SET SATELLITE ( SINGAPORE ) PTE. LTD ( NOW KNOWN AS MSM SATELLITE (SINGAPORE) PTE. LTD, MUMBAI V. DDIT (IT) 4(1), MUMBAI

CO 242/MUM/2009

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 5999 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 27-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 21-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MALATHI SHRIDHARAN
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'L' BENCH, MUMBAI BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 3601/M/2009 (ASSESSMENT YEAR: 2004-05) DDIT (IT) 4(1) 133, SCINDIA HOUSE M/S. SET SATELLITE (SINGAPORE) PTE LTD. (NOW KNOWN AS MSM SATELLITE (SINGAPURE) PTE LTD.) BALLARD PIER, MUMBAI 400038 C/O M/S. BATLIBOI & CO. VS. 18TH FLOOR, EXPRES TOWERS NARIMAN POINT, MUMBAI 400021 PAN - AABCS 9229 H APPELLANT RESPONDENT CO NO. 242/M/2009 (ASSESSMENT YEAR: 2004-05) M/S. SET SATELLITE (SINGAPORE) PTE LTD. (NOW KNOWN AS MSM SATELLITE (SINGAPURE) PTE LTD.) DDIT (IT) 4(1) 133, SCINDIA HOUSE C/O M/S. BATLIBOI & CO. BALLARD PIER, MUMBAI 400038 18TH FLOOR, EXPRES TOWERS VS. NARIMAN POINT, MUMBAI 400021 PAN - AABCS 9229 H CROSS OBJECTOR APPELLANT IN APPEAL REVENUE BY: SMT. MALATHI SHRIDHARAN ASSESSEE BY: SHRI PERCY PARDIWALLA/ SHRI NIMESH VOARA/SHRI AJAY SHAH O R D E R PER B. RAMAKOTAIAH, A.M. THESE ARE APPEAL BY REVENUE AND CROSS OBJECTION BY ASSESSEE FOR A.Y. 2004-05 AND ARE DIRECTED AGAINST THE ORDER OF THE C IT(A) XXXI, MUMBAI DATED 25.03.2009. ASSESSEES CROSS OBJECTION IS WIT H REFERENCE TO THE ISSUES NOT DECIDED BY THE CIT(A). 2. THE ASSESSEE IS A FOREIGN COMPANY ENGAGED IN THE BU SINESS OF ACQUIRING TELEVISION PROGRAMMES AND MOTION PICTURES AND EXHIBITING/TRANSMITTING THE SAME ON SONY ENTERTAINM ENT TELEVISION FROM SINGAPORE. THE ASSESSEE IS A TAX RESIDENT OF SING APORE IN TERMS OF ARTICLE 4 OF THE TAX TREATY BETWEEN INDIA AND SINGAPORE (THE TREATY). THE ASSESSEE ITA NO. 3601 & CO NO. 242/M/09 M/S. SET SATELLITE (SINGAPORE) PTE LTD. 2 FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR ON NOVEMBER 29, 2000 DECLARING TOTAL INCOME AT NIL AS PER THE FORMULA PR ESCRIBED IN CIRCULAR NO. 742 PROVIDING GUIDELINES TO ASSESSING OFFICER FOR C OMPUTING TAX LIABILITY OF FOREIGN TELECASTING COMPANIES. IN THE LETTER FURNIS HED ALONG WITH THE RETURN, IT WAS STATED THAT THE ASSESSEE DID NOT HAVE ANY TA X LIABILITY IN INDIA IN TERMS OF THE DETAILED SUBMISSION MADE DURING THE AS SESSMENT PROCEEDINGS FOR A.YS. 1996-97 AND 1997-98. ACCORDING TO THE ASS ESSEE, THE BUSINESS OPERATIONS OF THE ASSESSEE (VIZ. ACQUIRING PROGRAMM ES/MOVIES AND EXHIBITING/TRANSMITTING THE SAME ON TV CHANNELS) AR E CARRIED OUT FROM THE SINGAPORE. THE ONLY ACTIVITIES CARRIED OUT IN INDIA ARE THE MARKETING ACTIVITIES THROUGH SET INDIA PRIVATE LIMITED (SET I NDIA). FOR THESE SERVICES, THE ASSESSEE PAYS AN ARMS LENGTH SERVICE FEE TO SE T INDIA. ACCORDING TO THE ASSESSEE, AS PER EXPLANATION (A) TO SECTION 9(1)(I) OF THE I.T. ACT, IN CASES WHERE ALL THE BUSINESS OPERATIONS ARE NOT CARRIED O UT IN INDIA, ONLY SUCH PART OF THE INCOME AS IS REASONABLY ATTRIBUTABLE TO THE INDIAN OPERATIONS SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA. FURTHE R, AS PER ARTICLE 7(1) OF THE TREATY DEALING WITH BUSINESS PROFITS ONLY SO MUCH OF PROFITS OF AN ENTERPRISES AS ARE DIRECTLY OR INDIRECTLY ATTRIBUTA BLE TO ITS PE IN INDIA CAN BE TAXABLE IN INDIA. THUS, BOTH UNDER THE ACT AND THE TREATY, ONLY INCOME ATTRIBUTABLE TO THE ASSESSEES INDIAN OPERATIONS (V IZ. MARKETING OF THE AD TIME SLOTS) CAN BE TAXED IN INDIA. FURTHER PLEA OF THE ASSESSEE WAS THAT SET INDIA IS APPOINTED BY THE ASSESSEE TO MARKET THE AD TIME SLOTS IN INDIA. THE ASSESSEE PAYS AN ARMS LENGTH SERVICE FEE TO SET IN DIA FOR THE MARKETING SERVICES RENDERED BY IT TO THE ASSESSEE. PAYMENT OF SUCH ARMS LENGTH SERVICE FEE EXTINGUISHES THE ASSESSEES TAX LIABILITY IN IN DIA. ACCORDING TO THE ASSESSEE, THE ABOVE CONTENTION ALSO FINDS SUPPORT F ROM CIRCULAR NO. 23 WHICH STATES THAT IF THE AGENTS COMMISSION FULLY R EPRESENTS THE VALUE OF THE PROFIT ATTRIBUTABLE TO HIS SERVICE, IT SHOULD PRIMA FACIE EXTINGUISH THE ASSESSMENT OF THE PRINCIPAL. ACCORDING TO THE ASSES SEE, THE ABOVE CONTENTION HAS ALSO BEEN ACCEPTED INTERNATIONALLY. THE PROTOCO L TO THE AUSTRIA-GERMANY TREATY GOES A STEP FURTHER TO SUGGEST THAT WHERE TH E DEPENDENT AGENT IS PAID AN ARMS LENGTH COMMISSION, HE IS NOT EVEN REGARDED AS A PE OF THE PRINCIPAL AND THEREFORE NO PROFITS OF THE PRINCIPAL ARE LIABL E TO TAX IN THE COUNTRY OF THE ITA NO. 3601 & CO NO. 242/M/09 M/S. SET SATELLITE (SINGAPORE) PTE LTD. 3 DEPENDENT AGENT. THUS BASED ON ALL THE ABOVE, THE A SSESSEE CONTENDED THAT NO TAX LIABILITY ARISES IN INDIA IN THE HANDS OF TH E ASSESSEE VIS--VIS THE AD REVENUES EARNED BY IT. 3. THE ASSESSING OFFICER, HOWEVER, HELD THAT ADVERTIS EMENT REVENUE EARNED BY THE ASSESSEE IS TAXABLE IN INDIA AS BUSIN ESS INCOME. THE ASSESSING OFFICER THUS BROUGHT TO TAX THE ADVERTISE MENT REVENUE AFTER DEDUCTING COMMISSION DUE TO ADVERTISEMENT AGENCIES AND SERVICE FEES DUE TO SET INDIA. 4. ON APPEAL IT WAS CONTENDED THAT THE ISSUE IS COVERE D BY THE ORDER OF THE HON'BLE BOMBAY HIGH COURT IN ASSESSEES OWN CAS E FOR A.Y. 1999-2000 218 CTR 452 AND RELYING ON THE DECISION OF THE HON' BLE HIGH COURT, SINCE THE FACTS ARE SIMILAR TO ASSESSEES CASE FOR A.Y. 1 999-2000, THE CIT(A) ALLOWED ASSESSEES CONTENTION ON MARKING OF ADVERTI SEMENT AIR TIME FROM ITS VARIOUS OWN CHANNELS AND ALSO THE THIRD PARTY CHANN ELS. ACCORDINGLY THE REVENUE HAS RAISED GROUND NOS. 1 & 2 ON THE TWO DIF FERENT STREAMS OF INCOMES. GROUND NO. 3 IS WITH REFERENCE TO LEVY OF INTEREST UNDER SECTION 234B, WHICH WAS DELETED BY THE CIT(A) HOLDING THAT THE ASSESSEE IS A NON- RESIDENT AND ITS INCOME IS SUBJECTED TO TDS, HENCE ASSESSEE IS NOT LIABLE TO PAY ADVANCE TAX. 5. AT THE OUT SET IT WAS SUBMITTED THAT IDENTICAL ISSU ES HAS COME FOR CONSIDERATION BEFORE THE TRIBUNAL IN EARLIER YEARS AND THE TRIBUNAL HAS HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. ORDERS FOR VAR IOUS ASSESSMENT YEARS ARE AS UNDER: - I. DDIT (IT) VS. SET SATELLITE (SINGAPORE) PTE LTD. 1 06 ITD 175 (MUM) A.Y. 1999-2000 II. SET SATELLITE (SINGAPORE) PTE LTD. VS. DDIT (IT) IT A NO. 5352/MUM/ 2005 FOR AY 2002-03 III. DDIT (IT) VS. SET SATELLITE (SINGAPORE) PTE LTD. I TA NO. 3913/M/07 - A.Y. 2003-04 IV. DDIT (IT) VS. SET SATELLITE (SINGAPORE) PTE LTD. I TA NO.3534/M/04 - A.Y. 2000-01 6. IT WAS FURTHER SUBMITTED THAT THE ISSUE WAS CRYSTAL LISED BY THE HON'BLE HIGH COURT IN A.Y. 1999-2000 WHEREIN THE HON'BLE JU RISDICTIONAL HIGH COURT ITA NO. 3601 & CO NO. 242/M/09 M/S. SET SATELLITE (SINGAPORE) PTE LTD. 4 HELD THAT ASSESSEE PAID SERVICE FEES TO SET INDIA F OR MARKETING OF AIR TIME ON ARMS LENGTH BASIS AND SUCH PAYMENT EXTINGUISHES TAX LIABILITY OF THE ASSESSEE IN INDIA VIS--VIS ADVERTISEMENT REVENUE. IT IS FURTHER SUBMITTED THAT EVENTHOUGH THE CIRCULAR NO. 23, ON THE BASIS O F WHICH THE EARLIER ORDERS WERE CONSIDERED HAS BEEN WITHDRAWN, THE RATIONALE I S SAME AND THIS ISSUE WAS ELABORATELY DISCUSSED BY THE ITAT IN ITS ORDER FOR A.Y. 2002-03 IN ITA NO. 5352/MUM/2005 WHEREIN THE LEARNED D.R. HAS RAIS ED THE ISSUE THAT THE CIRCULAR HAS BEEN WITHDRAWN AND THEREFORE THE ASSES SING OFFICERS ORDER IS TO BE UPHELD. 7. WITH REFERENCE TO THE LEVY OF INTEREST IT WAS FURTH ER SUBMITTED THAT IN ASSESSEES OWN CASE FOR A.Y. 1997-98 AND 1998-99 TH E HON'BLE BOMBAY HIGH COURT IN ITA NO. 298 AND 301 OF 2008 DISMISSED REVE NUE APPEALS FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF DIT VS. NGC NETWORK ASIA LIC WHICH IN TURN WAS CONTESTED BEFORE THE HON'BLE SUPREME COURT AND THE SLP WAS DISMISSED. IN VIEW OF THIS GR OUND NO. 3 IS ALSO COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE. 8. IN VIEW OF THE SUBMISSIONS, SINCE THE ISSUE IS COVE RED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF JURISDICTIONAL HIGH CO URT IN ASSESSEES OWN CASE AND FURTHER THE TRIBUNAL IS CONSISTENTLY FOLLO WING THE SAME PRINCIPLE IN EARLIER YEARS, WE UPHOLD THE ORDER OF CIT(A) WHO ALLOWED THE APPEAL FOLLOWING THE PRECEDENTS HOLDING THAT THE FACTS ARE SIMILAR TO EARLIER YEARS. WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS REVEN UES GROUND NOS. 1 & 2. 9. WITH REFERENCE TO INTEREST UNDER SECTION 234B ALSO THE FIRST APPELLATE AUTHORITY HELD THAT THE ASSESSEE IS NOT LIABLE TO T AX IN INDIA AND HENCE THE QUESTION OF LEVY OF INTEREST UNDER SECTION 234B DOE S NOT ARISE. WE AGREE WITH THIS FINDING. EVEN OTHERWISE THE ISSUE OF LEVY OF I NTEREST UNDER SECTION 234B IS COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE BY THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN ITA NO. 298 OF 2008 DATED 15 TH JUNE 2009 WHEREIN THE HON'BLE BOMBAY HIGH COURT HAS FOLL OWED ITS OWN DECISION IN THE CASE OF DIT VS. NGC NETWORK ASIA LLC 222 CTR 386. IN VIEW OF THIS THE THIRD GROUND OF REVENUE IS ALSO DISMISSED. 10. APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 3601 & CO NO. 242/M/09 M/S. SET SATELLITE (SINGAPORE) PTE LTD. 5 11. THE CROSS OBJECTION IS WITH REFERENCE TO THE ALTERN ATE CONTENTIONS RAISED BY THE ASSESSEE BEFORE THE CIT(A) WHICH WERE NOT ADJUDICATED. IT WAS SUBMITTED THAT THE CROSS OBJECTION IS TO BE DISMISS ED AS ASSESSEES MAIN CONTENTION THAT INCOMES ARE NOT TAXABLE HAS BEEN UP HELD IN THE REVENUE APPEAL. IN VIEW OF THIS, THE CROSS OBJECTION IS TRE ATED AS INFRUCTUOUS AND ACCORDINGLY THE SAME IS ALSO DISMISSED. 12. IN THE RESULT, BOTH APPEAL OF REVENUE AND THE CROSS OBJECTION OF ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL 2011. SD/- SD/- (N.V. VASUDEVAN) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 29 TH APRIL 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXXI, MUMBAI 4. THE CIT DIT (IT), MUMBAI CITY 5. THE DR, L BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.