AI Drafter 
TaxTMI 
TaxTMI 
2020 (3) TMI 391
X X X X Extracts X X X X
X X X X Extracts X X X X
....w.s. 144C(13) of the Income Tax Act, 1961 (in short 'the Act'). 3. Brief facts of the case as emanating from the records are: The assessee company is engaged in distribution of Satellite Television Channels namely, National Geographic Channel and History Channel( Now known as Fox Traveller Channel) in India. The assessee during the period relevant to the assessment year under appeal entered into international transaction with two of its Associated Enterprises (AEs) namely;(i) M/s. NGC Network Asia LLC ,USA & (ii) M/s. Fox International Channels (US) Inc. USA. The assessee provided business support services in the form of (a) Promo Production Services; (b) Long Form Production Services; and (c) Quality Control Services in relation to content versioning. To benchmark transactions with its AEs, the , assessee selected eight companies as comparables. The assessee adopted Transaction Net Margin Method( in short 'TNMM') as the most appropriate method. The OP/OC was the filter for determining PLI. The Transfer Pricing Officer (TPO) rejected five out of eight comparables selected by the assessee and introduced two fresh comparables. Thus the final set of comparables adopted by the TPO f....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Apitco as one of the comparables. The said company is a 100% Government Undertaking and is functionally different from the assessee. The ld. Authorized Representative for the assessee submitted that a perusal of Directors report of Apitco at page 336 of the Paper Book would show that the company is engaged in high end technical consultancy services, such as skill development, tourism and research studies, micro enterprises developments, cluster development, asset reconstruction and management services, energy related services, environment management, infrastructure planning and development, etc. The activities carried out by Apitco are absolutely at variance with the activities of the assessee, which is primarily engaged in providing low end business support services. The ld. Authorized Representative for the assessee submitted that the Tribunal in assessee's own case in ITA NO.2223/Mum/2017 for assessment year 2012-13 decided on 30/04/2019has rejected Apitco as comparable on both ground i.e. the said company being Government Company and being functionally different. The ld. Authorized Representative for the assessee further submitted that in the case of assessee's group concern, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he invoice. The Assessing Officer wrongly presumed that trade discounts are in the nature of agency commission paid by the assessee to e intermediaries for procuring business to the assessee. The Assessing Officer further erred in coming to the conclusion that the assessee has not deducted tax at source under section 194H of the Act, on all such payments on agency commission. Therefore, the Assessing Officer made disallowance of the said purported payments under section 40(a)(ia) of the Act. The ld. Authorized Representative for the assessee submitted that trade discounts offered by the assessee to its customers are neither payments made by the assessee to its agents nor it is claimed in the books of account. The assessee has been following this practice of offering trade discounts to its customers right through and the same are reflected in the invoice issued by the assessee. In the earlier assessment years, the Department has never raised any dispute on this count. The assessment year under appeal is the first year when the Department raised any query on trade discounts offered by the assessee and has wrongly assumed the same as agency commission. The ld. Authorized Representativ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpany can be treated as a comparable. In our view, the dispute on this issue is now fairly well settled by virtue of various judicial precedents. The Tribunal, Mumbai Bench, in Thyssen Krupp Industries India Pvt. Ltd. (supra), has held that Government Company cannot be treated as comparable as they are not driven by profit motive and have been created in furtherance of social obligation of the Government. Having held so, we are to examine whether Apitco Ltd., falls in the category of a Government Company / PSU. On a perusal of the material on record including the annual report of the company, we are of the considered opinion that Apitco Ltd. has to be treated as a Government Company / PSU. In fact, in the case of International SOS Services India Pvt. Ltd. v/s DCIT, [2016] 67 taxmann.com 73 (Del.), the Tribunal, Delhi Bench, has excluded Apitco Ltd., by treating it as a Government Company. The aforesaid decision of the Tribunal was upheld by the Hon'ble Delhi High Court while deciding Revenue's appeal in ITA no. 454 of 2016, dated 30th May 2017. It is relevant to observe, though the Department challenged the aforesaid decision of the Hon'ble Delhi High Court before the Hon&#....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pment, project appraisals, asset valuation, HRD intervention, capacity building, etc. These services provided by the APTICO are in the nature of high end consultancy / project related services and hence APTICO cannot be compare as comparable to support to service providers. Even, company has not provided for any segmental break up for the income earned from various revenue streams as it is not clear from its audited accounts. Further, APTICO receives subsidy from central and state financial institutions for certain assignments. In view of the above reasons, we are of the considered view that APTICO cannot be considered as comparable to the assessee and we direct the AO to exclude this company from the list of comparables." 8.3 The ld.Departmental Representative has not placed on record any material to controvert the finding of the Tribunal rejecting Apitco as comparable being a Government company and functionally different from that of a support service provider. Thus, in view of similarity in facts of the case and the decision of Tribunal in assessee's own case in assessment year 2012- 13, we hold that Apitco is not a good comparable and, hence, is to be excluded from the list ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ision of Co-ordinate Bench of the Tribunal, we hold that TSRDL is not comparable to a company engaged in providing business support services. Consequently, we direct the TPO/Assessing Officer to exclude TSRDL from the list of comparables. Consequently, Ground No.11 of the appeal is allowed. 9. In ground No.14 of the appeal, the assessee has assailed disallowance made under section 40(a)(ia) Rs. 4,70,26,793/- The Assessing Officer has made disallowance on account of agency commission under section 40(a)(ia) of the Act on the ground that the assessee has not deducted tax at source under the provisions of section 194H of the Act in respect of said agency commission paid to the agents for procuring business for the assessee. The ld.Authorized Representative of the assessee has explained that the assessee is offering trade discount to its customers and the said trade discount is reflected in the invoice issued by the assessee. The trade discounts labelled as agency commission by Assessing Officer, are neither paid to the agents nor claimed in the books. Therefore, there is no question of deducting tax at source on such alleged payment of agency commission. The ld.Authorized Repres....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 40(a)(ia) of the Act. Thus, the Revenue accepted the findings of Tribunal on this issue. Taking into consideration, the facts of the present appeal and the aforesaid decisions, we find merit in the contentions of the ld.Authorized Representative of the assessee. Accordingly, Ground No.14 raised in the appeal is allowed. 11. Since, we have accepted the contentions of the assessee in excluding Apitco and TSRDL from the list of comparables the margin of the assessee falls within tolerance range of +/- 5%. As a result, the grounds No.1 to 9 and 12 to 13 relating to transfer pricing adjustment have become academic, hence, are not deliberated upon. 12. The Grounds Nos.15 & 16 of the appeal are respect to charging of interest under section 234B & 234C of the Act. Charging of interest is mandatory and consequential, hence, these grounds are dismissed. 13. In Ground NO.17 of the appeal, assessee has assailed initiation of penalty proceedings under section 271(1)(c) of the Act. Challenge to penalty proceedings at this stage is premature, therefore, this ground is dismissed as premature. 14, In the result, appeal of the assessee is partly allowed in the terms aforesaid. ITA ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me other companies is also mentioned in grounds of appeal but he is not pressing exclusion of other comparables viz. Best Mulyankan Consultancy Ltd., DLF Services, Genins India TPS Ltd., Killick Agencies and Marketing Ltd., Hindustan Housing Co. Ltd. 19. The ld. Authorized Representative for the assessee further pointed that ground No.14 to 19 of the appeal are on the issue of trade discounts treated as agency commission by the Revenue. The issue is similar to the one addressed in assessment year 2009-10. 20. The ld. Departmental Representative vehemently supported the finding of TPO/DRP in including WAPCOS Ltd. in the list of comparables. The ld. Departmental Representative fairly admitted that the ground raised in the present appeal are similar to the one raised by the assessee in assessment year 2009-10. The ld. Departmental Representative further contended that submissions made in the appeal of the assessee for assessment year 2009-10 would equally apply to assessment year 2010-11. 21. Both sides heard. The ground No.1 of the appeal is general in nature. In so far as Transfer Pricing issues raised in ground No.2 to 13, the ld. Authorized Representative for the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sing ground No.10 of the appeal, therefore, the same is dismissed as not pressed. 25. Since, we have adjudicated assessee's grounds relating to exclusion of certain comparables, consequently, the PLI of the assessee falls within +/- 5% range. The other grounds relating to transfer pricing issue raised in ground No.2 to 7 and ground No.11 to 13 have become academic and thus, are not deliberated upon. 26. In ground No.14 to 19 of the appeal, assessee has assailed the action of Assessing Officer in treating trade discount as agency commission. This issue we have adjudicated in the appeal of the assessee in assessment year 2009-10. Both sides are unanimous in stating that this issue is identical to the one raised in appeal for assessment year 2009-10. The finding given by us while adjudicating the issue of agency commission in assessment year 2009- 10 would mutatis mutandis apply to ground No.14 to 19 of the present appeal. Consequently, these grounds are allowed in similar terms. 27. In ground No.20 of the appeal, assessee has assailed charging of interest under section 234Bof the Act. The charging of interest under section 234B is mandatory and consequential, hence, the g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....In so far as assessee's prayer for exclusion of Apitco, TSRDL, WAPCOS is concerned, we have held that the said companies should be excluded from the list of comparables on account of functional disparity apart from the fact that Apitco and WAPCOS being Government companies are not good comparables. The detailed findings given by us in the preceding assessment years would mutatis mutandis apply to the assessment year under appeal. 35. As regards Hindustan Housing Co. Ltd., the assessee is seeking exclusion of the same as the said company fails to qualify RPT Filter. The ld. Authorized Representative for the assessee submitted that the said company is having related party transactions of 25.75% of total revenue. The ld. Authorized Representative for the assessee submitted that the Tribunal in the case of DCIT vs. Aruba Networks India Pvt. Ltd. in IT(TP) A NO.571/Bang/2015 for assessment year 2010-11 decided on 30/09/2016 has excluded Hindustan Housing Limited for the reasons that it has related party transactions exceeding 25% of turnover. Similar view has been taken by the Tribunal in the case of ITO vs. Alcon Laboratories Pvt. Ltd. in IT(TP)A No.391/Bang/2015 in assessment year ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Assessing Officer is directed to examine the documents filed by the assessee in support of the claim and allow TDS credit, in accordance with law. Thus, ground No.19 of the appeal is allowed for statistical purpose. 41. In ground No.20 of the appeal, assessee has assailed charging of interest under section 234B of the Act. The charging of interest under section 234B is mandatory and consequential, hence, the ground raised is dismissed. 42. In ground No.21, assessee has assailed penalty proceedings under section 271(1)(c) of the Act. This ground is premature at this stage. Accordingly, the same is dismissed. ITA NO.1245/MUM/2016,A.Y.2011-12Departmental appeal: 43. The Revenue in appeal has assailed the findings of Assessing Officer /DRP in deleting disallowance under section 40(a)(ia) r.w.s. 194J of the Act in respect of channel placement fee. 44. The ld. Authorized Representative for the assessee has submitted that Hon'ble High Court in the case of UTB Entertainment Television Ltd., Times Global Broadcasting Co. Ltd. and in assessee's own case has deleted the disallowance on account of channel placement fee. 45. We find that DRP has granted relief to the ass....