ATL MEDIA LIMITED ( EARLIER KNOWN AS ASIA TODAY LTD ), MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX (IT) 1(1)(2), MUMBAI

CO 138/MUM/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3804 (ITAT-MUMBAI)
• Duration Of Justice: 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: L
• Assessment Year: 2011-2012
• Appeal Filed On: 22-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Assessee Lawyers: JAI BHANSALI
• Keywords: Business income; Double taxation relief; Permanent establishment
• Section: 143(3)

Judgement Text

P A G E | 1 ITA NO. 5448/MUM/2016 C.O. NO. 138/MUM/2016 AY. 2011 - 12 DY. COMMISSIONER OF INCOME TAX (I.T) VS. M/S ASIA TODAY LTD . IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, M UMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAVISH SOOD, JM ITA NO.5448 /MUM/2016 C.O. NO. 138/MUM/2018 (ARISING OUT OF ITA NO.5448/MUM/2016 ( / ASSESSMENT YEARS:2011 - 12 ) DY. COMMISSIONER OF INCOME TAX, (INTERNATIONAL TAXATION) - 1(1)(2), ROOM NO. 117, SCINDIA HOUSE, BALLARD PIER, MUMBAI - 400 038. / VS. M/S ASIA TODAY LTD, C/O MGB & CO., CAS JOLLY BHAVAN NO.2 , 1 ST FLOOR 7 NEW MARINE LINES, CHURCHGATE, MUMBAI - 400 020 ./ ./ PAN NO. AAGCA5649G ( / REVENUE ) : ( / ASSESSEE ) / REVENUE BY : SHRI V. VIDHYADHAR, SR. D .R / ASSESSEE BY : SHRI JAI BHANSALI, A .R / DATE OF HEARING : 24.05 .2018 / DATE OF PRONOUNCEMENT : 31 .05.2018 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER : THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 55, MUMBAI , DATED 09.06.2016, WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 144C(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 29.04.2015. STILL FURTHER , THE ASSESSEE HAD ALSO FILED CROSS OBJECTION S BEFORE US. THE REVENUE HAS ASSAILED THE ORDER OF THE CIT(A) BEFORE US BY RAISING THE FOLLOWING GROUNDS OF APPEAL: P A G E | 2 ITA NO. 5448/MUM/2016 C.O. NO. 138/MUM/2016 AY. 2011 - 12 DY. COMMISSIONER OF INCOME TAX (I.T) VS. M/S ASIA TODAY LTD . 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THE ZEE ENTERTAINMENT ENTERPRISES LTD. (ZEEL) /ZEE TURNER LTD. ( ZTL) IS NOT A DEPENDENT AGENT AND HENCE IT DOES NOT CONSTITUTE A PERMANENT ESTABLISHMENT (PE) OF T HE ASSESSEE IN INDIA. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT IN THE ABSENCE OF PERMANENT ESTABLISHMENT (PE) AS DEFINED IN ARTICLE 5 OF THE TREATY, THE BUSINESS INCOME OF THE ASSESSEE IS NOT TAXABLE IN INDIA AS PER ARTICLE 7 OF THE DTAA. 3. WITHOUT PREJUDICE TO GROUND 1 & 2 AND IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD.CIT(A) ERRED IN RELYING THE ORDERS OF HIS PREDECE SSORS FOR AYS 2001 - 02 TO 2006 - 07 IN LIGHT OF THE FACT THAT FOR AND FROM THE FY 2009 - 10 A NEW AGREEMENT WAS SIGNED BETWEEN THE ASSESSEE AND ITS AGENT IN INDIA, ZEEL, WHICH MATERIALLY ALTERED THE TERMS OF ENGAGEMENT BETWEEN THE TWO, THUS REINFORCING THAT ZEEL WAS PE OF ATL IN INDIA UNDER ARTICLE 5(4) OF THE INDIA - MAURITIUS TAX TREATY. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) BE SET ASIDE ON THE ABOVE GROUNDS AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. STILL FURTHER, THE ASSESSEE HAD RAISED BEFORE US TH E FOLLOWING CROSS OBJECTION S : WITHOUT PREJUDICE TO THE JUDGMENT OF THE LD. CIT (A), WHEREIN THE LD. CIT (A) HELD THE NON - TAXABILITY OF INCOME FROM ADVERTISING/SUBSCRIPTION FEES UNDER THE DOUBLE TAXATION AV OIDANCE AGREEMENT (DTAA ) BETWEEN INDIA AND MAURITIUS HAVING REGARD TO THE FACT THAT THE RESPONDENT - ASSESSEE H AS NO PERMANENT ESTABLISHMENT (P E ) IN INDIA AS SPECIFIED UNDER ARTICLE 5 OF THE SAID DTAA, THE RESPONDENT RAISES THE FOLLOWING CROSS - OBJECTIONS: 1. ASSUMING WITHOUT ADMITTING ZEE ENTERTAINM ENT ENTERPRISE LIMITED ('ZEEL')/ ZEE TURNER LIM ITED ('ZTL') ARE CONSIDERED AS P E OF THE RESPONDENT - ASSESSEE WITHIN THE MEANING OF ARTICLE 5 OF THE DTAA, THE ASSESSING OFFICER ('AO') ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, FAILED TO APPRECIATE THAT NO FURTHER PROFITS CAN BE ATT RIBUTED AS ZEEL/ZTL HAVE ALREADY BEEN COMPENSATED AT ARM'S LENGTH PRICE; 2. THE AO ERRED IN H OLDING THAT THE RESPONDENT - ASSE SSEE HAS A BUSINESS CONNECTION IN INDIA AND ATTRIBUTING 10% OF THE NET REVENUES FROM ADVERTISEMENT AND SUBSCRIPTION, AS TAXABLE FOR REASON WHICH ARE CONTRARY TO FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW; 3. THE AO ERRED IN ATTRIBUTING PART OF THE TOTAL INCOME EARNED BY THE RESPONDENT - ASSESSEE FROM ADVERTISING/SU BSCRIPTION FEES TO THE ALLEGED P E ON ARBITRARY BASIS; 4. THE ABOVE CROSS OBJECTIONS ARE WITHOUT PREJUDICE TO EACH OTHER; P A G E | 3 ITA NO. 5448/MUM/2016 C.O. NO. 138/MUM/2016 AY. 2011 - 12 DY. COMMISSIONER OF INCOME TAX (I.T) VS. M/S ASIA TODAY LTD . 5. THE RESPONDENT CRAVES LEAVE TO ADD, AMEND OR ALTER ALL OR ANY OF THE OBJECTIONS RAISED THERETO. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE WHICH IS A FOREIGN TELECASTING COMPANY INCORPORATED IN MAURITIUS AND HAVING A TAX RESIDENCY CERTIFICATE OF MAURITIUS IS ENGAGED IN THE BUSINESS O F BROADCASTING OF TV CHANNELS FROM SING APORE. THE A SSESSEE COMPANY BEAM S ITS CHANNELS I.E. ZEE CAFE, ZEE TRENDS AND ZEE STUDIO IN INDIA FROM SINGAPORE/ MAURITIUS. THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME ON 29.11.2011, DECLARING A TOTAL INCOME OF RS.3,30,98,363/ - . THE CASE OF THE ASSESSEE W AS THEREAFTER SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE ACT. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE COMPANY HAD RECEIVED NET ADVERTISING REVENUE OF RS.53,68,52,426/ - AND SUBSCRIPTION REVENUE OF RS.58,97,35,786/ - DURING THE YEAR UNDER CONSIDERATION. IT WAS THE CLAIM OF THE ASSESSEE , THAT ITS INCOME WAS EXEMPT FROM TAXATION IN INDIA ON THE GROUND THAT IT HAD NEITH ER ANY BUSINESS IN INDIA NOR A P ERMANEN T E STABLISHMENT (FOR SHORT PE) IN INDIA. HOWEVER, THE A.O NOT BEING PERSUADED TO SUBSCRIBE TO THE AFORESAID CLAIM OF THE ASSESSEE INTERALIA CONCLUDED THAT A PERUSAL OF THE FACTS AND THE NATURE OF THE BUSINESS OPERATIONS OF THE ASSESSEE REVEALED THAT ZEEL / ZE E TURNER LTD. IN INDIA WERE THE DEPENDENT AGENT S OF THE ASSESSEE AND CONSTITUTED ITS PE IN INDIA UNDER ARTICLE 5(4) OF THE INDIA - MAURITIUS TAX TREATY. ON THE BASIS OF HIS AFORESAID DELIBERATIONS , THE A.O HELD THAT THE INCOME OF THE ASSESSEE WAS TAXABLE IN INDIA AS BUSINESS INCOME AND ESTIMATED 10% THE AGGREGATE AMOUNT OF ADVERTISING AND SUBSCRIPTION REVENUE OF RS.112,65,88,212/ - , AS THE BUSINESS INCOME OF THE ASSESSEE TAXABLE IN INDIA . THE A.O ON THE BASI S OF HIS AFORESAID OBSERVATIONS, AFTER MAKING AN ADDI TION OF RS.11,26,58,821/ - TOWARDS BUSINESS INCOME OF THE ASSE SSEE UNDER RULE 10, ASSESSED THE INCOME OF THE ASSESSEE AT RS.14,57,57,184/ - . P A G E | 4 ITA NO. 5448/MUM/2016 C.O. NO. 138/MUM/2016 AY. 2011 - 12 DY. COMMISSIONER OF INCOME TAX (I.T) VS. M/S ASIA TODAY LTD . 4. AGGRIEVED , THE ASSESSEE ASSAILED THE ORDER PASSED BY THE A.O BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON T HE FACTS OF THE CASE IN THE BACKDROP OF THE CONTENTIONS RAISED BY THE ASSESSEE BEFORE HIM, OBSERVED THAT A SIMILAR ISSUE HAD CAME UP BEFORE HIM IN THE ASSESSEES OWN CASE FOR A.Y 2010 - 11. THE CIT(A) OBSERVED THAT WHILE DISPOSING OFF THE APPEAL OF THE ASSES SEE FOR A.Y 2010 - 11, HE HAD FOLLOWED THE ORDER OF HIS PREDECESSOR FOR A . YS 2001 - 02 TO 2006 - 07, AND HAD CONCLUDED THAT AS NEITHER THE ASSESSEE HAD A FIXED PLACE OF BUSINESS IN INDIA NOR ITS AGENTS ZEEL/ZEE TURNER LTD WERE ITS DEPENDENT AGENTS, HENCE THE AS SESSEE HAD NO PE IN INDIA. THE CIT(A) OBSERVED THAT AS THE FACTS OF THE CASE INVOLVED IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION REMAINED THE SAME , AS WERE THERE IN THE CASE OF THE ASSESS EE FOR AY 2010 - 11, THUS ADOPTED A CONSISTENT APPROA CH AND CONCLUDED THAT THE ASSESSEE HAD NO PE IN INDIA DURING THE YEAR UNDER CONSIDERATION. THE CIT(A) ON THE BASIS OF HIS AFORESAID OBSERVATIONS , DELETED THE ADDITION OF RS.11,26,58,821/ - MADE BY THE A.O . 5. ALTERNATIVELY, THE ASSESSEE HAD SUBMITTED BEFORE THE CIT(A) THAT EVEN OTHERWISE AS THE ASSESSEE HAD COMPENSATED ITS AGENTS I.E. ZEEL /ZEE TURNER LTD BY MAKING PAYMENT OF COMMISSION TO THEM AT ARM S LENGTH , HENCE NO FURTHER INCOME COULD BE ATTRIBUTED TO THE ACTIVITIES CARRIED OUT BY THEM IN INDIA . HOWEVER, THE CIT(A) BEING OF THE VIEW THAT AS HE HA D CONCLUDED THAT THE ASSESSEE DID NOT HAVE A PE IN INDIA UNDER ARTICLE 5, THUS ITS BUSINESS PROFITS WERE N OT TAXABLE UNDER ARTICLE 7, HENCE REFRAINED FROM ADVERTING TO AND ADDRESSING THE AFORESAID CONTENTION SO RAISED BY THE ASSESSEE IN CONTEXT OF THE ISSUE OF ATTRIBUTION OF INCOME . ON THE BASIS OF HIS AFORESAID DELIBERATIONS , THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 6. THE REVENUE BEING AGGRIEVED WITH T HE ORDER PASSED BY THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THE ASSESSEE HAD CLAIMED BEFORE US THAT THE CIT(A) HAD ERRED IN RELYING ON THE ORDERS OF HIS PREDECESSORS FOR THE AYS 2001 - 02 TO 2006 - 07, LOOSING SIGHT OF THE FACT THAT FOR AND FROM THE FINANCIAL YEAR 2009 - 10 , AS A NEW AGREEMENT WAS SIGNED BETWEEN THE ASSESSEE AN D ITS AGENT IN INDIA, I.E. ZEEL , HENCE THE SAME MATERIALLY ALTERED P A G E | 5 ITA NO. 5448/MUM/2016 C.O. NO. 138/MUM/2016 AY. 2011 - 12 DY. COMMISSIONER OF INCOME TAX (I.T) VS. M/S ASIA TODAY LTD . THE TERMS OF ENGAGEMENT BETWEEN THE TWO, THUS REINFORCING THE CLAIM OF THE REVENUE THAT ZEEL WAS A PE OF THE ASSESSEE IN INDIA UNDER ARTICLE 5(4) OF THE INDIA - MAURITIUS TAX TREATY. IN THE BACKDROP OF THE AFORESAID FACTS, THOUGH THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) RELIED ON THE ORDER OF THE CIT(A), BUT SUBMITTED THAT AS THE AGENTS OF THE ASSESSEE, I.E ZEEL/ZEE TURNER LTD HAD BEEN COMPENSATED FOR THEIR ACTIVITIES IN INDIA BY THE ASSESSEE AT ARMS LENGTH, HENCE NO FURTHER INCOME COULD BE ATTRIBUTED TO ACTIVITIES CARRIED OUT BY THEM IN INDIA . IT WAS SUBMITTED BY THE LD. A.R THAT IF THE CROSS OBJECTIO N RAISED BY THE ASSESSEE TO THE SAID EFFECT IS ALLOWED, THEN THE CHALLENGE THROWN BY THE REVENUE TO THE ORDER PASSED BY THE A.O ON THE ASPECT OF THE EXISTENCE OF A PE OF THE ASSESSEE IN INDIA, WOULD BE MERELY RENDERED AS ACADEMIC. 7. THE LD. A.R TAKING US THROUGH THE CROSS OBJECTION FILED BY THE ASSESSEE , SUBMITTED THAT EVEN IF IT WAS TO BE ASSUME D, THOUGH NOT ADMITTED THAT ZEEL /ZEE TURNER LTD WHICH WERE THE INDEPENDENT AGENTS OF THE ASSESSEE, WERE TO BE CONSIDERED AS THE PE OF THE ASSESSEE IN INDIA WITHIN THE MEANING OF ARTICLE 5(4) OF INDIA - MAURITIUS TAX TREATY, STILL NO FURTHER PROFITS COULD BE ATTRIBUTED TO THE ACTIVITIES CARRIED OUT BY THEM IN INDIA , AS THEY HAD ALREADY BEEN COMPENSATED BY THE ASSESSEE AT ARM S LENGTH. THE LD. A.R SUBMITTED THAT A SIMILAR ISSUE THAT NO FURTHER PRO FITS COULD BE ATTRIBUTED TO THE ACTIVITIES CARRIED OUT BY ZEEL /ZE E TURNER LTD AS THEY HAD BEEN COMPENSATED BY THE ASSESSEE AT ARM S LENGTH , HAD CAME UP IN THE ASSESSEES OWN CASE FOR AYS 2006 - 07 TO 2009 - 10, DATED 12.01.2018 (COPY PLACED ON RECORD). IT WAS AVERRED BY THE LD. A.R THAT IN THE AFORE SAID CASE S ALSO , THE TRIBUNAL WHILE DISPOSING OFF THE CROSS OBJECTION S OF THE ASSESSEE , HAD OBSERVED THAT EVEN IF THE ASSESSEE IS HELD TO HAVE AN AGENCY PE IN INDIA BY HOLDING ZEEL/ZEE TURNER LTD AS DEPENDENT AGENT S OF THE ASSESSEE IN INDIA, NO FURTHER INCOM E CHARGEABLE TO TAX IN INDIA COULD BE ATTRIBUTED TO THE ASSESSEE, FOR THE REASON THAT ZEEL /ZEE TURNER LTD, HAD BEEN COMPENSATED FOR THEIR SERVICES AT ARMS LE NGTH BY THE ASSESSEE . IT WAS SUBMITTED BY THE LD. A.R THAT THE TRIBUNAL WHILE CONCLUDING AS HEREINABOVE, HAD TAKEN SUPPORT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ADIT VS. E - FUNDS P A G E | 6 ITA NO. 5448/MUM/2016 C.O. NO. 138/MUM/2016 AY. 2011 - 12 DY. COMMISSIONER OF INCOME TAX (I.T) VS. M/S ASIA TODAY LTD . I.T SOLUTION I & C (CIVIL APPEAL NO. 6082 OF 2015, DATED 24.10.2017 ) AND THE ORD ER OF A COORDINATE BENCH OF THE ITAT, MUMBAI IN THE CASE OF TAJ T.V. LTD, VS. ADIT (INTERNATIONAL TAXATION) (2017) 162 ITD 674 (MUM). IT WAS THUS SUBMITTED BY THE LD. A.R , THAT ON THE BASIS OF THE AFORESAID VIEW TAKEN BY THE TRIBUNAL, NO FURTHER INCOME OF THE ASSESSEE COULD BE ATTRIBUTED AND BROUGHT TO TAX IN INDIA. PER CONTRA, THE LD. D.R DID NOT CONTROVERT THE AFORESAID CONTENTION SO RAISED BY THE LD. A.R. 8. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE ARE PERSUADED TO BE IN AGREEMENT WITH THE CONTENTION RAISED BY THE LD. A.R THAT THE TRIBUNAL IN THE ASSESSEES OWN CA SE FOR AYS 2006 - 07 TO 2009 - 10, VIZ. DDIT (IT) - 1(1), MUMBAI VS. M/S ASIA TODAY LTD , DATED 12.01.2018 , WHILE DISPOSING OFF THE CROSS OBJECTION S FILED BY THE ASSESSEE IN THE SAID RESPECTIVE CASES, HAD CONCLUDED THAT NOW WHEN THE ASSESSEE HAD COMPENSATED ITS AGENTS I.E. ZEEL /ZE E TURNER LTD AT ARMS LENGTH, HENCE NO FURTHER INCOM E CHARGEABL E TO TAX IN INDIA COULD BE ATTRIBUTED TO THE ASSESSEE. WE THUS , IN TERMS OF OUR AF ORESAID OBSERVATIONS ALLOW THE CROSS O BJECTION NO. 1 RAISED BY THE ASSESSEE BEFORE US. AS WE HAVE HELD , THAT NO FURTHER INCOME OF THE ASSESSEE COULD BE BROUGHT TO TAX IN INDI A PURSUANT TO THE COMPENSATION OF ITS AGENTS AT ARMS LENGTH, HENCE WE DO NOT ADVERT TO THE OTHER GROUNDS OF CROSS O BJECTION S NOS. 2 TO 5 RAISED BY THE ASSESSEE BEFORE US. ON A SIMILAR FOOTING, IN TERMS OF OUR AFORESAID OBSERVATIONS , AS AGREED BY THE AUTHO RIZED REPRESENTATIVES FOR BOTH THE PARTIES BEFORE US, WE REFRAIN FROM ADJUDICATING THE GROUNDS OF APPEAL NO. 1 TO 5 RAISED BY THE REVENUE IN ITS APPEAL BEFORE US, WHEREIN THE FINDING OF THE CIT(A) THAT THE ASSESSEE DID NOT HAVE AN AGENCY PE IN INDIA AS PER ARTICLE 5(4) OF THE INDIA - MAURITIUS TAX TREATY HAD BEEN ASSAILED BEFORE US . THUS, THE GROUND S OF APPEAL RAISED BY THE REVENUE BEFORE US IN ITS APPEALS, IN TERMS OF OUR AFORESAID OBSERVATIONS ARE LEFT OPEN. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS UP HOLD THE ORDER OF THE CIT(A) DELETING THE ADDITION OF RS.11,26,58,821/ - MADE BY THE A.O. P A G E | 7 ITA NO. 5448/MUM/2016 C.O. NO. 138/MUM/2016 AY. 2011 - 12 DY. COMMISSIONER OF INCOME TAX (I.T) VS. M/S ASIA TODAY LTD . 9. THE APPEAL OF THE REVENUE IS DISPOSED OFF IN TERMS OF OUR AFORESAID OBSERVATIONS, WHILE FOR THE CROSS OBJECTION S FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PR O NOUNCED IN THE OPEN COURT ON 31. 05.2018 SD/ - SD/ - ( SHAMIM YAHYA ) ( RAVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 31 .05 .201 8 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . P A G E | 8 ITA NO. 5448/MUM/2016 C.O. NO. 138/MUM/2016 AY. 2011 - 12 DY. COMMISSIONER OF INCOME TAX (I.T) VS. M/S ASIA TODAY LTD .