SATELLITE TELEVISION ASIAN REGION LTD, MUMBAI V. DDIT (IT) 2(1), MUMBAI

ITA 1815/MUM/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7382 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 22-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 14-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR RAJEEV HARIT
• Keywords: Transfer pricing; Retrospective amendment; Initiation of penalty proceedings; Bad and doubtful debts
• Section: 143(3); 40(a)(ia); 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL , ACCOUNTANT MEMBER ITA NO . 1815 / MUM . /2014 ( ASSESSMENT YEAR : 20 09 10 ) STAR INTERNATIONAL MOVIES LTD. C/O STAR INDIA PVT. LTD. STAR HOUSE, OFF. DR. E. MOSES ROAD MAHALAXMI, MUMBAI 400 011 PAN AAICS3256P . APPELLANT V/S DY . DIRECTOR OF INCOME TAX (I.T) CIRCLE 2 ( 1 ) , MUMBAI . RESPONDENT ASSESSEE BY : SHRI PORUS KAKA REVENUE BY : DR. RAJEEV HARIT DATE OF HEARING 23.07.2019 DATE OF ORDER 18.10.2019 O R D E R PER SAKTIJIT DEY, J.M . T HE CAPTIONED APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 28 TH JANUARY 2014, PASSED UNDER SECTION 143(3) R/W SECTION 144C(13) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 2009 10. 2 STAR INTERNATIONAL MOVIES LTD. 2. IN GROUNDS NO.1, TO 4, THE ASSESSEE HAS CHALLENGED THE ADDITION MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT AMOUNTING TO ` 42,0 0,08,539. 3. BRIEF FACTS ARE, THE ASSESSEE IS A NON RESIDENT COMPANY INCORPORATED IN HONG KONG AND IS A PART OF NEWS CORP GROUP. BASICALLY, THE ASSESSEE IS ENGAGED IN THE DISTRIBUTION OF CHANNELS AND ADVERTISING FOR CHANNELS AT A GLOBAL LEVEL. IN THE COURSE OF SUCH ACTIVITY, THE ASSESSEE DISTRIBUTES THE CHANNELS OWNED BY STAR TELEVISION ENTERTAINMENT LTD., STAR INTERNATIONAL MOVIES LTD., STAR ASIAN MOVIES LTD., STAR REGION FZ LLC AND CHANNEL V NETWORKS LTD. PARTNERSHIP. IT NEEDS TO BE OBSERVED , THE AFORES AID CHANNEL COMPANIES ARE NON RESIDENT S AND ARE ENGAGED IN SATELLITE TELEVISION BUSINESS AND DERIVED REVENUE FROM VARIOUS COUNTRIES IN ASIA AND OTHER PARTS OF THE WORLD, INCLUDING THE INDIAN MARKET , FROM SALE OF ADVERTISEMENT TIME ON THE TELEVISION CHANNELS, D ISTRIBUTION OF TELEVISION CHANNELS AND SYNDICATION OF CONTENT ON THE CHANNELS. THE AFORESAID CHANNEL COMPANIES APPOINTED THE ASSESSEE AS AN AGENT FOR THE FOLLOWING FUNCTIONS / ACTIVITIES: I) TO SELL, ADVERTISING AIR TIME AND THE CHANNELS; II) TO DISTRIBUTE THE CHANNELS IN THE TERRITORIES WHERE THE CHANNELS ARE BROADCASTS; AND 3 STAR INTERNATIONAL MOVIES LTD. III) TO PROCURE SYNDICATION REVENUE IN RESPECT OF THE CONTENT ON THE CH A NNELS. 4. AS PER THE TERMS OF AGREEMENT, THE ASSESSEE WAS ALSO REQUIRED TO INCUR THE COST NECESSARY FOR THE PURPOSE OF BROADCASTING CHANNELS INCLUDING AND NOT LIMITED T O LEASE APPROPRIATE TRANSPONDER S PACE TO COVER THE RELEVANT FOOT PRINTS FOR BROADCAST. FOR PERFORMING THE AFORESAID FUNCTIONS / ACTIVITIES, THE ASSESSEE WAS COMPENSATED BY A FEE WHICH WAS CALCULATED SO AS TO RECOVER ALL THE COSTS THAT IT INCURRED IN RENDERING THE SERVICES INCLUDING THE SUB AGENTS COMMISSION WHICH ALSO INCLUDED 50% OF THE OVERALL PROFIT ON THE CHANNEL OPERATIONS (CALCULATED AFTER CONSIDERING THE COSTS INCURRED BY CHANNEL COMPANIES AND THE COST OF STAR LTD. AS ADJUSTED AGAINST THE OVERALL REVENUE FROM THE CHANNELS). THE AGREEMENT ALSO PROVIDED , IN THE EVENT OF AN OVERALL LOSS , 50% OF SUCH LOSS WOULD BE BORNE BY THE ASSESSEE AND THE OVERALL FEE PAYABLE IS TO BE ADJUS TED ACCORDINGLY. THE FEE COMPUTED , AS AFORESAID , ALSO SUBSUMED THE CONSIDERATION PAYABLE BY CHANNEL COMPANIES TO STAR LTD. FOR USE OF STAR BRAND . IN THE TRANSFER PRICING STUDY R EPORT, THE ASSESSEE BENCH MARKED THE INTERNATIONAL T RANSACTION BY SELECTING THE AES IN INDIA AS TESTED PARTY. WHILE, BENCHMARKING THE TRANSACTIONS RELATING TO GRANT OF LICENSE TO CHANNEL COMPANIES TO USE STAR MARK AND AGENCY SERVICES PROVIDED TO CHANNEL COMPANIES , THE 4 STAR INTERNATIONAL MOVIES LTD. ASSESSEE AS WELL AS CHANNEL COMPANIES USED PROFIT SPLIT METHOD (PSM ) WITH REFERENCE TO THE REVENUE GENERATED IN INDIA. WHILE APPLYING PSM, THE ASSESSEE UNDERTOOK A STEP BY STEP PROCESS OF COMPUTING THE PROFITS TAXABLE IN INDIA. FIRSTLY, THE GLOBAL PROFITABILITY PERCENTAGE BASED ON THE AUDITED FINANCIAL STATEMENT OF THE CH ANNEL COMPANIES FOR THE YEAR ENDED JUNE 30, 2009, WAS APPLIED TO THE INDIAN REVENUE EARNED BY THE CHANNEL COMPANIES FOR THE 12 MONTH PERIOD OF 1 ST APRIL 2008 TO 31 ST MARCH 2009 TO ASCERTAIN THE PROFITABILITY IN RESPECT OF INDIAN REVENUE EARNED BY THE CHANN EL COMPANIES. WHILE COMPUTING THE GLOBAL PROFITABILITY OF THE CHANNEL COMPANIES BASED ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 TH JUNE 2009, ANY PROFIT / LOSS EARNED / INCURRED TO / BY THE CHANNEL COMPANIES ON ACCOUNT OF THE BUSINESS NOT RELATED TO CHANNEL BROADCASTING WAS ELIMINATED AS EXTRA ORDINARY TRANSACTION. BASED ON THE ARRANGEMENT BETWEEN THE CHANNEL COMPANIES AND THE ASSESSEE, ENTITLING THE ASSESSEE TO A FEE CALCULATED SO AS TO RECOVER ALL THE COSTS INCURRED BY THE ASSESSEE IN RESPECT OF MA RKETING ADVERTISING AIR TIME ON CHANNELS, DISTRIBUTING THE CHANNELS AND SYNDICATE THE CONTENT TELECAST ON THE CHANNELS IN ADDITION TO THE 50% OF THE OVERALL PROFIT ON CHANNEL OPERATION THE PROFITS EARNED BY THE ASSESSEE AND ATTRIBUTABLE TO INDIAN REVENUE O UGHT TO BE EQUAL TO THE PROFITS EARNED B Y THE CHANNEL COMPANIES FROM INDIA, WERE ALSO CONSIDERED AS PROFITS EARNED BY THE ASSESSEE FROM INDIA DURING THE 5 STAR INTERNATIONAL MOVIES LTD. RELEVANT PERIOD. THE PROFIT EARNED BY THE CHANNEL COMPANIES AND THE ASSESSEE WAS CONSOLIDATED TO DETERM INE THE TOTAL PROFITS EARNED IN RESPECT OF THE INDIAN RE VENUE FOR THE RELEVANT 12 MONTH PERIOD OF 1 ST APRIL 2008 TO 31 ST MARCH 2009. SINCE THE PROFITS EARNED BY THE CHANNEL COMPANIES AND THE ASSESSEE WERE CONSOLIDATED, THE CONSOLI DATED PROFIT EFFECTIVELY D ENOTED THE PROFIT BASED ON THIRD PARTY REVENUE AND THIRD PARTY COST. IN THE AFORESAID PROCESS, THE ASSESSEE COMPUTED THE OVERALL PROFIT RATE OF 8.48%. THOUGH, THE ASSESSEE CLAIMED THAT ONCE THE ASSESSEE HAS DETERMINED THE PROFIT PERCE NTAGE BY APPLYING PSM, THERE IS NO FURTHER NEED TO BENCH MARK THE PRO FITABILITY AGAINST COMPARABLES , HOWEVER, TO PUT THE COMPARABILITY ANALYSIS BEYOND DOUBT, THE ASSESSEE COMPARED THE AFORESAID PROFITABILITY WITH NINE EXTERNAL COMPARABLES WITH AVERAGE MARGIN OF 4.85% BASED ON WE IGHTED AVERAGE OF EARLIER YEARS. T HUS, THE TRANSACTION WITH THE A ES WAS CLAIMED TO BE AT ARM'S LENGTH. AFTER EXAMINING THE TRANSFER PRICING STUDY R EPORT, THE TRANSFER PRICING OFFICER WAS OF THE VIEW THAT OUT OF THE NINE COMPARABLES SELECTED BY THE ASSESSEE , FOUR COMPANIES VIZ. ASTHA BROADCASTING NETWORK LTD., JAIN STUDIOS LTD., TELEVISION 18 INDIA LTD., RAJ TELEVISION NETWORK LTD., BEING EITHER LOSS MAKING OR LOW PROFIT MAKING COMPANIES CANNOT BE TREATED AS COMPARABLE. ACCORDINGLY, HE CALLED UPON THE ASSESS EE TO EXPLAIN WHY THESE COMPANIES SHOULD NOT BE EXCLUDED. IN RESPONSE TO THE QUERY RAISED BY THE TRANSFER PRICING 6 STAR INTERNATIONAL MOVIES LTD. OFFICER, THOUGH, THE ASSESSEE MADE ELABORATE SUBMISSIONS OBJECTING TO EXCLUSION OF THE AFORESAID FOUR COMPANIES, HOWEVER, THE TRANSFER PRICING OFFICER REJECTING THE OBJECTIONS OF THE ASSESSEE EXCLUDED THESE FOUR COMPANIES AND RETAINED THE OTHER FIVE COMPANIES SELECTED BY THE ASSESSEE HAVING AVERAGE MARGINS OF 13.54% AS AGAINST THE PROFIT MARGIN SHOWN BY THE ASSESSEE @ 8.48%. THIS RESULTED IN AN ADJUSTMENT OF ` 84,00,17,078, AND AS PER PSM METHOD, 50% OF THE AFORESAID AMOUNT WAS ATTR IBUTED TO THE ASSESSEE AND THE BALANCE 50% TO THE OTHER CHANNEL COMPANIES. THE ADJUSTMENT MADE BY THE TRANSFER PRICING OFFICER WAS ADDED TO THE INCOME OF THE ASSESSEE WHILE FRAMING THE DRAFT ASSESSMENT ORDER . THE AFORESAID TRANSFER PRICING ADJUSTMENT WAS CHALLEN GED BEFORE THE DISPUTE RESOLUTION PANEL (DRP), PRIMARILY ON THE ISSUE OF EXCLUSION OF CERTAIN COMPARABLES BY THE TRANSFER PRICING OFFICER. HOWEVER, LEARNED DRP DID NOT INTERFERE WITH THE DECISION OF THE TRANSFER PRICING OFFICER. 5. SHRI PORUS KAKA, LEARNED S R. COUNSEL FOR THE ASSESSEE RESTRICTED HIS ARGUMENT TO EXCLUSION OF FOLLOWING THREE COMPARABLES: I) JAIN STUDIOS LTD. ; II) TELEVISION 18 INDIA LTD., AND III) RAJ TELEVISION NETWORK LTD. 7 STAR INTERNATIONAL MOVIES LTD. 6. HE SUBMITTED , JAIN STUDIOS LTD. CANNOT BE CONSIDERED AS A CONSISTENT LOSS MAKIN G COMPANY , SINCE , IT HAS INCURRED LOSS ONLY IN ASSESSMENT YEAR S 2008 09 AND 2009 10. HE SUBMITTED , IN ASSESSMENT YEAR 2007 08, THE COMPANY HAS DECLARED A PROFIT OF 13.91%. HE SUBMITTED , TO BE CLASSIFIED AS A PERSISTENT LOSS MAKING COMPANY, IT SHOULD HAVE INCURRED LOSS IN THREE CONSECUTIVE ASSESSMENT YEARS. HE SUBMITTED , SINCE THE CO MPANY HAS REPORTED PROFIT IN ASSESSMENT YEAR 2007 08 AND HAS INCURRED LOSS IN ONLY TWO CONSECUTIVE ASSESSMENT YEARS, IT CANNOT BE TREATED AS A PERSISTENT LOSS MAKING COMPA NY TO EXCLUDE IT FROM THE LIST OF COMPARABLES. 7. AS REGARDS TELEVISION 18 INDIA LTD., THE LEARNED SR. COUNSEL FOR THE ASSESSEE SUBMITTED , THE COMPANY HAD DECLARED PROFIT IN THE ASSESSMENT YEAR S 2007 08 AND 2 008 09. THEREFORE, SINCE IT HAS REPORTED LOSS ONL Y IN THE IMPUGNED ASSESSMENT YEAR, IT CANNOT BE EXCLUDED AS A COMPARABLE. AS REGARDS RAJ TELEVISION NETWORK LTD., THE LEARNED SR. COUNSEL SUBMITTED , THE TRANSFER PRICING OFFICER REJECTED THE COMPA RABLE DUE TO WRITE OFF OF BAD DEBTS. HE SUBMITTED , THE COMPA NY HAS SHOWN HIGH PROFIT MARGIN IN THE ASSESSMENT YEAR S 2007 08 AND 2008 09. HE SUBMITTED , IN THE IMPUGNED ASSESSMENT YEAR ALSO, THE CO MPANY HAS SHOWN A PROFIT MARGIN OF 1.04%. FURTHER, HE SUBMITTED , BAD DEBTS ARE OPERATING IN NATURE, HENCE, HAVE TO BE CO NSIDERED FOR 8 STAR INTERNATIONAL MOVIES LTD. COMPUTING PROFIT MARGIN. THE LEARNED SR. COUNSEL SUBMITTED , THE TRANSFER PRICING OFFICER HIMSELF IN ASSESSMENT YEAR S 2007 08 AND 2008 09 HAS ACCEPTED TELEVISION 18 INDIA LTD. AS A GOOD COMPARABLE. THUS, HE SUBMITTED , RU LE OF CONSISTENCY SHOULD APPLY WHILE ACCEPTING / REJECTING THESE TWO COMPARABLES. FURTHER, IN SUPPORT OF HIS SUBMISSIONS, THE L EARNED COUNSEL RELIED UPON THE FOLLOWING DECISIONS: I) TPG CAPITAL INDIA PVT. LTD., [2017] TAXMANN.COM 101 (MUM. TRIB.); II) GOLDMAN SACHS INDIA SECURITIES PVT. LTD., [2016] 69 TAXMANN.COM 19 (BOM.); III) BOBST INDIA PVT. LTD., [2015] 63 TAXMANN.COM 339 (PUN. TRIB.); IV) ACTAVIS PHARMA DEVELOPMENT CENTRE PVT. LTD., 92 T AXMANN.COM 253 (MUM. TRIB.); V) WNS GLOBAL SERVICES PVT. LTD., [2019] 103 TAXMANN. COM 75 (MUM. TRIB.); VI) KENEXA TECHNOLOGIES PVT. LTD., [2015] 37 ITR(T) 306 (HYD. TRIB.); VII) OSI SYSTEMS PVT. LTD, [2016] 66 TAXMANN.COM 109 (HYD. TRIB.); VIII) HONEYWELL AUTOMATION INDIA LTD., [2015] 55 TAXMANN.COM 539 (PUN. TRIB.); AND IX) HYUNDAI MOTOR INDIA ENGG. PVT. LTD., I TA NO.87/HYD./ 2017 (HYD. TRIB.). 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY REL IED UPON THE OBSERVATIONS OF LEARNED DRP AND THE TRANSFER PRICING OFFICER. 9 STAR INTERNATIONAL MOVIES LTD. 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISION RELIED UPON. AS COULD BE SEEN FROM THE FACTUAL MATRIX OF THE ISSUE, BOTH THE TRANSFER PRICING OFFICER AND THE DRP HAVE N OT DISPUTED APPLICABILITY OF PSM AS THE MOST APPROPRIATE M ETHOD TO BENCHMARK THE TRANSACTION WITH THE A ES. THE DISPUTE IS ONLY CONFINED TO THE COMPARABILITY OF THREE COMPARABLES AS NOTED ABOVE. THE TRANSFER PRICING OFFICER HAS REJECTED JAIN STUDIOS LTD. AND TELEVISION 18 INDIA LTD., PRIMARILY ON ACCOUNT OF ABNORMAL FALL IN RATE OF PROFIT. LIKEWISE, HE HAS REJECTED RAJ TELEVISION NETWORK LTD. DUE TO SHARP FALL IN MARGIN BY ATTRIBUTING TO HIGH AMOUNT OF BAD DEBT WRITTEN OFF DURING THE YEAR. FROM THE FACTS ON RECORD, IT IS CLEAR THAT NONE OF THESE COMPANIES CAN BE CLASSIFIED AS PERSISTENT LOSS MAKING COMP ANIES. IN VARIOUS DECISIONS IT HAS BEEN HELD THAT UNLESS THE COMPANY DECLARES LOSS CONSISTENTLY FOR THREE CONSECUTIVE ASSESSMENT YEARS, IT CANNOT BE CONSIDERED AS A PERSISTENT LOSS MAKING COMPANY. IN THIS CONTEXT, WE MAY REFER TO THE DECISION OF THE TRIBUNAL IN GOLDMAN SACHS INDIA SECURITIES PVT. LTD. (SUPRA). THE OTHER DECISIONS CITED BY THE LEARNED SR. COUNSEL FOR THE ASSESSEE ALSO SUPPORT THIS VIEW. IT IS FURTHER RELEVANT TO OBSERVE , IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2008 09, THE TRIBUNAL HAS ACCEPTED JAIN STUDIOS LTD. AS A COMPARABLE. FURTHER, THE TRANSFER PRICING OFFICER 10 STAR INTERNATIONAL MOVIES LTD. HIMSELF HAS ACCEPTED TELEVISION 18 INDIA LTD., AS A COMPARABLE IN ASSESSMENT YEAR S 2007 08 AND 2008 09. THAT BEIN G THE CASE, BOTH, JAIN STUDIOS LTD. AND TELEVISION 18 INDIA LTD., SHOULD NOT BE REJECTED AS A COMPARABLE. INSOFAR AS RAJ TELEVISION NETWORK LTD. IS CONCERNED, UNDISPUTEDLY, THE PROFIT MARGIN SHOWN BY THE COMPANY IN THE ASSESSMENT YEAR 2007 08 AND 2008 09 I S SUBSTANTIALLY HIGH. THOUGH, IN THE IMPUGNED ASSESSMENT YEAR, THE PROFIT MARGIN HAS FALLEN DRASTICALLY, THE COM PAN Y HAS STILL SHOWN PROFIT OF 1.04%. EVEN IF THE FALL I N PROFIT RATE IS DUE TO WRITE OFF OF BAD DEBT, STILL THIS COMPANY CANNOT BE EXCLUD ED AS A COMPARABLE SINCE BAD DEBTS ARE OPERATING IN NATURE. IN VIEW OF THE AFORESAID, WE DIRECT THE ASSESSING OFFICER / TRANSFER PRICING OFFICER TO INCLUDE THE AFORESAID THREE COMPANIES AS COMPARABLE AND DETERMINE THE ARM'S LENGTH PRICE ACCORDINGLY. THESE GROUND S ARE ALLOWED. 10. IN GROUNDS NO.5 AND 6, THE ASSESSEE HAS CHALLENGED THE DECISION OF THE ASSESSING OFFIC ER IN NOT APPLYING PSM TO NON AE TRANSACTION AND DETERMINING THE PROFIT ON ESTIMATE BASIS. 11. BRIEF FACTS ARE, AS OBSERVED BY THE ASSESSING OFFI CER, IN SPIT E OF REQUESTING THE ASSESSEE TO PREPARE AND FURNISH INDIA SPECIFIC PROFIT & LOSS ACCOUNT SO AS TO IDENTIFY AND DETERMINE THE INCOME FROM OPERATIONS IN INDIA TO PROPERLY ALLOCATE THE PROFIT ATTRIBUTABLE TO INDIAN 11 STAR INTERNATIONAL MOVIES LTD. OPERATIONS , NO SUCH ACCOUNT WAS FURNISHED BY THE ASSESSEE. THUS, THE ASSESSING OFFICER OBSERVED THAT THOUGH THE TRANSFER PRICING OFFICER HAS DETERMINED THE TAXABLE INCOME IN INDIA UNDER PSM, HOWEVER, SUCH DETERMINATION I S RESTRICTED TO INTRA GROUP / AE TRANSACTIONS ONLY. HE OBSERVED , SINCE THE ASSES SEE HAS NON AE TRANSACTION, THE ARM'S LENGTH PRICE DETERMINED BY THE TRANSFER PRICING OFFICER WILL NOT BE APPLICABLE TO THE TOTAL TURNOVER OF THE ASSESSEE IN TOTO. THUS, HE OBSERVED , IN SUCH SITUATION, THERE IS NO OPTION LEFT TO HIM BUT TO ESTIMATE THE INC OME OF THE ASSESSEE AS PER RULE 10 OF THE INCOME TAX RULES, 1962 THEREFORE, REFERRING TO THE DECISION OF THE DR P IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2007 08, THE ASSESSING OFFICER PROCEEDED TO ESTIMATE THE TAXABLE PROFIT FROM NON AE TRANSACTION @ 28% OF THE GROSS RECEIPTS . ACCORDINGLY, HE ADDED BACK AN AMOUNT OF ` 19,60,251. 12. THE LEARNED SR. COUNSEL FOR THE ASSESSEE SUBMITTED , THE AFORESAID ADDITION HAVING BEEN MADE PURELY ON ESTIMATE BASIS CANNOT BE SUSTAINED. FURTHER, HE SUBMITTED , IDENTICAL ADDITI ON MADE IN THE ASSESSMENT YEAR 2007 08, WAS NOT ONLY DELETED BY THE TRIBUNAL BUT THE DECISION OF THE TRIBUNAL WAS ALSO UPHELD BY THE HON'BLE JURISDICTIONAL HIGH COURT. THUS, HE SUBMITTED , THE ADDITION MADE HAS TO BE DELETED. 12 STAR INTERNATIONAL MOVIES LTD. 13. THE LEARNED DEPARTMENTAL REPRE SENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER. 14. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. ADMITTEDLY, THE ASSESSING OFFICER SIMPLY RELYING UPON THE DIRECTION OF LEARNED DRP IN ASSESSMENT YEAR 2007 08 HA S ESTIMATED THE PROFIT ON NON AE TRANSACTIONS. HOWEVER, AS COULD BE SEEN, THE TRIBUNAL WHILE DECIDING THE ISSUE RELATING TO IDENTICAL ADDITION MADE IN ASSESSMENT YEAR 2007 08 IN ITA NO.8683/MUM./2011, DATED 2 ND FEBRUARY 2016, HAS OBSERVED THAT ONCE THE CO MBI NED NET PROFIT HAS BEEN ARRIVED AT BY TAKING INTO ACCOUNT THE TRANSACTIONS OF BOTH AES/NON AES, WHICH IS FACTORED INTO ALL THE COSTS AND REVE NUE, THEN, TO SEGREGATE A NON AE TRANSACTION OVER AND ABOVE SUCH PRO FIT DETERMINED IS NOT PROPER. THUS, ULTIMATELY, THE BENCH HELD THAT THE INCOME FROM NON AE TRANSACTION CANNOT BE TAXED SEPARATELY BY APPLYING NET PROFIT RATE OF 28%. IT IS RELEVANT TO OBSERVE , THE AFORESAID DECISION OF THE TRIBUNAL WAS NOT CONTESTED BY THE REVENUE IN THE APPEAL PREFERRED BEFORE THE HON 'BLE JURISDICTIONAL HIGH COURT. NOTABLY, THE SAME VIEW WAS AGAIN EXPRESSED BY THE TRIBUNAL WHILE DECIDING ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2008 09 IN ITA NO. 7680/MUM./2012 & ORS., DATED 16 TH SEPTEMBER 2016. IN VIEW OF THE AFORESAID, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER. GROUNDS ARE ALLOWED. 13 STAR INTERNATIONAL MOVIES LTD. 15. IN VIEW OF OUR DECISION IN GROUNDS NO.1 TO 6, GROUNDS NO.7 TO 12, ARE OF MERE ACADEMIC IMPORTANCE AND THERE IS NO NEED TO SPECIFICALLY ADJUDICATE THEM. HENCE, THESE GROUNDS ARE DISMISSED. 16. IN G ROUNDS NO.13 AND 14, THE ASSESSEE HAS CHALLENGED THE DECISION OF THE ASSESSING OFFICER IN BRINGING TO TAX THE ROYALTY INCOME BY APPLYING THE RATE OF 42.23%. 17. VIS A VIS THE ISSUE RAISED IN THE AFORESAID GROUND, THE LEARNED SR. COUNSEL FOR THE ASSESSEE SUBMI TTED , THE ASSESSEE BEING A FOREIGN COMPANY, THE APPLICABLE TAX RATE ON ROYALTY INCOME IS AS PROVIDED UNDER SECTION 115A OF THE ACT. HE SUBMITTED , INSTEAD OF APPLYING THE TAX RATE PROVIDED UNDER SECTION 115A OF THE ACT, THE ASSESSING OFFICER HAS TAXED IT @ 42.23% BY TREATING IT AS BUSINESS PROFIT. HE SUBMITTED , IDENTICAL ISSUE ARISING IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2007 08 AND 2008 09, HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF LEARNED DRP AND ASSESSING OFFICER. 18. WE HAVE HEARD THE PARTIES AND PERUSED MATERIALS ON RECORD. UNDISPUTEDLY, IDENTICAL ISSUE ARISING IN ASSESSEES OWN CASE IN PRECEDING ASSESSMENT YEARS HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. CONSI STENT WITH THE VIEW TAKEN BY THE TRIBUNAL 14 STAR INTERNATIONAL MOVIES LTD. IN ASSESSEES OWN CASE IN EARLIER ASSESSMENT YEAR S , WE DIRECT THE ASSESSING OFFICER TO TAX THE ROYALTY INCOME AT THE APPROPRIATE RATE AS PROVIDED UNDER SECTION 115A OF THE ACT. 19. IN GROUNDS NO.15 TO 19, THE ASSESSEE HAS CHALLENGED DISALLOWANCE MADE UNDER SECTION 40(A)(I) OF THE ACT IN RESPECT OF TRANSPONDER HIRE CHARGES PAID TO ASIA SATELLITE TELECOMMUNICATION LTD. WITHOUT DEDUCTING TAX AT SOURCE. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS PAID US$ 33,24,102 TO ASIA SATELLITE TELECOMMUNICATION LTD., WITHOUT WITHHOLDING TAX UNDER SECTION 195 OF THE ACT , CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE PAYMENT MADE SHOULD NOT BE DISALLOWED UNDER SECTION 40(A)(I) OF THE ACT. IN RES PONSE, THE ASSESSEE SUBMITTED THAT SINCE THE PAYMENT WAS MADE TO A NON RESIDENT COMPANY WHICH HAS NO BUSINESS CONNECTION IN INDIA AND ITS INCOME WAS NOT TAXABLE IN INDIA , THERE WAS NO REQUIREMENT TO DEDUCT TAX AT SOURCE. IN THIS CONTEXT, THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN ASIA SATELLITE TELECOMMUNICATION LTD. V/S CIT, [2011] 332 ITR 340 (DEL.) . T HE ASSESSING OFFICER, HOWEVER, DID NOT F IND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND PROCEEDED TO DISALLOW THE PAYMENT MADE TO ASIA SATELLITE TELECOMMUNICATION LTD. AMOUNTING TO ` 17,01,27,540 UNDER SECTION 40(A)(I) OF THE ACT. THOUGH, THE ASSESSEE 15 STAR INTERNATIONAL MOVIES LTD. OBJECTED TO THE A FORESAID DISALLOWANCE BEFO RE LEARNED DRP, HOWEVER , THE DISALLOWANCE WAS UPHELD REFERRING TO EXPLANATION 5 AND 6 TO SECTION 9(1)(VI) OF THE ACT , BROUGHT WITH RETROSPECTIVE EFFECT. 20. CONTESTING THE AFORESAID DECISION OF THE DEPARTMENTAL AUTHORITIES, THE LEARNED SR. COUNSEL FOR THE AS SESSEE MADE TWOFOLD SUBMISSIONS. FIRSTLY, HE SUBMITTED , THE PAYMENT FOR TRANSPONDER HIRE CHARGES CANNOT BE REGARDED AS ROYALTY UNDER THE PROVISIONS OF THE ACT. IN THIS CONTEXT, HE RELIED UPON THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMEN T YEAR S 2002 03, 2007 08 AND 2008 09. WITHOUT PREJUDICE, HE SUBMITTED , EVEN ACCEPTING THAT THE PAYMENT MADE TO ASIA SATELLITE TELECOMMUNICATION LTD. (SUPRA) IS IN THE NATURE OF ROYAL TY AS PER THE AMENDED PROVISION OF SECTION 195 OF THE ACT , SILL , THE ASSES SEE CANNOT BE EXPECTED TO WITHHOLD TAX ANTICIPATING SUCH RETROSPECTIVE AMENDMENT. THUS, HE SUBMITTED , THE DISALLOWANCE MADE SHOULD BE DELETED. 21. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , THE ASSESSEE IS NOT AUTHORISED UNDER THE ACT TO DECIDE THE TA XABILITY OF INCOME AT THE HANDS OF THE CHANNEL COMPANIES. HE SUBMITTED , AS PER THE PROVISIONS OF SECTION 195 OF THE ACT, THE ASSESSEE IS REQUIRED TO DEDUCT TAX AT SOURCE AT THE TIME OF MAKING PAYMENT. FURTHER, HE SUBMITTED , IN CASE OF ASIA SATELLITE TELECO MMUNICATION LTD. (SUPRA), 16 STAR INTERNATIONAL MOVIES LTD. THE TRIBUNAL HAS HELD THAT THE TRANSPONDER LEASE CHARGES RECEIVED BY IT IS IN THE NATURE OF ROYALTY, HENCE, TAXABLE IN INDIA. THEREFORE, THE DISALLOWANCE MADE IS JUSTIFIED. 22. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIA L ON RECORD. FOR NOT WITHHOLDING TAX AT SOURCE ON THE PAYMENT MADE TO ASIA SATELLITE TELECOMMUNICATION LTD., THE ASSESSEE HAD PRIMARILY ADVANCED TWO REAS ONS. FIRSTLY, THE PAYMENT HAS BEEN MADE TO ALL NON RESIDENT COMPANIES WHICH D O NOT HAVE ANY BUSINESS CO NNECT ION IN INDIA. THEREFORE, ITS INCOME IS NOT TAXABLE IN INDIA, HENCE, WITHHOLDING OF TAX IS NOT REQUIRED TO BE MADE WHILE MAKING THE PAYMENT. IT IS FURTHER SUBMITTED , EVEN IF BY VIRTUE OF AMENDED PROVISIONS OF SECTION 195 OF THE ACT, THE PAYMENT IS TO B E TREATED AS ROYALTY, HOWEVER, SUCH AMENDMENT HAVING BEEN BROUGHT WITH RETROSPECTIVE EFFECT, THE ASSESSEE COULD NOT HAVE FORESEEN THE OBLIGATION TO DEDUCT TAX AT SOURCE. IT IS RELEVANT TO OBSERVE , THOUGH , IN CASE OF ASIA SATELLITE TELECOMMUNICATION LTD. (SUPRA), THE TRIBUNAL OBSERVED THAT THE PAYMENT RECEIVED BY IT TOWARDS TRANSPONDER LEASE CHARGES IS IN THE NATURE OF ROYALTY, HENCE, TAXABLE IN INDIA, HOWEVER, THE SAID DECISION OF THE TRIBUNAL WAS REVERSED BY THE HON 'BLE DELHI HIGH COURT IN THE DECISION CITED SUPRA. THE TRIBUNAL, WHILE DECIDING THE ISSUE IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2002 03, VIDE ITA NO.6604/ 17 STAR INTERNATIONAL MOVIES LTD. MUM./2004 & ORS., DATED 5 TH OCTOBER 2018, HAS HELD THAT BY VIRTUE OF RETROSPECTIVE AMENDMENT BROU GHT IN SECTION 195 OF THE ACT, THE ASSESSEE COULD NOT HAVE BEEN FASTENED WITH THE LIABILITY TO DEDUCT TAX AT SOURCE AND ACCORDINGLY DELETED THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT IN RESPECT OF PAYMENT MADE TO ASIA SATELLITE TELECOMMUNICAT ION LTD. TOWARDS TRANSPONDER HIRE CHARGES. THE SAME VIEW HAVE BEEN EXPRESSED BY THE TRIBUNAL WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2007 08 AND 2008 09 AS WELL. FURTHER, IN THE AFORESAID DECISION, THE TRIBUNAL, FOLLOWING T HE DECISION OF THE HONBLE DELHI HIGH COURT IN ASIA SATELLITE TELECOMMUNICATION LTD. (SUPRA), HAS HELD THAT THE PAYMENT MADE IS NOT IN THE NATURE OF ROYALTY. ACCORDINGLY, THE ADDITION WAS DELETED . FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING THE CONSISTEN T VIEW OF THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER ASSESSMENT YEARS, WE DELETE THE DISALLOWANCE MADE UNDER SECTION 40(A)(I) OF THE ACT. GROUNDS ARE ALLOWED. 23. IN GROUNDS NO.20 TO 22, THE ASSESSEE CHALLENGED INITIATION OF PENALTY PROCEEDINGS UNDER VARI OUS PROVISIONS. 24. THE ISSUE RAISED IN THESE GROUNDS BEING PRE MATURE AT THIS STAGE, DO NOT REQUIRE ADJUDICATION. HENCE, THESE GROUNDS ARE DISMISSED . 18 STAR INTERNATIONAL MOVIES LTD. 25. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.10.2019 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 18 .10.2019 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI