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2019 (8) TMI 1464
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....x (in short 'the CIT') and the CIT erred in mechanically granting approval to the AO for referring the case to the TPO merely on the fact that the transaction value exceeded INR 15 Crores to the Instruction issued by Central Board of Direct Tax. For this assessee raised Ground No.1. During the hearing, the assessee's counsel has pointed out that in view of the submissions on other grounds namely, comparables, it would not be necessary to argue on this ground. Despite the same, the Id. DR has preferred written submissions. But this issue is more of academic in nature, hence we leave it as it is and do not adjudicate. 3. The second issue raised by the assessee in AY 2011-12 in IT(TP)A No. 1901/Mum/2016 is as regards to international transactions of provision of support services for distribution of television channels and in relation to international transactions of provision of support services. The assessee has also raised the issue in relation to international transactions captured under the broadcasting segment for franchise channels. For this interconnected issue, the assessee had raised the following Ground Nos. 2 :- "Ground number 2 have erred in ....
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....no 63 and page nos. 48 to 57 of the assessee paper book. 7. We noted that TPO did not dispute the functional Role or FAR analysis of the assessee but rejected the comparables selected in the TP Study without giving any reasons. The TPO picked cherry-picked without conducting any search process for the year under consideration. The DRP has upheld the order of the TPO. 8. We further noted that the TPO inserted his comparables but Ld Counsel for the assessee made contentions for exclusion of specific comparables (i.e. APITCO Limited and TSR Darashaw Limited) as to why these companies selected by the TPO as comparable ought to be rejected. The updated chart provided with reasons for rejecting the companies as comparables was filed before the Bench. It was contended that if the ITAT reject the above mentioned two comparables, the assessee shall fit within +/- 5% of the range, and hence the adjustment stands deleted, and the other comparables issues become academic. In light of the above, SIPL does not wish to press for the balance comparables for the statistical purpose for the year under consideration; however, reserves its right if required in future. Provision of services for d....
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....ia. Star Ltd has appointed the assessee as a sub-agent. The assessee, in turn, collects distribution fees from Star Den, another step down entity. The AR argues that the assessee undertakes advertisement and publicity of the channels in India, collects fee from Star Den, procures Integrated Receiver and Decoder (IRD) boxes for Star Den; and manages Subscriber Management System. The assets employed are IRD boxes, SMS and smart cards. The risks are claimed to the minimal as it operates on cost plus basis. However, it is apparent that the set of comparables chosen by the assessee do not have the same FAR. 10. He contended that the AR made submissions to dispute the inclusion of only two comparables by the TPO i.e. APITCO Ltd and TSR Darashaw Ltd. The arguments of the Revenue are therefore confined to these two concerns only. He narrated fact that as regards to APITCO Ltd. the AR has argued that this is a Government Company and has cited certain case law to claim that 100% Government owned companies should not be taken as comparable since they do not have a profit motive etc. This contention of the assessee is wrong. The company APITCO Ltd is jointly promoted by All India Financial ....
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....y. He stated that the AR has claimed that in the Information given under Part IV of Schedule VI to the Companies Act, 1956 (page 263 of the Assessee Paper Book) in the Final Accounts of the Company mentioned the Generic Name of the Principal Service of the Company as a "Registrar and Share Transfer Agents". This argument is basically unacceptable since the generic description given at the time of incorporation of company is not determinative of the profile of the company and the nature of its activities in the year under consideration. This company provides documentation services which are akin to the services rendered by the assessee of subscriber management system. Besides TSR Darashaw Ltd has earning from Record Management, Payroll business which are Support Service Activities. He further argued that the AR has also argued that the company has made a Provision for Diminution of value of assets which is taken to suggest that the FAR of the company is different. However, the Director's Report at page 235 of the Paper Book Paper Book mentioned that this diminution is only on capital account due to reduction in value of investments of the company in the shares of Ankur Drugs Ltd....
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....istrar and transfer agent and also engaged in provision of pay roll services. We have gone through the annual report Schedule 'J' and as per note 7 revenue recognition of this company provides share registry and transfer services, depository services, record management, pay roll and provident fund management and corporate fixed deposit management services. We also noted from the directors report that this company has completed implementation of a new global pay roll ERP application called RAMCO pay roll business which will enable it to withstand competition and service clients in the overseas market. Accordingly, we are of the view that TSR Darashaw is a registrar and share transfer agent, who has also forayed into pay roll business as in house software development and cannot be compared as a sub agent as the functions are wholly different. Accordingly, we direct the AO to exclude this from comparable to support service provider like SIPL. We direct the AO accordingly. This issue of assessee's appeal is allowed. 14. The next common issue in this appeal of assessee for AY 2011-12 in IT(TP)A No. 1901/Mum/2016 is as regards to international transaction captured under the broadcasti....
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....ins earned by external comparable companies engaged in similar activities (i.e. companies engaged primarily in television broadcasting). 16. The TPO did not dispute the FAR analysis neither search process nor the final list of comparable companies. However, out of total nine comparables, the TPO rejected four comparable companies accepted by the assessee in its TP Study Report. The TPO rejected one comparable company stating reasons of consistent loss-making with accumulated losses; one comparable company due to consistent loss-making; one comparable company due to functionally not similar; and one comparable company due to high related party transaction. The DRP upheld the said action of the TPO. Aggrieved, assessee came in appeal before Tribunal. 17. The assessee has made contentions for comparables as to why the companies rejected by the TPO ought to be considered and accordingly to be included as comparable. The arguments to accept the companies as comparables are argued by the learned Counsel for the assessee in detail. He argued and raised objection for comparable companies in broadcasting segment in regard to UTV Software Communication Limited, which is in television s....
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....ty at operating level for broadcasting segment. The learned Counsel drew our attention to a table of the segmental profitability of the company over the period for FY 2007-08 to FY 201011, which is enclosed in assessee's paper book Page No. 872B. The consolidated financial results are also on page No. 776 of the assessee's paper book. The learned Counsel for the assessee also drew our attention to operating margins from FY 2007-08 to FY 2010-11 and a table capturing the segmental profitability of the company for the relevant year is provided at page No. 872B of the paper book, which read as under: - Particulars Financial year (Amounts in INR) 2007-08 2008-09 2009-10 2010-11 Operating Profit/ operating revenue (OP/ OR) (%) 2.23% 32.30% 12.77% 4.33% 19. Hence, the learned Counsel for the assessee stated that the company has earned operating profits in the year under consideration in one out of three preceding previous years. Thus, it is evident that IBN 18 is not a consistent loss-making company. Finally, he argued that functionally comparable companies should not be rejected unless they are persistent loss making. 20. The next compara....
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....IPL in the capacity of a broadcaster, the transactions of merged entities were benchmarked using same set of comparable companies as identified above for broadcasting of franchise Channels. Therefore, the above arguments shall equally apply to broadcasting segment of merged entities also. 22. On the other hand, the learned CIT DR argued that the assessee had obtained exclusive franchise right to exploit certain TV channels of SIML and V Partnership in the territory of India, Nepal. Bhutan etc. (India Territory). The assessee pays 4% of the revenues to the AEs. Then the assessee has also appointed SIML as an intermediary between the assessee and the third parties from whom certain content is procured. The assessee also gets content from the libraries of SIML and TCF. Thus the assessee procures franchise rights/content/services in its capacity of a broadcaster. The assessee had claimed that in respect of these streams clubbed together, it earned a margin on cost at 15.02%. The TPO rejected four comparables of the assessee and determined the margin on cost in the case of the remaining comparables at 28.42%. He contended that the assessee before ITAT now has only contested the rejec....
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....that the Broadcasting Segment of TV18 at Page 776 can be taken for comparison and this segment has a profit. The AR also mentions that prior to FY 20 10-11 TV 18 was not having any Segment Reporting and admits that the company was running into continuous losses. The assessee has given a comparative chart at Page 872B of the Assessee Paper Book. The contentions of the assessee are wrong and cannot be accepted. The standalone account of TV 18 show continuous losses. The AR wants the ITAT to take the Segment Reporting (Page 776 of Assessee Paper Rook) but this page has segmental reporting of the consolidated accounts of TV 18 and includes the accounts of all its subsidiaries and Joint Ventures like RVT Media Pvt. Ltd (consolidated): IBN 18 Media & Software Ltd (Jagran TV): IBN Mauritius Ltd: IBN Lokmat News Pvt. Ltd and Viacom 18 Media Pvt. Ltd (Colors channel) (pages 679 & 765 of Assessee Paper Book). The inclusion of all these broadcasting companies' accounts further make the argument of the assessee totally irrelevant. Besides TV 18 has a RPT of over 37%, which makes it unfit for comparability. It has been held by the Mumbai ITAT in the case of Capgemini India (P.) Ltd. Vs. ACI....
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....o. 616. We are in agreement with the argument of the learned counsel that the television business segment includes broadcasting of four specialty genre channels i.e. UTV Action, UTV World Movies, UTV Movies and UTV Bindas. It also operates production of television content, airtime sales and dubbing services. UTV is engaged in the business of broadcasting of channels, and thus, for the purpose of benchmarking the "Television" segment from the consolidated financials of UTV has been considered by the assessee. The assessee is also engaged in broadcasting of similar entertainment channels like Star Plus, Star Utsav, Star Movies, Star Gold, Chanel V, etc., owns dubbing studios, procures contents and over the years it is also engaged in production of television content for one of the channel company. Hence, the 'television segment' of UTV is to be considered appropriate segment as comparable to that of SIPL's broadcasting segment. We also noted that in AY 2003-04 SIPL was only an agent procuring content for its AEs. It was neither a broadcaster nor was the content producer as is the case today, i.e. from AY 2011-12 onwards SIPL is engaged as broadcaster of channels i.e. Star Plus, Star ....
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.... record that Raj has earned operating profits in FY 2007-08 and 2008-09 and hence not a consistent loss making company. The working of the operating profitability of the company was referred as under which is given at pages 872A of assessee's paper book. Based on the working given in the chart at assessee's paper book page 872A, we noted that the company has earned operating profits in two out of three previous years. Thus, it is evident that Raj is not a consistent loss making company. The learned Counsel for the assessee also contradicted Ld CIT DR's argument that the Departmental Representative during the course of hearing made new arguments for registration of the comparable that were not contested by the TPO that the company is not comparable because it is also involved in movie productions and distribution business in the same broadcasting segment. In view of these facts, we are of the view that Raj Television Network Limited should be considered as a comparable company to broadcasting segment of SIPL. We direct the AO accordingly. 30. This next issue of assessee's appeal for AY 2012-13 in ITA No. 1048/Mum/2017 is as regards to international transaction captured under the ....
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....proach adopted by the learned Transfer Pricing Officer should be rejected." 31. We find that this issue is already taken into consideration vide paras 14 to 29 of this order for earlier assessment year i.e. AY 2011-12. The Ld. Counsel for the assessee as well Ld. DR also not argued because the issue is same and facts and circumstances are also same. The facts and circumstances are exactly identical in the present appeals on this issue, hence, taking a consistent view, we allow this issue of assessee's appeal in this year also. 32. The next issue in this appeal of assessee for AY 2011-12 in IT(TP)A No. 1901/Mum/2016 is as regards to international transaction of availing of management services (adjustment value of Rs. 3,56,38,917/-). For this assessee had raised the following ground No. 5: - "Ground number 5 have erred in rejecting transfer pricing analysis undertaken, including the comparable companies identified by the Appellant, thereby undertaking an enhancement of taxable income. Your Appellant prays that the transfer pricing analysis undertaken by the Appellant should be accepted and accordingly, the action of the learned TPO should be held as h....
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....ties have paid a combined service fee of Rs. 35,638,917 as consideration for availing services from STAR Ltd. 35. As the effective date of merger was 01.04.2009 Star Ltd had charged services fee of cost plus 5% mark up for the provisions of management services to the channel companies for the entire Assessment year 2009-10. Star Ltd was paid a services fees of Rs. 372,670,363/-. The TPO and AO have accepted the fee in the hands of the assessee to be at arm's length price. The nature of services rendered by STAR Ltd are as under: Human resources Finance and accounting Legal services Administration services The nature of above mentioned services does not tantamount to shareholding functions. Refer page no 878 of the assessee paper book for the details of management services availed by channel companies. The transactions were benchmarked in the study report of the channel companies, and assessee considered the TP study of the channel companies, as the High court approved the scheme of merger in the year 2010 and accordingly the assessee perused the benchmarking study of channel companies for benchmarking the management fee transaction. Fur....
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....all previous assessment proceedings of channel companies as well as in STAR Ltd. 38. Hence, the above activities are management and administration activities undertaken for STAR Ltd and the channel companies as accepted by the TPO over the years. It was explained that STAR Ltd has identified a pool of general and administration costs which were incurred for the purpose of providing management services to the channel companies and for STAR Ltd's own business. The portion of G & A costs were charged to channel companies at a mark-up of 5% as management fees. The management fee is allocated to each channel companies in the proportion of revenues generated by individual channel companies to the consolidated revenues of all the channel companies taken together. At the time of hearing the calculation for monthly invoice of the management fees paid to STAR Ltd. was sought and the details were filed vide Annexure 5. Ld Counsel explained that TPO in its order stated that the assessee has not provided details of personnel involved, their timesheets but the details called for by TPO were not relevant as the management costs were allocated in the ratio of Revenue, which is an accepted metho....
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....(A) that the intra-group service charge under the agreement between the assessee and Nalco Pacific was fixed not with reference to any particular service and the intra-group service charge was calculated at a fixed percentage of sales of assessee, irrespective of which services were actually received by assessee or whether any services were received by it or not, has no leg to stand." 39. The assessee also placed its reliance on OECD guidelines wherein the guidelines acknowledge that turnover is an appropriate method (i.e. indirect charge method) to allocate the intra-group service charges. Relevant extract is reproduced below for reference: - "the allocation should be based on an appropriate measure of the usage of the service that is also easy to verify example turnover, stuff employed, or an (Activity bused key such as orders processed." Page 328 of the OECD TP Guidelines - Chapter on intra Group services. 40. The assessee also argued that there is no intention to shift profits and to explain this it stated that the recipient AK (STAR Ltd) had been regularly assessed to tax in India and had duly offered this income to tax in India even for AY 2011-12. Therefore, t....
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....on by the assessee (refer Pages 873 of the assessee paper Book) is of no assistance. This agreement between entities under their old names in fact mentions that the Management Service Agreement stands terminated effective June 2005. However, the Agreement mentions that Star shall henceforth provide Corporate Management and Administrative Services only in lieu of the Service Fee. These services are Shareholder functions and are not commercial services. After the merger of the three concerns with the assessee, it is not proved that even these shareholder functions were required to be continued. Further it is to be noted that the payment for Management Services expenses have been apportioned on basis of own agreement and not on the basis of actual services rendered. In a similar case the Bangalore ITAT in the ease of Gemplus India P Ltd vs. ACT (2010) 3 taxmann.com 755 (Bangalore-Trib.) has held that it was imperative on part of the assessee to establish that the payments were made commensurate to volume and quality on services and that such costs were comparable. Hence, he urged for upholding of TPO/DRP. 43. We have heard rival contentions and gone through the facts and circumstan....
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....ere necessary to carry on the business cannot be questioned. Even the transactions of management charges have always been accepted to be at arm's length in the previous assessment proceedings of the channel companies and STAR Ltd., then on account of mere merger of channel companies with SIPI. Hence, we are of the view that the value taken by assessee of this transaction is correct. Hence, we direct the AO/ TPO accordingly. 45. The next issue in this appeal of assessee for AY 2011-12 in IT(TP)A No. 1901/Mum/2016 is in relation to international transaction of payment of brand license fees. For this assessee has raised the following Ground No.6 & 7: - "Ground number 6 have erred in determining the arm's length price in respect of the international transaction of avail' 'of management services by the Appellant from its Associated Enterprise ('AE') at Rs Nil by: * Not providing an opportunity of being heard and rejecting the transfer pricing analysis undertaken by the Appellant including the comparable companies identified by the Appellant; * Not considering that Appellant has supported the claims with appropriate evidences....
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....ies (i.e. Star Plus, Star Utsav, Star One and Star Gold) moved to the assessee, and effectively, the assessee became the broadcaster of these channels. However, to broadcast them under the STAR brand and logo, the assessee had to obtain a license to use the brand. 47. During AY 2011-12 SlPL was a broadcaster, in order to be able to carry on it's broadcasting business under the STAR brand it sought a license for the brand name and design of the channels featuring the Star marks and Star Corporate mark. Accordingly, during AY 2011-12, STAR Ltd, granted SIPL, all right to use the Channel marks and Star corporate marks solely to be incorporated or contained in the applicable Channels for the Indian Territory. SIPI had obtained license to use the Star Mark for Iump sum consideration of USD 36.02 million (i.e. Rs. 1624 million). The consideration for the payment towards brand license was determined based on valuation of the brand by an independent valuer and the said payment towards brand license was capitalized in the books of accounts and depreciation was claimed under the Act only on year basis. The payment for the said consideration was also subjected to RBI approvals. Further....
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.... "In the instant case, TPO was authorised to determine, by order in writing, the arm's length price of an international transaction in accordance with section 92C(3). The TPO mentioned in his order that during the course of hearing in response to notice issued under section 92CA(2), assessee had attended the office of the TPO from time to time and filed details as requisitioned by the TPO which were placed on records. The TPO had examined the details filed by assessee and based on such examination, he held in his order that the pricing of the aforesaid agreements was justified by assessee on the basis of the TNMM. The TPO did not make any adverse comments in his order upon the arm's length analysis carried out by assessee under the TNMM as per section 92C read with rule 10B. Accordingly, it is felt that TPO made proper enquiry and applied his mind to the details brought on record by assessee. He had agreed with the assessee that the international transactions covered by the TNMM analysis (including the intra-group service charge paid/payable to NP) adhered to the arm's length principle in Transfer Pricing Regulation. Another fact relating to this issue is ....
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....enture - The Playboy Japan Inc. set up to operate a subscriber based television channel in Japan (Refer page 921 to 925 of the factual paper book for AY 2012-13) 52. He further explained from the facts that the effective rate of brand license fees for the next 4 years which shows the reasonableness of the amounts vis the revenues taxed in India. In fact, the amounts paid by the assessee way below than the automatic approval limit sanctioned by the RBI of 5% vide press note no 8 (2009 series). For the year under consideration, the depreciation on the brand license fee as per financial statements is Rs. 166.08 million as against the total revenue of Rs. 27,041.74 million. The effective rate of expenses for brand license fee is 0.61% is significantly lower than the average of above external effective royalty pay-out rates of 4.72%. Accordingly, considering the above external reference points, 0.61% license fee paid should be considered to be at arm's length. 53. Further, he explained that there is no erosion of base of profits taxable in India for the reason that the entire amount of brand license fee paid by the assessee to STAR Ltd has taxed in the hands of STAR Ltd for &A....
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....uffered by the assessee in his business, he could have fared better had he not incurred such expenditure. These are irrelevant considerations for the purpose of Rule 10B. Whether or not to enter into the transaction is for the assessee to decide. The quantum of expenditure can no doubt be examined by the TPO as per law but in judging the allowability thereof as business expenditure, he has no authority to disallow the entire expenditure or a part thereof on the ground that the assessee has suffered continuous losses. The financial health of assessee can never be a criterion to judge allowability of an expense; there is certainly no authority for that. What the TPO has done in the present case is to hold that the assessee ought not to have entered into the agreement to pay royalty/brand fee, because it has been suffering losses continuously. So long as the expenditure or payment has been demonstrated to have been incurred or laid out for the purposes of business, it is no concern of the TPO to disallow the same on any extraneous reasoning. As provided in the OECD guidelines, he is expected to examine the international transaction as he actually finds the same and then make suitable ....
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....he establish that 50% that the treatment of an amount in the hand of another person is not determinative of the allowability of an expense in the hands of the first person. This can be explained with the help of various examples as will he done orally. The reliance placed by the assessee on the TPO order of Star Ltd for AY 2008-09 (Sr. No. 30 of paper book for AY 2012-13) to claim 50% share under the Profit Split Method is not appropriate. There is no evidence that the 50% share was for brand value. This figure was only of a Profit Split and nothing else. The TPO also simply accepted the share suo moto given by the Star Ltd and this cannot be called a proof for allowability of payment for Brand Licensing by the assessee to Star Ltd in this current year under consideration. The assessee has no explanation for the basic logic that if there had been no merger of the three channels with Star Ltd, would they be paying Brand License fee in their own cases? They were never paying the same and merely because these companies had merged with the assessee cannot be a trigger to hold that the assessee is required to pay Brand License fees after so many years of operation in India and after bui....
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....s, the TPO concluded and accepted profit split of (50:50 i.e. profit split of 50% to channel companies and 50% to Star Ltd) at page 13 of the order (refer case law at sr. no. : 30 of legal paper book for ÀY 2012-13). 58. In light of the said observations of the TPO, the remuneration (50%) of the profits taxed in the hands of STAR Ltd included remuneration for the brands, etc. The TPO in it is order for STAR Ltd for AY 2008-09 has observed that over a period of time STAR Ltd. has nurtured and invested significantly in the creation anti promotion of the STAR brand including the logo, along with Channel name in form of Star Cropped box / Star logo. Therefore, it said that STAR Ltd has developed the brand and is the economic owner of the STAR Ltd. Even, the Tribunal in the case of assessee's sister concern for AY 2008-09 in ITA No. 7680/Mum/2012 has approved this FAR analysis of the Transfer Pricing Officer. 59. We noted that the channel companies, i.e. STEL, SAML, SAR, which were owners of various channel at the time of merger, merged with SIPL who then carried on broadcasting business under its own umbrella. The STAR brand, however, continued with STAR Ltd. Thus, the STA....
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....e needed to expend money but would also need to develop new strategies for promoting its channel, creating awareness amongst viewers and work towards achieving brand loyalty and credibility. Thus, since SIPL could not run its operations without the Star brand, it entered into a licensing arrangement for 10 years. 61. We also noted that the approval of the RIB to brand license fee was taken and for the purpose of making lump sum payment to STAR Ltd, had determined the total value of brand license to be of USD : 36.02 million for the use of STAR mark for a tenure of two years on the basis of a valuation by third party valuer. SIPL, intended to pay the above payment in six installments. Considering the deferral in the payments, an interest component was considered to the overall value based on which the total value was determined to of USD 36.95 million. After consideration, the reserve bank refused to permit the assessee to pay the amount of US$ 36.95 Million and only approved all of USD 36.02 Million thereby excluding any interest on the value of brand license fees was approved basis the letter dated 01.08.2011 received by Deutsche Bank AG (authorized representative) from the Res....
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....d No. 8 The learned Transfer Pricing Officer, during the year under consideration, has erred in exceeding his jurisprudence by disallowing depreciation, which is under the purview of the learned Assessing Officer." 63. We find that this issue is already taken into consideration vide paras 45 to 61 of this order for earlier assessment year i.e. AY 2011-12. The Ld. Counsel for the assessee as well Ld. DR also not argued because the issue is same and facts and circumstances are also same. The facts and circumstances are exactly identical in the present appeals on this issue, hence, taking a consistent view, we allow this issue of assessee's appeal in this year also. 64. The next issue in this appeal of assessee for AY 2011-12 in IT(TP)A No. 1901/Mum/2016is as regards to corporate ground raised on the issue of disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (hereinafter the Rules). For this assessee has raised the following ground No. 10: - "Ground number 10 a) have erred in making a disallowance under Section 14A read with Rule 8D ignoring the fact ....
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....is fact is noted by AO in its order and the contentions of the assessee were also before AO as well as before DRP. We note that this issue is squarely covered by the decision of Hon'ble Bombay High Court, Nagpur Bench in the case of Pr. CIT vs. Ballarpur Industries Limited in Income Tax Appeal No. 51 of 2016, wherein this issue has been considered and finally following the judgment of Hon'ble Delhi High Court in the case of Cheminvest Limited vs. CIT (2015) 378 ITR 33 (Delhi) held as under: - "On hearing the learned Counsel for the Department and on a perusal of the impugned orders, it appears that both the Authorities have recorded a clear finding of fact that there was no exempt income earned by the assessee. While holding so, the Authorities relied on the judgment of the Delhi High Court in Income Tax Appeal No. 749/2014, which holds that the expression "does not form part of the total income" in Section 14A of the Income Tax Act, 1961 envisages that there should be an actual receipt of the income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. The Inc....
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....3,248/- represented the expenditure incurred by the Appellant in respect of reimbursement of property taxes to Precision Component(P) Ltd.(PCPL). It is argued by the assessee that in accordance with the letter dated 01.04.2001 to the PCPL, the assessee company was under obligation to pay that property tax and the said tax was paid. Therefore, the expenditure to the tune of Rs. 30,63,248/- is required to be allowed. The learned A.O. recorded the findings that in view of the clause 4 of the agreement dated 01.04.2001 the liability was with the licensor i.e. PCPL and PCPL was under obligation to pay the tax. Therefore, this expenditure was not found to be justified and disallowed the same. There should not be any dispute that the issue relating to payment of rent is normally decided between the land lord and tenant. Though the agreement has fastened the liability about payment of property tax upon the land lord, yet the fact remains that the assessee has reimbursed its property tax which was contrary to the term of license agreement. Under normal circumstances, such kind of violation of agreement does not happen. However, the assessee has drawn support from a letter claimed to have be....
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....stances are also same. The facts and circumstances are exactly identical in the present appeals on this issue, hence, taking a consistent view, we allow this issue of assessee's appeal in this year also. 72. The next issue in this appeal of assessee for AY 2011-12 in IT(TP)A No. 1901/Mum/2016 is against the order of AO/ DRP in not allowing depreciation in relation to computer software held as capital in nature in earlier years. For this assessee has raised the following ground No. 12: - "Ground number 12 have erred in non-grant of depreciation amounting to Rs. 56,12,259 in respect of the expenditure held as capital in nature incurred in relation to the computer software in earlier years. Your Appellant prays that depreciation in relation to the computer software amounting to Rs. 56,12,259 should he allowed as a deduction." 73. We noted that the DRP has already directed the AO to verify records and grant depreciation on opening WDV of software expenses earlier held as capital expenditure. We find no infirmity in the directions and AO can allow depreciation accordingly. 74. This next issue of assessee's appeal for AY 2012-13 in ITA No. 1048/Mum/201....
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.... prays to please direct the learned AO to allow depreciation of Rs. 33,34,911 on cumulative additions made to leasehold requirement in earlier years while computing taxable income." 79. We find that this issue is already taken into consideration vide paras 76 & 77 of this order for earlier assessment year i.e. AY 2011-12. The Ld. Counsel for the assessee as well Ld. DR also not argued because the issue is same and facts and circumstances are also same. The facts and circumstances are exactly identical in the present appeals on this issue, hence, taking a consistent view, we allow this issue of assessee's appeal in this year also 80. The first issue in this appeal of Revenue's for AY 2011-12 in ITA No. 1724/Mum/2016 is as regards to allowability of depreciation of computer peripherals. For this Revenue has raised the following ground No.1: - "1. On the facts and circumstances of the case and in law, whether the Hon'ble DRP was justified in directing to allow depreciation @ 60% on printers and scanners instead @ 15%? 81. We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the devices like Printer, sca....
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....or related to the computer are to be treated as computer and eligible for depreciation at the rate of 60%." 84. We find that this issue is already taken into consideration vide paras 80 to 81 of this order for earlier assessment year i.e. AY 2011-12 in revenue's appeal. The facts and circumstances are exactly identical in the present appeals on this issue, hence, taking a consistent view, we allow this issue of assessee's appeal in this year also 85. The next issue in this appeal of Revenue's for AY 2011-12 in ITA No. 1724/Mum/2016 is as regards to allowability of software expenses. For this, Revenue has raised the following ground No. 2: - "2. On the facts and circumstances of the case and in law, whether the Hon'ble DRP was justified in directing to hold the 'Software expenses' claimed by the assessee as revenue in nature instead of capital as held in the assessment order? 86. We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the DRP has accepted the software expenses as revenue in nature amounting to Rs. 5,91,18,868/- by following earlier years precedence vide Para 16.2.2 as under: - ....
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....ollowing questions of law raised by the Department - i) Whether definition of term 'process in Explanation 6 to section 9(1)(vi), by way of retrospective amendment is Clarificatory in nature and did not amend definition of 'royalty' per se- Held, yes; and ii) Whether payments made for use/ right to use of 'process' are 'royalty' in terms of the Income-tax Act, 1961- Held Yes." 91. We have heard the rival contentions on this issue and gone through the facts and circumstances of the case. We noted that the DRP has considered this issue and following assessee's own case of coordinate Bench of this Tribunal for AY 2009-10 deleted the disallowance by observing in Para 19.4.1 and 19.4.2 as under: - "19.4.1 The DRP has considered the submissions of the assessee. It has been brought to the notice of DRP that Hon'ble Mumbai Tribunal in assessee's own case for AY 2009-10 (ITA No. 1414/Mum/2014 and CO No. 72/Mum/2014) has held that there is no requirement to withhold tax at source while making payments of channel placement fees to cable operators/ multi system operators and that with reference to order under section 201(1) and 201 (1A) als....
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.... Your appellant prays that payment of channel placement fees/ carriage fees is not in the nature of process royalty basis retrospective amendment to Section 9(1)(vi) of the act. Ground Number 17 Have erred in not appreciating that the disallwonce under section 40(a)(Ia) of the Act cannot be made in case of alleged short deduction of tax deducted at source (TDS). Your appellant prays that no disallowance under section 40(a)(ia) of the Act can be made in case of short deduction of TDS. Ground No. 18 have erred in appreciating that the disallowance under section 40(a)(ia) of the Act should not be made where the taxes so deductible but not deducted by the payer are directly paid by the payee. Your appellant prays that disallowance (if any) under section 40(a)(ia) of the Act should not be made where taxes are directly paid by the payee. Ground No. 19 Without prejudice to above, have erred in not appreciating that the disallowance under Section 40(a)(ia) of the Act should be restricted to the amount outstanding (payable) at the end of the captioned AY and not the amount paid during the captioned AY. Ground No. 20 ....