TaxTMI 
TaxTMI 
2025 (1) TMI 899
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....y perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules. ITA No. 7631/DEL/2017 [A.Y. 2013-14] 4. The grounds raised by the assessee read as under: "1. That on the facts and in the circumstances of the case and in law, the order of Assistant Commissioner of Income Tax, Circle 1(2)(2), International Taxation, New Delhi ('Ld. AO') is bad both in law and on facts. The Ld. AO, based on surmises/ conjectures and in violation of the principles of natural justice, has grossly erred in assessing the income at INR 186,14,66,184 as against NIL income as per return. Grounds relating to taxability of advertisement revenues 2. The Ld. AO and Ld. DRP have grossly erred in not appreciating that payment of an arm's length remuneration by the appellant to its Permanent Establishment ('PE') (le Discovery Communications India) extinguishes the tax liability of the appellant in India. 2.1 That on the facts and circumstances of the case and in law, the Ld. AO and Ld DRP have grossly erred in holding a sum of INR 23,20,62,658 (being 15% of the gross advertisement revenues) attributabl....
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....munerated at an arm's length, no further attribution of profits can be done for such PE. 3.4 Without prejudice, the Ld. AO erred in holding that distribution revenues of INR 162,94,03,526 are taxable on gross basis @ 15%, instead of rate of 10% as prescribed under India-Singapore tax treaty. Miscellaneous grounds 4. Without prejudice to the above, the Ld. AO and the Hon'ble DRP have erred on the facts and circumstances of the case and in law, in not following the Mutual Agreement Procedure ('MAP') Resolution dated August 24, 2017 reached for Assessment Years 2004-05 to 2012-13 in case of appellant's group company Discovery Asia LLC. Levy of Interest under Section 234A, 2348, 234C, 234D and 244A of the Act 5.1 The Ld. AD erred in levying and the Hon'ble DRP erred in confirming the interest under section 234B of the Act as all receipts of the assessee were subject to deduction of tax at source and hence the provisions of Section 234B are not applicable in this case. 5.2 The Ld. AO erred in levying interest under Section 234A of the Act. Initiation of penalty proceedings under Section 271(1)(c) of the Act ....
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....ted DCIN as an agent for the sale of commercial airtime and distribution of the Channels in India. As per aforesaid agreement, DCIN retained 40 percent of revenues earned from subscription sales and 15 percent of revenues earned from sale of advertisement inventory for the channels in India as an arm's length consideration for services rendered to DNAP. 8. The assessee, during the year under consideration, has received Rs 1,54,70,84,391/- as advertisement revenue and Rs 1,62,94,03,526/- as distribution revenue. The assessee however, has filed ROI on 29.11.2013 for AY 2013-14 declaring nil income. The assessee in its return of income has claimed that the above advertisement revenue of Rs 1,54,70,84,391/- and distribution revenue of Rs 1,62,94,03,526/- is not taxable in India. It has also claimed that it has PE in India. 9. For F.Y 2012-13, the assessee has carried out its business from Singapore under the name DNAP with PAN: AAECD1880C. In the earlier years, the assessment of the Indian Operations of Discovery Asia LLC (DALLC) i.e for AY's 2004-2005 to 2012-13 have been completed u/s 143(3)/ 144C holding that the DALLC has a PE in India in the form of DCIN. The assessm....
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....e previous year relevant to AY 2013-14 are taxable as Royalty @ 15% on gross basis as per India-Singapore DTAA. The AO, later rectified the percentage of gross distribution revenues from 15% to 10%. c) Without prejudice to the findings above, the AO also held that the Distribution revenue can also be taxed as business income. The profit attributable to the permanent establishment of the assessee is computed @15% of gross subscription revenue collected by DCIN of Rs. 1,62,94,03,526/-. 13. Aggrieved, the assessee is before us. 14. At the outset, the ld. counsel for the assessee requested us to decide the subject appeal for A.Y 2013-14 on the ground no. 4 i.e., the ground taken without prejudice, i.e., in consonance with the position adopted in the recently signed MAP resolution dated January 09, 2024 in assessee's own case, wherein it has been agreed that 10% of the net advertisement and distribution revenues received by DNAP from India (i.e., post DCIN's share) shall be taxed as business profits of DNAP in India. The assessee made the above request with a view to achieve tax certainty in India and to avoid further litigation for subject AY. In this regard, the....
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....n this regard, the assessee invited our attention to the judgment of co-ordinate bench of ITAT in case of assessee's group company, ADIT v. Animal Planet (Asia) LLC [I.T.A.No.4840/Del/2012 and I.T.A. No. 4841/Del/2012 (Delhi). The ld AR relied on the decision of the Hon'ble Supreme Court in the case of PCIT vs. Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375 (SC) for the proposition of tax certainty and consistency. 18. The ld AR also placed reliance on the following judicial precedents as well wherein the ITAT has replicated MAP/APA positions: a) Principal Commissioner of Income Tax-10 v. J.P. Morgan Services India (P.) Ltd. [2019] 105 taxmann.com 40 (Bombay HC); b) CGI Information System & Management Consultants (P.) Ltd v. DCIT [2017] 81 taxmann.com 169 (Bangalore - ITAT); and c) Colt Technology Services (1) (P.) Ltd. v. DCIT [2022] 141 taxmann.com 386 (Delhi - ITAT). 19. The ld AR further, without prejudice to above request for replication of MAP position to subject A.Y, also submitted to decide the said appeal on the basis of technical submission supporting NIL taxability claim in Revised ROI filed for the subject AY. The ld counsel....
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....tion to the UAPA signed for DCIN wherein complete functions, assets and risks undertaken by DCIN with respect to aforementioned transactions pertaining to sale of commercial airtime and distribution of the Channels with DNAP in India have been analyzed in detail and an arms-length methodology has been agreed upon. 23. The ld AR finally submitted that even where DCIN constitutes a DAPE of DNAP in India, no further business profits (pertaining to advertisement and distribution revenues) should be attributed to such a DAPE where it has already been compensated on an arms-length basis and relied on the Hon'ble SC of India in the case of Director of Income-tax (International Taxation) v. Morgan Stanley & Со. [2007] 162 Тaxman 165 (SC) and ADIT-1 v. E-funds IT Solutions Inc. [2017] 86 taxmann.com 240 (SC). 24. Per contra, the DR forcefully submitted that the MAP resolution applies only to the particular entity and for the particular year which is covered by such resolution. The ld DR however, did not controvert nor made any substantial disagreement with regard to the factual matrix of the case in hand with respect to the AO having assessed the assessee's incom....
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.... DTAA dated 24.08.2017 and Rule 44H of the Income-tax rules, 1962 as follows: (i) 10% of advertising revenues will be taxable in the hands of Discovery Asia Inc. taxed @40% and (ii) Net Distribution revenues taxed in the hands of Discovery Asia Inc. @10% + surcharge and Cess. 28. Similarly, for subsequent years, as per India-Singapore MAP dated 09.01.2024, the taxation was provided as under: i) 10% of net advertising revenues and Net Distribution revenues will be taxable as business profit in the hands of Discovery Asia Inc. taxed @40% + surcharge and Cess. 29. Following the principle of tax certainty and consistency, especially when there is no change in factual matrix and business operations of assessee in the year under consideration, compared to earlier and subsequent years, we are of the considered view that the taxation of assessee's revenue may be based on the resolution as per MAP in the impugned AY 2013-14 as well. We are fortified in our view by the decision of coordinate Bench of Delhi in the assessee's group company namely ADIT v. Animal Planet (Asia) LLC [I.T.A.No. 4840/ Del/2012 and I.T.A. No. 4841/Del/2012 (Delhi) which held as under:....
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....in grounds 1 to 3 and is sub-grounds. Since the issues of taxability of Advertising and Distribution receipts have been decided on the basis of MAP resolutions between the Competent Authorities of India and USA and India and Singapore, the said technical arguments no longer survives and are rendered infructuous. Grounds 1 to 3 and is sub-grounds are decided accordingly. 33. As a result, the appeal of the assessee is partly allowed. ITA Nos. 908 and 909/DEL/2020 A.Ys 2014-15 and 2015-16 34. These are Revenue's appeals against deletion of penalty u/s 271(1)(c) for AY 2014-15 and 2015-16. The brief facts of the case are that the assessee filed nil return for AY 2014-15 and AY 2015-16 considering the advertisement and distribution revenue received by it from India, as non-taxable. The AO held that 10% of gross advertising revenues will be taxable in the hands of Discovery Asia Inc. @ 40% plus applicable surcharge and Cess and the Net Distribution revenues will be taxed in the hands of Discovery Asia Inc. as Royalty @ 10% + surcharge and Cess. 35. The AO simultaneously initiated the penalty proceedings u/s 271(1)(c) for furnishing of inaccurate particulars and subsequentl....
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....cember 18, 2018 requested the Ld. AO that in a scenario where the Ld. AO passes the draft assessment order for the subject AY on the same basis as revised final assessment order dated December 14, 2018 for AY 2014-15, no objections shall be filed by the respondent before Hon'ble DRP, nor any appeal shall be preferred with Hon'ble CIT(A) against the final assessment order to avoid protracted litigation and buy peace of mind. 43. The ld AR further argued that it has been held by various courts that mere non-filing of appeal in quantum matter would not ipso-facto lead to an automatic levy of penalty under section 271(1)(c) of the Act. Reliance in this regard is placed on the judgement of Hon'ble SC in the case of Sir Shadi Lal Sugar & General Mills Ltd. V. CIT 33 Taxman 460A(SC) and Hon'ble HC of Karnataka in case of CIT v. Manjunatha Cotton & Ginning Factory (2013) 35 taxmann.com 250 (Karn). 44. The ld AR, on the issue of no provision in law when resolution in case of group company leading to non-levy of penalty, stated that the issue/additions involved in the subject AY are capable of more than one opinion and are a debatable question of law. The ld AR relied o....
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....ere it disclosed all material facts and information during the MAP proceedings as well as assessment proceedings substantiating the position adopted by it in its RoI. 48. The ld AR also distinguished the facts of the Zoom Communications (supra) where the Hon'ble HC held that disallowance of income tax paid is not a debatable issue and is entirely unsustainable in law. The court held that as long as the assessee has not concealed any material fact or any factual information given by him has not been found to be incorrect, he will not be liable to imposition of penalty under section 271(1)(c), even if claim made by him is unsustainable in law, provided that he either substantiates explanation offered by him or explanation, even if not substantiated, is found to be bona fide. The ld AR stated that in that case, the Court found that the claim of the assessee that due to oversight the amount of income tax paid was not added back, is incorrect in law and without any basis, hence sustained the penalty. 49. The ld AR further stated that the facts of assessee's case are clearly distinguishable from the above, as in the instant case, the claim made by the assessee is based on j....
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....asis of such a stand of the assessee are the judicial precedents and legal interpretation of 'Royalty' in decisions of the Hon'ble HC of Delhi in the case of CIT International Taxation vs. ESPN Star Sports (Mauritius) SNC et Co mpagnie (supra) and Hon'ble HC of Bombay in the case of CIT v. MSM Satellite (Singapore) Pte. Ltd (supra). 52. We also find that the AO has not questioned the genuineness or adequacy of revenue received by the assessee. The penalty imposed is merely on the basis of additions made by the AO in the assessment order. The AO has adopted a view which is different from the view taken by the assessee on the same set of facts which can only be termed as difference of opinion. There were judgements such as Director of Income-tax (International Taxation) v. Morgan Stanley & Co. (supar) and ADIT- 1 v. E-funds IT Solutions Inc.(supra) which interpreted such receipts as not taxable. We therefore hold that when the assessee has disclosed all facts, addition made on difference of opinion can not lead to levy of penalty u/s 271(1)(c). We get support from the decision of the Hon'ble HC of Delhi in case of CIT v. Nath Bros Exim International Ltd. [2007] 288 ITR....
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....to an automatic levy of penalty under section 271(1)(c) of the Act. A view which is supported by the judgement of Hon'ble SC in the case of Sir Shadi Lal Sugar & General Mills Ltd. V. CIT (supra) wherein it has been held that: "14......from agreeing to additions, it does not follow that the amount agreed to be added was concealed. There may be 101 reasons for such admissions...". 56. Similarly, the Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory 35 taxmann.com 250 (Kar) observed that: "(K) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the Assessing Officer in the assessment order" 57. We also endorse the submission of the ld AR that the decision of the Supr....