake in other entities by subscribing to majority shares therein. These entities fall within the meaning of related parties as defined in Section 40A(2)(b) of the Act. These entities are hereinafter referred to as "Related Parties" (RPs). These RPs of the company operate as last mile cable operator in their respective territories which are not within the operating area of the assessee company. As such the assessee company and RPs together, as a group, operate over a large part of the country. The assessee company has adopted a 'Pooled Model' under which it negotiates and settles with the broadcasters for their channels or bouquets of channels. It acts as a principal negotiator (pooling entity) in the discussions and negotiations with the....
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....rmined the ALP of placement charges at 50% of the amount and held that the balance 50% has to be retained by the assessee for its own services rendered, risks undertaken and capital deployment. Accordingly, he directed an adjustment of Rs. 34,80,05,601/- to be made in respect thereof in determining the total income. 3. By the impugned order, the DRP has restricted ad hoc addition to the extent of 10% after observing as under: "4.7 However, the Panel notes that the assessee has indeed performed more, functions with respect to the transaction of placement charges. This includes making efforts to consolidate the RPs, presenting their position and negotiating for RPs from broadcasters. The Panel is also of the view that each RP is also taking its own risks and deploying its own capital and is entitled to its share. The Panel is not in agreement with the TPO that just because each RP individually represents mere 5% to 7%, of the subscriber base and hence is not in a position to negotiate with the broadcaster individually, it should be allowed just 50% of the amount attributable to its subscriber base. 4.8 In our view, the transaction can be viewed as a t....
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....mpugned order, the DRP upheld ad hoc addition to the extent of 10%. We found that while upholding 10% of addition in respect of the amount distributed, the DRP at para 4.6 have clearly obsered that the TPO was not justified in making addition to the extent of 50%. The DRP held that consumer numbers represent a key parameter for deciding the amount or placement charges and in the facts and circumstances of the case held that allocation made by the assessee with respect to the total placement charges received is fair and proper. In our considered view, after this finding being recorded by the DRP, there is no justification even for upholding 10% of the addition, in so far as the assessee has distributed income on the basis of actual subscribers being commanded by the RPs. 6. We further observe that at para 4.7 of the direction, that DRP has categorically observed that the assessee has performed more functions that include making efforts to consolidate the RPs presenting their position and negotiating with the broadcasters for RPs. The DRP has further categorically rejected the findings of the TPO that just because each RP individually represents mere 5% to 7% of the subscriber bas....