CHANEL V MUSIC NETOWRKS LTD PARTNERSHIP, MUMBAI V. ASST DIT (IT) 1(2), MUMBAI

ITA 1818/MUM/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7376 (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; Bad and doubtful debts; TDS
• Section: 143(3)

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 . 1818 / MUM . /2014 ( ASSESSMENT YEAR : 20 09 10 ) CHANNEL V MUSIC NETWORKS LTD. PARTNER SHIP , C/O STAR INDIA PVT. LTD. STAR HOUSE, OFF. DR. E. MOSES ROAD MAHALAXMI, MUMBAI 400 011 PAN AAICS3256P . APPELLANT V/S ASSTT . DIRECTOR OF INCOME TAX (I.T) CIRCLE 1 ( 2 ) , 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 . THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST FINAL ASSESSMENT ORDER DATED 26 TH FEBRUARY 2014, PASSED UNDER SECTION 143(3) R/W SECTION 144(C)(13) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT') IN PURSUANCE TO THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL - III, MUMBAI, ( THE DRP ) FOR THE ASSESSMENT YEAR 2009 - 10. 2 CHANNEL V MUSIC NETWORKS LTD. PARTNER SHIP 2. THE FACTS AND ISSUES INVOLVED IN THE PRESENT APPEAL ARE IDENTICAL TO THE FACTS AND ISSUES INVOLVED IN ITA NO.1815/MUM./2014. THE ONLY FACTUAL DIFFERENCE IN THE PRESENT CASE IS, THE ASSESSEE IS A CHANNEL OWNING COMPANY BELONGING TO THE NEWS CORP GROUP OF HO NG KONG. 3. GROUNDS NO.1 AND 2, BEING GENERAL IN NATURE DO NOT REQUIRE ADJUDICATION. 4. GROUNDS NO.3, 4 AND 5, THE ASSESSEE HAS CHALLENGED THE ADDITION MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT , BASICALLY , ON THE ISS UE OF REJECTION OF THREE COMPARABLES . THE ISSUE RAISED IN THESE GROUNDS ARE IDENTICAL TO THE ISSUE RAISED IN GROUNDS NO.1 TO 4 OF ITA NO.1815/ MUM./2014, DISPOSED OFF VIDE OUR ORDER DATED 18 TH OCTOBER 2019, PASSED IN THE SAID APPEAL. T HE ISSUE HAS BEEN DECIDED IN THE FOLLOWING MANNER: - 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 NOT DISPUTED APPLICABI LITY OF PSM AS THE MOST APPROPRIATE METHOD TO BENCHMARK THE TRANSACTION WITH THE AES. 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 T HAT NONE OF THESE COMPANIES CAN BE CLASSIFIED AS PERSISTENT LOSS MAKING COMPANIES. IN VARIOUS DECISIONS IT HAS BEEN HELD THAT UNLESS THE COMPANY DECLARES LOSS 3 CHANNEL V MUSIC NETWORKS LTD. PARTNER SHIP 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 OBSE RVE, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008 09, THE TRIBUNAL HAS ACCEPTED JAIN STUDIOS LTD. AS A COMPARABLE. FURTHER, THE TRANSFER PRICING OFFICER HIMSELF HAS ACCEPTED TELEVISION 18 INDIA LTD., AS A COMPARABLE IN ASSESSMENT YEARS 2007 08 AND 2 008 09. THAT BEING 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 IS SUBSTANTIALLY HIGH. THOUGH, IN THE IMPUGNED ASSESSMENT YEAR, THE PROFIT MARGIN HAS FALLEN DRASTICALLY, THE COMPANY HAS STILL SHOWN PROFIT OF 1.04%. EVEN IF THE FALL IN PROFIT RATE IS DUE TO WRITE OFF OF BAD DEBT, STILL THIS COMPANY CANNO T BE EXCLUDED 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 ACCORDIN GLY. THESE GROUNDS ARE ALLOWED. 5. FACTS BEING IDENTICAL, THE AFORESAID DECISION OF THE TRIBUNAL WOULD APPLY MUTATIS MUTANDIS TO THE FACTS OF THE PRESENT CASE ALSO. ACCORDINGLY, THESE GROUNDS ARE ALLOWED. 6. IN GROUNDS NO.6 AND 10, THE ASSESSEE HAS CHALLENG ED NON - APPLICATION OF PROFIT SPLIT METHOD (PSM) TO NON - AE TRANSACTION S AND AD - HOC ADDITION MADE BY THE ASSESSING OFFICER ON SUCH TRANSACTION. 7. THE ISSUE RAISED IN THESE GROUNDS ARE IDENTICAL TO THE ISSUES RAISED IN GROUNDS NO.5 AND 6 IN ITA NO.1815/MUM./20 14, DATED 4 CHANNEL V MUSIC NETWORKS LTD. PARTNER SHIP 18.10.2019, WHEREIN , THE TRIBUNAL HAS DECIDED THE ISSUE IN THE FOLLOWING MANNER: - 14. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. ADMITTEDLY, THE ASSESSING OFFICER SIMPLY RELYING UPON THE DIRECTION OF LEARNED DRP IN ASS ESSMENT YEAR 2007 08 HAS 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 COMBINED 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 REVENUE, THEN, TO SEGREGATE A NON AE TRANSACTION OVER AND ABOVE SUCH PR OFIT 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 TH E 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 SEPTEMB ER 2016. IN VIEW OF THE AFORESAID, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER. GROUNDS ARE ALLOWED. 8. FACTS BEING IDENTICAL, THE AFORESAID DECISION OF THE TRIBUNAL WOULD APPLY MUTATIS MUTANDIS TO THE FACTS OF THE PRESENT CASE ALSO. ACCORDINGLY, THESE GROUNDS ARE ALLOWED. 9. IN VIEW OF OUR DECISION IN GROUNDS NO.3, 4, 5, 6 AND 10, THE GROUNDS NO.7, 8, 9, 11, 12 AND 13, HAVE BECOME ACADEMIC, HENCE, DO NOT REQUIRE ADJUDICATION. 10. IN GROUND NO.14, THE ASSESSEE HAS RAISED THE ISSUE OF SHORT GRANT OF TAX DEDUCTED AT SOURCE AMOUNTING TO RS.1,82,84,887. AFTER 5 CHANNEL V MUSIC NETWORKS LTD. PARTNER SHIP CONSIDERING THE SUBMISSIONS OF THE PARTIES, WE DIRECT THE ASSESSING OFFICER TO VERIFY ASSESSEES CLAIM ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND ALLOW CREDIT FOR TDS AS PER LAW. 11. IN GROUND NO.15, THE ASSESSEE HAS RAISED THE ISSUE OF SHORT CREDIT OF ADVANCE TAX AND SELF - ASSESSMENT TAX. 12. AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES, WE DIRECT THE ASSESSING OFFICER TO VERIFY ASSESSEES CLAIM ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND ALLOW CREDIT FOR TDS AS PER LAW. 13. IN GROUNDS NO.16 TO 18, THE ASSESSEE HAS CHALLENGED I NITIATION OF PENALTY PROCEEDING UNDER VARIOUS PROVISIONS OF THE ACT. 14. THE ISSUE RAISED IN THESE GROUNDS BEING PRE - MATURE AT THIS STAGE DOES NOT REQUIRE ADJUDICATION. ACC ORDINGLY, THESE GROUNDS ARE DISMISSED. 15. IN THE RESULT, 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 6 CHANNEL V MUSIC NETWORKS LTD. PARTNER SHIP 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