ZEE ENTERTAINMENT ENTERPRISES LTD, MUMBAI V. ASST CIT RG 6(1), MUMBAI

ITA 1475/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7043 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 02-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAYANT KUMAR
• Keywords: Transfer pricing; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH K, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.1475/M/2017 ASSESSMENT YEAR: 2012-13 M/S. ZEE ENTERTAINMENT ENTERPRISES LIMITED, 18 TH FLOOR, A-WING, MARATHON FUTUREX, N.M. JOSHI MARG, LOWER PAREL, MUMBAI 400 013 PAN: AAACZ 0243R VS. ASST. COMMISSIONER OF INCOME TAX, RANGE-16(1), AAYAKAR BHAVAN, ROOM NO.439, MUMBAI 400 020 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI MADHUR AGRAWAL, A.R. SHRI JAY BHANSALI, A.R. REVENUE BY : SHRI JAYANT KUMAR, D.R. DATE OF HEARING : 05.06.2018 DATE OF PRONOUNCEMENT : 08.06.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 29.11.2016 OF THE DISPUTE R ESOLUTION PANEL [HEREINAFTER REFERRED TO AS THE DRP] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE FACTS IN BRIEF ARE THAT ASSESSEE FILED THE R ETURN OF INCOME ON 23.11.2012 DECLARING AN INCOME OF RS.735,61,83,830/- WHICH WAS REVISED TO RS.735,90,74,570 /- ON 31.03.2014. THE CASE OF THE ASSESSEE WAS SELECTED FOR ITA NO.1475/M/2017 M/S. ZEE ENTERTAINMENT ENTERPRISES LIMITED 2 SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDI NG THE AO NOTICED THAT THE ASSESSEE HAS ENTERED INTO INTERNAT IONAL TRANSACTIONS WITH ITS AES (ASSOCIATED ENTERPRISES) AND THEREFORE A REFERENCE WAS MADE UNDER SECTION 92CA(1 ) OF THE ACT DATED 17.12.2014 TO TRANSFER PRICING OFFICER. T HE ASSESSEE IS IN THE BUSINESS OF BROADCASTING OF SATE LLITE TELEVISION CHANNELS, SPACE SELLING AGENT FOR OTHER T ELEVISION CHANNELS, SALE OF TELEVISION PROGRAMMES, FILMS, MOVI ES ETC. THE AO FINALLY FRAMED THE ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 144C (13) OF THE ACT BY MAKING TW O ADDITIONS I.E. ONE IN RESPECT OF TRANSFER PRICING AD JUSTMENT UNDER SECTION 92CA(3) AS PER TPO ORDER TO THE TUNE OF RS.63,45,801/- IN RESPECT OF CORPORATE GUARANTEE G IVEN BY THE ASSESSEE @ 1.5% OF THE TOTAL LOAN OUTSTANDING AN D 2 ND IN RESPECT OF DISALLOWANCE UNDER SECTION 14A OF RS.6,58 ,956/-. 3. THE ISSUE RAISED IN GROUND NO.1 IS IN RESPECT OF CONFIRMATION OF ADDITION OF RS.63,45,801/- BY THE DRP AS MADE BY THE AO/TPO IN RESPECT OF CORPORATE GUARANTE E GIVEN BY THE ASSESSEE FOR AVAILING LOAN BY THE ASSOCIATED ENTERPRISES. THE TPO CALCULATED THE TOTAL ARM LENG TH PRICE OF THE GUARANTEE FEE AT RS.1,90,37,404/- AND AFTER REDUCI NG THE GUARANTEE FEE RECEIVED BY THE ASSESSEE @1% FROM ITS AES TREATED THE BALANCE AMOUNT OF RS.63,45,801/- AS ADJUS TMENT UNDER SECTION 92CA AS TRANSFER PRICING ADJUSTMENT W HICH IS ALSO CONFIRMED BY THE DRP. 4. THE LD. A.R., AT THE OUTSET, POINTED OUT THAT THE I SSUE IS SQUARELY COVERED IN ITS OWN CASE IN FAVOUR OF THE A SSESSEE BY ITA NO.1475/M/2017 M/S. ZEE ENTERTAINMENT ENTERPRISES LIMITED 3 THE DECISION OF TRIBUNAL IN ITA NO.2035/M/2016 FOR A.Y. 2011- 12 IN WHICH IT HAS BEEN HELD THAT THE GUARANTEE COM MISSION SHOULD BE WORKED OUT AT 0.50% OF THE AVERAGE AMOUNT OF THE LOAN OUTSTANDING AND THEREFORE THE ADDITION AS SUST AINED BY DRP SHOULD BE DELETED. 5. THE LD. D.R. FAIRLY AGREED TO THE CONTENTION OF THE ASSESSEE THAT ISSUE IS COVERED IN FAVOUR OF THE ASS ESSEE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT TH E IDENTICAL ISSUE HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.2035/M/20 16 FOR A.Y. 2011-12 VIDE ORDER DATED 28.05.18 WHEREIN IT HA S BEEN HELD THAT GUARANTEE COMMISSION SHOULD BE WORKED OUT AT 0.50% OF THE AVERAGE AMOUNT OF THE LOAN OUTSTANDING . THE OPERATIVE PART OF THE DECISION IS REPRODUCED AS UND ER: 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICED THAT THE COORDINATE BENCH OF THE TRIBUNAL HAS CONSIDERED THE ISSUE RELATING TO GIVING OF CORPORATE GUARANTEE IN THE ASSESSEE'S OWN CASE AND HAS HELD THAT GUARANTEE COMMISSION SHOULD BE WORKED OUT AT 0.50% OF THE AVE RAGE AMOUNT OF LOAN OUTSTANDING. BEFORE US, THE ASSESSEE HAS ARGUED THA T THE CORPORATE GUARANTEE GIVEN BY THE ASSESSEE SHOULD NOT BE CONSIDERED TO BE AN I NTERNATIONAL TRANSACTION. HOWEVER, SINCE A PARTICULAR VIEW HAS ALREADY TAKEN BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE'S OWN CASE IN A.Y. 2008- 09, W E PREFER TO FOLLOW THE SAME. ACCORDINGLY, IN RESPECT OF CORPORATE GUARANTEE GIVE N ON OVERDRAFT FACILITY, FOLLOWING THE ORDER PASSED BY TRIBUNAL IN AY 2008- 09, WE DIR ECT THE ASSESSING OFFICER TO RESTRICT TP ADJUSTMENT TO 0.5% OF AVERAGE AMOUNT OF LOAN OUTSTANDING DURING THE YEAR. IN RESPECT OF COUNTER GUARANTEE GIVEN BY THE ASSESSEE FOR THE GUARANTEE GIVEN BY IDBI BANK ON BEHALF OF TAJ TV, WE AGREE WITH THE CONTENTIONS OF LEARNED AR THAT NON-FUND BASED FACILITY CANNOT BE TREATED AT PAR WI TH THE THE FUND BASED FACILITY. WE NOTICE THAT IN THE M / S . Z E E E N TE R T A I N M E N T E N TE R P R IS E S L I M I TE D CASE OF ASIAN PAINTS (INDIA) LTD (SUPRA), 0.20% HAS BEEN HELD TO BE APPROPRIATE BY THE TRIBUNAL. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO COMPUTE TP ADJUSTMENT IN RESPECT OF COUNTER GUARANTEE GIVEN AT 0.20% OF THE AMOUNT OF COUNTER GUARANTEE. ITA NO.1475/M/2017 M/S. ZEE ENTERTAINMENT ENTERPRISES LIMITED 4 7. WE, THEREFORE, FOLLOWING THE DECISION OF THE CO-OR DINATE BENCH AND MAINTAINING THE CONSISTENCY WITH THE EARL IER YEAR, DIRECT THE AO TO DELETE THE ADDITION OF RS.63,45,80 1/-. ACCORDINGLY, GROUND NO.1 IS ALLOWED. 8. THE ISSUE RAISED IN SECOND GROUND OF APPEAL IS AS REGARDS THE CONFIRMATION OF DISALLOWANCE OF RS.6,58,956/- B Y DRP AS MADE BY THE AO UNDER SECTION 14A READ WITH RULE 8D. 9. AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE PRAYED BE FORE THE BENCH THAT THE ISSUE INVOLVED MAY KINDLY BE RES TORED TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE S AME IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH IN THE C ASE OF ACIT VS. VIREET INVESTMENT (P.) LTD. (2017) 82 TAXMANN.C OM 415 (DELHI-TRIB.) (SB) BECAUSE THERE ARE SEVERAL INVESTM ENTS WHICH YIELDED NO EXEMPT INCOME DURING THE YEAR AND THE SAME SHOULD BE EXCLUDED WHILE COMPUTING THE DISALLOWANCE UNDER SECTION 14A. 10. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE GROU ND RAISED BY THE REVENUE. 11. HAVING HEARD BOTH THE PARTIES AND PERUSING THE MATERIAL PLACED BEFORE US, WE FIND THAT NO DISALLOWANCE IS AT TRACTED IN RESPECT OF THOSE INVESTMENTS WHICH YIELDED NO EXEMP T INCOME UNDER THE PROVISION OF SECTION 14A READ WITH RULE 8 D AS HAS BEEN HELD IN THE CASE OF ACIT VS. VIREET INVESTMENT (P.) LTD. (SUPRA). WE, THEREFORE, RESTORE THE ISSUE BACK TO T HE FILE OF THE AO WITH THE DIRECTION TO DECIDE THE SAME IN THE LIGHT OF THE ITA NO.1475/M/2017 M/S. ZEE ENTERTAINMENT ENTERPRISES LIMITED 5 RATIO LAID DOWN BY THE SPECIAL BENCH IN THE ABOVE C ASE. ACCORDINGLY, THE GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 08.06.2018. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 08.06.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.