TAJ TV LTD., MUMBAI V. DY CIT (INTERNATIONAL TAXATION)-4(1)(2), MUMBAI

ITA 821/MUM/2021

AI Insights

The case involves Taj TV Limited, a company incorporated in Mauritius, which appealed against the assessment order by the Deputy Commissioner of Income Tax, International Taxation, Mumbai, for the assessment year 2017-18. The assessment had included the income from the sale of its global sports broadcasting business and other revenues as taxable in India. The Tribunal examined whether the applicant had a permanent establishment in India and whether the income from the sale and other revenues was chargeable to tax in India under the Income Tax Act and the India-Mauritius DTAA. The Tribunal found that the applicant did not have a permanent establishment in India and that the income from the sale of the business and other revenues was not chargeable to tax in India.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113413 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 16-01-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 17-05-2021
• Other Referred Cases: CIT v. Taj TV Limited, Director of Income Tax (International Taxation) v. Morgan Stanley & Co. Inc., Formula One World Championship Ltd v. CIT, Director of Income Tax (International Taxation) v. E Funds IT Solutions Inc, Additional Director of Income Tax v. Taj TV Limited, Joint Commissioner of Income Tax v. Flipkart India Private Limited, Assistant Commissioner of Income Tax v. Balaji Trust, Mahindra and Mahindra Ltd v. Deputy Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Related party transaction; Capital asset; Business income; Depreciation; Transfer pricing; Double taxation relief; Share purchase agreement; Permanent establishment; Wholly owned subsidiary; Non-deduction of tax; Valuation report; Unabsorbed depreciation; Capital Gains
• Section: 90; 260A; 195; 144C; 64; 113; 43; 48; 73; 72; 13(2); 13; 119; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIB UNAL “I” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI SANDEEP SINGH KARHAIL, JM ITA No.821/Mum/2 021 (Asse ssment Year: 2017-18) Taj TV Limited C/o. Sure sh Surana & Associates LLP 8th Floo r, Ba khtawar, Nariman Point, Mu mbai-400 020 Vs. DCIT (International Taxation)-4( 1)( 2) Air India Bui lding, Nariman Point, Mumbai-400 021 (Appellant) (Respondent) PAN No. AABCT6542J Reference of orders / Directions in Appeal Sr No Orders and Directions Passed By Date 1 Draft Assessment order u/s 144C of the Act The Deputy Commissioner of Income tax , international taxation, Circle 4 (1) (2), Mumbai 27/12/2019 2 Direction u/s 144C (5) of the Act CIT (DRP-2) , Mumbai - 2 22/03/2021 3 Assessment order u/s 143 93) r.w.s 144C (13) of the Act The Deputy Commissioner of Income tax , international taxation, Circle 4 (1) (2), Mumbai 12/04/2021 Assessee by : Shri P.J. Pardiwa la Sr Adv, Shri Madhur Agrawal, Adv Shri Jai Bhan sali; Adv Revenue by : Shri G.C. Sriva stava, Adv Special Coun se l, Shri Mi lind Cha van, SR DR Page | 2 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 2 of 121 Shri Ma yank Pat wari, Adv Shri Ka lrav Mehrotra, DRs Dat e o f heari ng: 17.01.2023 Date of pronouncement : 31. 03.2023 O R D E R PER PRASHANT MAHARISHI, AM: Fact of Appeal 01. This appeal is filed by M/s Taj TV Limited [The Assessee/Appellant] for the assessment year 2017 – 18 against the assessment order passed under section 143 (3) read with section 144C (13) of The Income Tax Act, 1961 (The Act) dated 12/4/2021 by The Deputy Commissioner Of Income Tax, International Tax Circle 4 (1) (2), Mumbai (The Learned AO) where the return of income filed by the assessee on 30/11/2017 declaring a total income of ₹ 157,461,370 is assessed at ₹ 19,108,044,470/–. Assessee has offered Interest on Income tax Refund of ₹ 185,593,487 as Income from Other Sources. Return of Income of Assessee 02. During the course of assessment processing, assessee has filed detailed note on business activities of the assessee company and said that it does not have any permanent establishment [PE] in India and therefore it has offered nil income. Accordingly, as per assessee, it has two streams of Income Advertising service income and Distribution service income and both these streams of income are not chargeable to tax in India. Assessment Proceedings Page | 3 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 3 of 121 03. Ld. AO was of the view that past records and assessment shows that revenue has held that the assessee company has a permanent establishment and hence income attributable to the permanent establishment is chargeable to tax in India. 04. Assessee submitted that i. Coordinate bench for assessment year 2011 – 12 held that there is no permanent establishment in respect to distribution revenue and issue of the same with respect to advertisement revenue is kept open. ii. However, the payment to its associated enterprises is at arm's-length, nothing further should be attributable to the assessee that can be taxed in India. iii. There is no change in the facts and circumstances of the case compared to assessment year 2011 – 12 that is subsequently followed for assessment year 2006 – 07 to assessment year 2010 – 11 and 2012 – 13. iv. Even otherwise, it was claimed that assessee does not have a fixed place of business in India not having any branch or office in India. The management and control of assessee is situated outside India and is managed by independent directors. v. Assessee is also a tax resident of Mauritius. Further, the agent of the assessee Taj India does not have any authority to conclude contracts in the name of the assessee. vi. It further relied on several judicial precedents to submit that none of the functions and activities is performed in India Page | 4 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 4 of 121 except collection of advertisement revenue from Indian advertisers and distribution revenue. Findings of Assessing Officer 05. Ld. AO on the submission of the assessee held that i. Assessee has a fixed place permanent establishment in India as assessee has shifted its Play out and production facilities to India and it does not have Play out of the channels anywhere else in India. The assessee company pays play out fees to its associated enterprise Zee Entertainment Enterprises Ltd [ZEE] for use of its premises for Channel play out. This is further confirmed by the LinkedIn profiles of some senior personnel involved in the process that confirms that assessee indeed had a fixed place of business in India during the year under consideration. Thus, according to the AO, assessee in the present case has a place of business, such place is fixed, activities have been performed by the assessee throughout the said fixed place of business, and the said fixed place of business was at the disposal of the assessee and its employees. It was further held that requirement of the ownership of the space is not required. ii. Ld. AO further held that assessee also has an establishment in the form of dependent agent permanent establishment [DAPE] with respect to its advertisement and distribution revenue. iii. For Advertisement income, on reading the advertisement sales agency agreement the learned AO was of the view that a. Taj India is an associated enterprise of the assessee company. Page | 5 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 5 of 121 b. Taj India is its advertising sales agent for soliciting orders for placement of advertisement on the channel and forwarding them to the assessee for acceptance. However, the assessee has not contemplated appointing any other advertising sales agent. c. Taj India also conducted activity in India and on behalf of the assessee, which only a dependent agent could carry out or it's principal like facilitating arrangement with advertising agencies, sales representatives, conducting market studies, promoting awareness regarding channel and other services incidental to acting as dependent agent for booking of advertisement in India. d. In return for the above-mentioned services, Taj India only receives a commission of 10% of the advertisements in India. e. Clause 5 (a) of the agreement clearly mentions that the assessee and Taj India acknowledges that Taj India can enter into contracts with third parties, subject to prior approval by the assessee in its absolute discretion. f. Clause 10 of the agreement mentions that the assessee may assign or transfer without the prior written permission of Taj India, the whole or any part of its rights to any party in its absolute discretion. g. It can be seen that a major part of the risk in terms of market risk and technology risk are borne by the Taj India. Further measure of the revenue is from advertisement and subscription of the assessee comes Page | 6 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 6 of 121 through the Indian viewership which is undoubtedly linked with the permanent establishment i.e., Taj India. ii. The learned AO also rejected the argument of the assessee that if remuneration is paid to the dependent agent in source country India at arm‟s-length price, no further profits can be attributed to the source country. AO was of the view that it is conceptually wrong. iii. She referred to the reports on the „Attribution of Profits to Permanent Establishment‟; she held that single taxpayer approach has many conceptual problems. After discussing the above report, she held that a consensus has been arrived at internationally that if remuneration is paid to dependent agent, even in those cases, further profits can be attributed to the source state. Thereafter, she referred to the methodology of computation of the profit attributable. She further rejected the reliance by the assessee on the decision of the Honourable Supreme Court in case of Morgan Stanley [292 ITR 416] holding that reliance shall be applicable only when arm‟s-length price has been determined for all the functions and risks carried out by the dependent agent which is not the case of the assessee. Thus, she rejected claim of the assessee that if the payment to the agent is made at arm‟s-length, then non-resident is not liable to tax. The reasons for the same are a. Payment to the agent and profit of the assessee from business operation in India is two separate things that cannot be compared. Page | 7 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 7 of 121 b. Hypothesis is applicable only in case of independent agents where no assets or capital of non-resident are used in India, no risk is assumed by the non-resident in India and no other activities carried out by the non-resident in India. c. OECD report also suggest apportionment basis for determination of profits attributable to permanent establishment that is similar to the provision in rule 10 of the IT rules. d. No such categorical statement/hypothesis has been suggested by the OECD or any other commentary. e. It would also not be accordance with the statutory provisions like section 44B of the act that is a self-contained code. f. Circular number 1 of 2004 also provides that when activities of the business of the assessee are outsourced, then there would be substantial profit of the principal would be the income of the non-resident taxable in India. g. It would make principles of „force of attraction‟ inapplicable in India. iv. Accordingly, she held that it is amply clear that Taj India is acting wholly and exclusively for the assessee company as a dependent agent and is regularly selling the advertisement spots on behalf of the assessee. It is also clear that the Taj India is functionally and economically dependent on the assessee and takes risk on behalf of the assessee. It is therefore independent Page | 8 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 8 of 121 agent of the assessee within the meaning of Article 5 of the Indo Mauritius Double Taxation Avoidance Agreement. v. She further referred to the agreement and held that even allowing for the fact that assessee company is responsible for setting down the broad guidelines under which the contracts to be made, served, the importance of Taj India in concluding the contracts cannot be ignored. According to her it is the later [Taj India] that is responsible for all the negotiations in India and its activities in India are devoted exclusively on behalf of the assessee company. vi. Therefore, Taj India has authority to conclude contracts in the name of the assessee and the authority is exercised in India habitually and repeatedly. Hence the assessee has a Permanent Establishment in India within the meaning of article 5(4) (i) of The Double Taxation Avoidance Agreement. vii. On distribution income, She further referred to the distribution agreement between the assessee and Taj India and held that it is clear that Taj India has exclusive right to represent the assessee before the distribution systems/cable operators and negotiate and procure cable distribution license agreement for the service, the term of which shall be determined by Taj India as authorized by the assessee. The distribution revenue collected by Taj India shall be shared in the ratio of 86 x 14 by the assessee and Taj India respectively. viii. Therefore with regard to Taj India acting as a dependent agent for Advertisement Revenue and on account of similar legal position on that issue with respect to the Distribution Income of the assessee, she held that the assessee has a permanent Page | 9 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 9 of 121 establishment in India as such and therefore the subscription revenue is taxable on net basis on business income in the hence of the assessee. ix. On Attribution of profit to PE, she held that 81.84% of the global revenues are received from India and therefore it is reasonable to hold that even 81.84% of the Global profits arising from Indian operations are attributable to the functions performed by fixed place and/or dependent agent permanent establishment in India and the same would be liable to be taxed in India. x. The learned AO further held that assessee has incurred expenses of programming cost, transponder charges and up linking charges on which tax should have been deducted which assessee has failed to deduct at source. According to the learned AO, programming cost is a payment made for acquisition of right in respect of various content acquired by the assessee including live feeds for the casting India is in the nature of royalty requiring tax deduction at source. With respect to Transponder fees and up linking charges it was held that the process is always included the transmission by satellite and further it would also fall in the definition of equipment in explanation 5 of that section accordingly the payments being made by the assessee are taxable as royalty under section 9 (1) (vi) of the act. Hence tax at source been deducted thereon. According to the AO these payments are also chargeable to tax as royalty as per article 12 of the Indo US DTAA as recipient of income is US Resident. The learned AO further rejected the contention of the assessee that when there is a payment from one non-resident to another non-resident there is no liability for tax deduction at source under section 195 of the act the learned AO was of the view that liability to make tax deduction at source under section 195 is Page | 10 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 10 of 121 irrespective of the fact whether the person making payment is a resident or a non-resident or having a business connection in India or not. The learned AO further noted that coordinate bench has allowed a relief to the assessee on the issue of disallowance of non-deduction of tax for assessment year 2003 – 04 until assessment year 2011 – 12. Against these orders, the revenue has filed an appeal before the Honourable High Court, which is pending. However, each assessment proceedings for each year are separate and a principle of rest judicata does not apply. Accordingly, all these payments are disallowable under section 40 (a) (i) of the act. xi. Accordingly, She held that the total profit of the business is US$ 4,839,582 out of which disallowance of expenditure under section 40 (a) (i) of the act is required to be made with respect to the programming cost of US$ 10,814,810, transponder fees of US$ 1,793,183, up linking charges of US$ 1,790,261 totaling to US$ 143,98,254. Therefore, the business income is US$ 19,237,836. Business income attributable to India was assumed at 81.8% at the exchange rate of ₹ 64.8386 per US dollar was determined at Rs. 102,03,35,860/- . xii. There is also an issue of chargeability of capital gain on sale of Global Sports Business by Assessee to Sony Pictures Network [India] Private Limited [SONY] in this case. During the year under consideration the assessee has sold sports broadcasting business and all assets, right, title and interest of the assessee in the sports broadcasting business to Aqua holding investment private limited, Mauritius ongoing concern basis by way of a slump sale for consideration of US$ 338,400,00. The purchaser is [1] SPE Mauritius Holdings Ltd and [2] SPE Mauritius investment Ltd both the companies incorporated in Mauritius in turn owned Page | 11 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 11 of 121 by Sony pictures network India private limited, India [SONY] . On question that why capital gain on sale of these business is not chargeable to tax in India , assessee raised the argument that a) Assessee does not have any branch or place of business or any business connection in India and any asset or source of income in India any property or capital asset in India hence it does not have any permanent establishment in India. Therefore, the income of the assessee related to disposal of its global sports broadcasting business to another Mauritius company is not taxable in India. b) Assessee stated that as per article 13 (4) of the Double Taxation Avoidance Agreement between India and Mauritius, any gain on sale of its business is not chargeable to tax in India. c) Assessee has received Nil deduction certificate under section 197 (1) of the act. d) Accordingly, according to assessee chargeability of this transaction is not tenable. xiii. The AO further per letter dated 3/12/2019 asked for the several details that were replied to 16/12/2019 partially. The AO held that assessee did not file a valuation report for sale of Global Sports broadcasting business neither any computation of income arising on the said transfer. Assessee also did not file global financials that can assist the learned AO in computing the income arising on the transfer of broadcasting business. Assessee has also not filed details with respect to approvals taken from any government or statutory or regulatory authorities in India Page | 12 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 12 of 121 for the transfer and has not notified details of authorized bank signatories for the period relevant to the said transaction. xiv. The learned AO held that it is too simplistic an assertion that the transaction is an overseas transaction between two overseas companies. According to her, it is equally important to view the true nature and character of the transaction from the covenants of the contract in the light of surrounding circumstances. The AO noted that Zee entertainment enterprises Ltd [ ZEE] in its annual report for 2017 has categorically stated that its board has approved sale of sports broadcasting business comprising of assets and rights relating to Ten brand of sports channel held in Taj TV Limited Mauritius, a step down subsidiary of the company and sale of entire equity stake in the Indian subsidiary handling sports business viz. Taj Television (India) Private Limited [ Taj India] to Sony group at an aggregated all-cash consideration of US$ 385 million. ZEE in its annual reports of 2018 further noted that second phase of sale of sports broadcasting business was concluded upon receipt of aggregate consideration of US$ 366.32 million after certain adjustment as per the terms of agreement. On 31 August 2016, Zee made announcement at stock exchange disclosing material events of sale of sports broadcasting business. Further, on 20 February 2017, Zee filed to the Bombay stock exchange and National stock exchange of further update on sale of sports broadcasting business. The AO further referred information available in public domain that showed that purchaser has applied to The Competition Commission of India [CCI] to receive approval for the said transfer/transaction. The Competition Commission Of India as per order dated 13/1/2017 passed under section 31 (1) of The Competition Act 2002 on the basis of notice given by SONY Page | 13 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 13 of 121 PICTURES NETWORK PRIVATE LIMITED and Holdings pursuant to execution of (1) share sale and purchase agreement dated 31/8/2016 executed between Sony India, Taj television (India) private limited and ZEE Ltd, (2) Business Purchase Agreement dated 31/8/2016 executed between Taj TV Limited, ATL India Ltd, SPE Mauritius Holdings Ltd and SPE Mauritius investments Ltd. It was held that the proposed combination is an interconnected transaction involving acquisition of 100% shareholding of Taj India by Sony India from Zee and acquisition of sports broadcasting business of Taj Mauritius-by-Mauritius entities. It further held that the proposed combination relates to broadcast, distribution and syndication of television channels in India. Based on this the learned AO reached at a conclusion that there are two transactions (1) acquisition of 100 % percent shareholding of Taj India by Sony, (2) acquisition of sports broadcasting business by two Mauritius entities. Therefore, according to her, entire transaction or scheme was with respect to sale of broadcast, distribution, and syndication of television channels in India and therefore it needs to be viewed in its entirety and two transactions cannot be viewed independently from each other. xv. According to her, the transaction has resulted in consequential effective control and management or Indian business of the company and not merely transfer of sports broadcasting business outside India. The entire agreement allowed Sony pictures network India private limited through other entities, which was later merged/amalgamated, with Sony pictures network India to step into the shoes of Taj TV and increase its presence in the sports TV channel viewership in India and other territories. Page | 14 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 14 of 121 xvi. Thereafter, the learned AO looked into The Business Purchase Agreement dated 31/8/2016 and reached at a conclusion that the definition of sports broadcasting business is all inclusive and pertained to broadcast, distribution and syndication of sports content along with the distribution of channels anywhere in the world (other than Pakistan). Therefore, according to her the business purchase agreement has transferred all assets, rights, title, and interest in and to the sports broadcasting business of the assessee to the purchaser. The „assets‟ means the assets of the seller relating to or used to operate the sports broadcasting business including all movable assets, all current assets, and all other assets, tangible or intangible of whatsoever nature and where so ever situated, each of which relates to all is used in sports broadcasting business. Assessee does not have any immovable property exclusively for conduct of its sports broadcasting business. Therefore, assessee has transferred all the rights and title is an interest in the sports broadcasting business including but not limited to agreements with various sports bodies to broadcast matches, trademarks being Ten sports logo, name etc and other intellectual properties defined under the business purchase agreement. On the basis of the definition of the trademark, the learned AO noted that out of 272 such trademarks of that business , 158 trademarks are with respect to Indian territory [ Schedule 3 of the BPA ] . This shows that the said agreement had indeed transferred a significant right of the assessee in relation to India. The AO further look at clause of the BPA on purchase consideration and noted that committed distribution revenue defined as a special penal clause for adjustment in the purchase consideration for any shortfall in distribution revenue with respect to Indian Territory. The learned AO further looked at the conditions precedent to the Page | 15 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 15 of 121 contract, closing actions, and conduct between exclusion and closing and non compete clauses. It further looked at the governing law as per paragraph number 12 that provides that the agreement is governed by, interpreted by, and construed in accordance with the substantive laws of India. xvii. The learned AO further noted that revenue has been consistently holding that assessee has a Dependent Agent Permanent Establishment [DAPE] in the form of Taj TV India and has been holding that the business income attributable to the assessee from its operations in India is chargeable to taxation in India. xviii. The learned AO further noted that during the year under consideration the assessee has shifted its play out and production facilities to India, which has created a fixed place permanent establishment in India. xix. The learned AO further noted that global CEO of 10 sports and CEO of assessee's distribution agent are one Shri Rajesh Settee who is based out of Noida. She noted that he also spearheaded the sale of Ten sports broadcasting business and therefore the policy-making head of both the principal and the agent is the same. xx. She further noted that that both the assessee‟s[i] sports broadcasting business and [ii] shares in its exclusive Indian agent i.e. Taj TV India have been transferred to Sony pictures network India private limited, hence, effectively entire Indian operations have been transferred to that company. Therefore, it establishes the territorial nexus of the said agreement with India. xxi. Based on this: – Page | 16 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 16 of 121 a) the AO held that by the means of the business purchase agreement assessee has transferred all assets, rights, title and interest in and to the sports broadcasting business which is squarely covered by the definition of „property‟ and hence „capital asset‟ situated in India. b) The provisions of The Income Tax Act under section 50B dealing with income on sale of a business unit/undertaking/division via slump sale is required to be computed. c) The capital gain is required to be computed by deducting net worth of the undertaking as on the date of transfer. d) As the assessee has transferred assets, rights, title and interest in and to the sports broadcasting business by means of a Business Purchase Agreement dated 31/8/2016 and it has also been established that the said business has territorial nexus with India and that the said transfer is covered by the provision of The Income Tax Act, she invoking the provisions of section 9 (1) read with section 5, held that that any income accruing or arising in India ,directly or indirectly or from business connection in India shall be taxable in India. e) With respect to the eligibility of assessee for the benefit of Double Taxation Avoidance Agreement, it was noted that assessee is a company Incorporated under the laws of Mauritius and it runs and operates its business from Mauritius. The assessee has claimed that it is a tax resident in Mauritius and satisfies the condition under section 90 (4) of The Income Tax Act for being eligible to Page | 17 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 17 of 121 claim the benefit of tax treaty between India and Mauritius. Further, the claim of the assessee is that the issue is squarely covered under the provisions of article 13(4) of the DTAA. The AO was of the view that assessee was in substance not running the broadcasting business on its own account from Mauritius as decision to sale said business was not taken independently. For this proposition she referred to the resolution of the company dated 30/8/2016 wherein it was inferred that the decision to sale the broadcasting business was taken by ultimate parent ZEE entertainment Enterprises Ltd, the assessee was not involved in the decision-making process to finalize the nature of transaction being slump sale and the assessee was not involved in the decision-making process to finalize the sale consideration which was approved as notified to it by ZEE. Further, there is no discussion on valuation report or any independent decision-making by the board of the assessee company. Accordingly, it was held that assessee acted as a „puppet‟ in the hands of its parent and was not involved in the decision-making process or in deciding the nature and quantum of sale consideration. The learned AO further noted that that Business Purchase Agreement was signed by one Mr. Anil Maurya on behalf of both the assessee company and ATL Media Limited [ATL]. Accordingly, agreement was not signed by any of the directors of the assessee company. On the claim of the assessee that Mr. Anil Maurya was acting as a representative of the assessee company, the learned AO held that the decision to authorize him was not independently taken by the Page | 18 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 18 of 121 assessee company but was dictated to it by its parent company ZEE. f) The AO further noted that parent company Zee Entertainment Enterprises Ltd has given corporate guarantee with respect to various associations/boards to acquire the licensing rights for matches in various territories, therefore, according to AO the subsidiary is not functioning independently as a „separate legal entity‟. g) Assessee has not established how the funds realized after the sale by it for its business purposes and further it has also not submitted any valuation report. h) Thereafter, ld. AO looked at statement of segmental assets and liabilities as on 31 August 2016 of the assessee and found that the out of total net worth of global sports broadcasting division, US$ 7,893,917 is required to be deducted as cost of acquisition and improvement being net worth of the business as per accounts of the assessee. Accordingly, from sale consideration of US$ 33,84,00,000, the cost of acquisition of US$ 7,893,917 was deducted and long-term capital gain on sale of sports broadcasting business division of US$ 330,506,083 was worked out. The same was converted at exchange rate of SBI TT Buying rate of US dollar as on 31/8/2016 and capital gain chargeable to tax in India was worked out that ₹ 22,137,594,895/–. Page | 19 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 19 of 121 xxii. Thus, Draft Order u/s 144C of the Act was passed on 27/12/2019 where the ld. AO computed the income of the assessee as under :- Sr No Particulars INR 1 Business income from Broadcasting of channels from India holding that assessee has a DAPE 102,03,35,860/- 2 Capital gain on slump sale of Global Broadcasting business of Assessee chargeable to tax in India as per the Income tax Act as well as per DTAA and benefit of DTAA is not available to the assessee 2213,75,94,895/- 3 Income from Other sources being Interest on Income tax Refund 18,55,93,487/- Total income 2234,35,24,242/- Proceedings before DRP 06. Assessee preferred objection before The Dispute Resolution Panel – 2, Mumbai (The Learned DRP). The directions were issued on 22/3/2021. Page | 20 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 20 of 121 i. As per objection number 1 and 2, assessee challenged chargeability of capital gain on account of sale of global broadcasting business of the assessee. Objection number 3 and 4 are with respect to the taxability of advertising and distribution revenue holding that assessee has a permanent establishment in India. These objections also were with respect to the claim of the assessee that agent of the assessee has been paid at arm‟s-length. Objection number 5 and 6 are with respect to the decision of the AO that assessee should have deducted tax at source in programming cost, transponder fees and up linking charges. ii. With respect to objection number 1 and 2, the learned dispute resolution panel held that through business purchase agreement assessee has transferred the assets, right, title and interest of its sports broadcasting business in India and other territories. As the assessee has a permanent establishment in India, the revenue derived from advertisement and distribution of any India is attributable to its permanent establishment. Therefore, according to this business purchase agreement assessee has transferred the immovable property including assets, rights, title, and interest on goodwill of its business in India, which forms part of the business property of the permanent establishment. Accordingly,Article13 (2) of The Double Taxation Avoidance Agreement is applicable and the state in which the permanent establishment is situated may tax the same. Accordingly, the gain arising out the above sale is taxable in India under article 13 (2) of the India Page | 21 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 21 of 121 Mauritius Double Taxation Avoidance Agreement. It also rejected the claim of the assessee that about gains is covered by Article 13 (4) of DTAA. Accordingly, ld. DRP confirmed the action of the learned assessing officer holding that capital gain attributable to the permanent establishment in India of US$ 267,271,940 is chargeable to tax in India u/s 50 B of the act read with article 13 (2) of the DTAA. iii. With respect to objection number 3 and 4 it was held that as the revenue has been consistently holding that assessee has a permanent establishment in India which has also been confirmed by the learned CIT – A in earlier years, there is no change on the facts and circumstances of the case and therefore the action of the learned assessing officer was confirmed holding that Taj TV Ltd has income chargeable to tax in India in respect of advertisement and distribution revenue as it has a business connection and permanent establishment in India. iv. With respect to objection number 4 being an alternative submission that the permanent establishment has been compensated at arm‟s-length in respect of various services provided in India and therefore no further attribution can be made, the action of the learned assessing officer was upheld holding that without benchmarking of all functions of the permanent establishment for generating advertisement revenue it cannot be presumed that the payment made to the agent was at arm‟s-length. It held that even before the Page | 22 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 22 of 121 DRP applicant did not contradict the findings of the AO with the help of the necessary evidence. So, objection number 4 was also rejected. v. With respect to the objection number 5 about disallowing the programming cost by holding that the same is royalty chargeable to tax and under section 195 of the act the tax was required to be deducted, which is not been made and therefore is disallowable under section 40 (A) (I) of the act and objection number 6 with respect to disallowance of transponder fees and up linking charges, the learned DRP held that as the decision of the coordinate bench, decided in favour of the assessee, has not been accepted by the revenue, and as appeal has been filed before the Honourable High Court, to keep the issue alive, it did not issue any direction to the AO. 07. Accordingly, the direction of the learned dispute resolution panel confirmed the action of the learned assessing officer in toto. 08. Accordingly, the final assessment order was passed u/s 143 (3) r.w.s 144C(13) of The Act by the learned assessing officer on 12/4/2021 computing the total income of the assessee from business of Rs. 1,020,335,860/-, as long-term capital gain on slump sale of Rs. 17,902,115,123/- and interest income of Rs. 185,593,487/-totaling to total income of Rs. 19,108,044,471/-. Grounds of Appeals 09. The assessee is aggrieved with this assessment order has preferred this appeal raising following grounds:- Page | 23 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 23 of 121 “Grounds of Appeal 1. Taxability of gains from the sale of sports broadcasting undertaking by the Appellant- a. The Dispute Resolution Panel (hereinafter referred to as "the DRP") erred in upholding and confirming the action of the Deputy Commissioner of Income- tax (International Taxation) Circle 4(1)(2), Mumbai (hereinafter referred to as "the AO") holding that the gain of Rs. 1790,21,15,124/- on sale of sports broadcasting undertaking by the Appellant outside India, is chargeable to tax in India under section 5 read with section 9(1)() of the Income-tax Act, 1961 (the Act") as a slump sale. b. The DRP erred in holding that the gain of Rs. 1790,21,15,124/- on sale of sports broadcasting is chargeable to tax under the India-Mauritius Double Taxation Avoidance Agreement (hereinafter referred to as "the Treaty"). The DRP erred in relying on the provisions of Article 13(2) of the Treaty to justify taxability under the Treaty without appreciating that the provision of Article 13(2) is not applicable in the facts and circumstances of the present case as the Appellant neither has a Permanent Establishment in India nor can the instant transfer of sports broadcasting undertaking be equated as an alienation of movable property Page | 24 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 24 of 121 forming part of the business property of the alleged permanent establishment. c. The DRP / AO failed to appreciate that the gain on transfer of sports broadcasting business is not chargeable to tax in India in view of Article 13(4) of the Treaty. 2. The DRP erred in upholding the action of the AO in taxing profit on advertisement and distribution revenues collected from India computed at 102,03,35,861/- without appreciating fact that the Appellant neither has any business connection in India nor fixed place or agency permanent establishment in India and, therefore, the said revenues are neither chargeable to tax under the provisions of the Act or under the Treaty; 3. The DRP/AO failed to appreciate that even assuming without admitting that the Appellant has a permanent establishment in India, arm's length consideration paid to the advertising agent, distributor and other service providers in India would extinguish any further tax liability arising in the hands of the Appellant in India; 4. The DRP erred in upholding the action of the AO in treating Programming Cost of US$ 10,814,810 for acquiring telecasting rights as "royalty" and, consequently, disallowing the same under section 40(a)(1) of the Act on account of non-deduction of Page | 25 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 25 of 121 tax under Section 195 of the Act for reasons which are wrong, contrary to facts and position in law. 5. The DRP erred in upholding the action of the AO in treating Transponder Fees of US$ 1,793,183 and Up linking Charges of US$ 1,790,261 as "royalty" and consequently disallowing the same under section 40(a)(i) of the Act on account of non-deduction of tax under Section 195 of the Act for reasons which are wrong, contrary to facts and position in law. 6. The above grounds/sub-grounds are without prejudice to each other. 7. The appellant craves the leave to add, amend or alter all or any of the grounds of appeal.” Submissions of Assessee 010. The learned authorized representative arguing on behalf of the assessee with respect to ground number 1 submitted that i. Gain on transfer of the global sports broadcasting business is not taxable Under the Income Tax Act. His argument was the assessee has transferred the global sports broadcasting business of the assessee to another non-resident and as per section 9 of the act the said transfer can be charged to tax in India only if the „income arises through‟ the transfer of any „capital asset‟ „situated in India‟. It was submitted that in case of a transfer of capital asset in any of the limbs of section 9 of the act such as business connection is not at all attracted. According to the assessee, assessee has sold an Page | 26 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 26 of 121 undertaking or business which is a „capital asset‟ and there is no separate sale of individual assets, the undertaking itself constitute a capital asset. It was further submitted that if the capital asset is not situated in India and if the transfer of the same is outside India, it cannot give rise to a chargeable capital gain in India. It was claimed that global sports broadcasting undertaking is not situated in India and therefore its transfer does not give any rise to any taxability under the head capital gain. ii. It was further submitted that the situs of the undertaking would be the situs of the owner where the company is Incorporated. Assessee company is resident of Mauritius and therefore the undertaking has corresponding situs in Mauritius and hence undertaking is situated in Mauritius and not India. Assessee strongly relied on the decision of the Honourable Delhi High Court in case of CUB Pty Ltd versus Union of India 71 taxmann.com 315. iii. Further submitted that even otherwise where the situs of the undertaking is located ought to be based upon where the „operations and activities‟ are carried on. Merely because the channels are viewable in India amongst other countries, it cannot be said that the undertaking is situated in India. Further it was also claimed if the channels are viewed in more than one country, it cannot be said that situs of the business is in multiple countries. iv. The assessee further claimed that assessee is a company Incorporated in Mauritius and is engaged in satellite television broadcasting business. The business process of Page | 27 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 27 of 121 the assessee‟s operations that are broadcasting, selling, up linking, management, finance and books of accounts are all undertaken outside India. The assessee does not have any branch, respective bank account, books of account or control existing in India or any fixed place of business in India. It was also submitted by the assessee that all principal activities carried out in connection with the global sports broadcasting undertaking are performed outside India. v. Assessee submitted that it only received certain services from Taj India in respect of advertisement and distribution and from ZEE entertainment Enterprises Ltd for play out services. All these entities are mere service providers and paid according to the contracts . However, the assessee has not conducted any activity in India and all its operations are carried outside India. vi. Both these entity i.e.Taj India and ZEE Enterprises Ltd have been paid at arm‟s-length and therefore any further attribution in India extinguishes. vii. Merely because some services are secured from person resident in India, it cannot be said that the undertaking of the assessee is in India. The service provider may have a business in India but the same is not the business or undertaking of the assessee and there is no question of any gain arising from sale of the business or undertaking of the assessee. viii. It was also the claim of the assessee is that cost of play out is merely US$ 1,048,289 which is merely 1.23% of the Page | 28 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 28 of 121 total operational cost of the assessee. It was claimed that play out is very minuscule part of the broadcasting content for viewers which includes (1) maintaining agreed technical specification in providing the broadcasting operations and engineering facility to each of the channels of the assessee, (2) provide quality support relating to latest broadcast features. ix. It was also claim of the assessee that all the assets and liabilities, intellectual property rights, goodwill, rights and claims that form part of the global sports broadcasting undertaking are located outside India. The learned authorized representative referred to the letter dated 19/12/2019 and submitted that same has not been disputed by the learned assessing officer or the learned dispute resolution panel. Therefore, entire undertaking is situated outside India. x. Assessee also claims that no fixed assets are located in India. Assessee referred to the India operations financials placed at page number 6 of the paper book. It was submitted that depreciation claimed in the profit and loss account is an apportionment of the expenses of assets used globally to earn revenue from India. xi. It also claims that the control and management of the assessee is situated in Mauritius and not in India. It was claimed that none of the directors of the assessee were resident of India during the year under consideration, all the board meetings of the Board of Directors were held outside India, the directors at those board meetings took Page | 29 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 29 of 121 the significant decisions and therefore 'head and brain‟ of the assessee also resides outside India. xii. It was also the claim of the assessee that all significant contracts were negotiated, finalized, and executed outside India. These facts were brought to the notice of the learned assessing officer as per letter dated 23/10/2019 and same are not disputed. xiii. With respect to the observation of the AO that most of the registered trademarks are registered in India, assessee submitted that because some of the trademarks registered in India, it would not mean that undertaking is situated in India. Specific reference was made to the decision of the Honourable Delhi High Court in case of CUB Pty Ltd ( Supra). xiv. Therefore, since the operation of the undertaking are carried out outside India, gain on global sports broadcasting business is a transfer of capital asset situated outside India and hence, there cannot be said to be any income accrued or arising in India and accordingly cannot be taxed in India. xv. Assessee, assuming while denying, submitted that the other limbs of section 9 are not applicable as even otherwise there is no business connection in India. It was the claim that once it is held that the capital asset cannot be taxed under the said limb , since it is not situated in India, it is not permissible to consider Other limbs of section 9 (1) (i) seeking to tax income from transfer of Page | 30 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 30 of 121 capital asset on the basis of the alleged business connection in India. xvi. Therefore, assessee contended that since there is neither any „business connection‟ nor capital asset situated in India, the gain from sale of global sports broadcasting division is not taxable in India under the provisions of The Income Tax Act. xvii. Assessee further contended that even otherwise gain on transfer of global sports broadcasting business is taxable only in Mauritius. It was the claim of the assessee that assessee holds a valid tax residency certificate granted by the Mauritius tax authorities from financial year 2002 – 03 until date. Therefore, assessee is eligible to avail benefit of the provisions of Double Taxation Avoidance Agreement. In assessee‟s own case , revenue has always accepted the applicability of the tax treaty from assessment year 2003 – 2004 to assessment year 16-17 while assessing the income of the assessee for the relevant assessment years. It was the claim of the assessee that assessee has sold its global sports broadcasting business, being a capital asset, to another non-resident entity and accordingly the provisions of Article 13 of the Double Taxation Avoidance Agreement dealing with the capital gain shall apply. According to Article 13 (5) of the Treaty the gains derived by resident of the contracting state from the alienation of any property other than those mentioned in paragraph (1), (2) and (3) of this article shall be taxable only in that state. Accordingly when an undertaking is sold, as a whole, there is no separate sale of land or plant and machinery Page | 31 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 31 of 121 or furniture and therefore it cannot be split into its components. Therefore, the taxability of transfer of undertaking is covered under Article 13 (4) of DTAA. According to that the alienation of any other property are taxable in the state of residence irrespective of where the assessee situated or whether there is a permanent establishment in India or not. Therefore, in the present case, since the assessee is a residence of Mauritius, the gains are taxable in Mauritius. Therefore even otherwise, assuming while denying, that the global sports broadcasting undertaking is situated in India, still, in view of article 13 (4) of DTAA, gains would be taxable only in Mauritius. xviii. With respect to the denial of treaty benefit in the present assessment year, alleging that assessee is a puppet, and run by its Parent ZEE, as assessee has not taken its decisions independently, it was submitted that all the decisions of the assessee have been taken independently in meeting. Mr. Anil is a non-resident and a director of ATL media Ltd, was authorized to enter into the necessary agreements for executing the sale of the global sports broadcasting undertaking. The involvement of ATL Ltd and ZEE is merely in terms of being a shareholder. The disclosure to the various stock exchanges is mandated because the holding company is a listed entity and any material transaction of its subsidiaries required to be disclosed to the stock exchange as per Stock Exchange Listing Agreements, which are mandatory compliances as per SEBI Act. It was the claim of the assessee that business of this assessee has been run for more than 15 Page | 32 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 32 of 121 years and it has never been the allegation of the revenue that the business is run by someone else other than the assessee company. Therefore, it is now not open to the revenue to contend to the contrary only with the ulterior motive of trying to bring the capital gain to tax in India. It was submitted that even otherwise if the sale of undertaking was on the basis of the decision of zee Ltd, does not make any difference as far as the applicability of the treaty is concerned. xix. It was the claim of the assessee that the assessing officer is applying treaty benefit in piecemeal. The AO denied treaty benefit for the transaction of sale of undertaking, however on the other hand applied treaty provisions to hold that the advertisement and subscription revenue from same business is taxable in India as assessee has a permanent establishment in India. The applicability of the treaty benefit per se has not been denied. It was claimed that the undertaking has been running since last several years and in none of the years, the assessing officer has questioned the applicability of or eligibility of treaty. Therefore, the denial of the treaty benefit is not in accordance with the law. xx. The AR further stated that the learned dispute resolution panel has accepted the applicability of treaty provisions to the transaction of the sale of business undertaking , however it held that the transaction to be taxable incomes of Article 13 (2) of DTAA. Therefore, the applicability of treaty to the transaction of sale of global sports broadcasting undertaking is an accepted position and cannot be contested by the learned assessing officer. Page | 33 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 33 of 121 It was further claimed that the AO does not have any right to file an appeal against the decision of the learned dispute resolution panel, as its direction is mandatory. xxi. With respect to the applicability of article 13 (2) of the treaty to the transaction of the sale of undertaking, it was claimed that that article deals with the „movable property‟ forming part of the business property of the permanent establishment of an enterprises. The provision applies either to (i) alienation of such property that was owned by the alienator or (ii) the alienation of permanent establishment itself. It was submitted that as assessee does not have any permanent establishment in India, there is no question of alienation of permanent establishment or any alienation of movable property of the alleged permanent establishment forming part of the business property. xxii. With Respect to PE , assessee submitted that that there is a „subscription agreement‟ and „advertisement agreement‟ with Taj India. The Honourable Bombay High Court in assessee‟s own case for assessment year 2004 – 05 and 2005 – 06 has held that Taj India was acting independently, its distribution rights and the entire agreement was on „principal to principal‟ basis and therefore it does not constitute a permanent establishment of the assessee with respect to subscription agreement/ revenue. xxiii. With respect to the advertisement agreement, it was submitted that Taj India would constitute a permanent establishment only if (1) it has the authority to conclude Page | 34 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 34 of 121 contract binding the appellant and (2) it habitually exercises such authority. Assessee submitted that Taj India, in line with the Ministry of information and broadcasting guidelines has been given the authority to conclude contract, which has not at all been exercised and no contracts are concluded by it but all by the assessee. There is no evidence available with the revenue that Taj India has „habitually exercised‟ any authority to conclude any contract binding on the appellant. Therefore, it cannot constitute a permanent establishment in terms of article 5 (4) of the DTAA. xxiv. Assessee submitted that as per letter dated 23/10/2009 it submitted copies of various advertisement invoices, which clearly demonstrates that the same have been concluded by the assessee itself and not by anybody else including not by Taj India. xxv. With respect to the ZEE Ltd, it was submitted that assessee has entered into an agreement with that company for provision of services for maintaining agreed technical specification in providing the broadcasting operation and engineering facility to each of the channel of the assessee and to provide quality support relating to latest broadcast features. This agreement does not contemplate that assessee has any establishment or place of any permanence or enduring nature in India at the disposal of assessee. That company is merely a service provider to the assessee from its own devices using its own assets. Such premises are not at the disposal of the assessee. It was further claimed that none of the assessee‟s employees have ever travelled to India during Page | 35 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 35 of 121 the year. Therefore, ZEE or any premises of that company do not constitute a fixed place of permanent establishment of the assessee in India. xxvi. With respect to the allegation of the learned AO that Mr. Rajesh Shetty and Mr. Vijay parab constituting a permanent establishment of the assessee in India, assessee submitted that they are not employees of the assessee. Therefore, the allegation of the learned assessing officer that they were the employees of the assessee and are utilizing the premises of ZEE, which is at their disposal, is incorrect and without any evidence. xxvii. It was the claim of the assessee that a service permanent establishment is established in the India only if assessee renders services in India through its employees. It was the claim of the assessee that it does not have any employee in India and none of the employees of the assessee travelled to India during the year. Hence, the allegation of service permanent establishment also does not arise. xxviii. With respect to the LinkedIn profile of Mr. Rajesh Shetty and Mr. Vijay Parab , assessee submitted that Mr. Rajesh is CEO of Taj India, which was engaged as a distributor and Mr. Vijay was an employee of ZEE engaged as a production executive. The services provided by these individuals were in connection to the services provided by their employer entities to the assessee and they were under the control and management of their respective employers. Therefore, the reliance on the LinkedIn profile is misplaced. Page | 36 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 36 of 121 xxix. Even otherwise it was submitted that the revenue‟s claim was with respect to the applicability of article 13 (2) is with respect to Taj India as a permanent establishment of the assessee in India and not with reference to the Zee entertainment Ltd., xxx. The assessee submitted that even if the allegation of the revenue of Taj India constituting a dependent agent permanent establishment is presumed to be correct, still the provisions of article 13 (2) cannot be invoked as that article is applicable only in case of fixed place of permanent establishment and does not apply to dependent agent permanent establishment. The assessee led an example that if a foreign bank having various branches in India, the provisions of article 13 (2) of the treaty are attracted either on sale of branch in India or transfer of assets of the branch in India which are economically owned by the foreign bank. Therefore the provisions of article 13 (2) apply on transfer of fixed permanent establishment or assets forming part of fixed permanent establishment and cannot be workable in case of agency permanent establishment. xxxi. The assessee submitted that assuming while denying that assessee has a permanent establishment in India, the property transferred in the instant case is a global sports broadcasting undertaking which is owned and controlled by the assessee and the same is not the alleged permanent establishment in India. The whole premises of the argument of the learned AO is that the fixed place permanent establishment i.e., Noida play out center of the ZEE Ltd. However, the Noida play out center belongs Page | 37 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 37 of 121 to ZEE Ltd, which caters to not only Ten sports but all other channels of ZEE enterprises entertainment Ltd. Noida play out facility was never transferred and hence the argument of fixed place permanent establishment and invoking article 13 (2) is frivolous. xxxii. The present case is not the sale of the permanent establishment as it is not even the case of the revenue that the global sports broadcasting undertaking is a permanent establishment of the assessee in India and hence not covered under parameter of article 13 (2) of DTAA. xxxiii. It was the claim of the assessee that no relation of movable property of the alleged permanent establishment forming part of business property. Assessee submitted that, assuming while denying, that assessee has a permanent establishment in India, the property transferred by the assessee does not form part of the business property of the alleged permanent establishment. All the assets and liabilities of the undertaking transferred are located outside India. None of the movable properties forming part of the business property of alleged permanent establishment is transferred as a part of the transfer of global sports broadcasting undertaking. xxxiv. In the present case, the alleged fixed permanent establishment Zee Ltd has not alienated any assets. Even the play out facilities continues to be owned by that company and has not been alienated. Therefore, the article 13 (2) does not apply. Page | 38 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 38 of 121 xxxv. In the end assessee submitted that burden is on the revenue to establish that any income or gain arising on sale of sports broadcasting business is taxable under the Treaty in view of the decision of Motorola incorporation (special bench) and Right florist private limited. xxxvi. The revenue other than by making a bald assertion on surmises and conjunctures has not established the same. 011. In view of this, the assessee submitted that that global sports business sold by the assessee, capital gain arising therefrom is not chargeable to tax in India. 012. With respect to the ground number 2 regarding taxing advertisement and subscription income to the extent of Rs. 1,020,334,861/– the learned authorized representative submitted that assessee does not have a permanent establishment in India. The said issue is recurring issue and has been decided in favour of the assessee in the earlier years. The learned authorized representative submitted the various decisions in the assessee‟s own case by the coordinate bench wherein it has been held that advertisement and subscription income does not satisfy the test of business connection and therefore cannot be charged to tax in India. Further, with respect to the Double Taxation Avoidance Agreement the profits of the assessee company shall be taxable in India only if such profits are attributable to a permanent establishment in India. As the assessee does not have any permanent establishment in India, it is not chargeable to tax. 013. Even otherwise, if it is assumed that the assessee has a permanent establishment in India, the alleged permanent establishment is Page | 39 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 39 of 121 remunerated at arm‟s-length price and therefore it extinguishes any further tax liability in India. 014. The learned authorized representative referred to the various judicial precedents including the decision of the honorable Bombay High Court in assessee‟s own case for assessment year 2004 – 05 and 2005 – 06 reported in425 ITR 141in CIT V Taj TV Limited where in after appreciation of agreements Hon Court upheld the order of the coordinate bench. 015. With respect to ground number 3 assuming without admitting that assessee has a permanent establishment in India, arm‟s-length remuneration extinguished any further tax liability in India submitted that the remuneration paid to Taj India and ZEE enterprises entertainment Ltd has not been questioned. The consideration paid to these entities is at arm‟s-length price and therefore there is no further liability of tax on assessee. 016. With respect to ground number 4 on disallowance of the programming cost for non-deduction of tax under section 195 of the act, the learned authorized representative submitted that this issue is covered in favour of the assessee by the various decisions of the coordinate bench in assessee‟s own case. Further, it was claimed that such payment is not royalty under the income tax act and further, as there is no permanent establishment in India. Further, the royalty paid relates to business carried on outside India. 017. With respect to ground number 5 of disallowance of transponder fees and up linking charges on account of non-deduction of tax under section 195 of the act, assessee submitted that the issue in dispute is squarely covered by the decision of the honorable Delhi Page | 40 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 40 of 121 High Court in case of director of international taxation versus New Skies satellite BV 382 ITR 114 and further the decision of the coordinate bench in assessee‟s own case for last several years wherein it has been held that the payment of up linking and transponder fees does not amount to royalty and further in absence of any permanent establishment or business connection in India it is not taxable in India. Submission of revenue 018. The learned special counsel first referred to the background of the assessee that assessee is a company engaged in the business of telecasting of TV channels, which are owned by it. It is wholly owned subsidiary of ATL media Ltd Mauritius [ATL] that in turn is a wholly owned subsidiary of ZEE entertainment Enterprises Ltd [ ZEE] an Indian company. i. The assessee was Incorporated in the British Virgin Islands on 21/6/2000 and thereafter assessee got itself registered by continuation in Mauritius and obtained a Global Business License – 1 in terms of The Financial Services Commission Act 2007. The learned counsel further submitted that as assessee is a registered Mauritian company and at the time of its registration in Mauritius, it was governed by The Financial Services Development Act 2001, which was later changed to Financial Services Commission Act 2007. However prior to financial services development act which came into being in 2001, companies such as the assessee were governed by Mauritius Offshore Business Activities Act 1992. It was submitted That Global Business License – 1 company shall enjoy the benefit of non-taxation in Mauritius only if they are registered in Mauritius but carry out business with a person/entity outside Mauritius. He Page | 41 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 41 of 121 referred to the relevant provisions of Mauritius Offshore Business Activities Act 1992. Accordingly it was the claim of the learned special counsel that appellant assessee was barred from carrying on any business operation in Mauritius. ii. As the assessee is carrying on sports broadcasting business in India, the assessee is also governed by various guidelines of the Telecom Regulatory Authority of India [TRAI] . He referred to the policy guidelines of Down linking of television channels dated 5/12/2011 according to which the eligibility criteria states that the [1] company must be registered in India under The Companies Act 1956 and [2] the applicant company must have a commercial presence in India with its principal place of business in India. [3] It was also the condition that the applicant company must enjoy territory of India exclusive marketing/distribution rights for the same channels inclusive of the right to the advertisement and subscription revenues for the channel. Accordingly, it was the claim of the learned departmental representative that when it comes to Indian Territory where the channels are being down linked and watched, the company must mandatorily be registered in India and must have a commercial presence in India with its principal place of business in India. According to the guidelines of Telecom Regulatory Authority Of India, company either must own the channel or must enjoy further territory of India exclusive marketing or distribution rights together with the rights to advertisement and subscription revenues for the channel. Therefore, the appellant assessee could not have operated its channels in India without having a distinct physical and commercial presence either on its own or through its agent. Therefore, Taj TV India Ltd, which is a step down wholly owned subsidiary of Zee entertainment Enterprises Ltd, has the Page | 42 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 42 of 121 exclusive marketing and distribution rights for the channels and is acting as an agent of the assessee in terms of those policy guidelines. iii. Assessee has entered into an advertisement sales agency agreement dated 4/5/2002 with its non-exclusive agent i.e. Taj India for soliciting orders for placement of advertisements on the channel and forwarding them, collecting advertisement revenue and behalf of Taj among other things. According to clause 5 (a) of the advertisement agreement, Taj India has denied any right authority to assume or create in writing or otherwise any obligation of any kind, express or implied in the name of on behalf of the assessee unless expressly authorized by Taj. However in addendum dated 27/4/2006 the above 5 (a) is turned on its head entirely and the Taj India is provided with the right and authority to creating writing or otherwise an obligation of any kind, express or implied in the name of an on behalf of the assessee relating to activities undertaken in India. It was further stated that clause 5 (b) of the advertisement agency agreement provided that Taj India agrees to submit all proposed agreements and contracts in respect of services and periodic budget of all costs and expenses to be incurred in connection with the services to the assessee for the assessee's approval which shall be granted or rejected by the assessee. This clause was also deleted by the addendum dated 23/1/2008. Accordingly, the effect of this is Taj India now has all the authority to conclude contracts as mandatorily required under the policy guidelines of the Telecom regulatory authority of India. Now it does not have to submit the agreements for the approval of the assessee. Thus the advertisement agreement as Page | 43 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 43 of 121 amended, had all authority to bind the assessee and that whatever was being done by it, was for and on behalf of the assessee. The guidelines of the Telecom regulatory authority would also apply with equal force with respect to subscription revenue as well. It was also submitted that similar addendums were executed with regard to the distribution agreement so that Taj India gets exclusive distribution right and has all the authority to enter into the agreement on behalf of the assessee. Accordingly, assessee in order that it follows the policy guidelines of the Telecom regulatory authority in its letter and spirit and operates in India on its own behalf through itself or through an authorized agent makes that is necessary amendment to the advertisement agency. Thus, Taj India has an authority to conclude contracts on behalf of assessee, which it habitually exercises also, otherwise there is no reason to grant such right by the amendments. It is for assessee to show that it has not been exercised. iv. Thus, combined effect of Global Business License – 1 and TRAI policy guidelines, assessee is not doing any business in Mauritius and had a physical/commercial presence in India either on its own or through its agent, which had exclusively authority to conclude contracts on its behalf as per the terms of the addendum to the advertisement agreement. Therefore, now it is not open for the assessee to argue that it had no presence of business operation in India or that it had no permanent establishment in India. v. It was further argued that before ld. AO assessee has taken a plea that though the terms of advertisement agreements were amended, they were not really acted upon which is a fallacious for the reason that it is not open for the assessee to say in the Page | 44 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 44 of 121 first place that they have amended the advertisement agreement but continued to violate the Telecom regulatory authority of India's guidelines and secondly there is no material to support the plea which the appellant is seeking to advances this stage to wriggle out of the situation. vi. With respect to the applicability of article 13 (2) or article 13 (4) of The Double Taxation Avoidance Agreement, the learned departmental representative submitted that the case of the learned AO is that gain derived by the assessee are covered under article 13 (2) of the Double Taxation Avoidance Agreement In which case the applicability of article 13 (4) becomes fully irrelevant. vii. He submitted that according to article 13 (2) of the Double Taxation Avoidance Agreement provides that if there is a permanent establishment in India and there is an alienation of permanent establishment itself, then in such case the gain arising therefrom are liable to be taxed in India. It was submitted that assessee during the course of hearing submitted that the permanent establishment in the context of article 13 (2) means only fixed place permanent establishment. This argument may be true to a certain extent, but it cannot be suggested that if an entity is operating through an agency permanent establishment and that business is validated on "as is where is basis” as a slump sale together with the transfer of agent itself with all his belongings, rights, titles, and interest, yet article 13 (2) would not apply. It is the case of the assessing officer that there is a fixed place permanent establishment as well as Dependent Agent permanent establishment. Page | 45 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 45 of 121 viii. The learned special counsel took us to the factual matrix of the case and the revenue streams of the assessee. He also explained the various steps involved in the business of the assessee. He also took us to the terms of the Business Purchase Agreement dated 31/8/2016. Based on the various terms of that agreement, he submitted that the transaction has a real and close territorial nexus with India. He made specific reference to clause 1 – 1, clause 2, clause 3, 2, 6, 9 and clause 12 of that agreement. Based on this, he submitted that it is evident that there is a transfer by way of a slump sale as a going concern of sports broadcasting business of the assessee and all assets, rights, title, Indian interest of the seller. It is further apparent that business purchase agreement has a special penal clause for adjustment in the purchase consideration for any shortfall in distribution with respect to the Indian territory. ix. He thereafter explained that what is the meaning of the sports broadcasting business as per clause 1 – 1. Based on this he submitted that the transfer of the sports broadcasting business has territorial nexus with India. His main argument is that clause 1.1 envisages material event impacting the sports broadcasting business and then make special exception for a change brought out by the implementation of the recommendation of the Lodha committee or regulation, tariff order and direction of the Telecom regulatory authority and Ministry of information and broadcasting affecting the broadcasting sector as a whole. Therefore, this proves that the transaction has sufficient territorial nexus to India. x. He further submitted that the business purchase agreement specifically refers to approval from the competent authorities in India such as competition commission and Ministry of Page | 46 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 46 of 121 information and broadcasting as a part of condition precedent and further the agreement has specific non-compete clause regarding sports broadcasting business in India and other territories which once again establishes the territorial nexus of the transaction with India. xi. Further, the agreement itself is subject to the governing laws of India. xii. Therefore, according to the learned special counsel, the transfer of the sports broadcasting business has territorial nexus with India. xiii. It was also the claim of the learned departmental representative that clause 9 of schedule 6 extracted that the assessee has obtained permission from its affiliates to use its premises from where it is operating. Further, no written agreement has been entered into in this regard. He further submits that according to clause 19 of schedule 6 of the agreement clearly states that the play out is done from Noida only and from no other place in the world. He further referred to clause 12.1 of schedule 6 read with schedule 9 saying that it implies that the robust IT system is in place in Noida, which is being transferred under the business purchase agreement. Therefore, according to him the assessee operates from India. xiv. He submitted that the overall implication of the sale of broadcasting business in India has to be seen in light of what is stated in the clause 2, schedule 2 of the business purchase agreement where the transfer of equity shares of Taj India to Sony is contemporaneous and meant to happen concurrently with the transfer of sports business of the assessee. Further as Page | 47 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 47 of 121 per clause 2.3 in case the transfer of equity shares of Taj India to Sony is not consummated contemporaneously on the closing date, none of the transaction set out in the business purchase agreement shall be deemed to have been concluded and closed. Therefore, according to him, if a step of the entire arrangement fails, the entire transactions are nullified. xv. He further submitted that Taj India functions as a distribution and advertisement-selling agent in India for television channels broadcasted by the assessee. Therefore, it is clear that what is being bought is the sports business with respect to its broadcasting, distribution and syndication of television channels in India. He further submitted that a close reading of the various clauses of business purchase agreement clearly shows that Sony is not paying for acquiring global sports business of the assessee but is in fact paying for acquiring rights for broadcast, distribution and syndication of television channels in India. xvi. He further referred to the annual report of Zee entertainment Ltd and its announcements to the shareholders through stock exchange and submitted that even this declaration by the parent should also be viewed in its totality. xvii. Thus, according to him as part of the whole arrangement both the assessee‟s sports broadcasting business and shares in its exclusive India agent Taj India have been transferred to Sony, therefore effectively the entire Indian operations have been transferred to Sony. xviii. It was therefore submitted that the suggestions of the assessee that agency permanent establishment cannot be roped in article 13 (2) for the reason that agents assets do not get transferred to Page | 48 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 48 of 121 the purchaser is wholly irrelevant in the peculiar facts of this case where the agent, too is getting transferred with all its assets, rights, titles and interest as an integral part of the impugned transaction. xix. The learned departmental representative further referred to the transfer pricing study report of the assessee. He referred to the background of the entity and assets employed, he submitted that the assessee is having a very advanced broadcast and production facility, it employs fixed assets, tangible and intangible assets, and however there is no indication that these assets are located out of India. He submitted that on the other hand, the title of the transfer pricing study report refers to India operation and therefore transfer pricing study report is dealing with only those assets, which are employed in India. Thus, Assessee has assets in India is clearly inferred. xx. The learned special counsel further referred to the audited financial statements and submitted that the depreciation and employees‟ cost has been charged to the India operation and therefore it cannot be believed that the assessee does not have any asset in India , now it cannot be said that those assets have not been used for operation in India. If that is so than how assessee claimed depreciation on account of the India operation and further it is nowhere stated as to where the employees are located, if not in India. xxi. He further referred to the claim of the assessee that the play out facility belong to ZEE entertainment Ltd and it was outsourced to that company for a consideration and therefore ZEE entertainment Ltd could not be regarded as a permanent establishment of the assessee. He further referred to the Page | 49 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 49 of 121 argument of the assessee that facility of ZEE entertainment Ltd was not transferred and therefore article 13 (2) of the Double Taxation Avoidance Agreement was not applicable to the facts of the case. To counter this, he referred to the play out facility agreement and referred to the salient features of that agreement dated 19/4/2017, which has been entered more than eight months after the acquisition of the sports broadcasting business by Sony. He referred to the date of the business purchase agreement as 31/8/2016 and submitted that the play out agreement is dated 19/4/2017. He further referred to clause 8 of the agreement stating that it shall come into effect retrospectively from April 2016 and would be valid only until 28/2/2017. He also referred to the consideration of US$ 1,048,290 for the period of 10 months during the validity of the agreement. Accordingly he further referred to annual accounts of Zee entertainment Ltd wherein it is shown that no amount was charged for transmission from the assessee in the financial year March 2016, therefore it is obvious that there was no agreement for earlier years between the assessee and ZEE entertainment Ltd and therefore there could not have been any consideration flowing from the assessee to ZEE entertainment Ltd for broadcasting of the channel. He specifically objected to the argument of the assessee that assessee was getting the services of ZEE entertainment Ltd as a service provider. According to him if ZEE entertainment Ltd was rendering play out functions for the channels owned by the assessee, it was in operation done for and on behalf of the assessee and not as a service provider to whom such an operation was outsourced. He further submitted that the play out agreement is an afterthought. According to him the play out facility was used all along by the assessee and whatever facility was rendered by Zee Page | 50 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 50 of 121 entertainment Ltd, it was not in the capacity of a service provider but as a group entity acting for and on behalf of the appellant without any consideration and without any agreement or arrangement to show otherwise. xxii. He therefore explained that Fixed permanent establishment is triggered. It was referred that in the assessment order at paragraph number 5.3 of the assessment order, Ld. AO alleges that assessee has a fixed place of permanent establishment in India. xxiii. He further submitted that article 13 (2) does not provide any exception when it comes to alienation of movable assets of the permanent establishment or of the permanent establishment itself. If the intent was to restrict its application to only fixed place permanent establishment, the Double Taxation Avoidance Agreement would certainly say so, more so because the Double Taxation Avoidance Agreement itself contains a wider definition of permanent establishment. xxiv. He further referred to the clause 9 and 19 of schedule 6 of the business purchase agreement with respect to properties and technical arrangements and submitted that the appellant does not have any immovable property of its own in Noida, but it has got permission from its affiliates to use the premises and this clearly shows that there is a fixed place which is being used by the assessee. It clearly shows that wherefrom the assessee is operating. Accordingly, he submitted that the business operations are being carried on from this premises, which belongs to the affiliates but is made available to the appellant for its business operation. No payments are made for the use of this premise. He further submitted that there is a stipulation in Page | 51 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 51 of 121 the agreement that the purchaser will use this premises and it shall not be required to make any payment for the use of such devices. Therefore, it indicates that the transfer of the business is together with the facility to use the premises for business operations. Accordingly, he submitted that it becomes apparent that the assessee has a fixed place in Noida from which business operations are being carried on. xxv. He further submitted that it is a settled principle that the premises may not belong to the enterprises, it may not be taken on rent by the enterprises, or may not be otherwise in its possession, but the only requirement is that the premise is at the disposal of the enterprise for its use in the business operations with or without ownership/lease/payment. Therefore, according to him it is not open for the assessee to suggest that they do not have fixed place permanent establishment in India. xxvi. It was further vehemently stated that revenue has not to demonstrate any further. He once again referred to the transfer pricing study report and referred to paragraph number 41 and 42 of his return submission to show that assessee has already accepted the existence of a world-class facility, equipment and systems in place. He submitted that nowhere is it is stated in the transfer pricing study report that such facilities or equipment do not belong to the assessee or that it is not being used for and on its own behalf. xxvii. Coming to the next aspect of the agency permanent establishment of the assessee, he submitted that there are four amendments to the advertisement and distribution agreement on 27/4/2006, 28/12/2007, 23/1/2008 and 5/11/2010. Page | 52 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 52 of 121 According to that, he contended that it is amply clear that the assessee had agent in India by the name of Taj India, who had authority to conclude contracts on behalf of the assessee. This Indian entity was representing the assessee in India and was satisfying various conditions laid down by the Telecom regulatory authority. xxviii. He further referred to the argument of the assessee that since the agent was paid on an arm's-length basis and therefore no revenue could be attributed to the assessee nor could such a permanent establishment be considered as a permanent establishment for the purposes of article 13 (2) of the Double Taxation Avoidance Agreement is untenable. He further submitted that the reliance by the assessee on the decision of Honourable Supreme Court in case of Director Of Income Tax (International Taxation) Mumbai Versus Morgan Stanley And Company Incorporation (2007) 7SCC 1 is inappropriate for the reason that there is a fundamental difference between the Double Taxation Avoidance Agreement Between India and the United States and the DTAA between India and Mauritius. According to him, the paragraph number 5 of article 5 of the Indo US DTAA contemplates that the agency would not emerge if the agent is paid at arm's-length basis. Thus if the enterprises is not paid at arm's-length, he shall not be considered as an agent of independent status. Then he referred to the paragraph number 5 of article 5 of the India Mauritius Double Taxation Avoidance Agreement stating that it is differently worded and whether or not the payment is made on arm's-length basis, if the activities of the agents are devoted exclusively or almost exclusively on behalf of that enterprises, sale agent would not be considered as an agent of the independent status and would Page | 53 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 53 of 121 constitute agency permanent establishment for the foreign enterprises. He further submitted that it is not at all in dispute that Taj India is an exclusive agent and is working fully for the appellant. Therefore, in respect of the payment being made on arm's-length basis to Taj India, it cannot be regarded as agent of the independent status under The Double Taxation Avoidance Agreement and itself constitute the agency permanent establishment for the appellant. xxix. Agency permanent establishment cannot be roped in under article 13 (2) because the assets of the agent cannot be transferred as argued by the learned authorized representative, he submitted that in this case the agent Taj India is also being transferred as an integral part of the sports broadcasting business. He referred to the clause 2 read with clause 5 of schedule 2 of the business purchase agreement which suggest that the transfer of 100 % shares of Taj India and slump sale of the sports broadcasting business of the assessee would happen simultaneously and contemporaneously and if fails, entire arrangement fails and entire transaction would get nullified. Therefore according to him, where the agent is getting transferred all together with the sports broadcasting business of the assessee, it is not open for the assessee to argue that agency permanent establishment is outside the ambit of article 13 (2) of the Double Taxation Avoidance Agreement. He further submitted that it is not the case of the assessee that the assets of the agents are not getting transferred. He further submitted that there is nothing in the provisions of the Double Taxation Avoidance Agreement that only permanent establishment other than agency permanent establishment are subject matter of transfer under article 13 (2) of the DTAA. Page | 54 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 54 of 121 xxx. He further submitted that it is of vital importance to understand that what the subject matter of transfer is. He submitted that the subject matter of the transfer is the entire business of the assessee by way of slump sale. It is not a transfer of individual assets and therefore the location/situs of different assets is wholly irrelevant. Therefore, the revenue does not consider it necessary to go into the various judicial precedents cited by the assessee to show that certain assets should be deemed located outside India. He submits that it is the business operation carried on in India which is getting transferred and therefore it is a case of transfer of permanent establishment itself in accordance with the second limb of article 13 (2) of the Double Taxation Avoidance Agreement. xxxi. He further submitted that the assessee has fairly conceded during the hearing that in the event of transfer of permanent establishment itself, article 13 (2) of the Double Taxation Avoidance Agreement gets attracted. Therefore according to him the appellant's permanent establishment exists in India in no uncertain terms and thus article 13 (2) gets attracted on account of transfer of permanent establishment of the assessee to Sony. He submitted that it is so because the transfer of Taj India by the parent company as an integral part of the main transaction supports the proposition of the revenue. xxxii. He further referred to the several decisions of the coordinate bench which is rendered in case of the assessee holding that assessee does not have a permanent establishment in India, he submitted that the facts as brought out on record for this assessment year are totally different from those in earlier years and therefore the decisions rendered by the coordinate bench would not be applicable for the year under consideration. Page | 55 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 55 of 121 xxxiii. He further submitted that the principle of res Judicata does not apply in tax proceedings and therefore each year has to be judged on the basis of the facts existing in that assessment year. xxxiv. Even otherwise, he submitted that the appellant has misrepresented the facts in earlier years and therefore those decisions having been obtained on account of misrepresentation and concealment of vital facts do not have any binding character. He submitted that the following facts were neither disclosed to the assessing officer nor to the coordinate bench in earlier years: – a) There was a fixed place of business of the assessee in India, at its disposal, as referred to in clause number 9 of schedule 6 of the business purchase agreement dated 31/8/2016 was never disclosed to the assessing officer or to the coordinate bench during the course of hearing for the earlier years. b) It was also not disclosed to the coordinate bench that the Taj India was soliciting orders on behalf of the assessee as is evident from the addendum to the advertisement agreement entered into by the appellant with Taj India . c) The transfer pricing study report of the assessee as well as ZEE Ltd shows several functions which could not be performed without the presence of the assessee in India. The findings of the coordinate bench in earlier years are bereft of such important information, as it was never disclosed by the assessee. d) The transfer pricing study report shows the details of Indian operation stating the equipments, which are Page | 56 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 56 of 121 needed for production. He specifically made a reference of 2 studios of the assessee and robust transmission system, which has been highlighted by the assessee. According to him, these facts stated in the transfer pricing study report were never brought to the attention of the coordinate bench in earlier years. The above facts clearly stand in teeth of the assertion that there is no place, no assets, no employees, and no business operations in India. e) The play out agreement entered into between the assessee and ZEE entertainment Ltd relevant to assessment year 2018 – 19 brought into effect retrospectively. He submitted that how a service agreement can be given a retrospective operation and that too for a short period of 10 months. He specifically challenged that how can such an arrangement suggest that the transmission done from the Noida was not a business operation of the assessee even in earlier years. f) He submitted that the policy guidelines of Telecom regulatory authority for up linking and down linking of channels was never placed before the bench. g) The earlier year orders of the coordinate bench have gone by the streams of revenue for determining the status of the permanent establishment. He submitted that permanent establishment and its determination is dependent on functions and mainly the business operations that are done from a place either through the enterprises owned employees all through other persons or through the agent etc. The determining factor for Page | 57 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 57 of 121 permanent establishment is the place, the business operations, and the functions but can never be dependent upon the streams of the income. He therefore submitted that the orders of the coordinate bench, which has referred only the income streams of the agent to determine the status of the permanent establishment, is not correct. h) The issue of the capital gain is arising for the first time in this year and therefore the fresh examination of the facts needs to be done for this year. For the earlier years, facts are only related to the income streams. Here the assets need to be examined and that too capital asset. i) The difference between the DTAA of India and USA and India with Mauritius was never pointed out to the bench by either side. xxxv. Coming to the provisions of the Income Tax Act, he submitted that the gains derived by the appellant are chargeable under the domestic tax laws. He submitted that according to section 9 (1) (i) of the act, income-accruing arising through the transfer of a capital asset situated in India shall be deemed to or accrue or arise in India. He further referred to the provisions of section 5 (2) of the act which makes it clear that the subject to other provisions of the act, the non-resident is liable to be taxed on his India source income. In the present case section 5 (2) is subject to the provisions of section 50 B of the act which talks about slump sale. Therefore, he submitted that the operations of the assessee i.e. business of sports broadcasting and telecasting of the same on TV channels are India centric and Page | 58 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 58 of 121 therefore the operations of the assessee have an intricate territorial nexus with India. xxxvi. It was further the claim of the learned DR that though assessee submits that it carries out its business from outside India i.e., from Dubai, however it does not have any clarity or evidence to such effect and therefore it cannot be accepted. xxxvii. He further submitted that the assessee shifted its play out facilities from Dubai to Noida in the year 2012 – 13 and therefore during the year under consideration the assessee carried out is play out facility from Noida. xxxviii. He further submitted the LinkedIn profile of 2 persons Mr. Vijay Parab and Mr. Rajesh Shetty. He submitted that Mr. Vijay Parab is head of migration of play out in production of 10 sports operations from Dubai to Noida. With respect to Mr. Rajesh who was also the chief executive officer of the assessee's distribution agent Taj India at the same time. xxxix. He further referred to the digital studio Magazine (volume 6, issue 7) which is placed at paper book volume 2 of the AO to show that the sifting of Ten sports was widely reported in international news, which shows that operations of Ten sports from Dubai to Noida happened in the year 2013 – 14. xl. He further referred to the news article titled dilemma for staff as ten sports relocates to show that assessee closed it Dubai office and relocated to India by mid-September. Mr. Rajesh further stated that it is consolidating its operation into its facility in Noida. Therefore, it is clear that the assessee shifted its operations from Dubai long back and now it operates from Noida for carrying out its functions. He submitted that it is also Page | 59 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 59 of 121 evident by reading the clause 19 of schedule 6 of the business purchase agreement. xli. He categorically submitted that that the operation of the assessee is not situated in any other place outside India. For this proposition he submitted that the assessee even after repeated queries has not been able to indicate from where, if not in India, the operations of the assessee is being carried out. Mere stating that assessee is still maintaining some properties in Dubai and rent agreement was filed in support of this contention cannot help the case of the assessee. Assessee need to show that wherefrom the business operations are being carried on. Therefore, in absence of any material to even remotely suggest that broadcasting of the channel is being done from Dubai or any other place except Noida is established. He therefore submitted that as the business is certainly a capital asset within the meaning of section 2 (14) of the act which is located in India and therefore the provisions of section 9 (1) (i) get attracted and thus gains arising from the transfer of a capital asset situated in India constitutes income which is deemed to accrue or arise in India and is chargeable to tax. xlii. He even otherwise submitted that the underlying concept in International tax is the notion of separate entity approach, which forms the foundation of taxation of cross-border transaction. The fact that an entity works independent of aspirants and takes its own decisions form the basis on which subsidiaries are recognized in other tax jurisdiction. He submitted that the corporate veil is the very basis of its independent existence in other jurisdiction or else all its functions may get attributed to the parent company. He submits that it is not open to the parent to pierce corporate veil and Page | 60 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 60 of 121 start operating as if it is only a part of the group and therefore has no independent status. He submitted that in the present case the assessee is seeking to suggest that subsidiary is only an extension of the group but for the revenue, it is a separate entity. He submits that revenue cannot be expected to recognize independent and separate corporate structure of the entity if the parent itself decides to tear apart the corporate veil and in such circumstances the entity has to be discarded and the consequences needed to follow. He referred to the decision of the Honourable Supreme Court in case of Vodafone international Holdings versus Union of India (2012) 6 SCC 613 referring to paragraph number 74, 79 and 277 and 280 of that decision. He submits an alternative argument has been taken by the assessing officer that assessee was not running the broadcasting business on its own account from Mauritius and the decision to sell the said business was not taken independently but was taken by its ultimate parent ZEE entertainment Ltd. To show these facts he referred to the resolutions approving the sale of broadcasting business which suggests that decision to sell the broadcasting business was taken by ultimate parent ZEE entertainment Ltd, the assessee was not at all involved in the decision-making process to finalize the nature of the transaction being slump sale and therefore it was not the decision of the assessee but the assessee simply noted and followed the decision which has already been taken behind its back by its parent ZEE entertainment Ltd. He submits that the assessee's board approved the sale consideration as notified to it by the parent. There is no discussion on valuation report or any independent decisions taken by the board of the assessee. Therefore, he submits that the assessee acted as a „puppet‟ in the hands of its parent and did not have any involvement in the Page | 61 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 61 of 121 decision-making process or in deciding the nature and quantum of sale consideration. Therefore, there is not an iota of evidence, which even remotely suggest that the assessee was involved in negotiations at any stage. He further referred to the minutes of the meeting of ZEE entertainment Ltd stating that it was held on the same date on which the business purchase agreement was signed and therefore it establishes that the decision to sale the broadcasting business was communicated to assessee by its parent only. He further referred to the income tax return filed by the assessee showing the names of the directors of the assessee company. He submits that though assessee has 4 directors, however the agreement of business purchase was signed by some other person on behalf of both the assessee as well as ATL. He submits that the agreement was signed by one Mr. Anil Maurya whose role in the assessee was not at all explained, except for the fact that he was a director in assessee's parent company ATL. From the resolutions submitted by the assessee, it is apparent that he was acting as a representative of the assessee company but it did not specify as to what role and capacity and to what account he represented the assessee. He further submitted that even the decision to authorize that person for the assessee was not taken by the assessee but was in fact dictated by its parents, which is evident from the authority given to him. He further submitted that as per the information available in public domain, he is Director in other group companies and therefore it is affirmed that he acted in the capacity of representative of Zee entertainment limited and not the assessee. It was further claimed that bank account of the assessee were being controlled by its parent company through its appointing Mr. Anil Maurya. Therefore, it is apparent that Assessee Company is not at all functioning as an Page | 62 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 62 of 121 independent legal entity and for all purposes, it is ZEE entertainment Enterprises Ltd that is functioning in the name of the assessee. He submitted that one of the principal criteria to see whether a subsidiary is functioning independently as a separate legal entity is to check its sources of funds and to how exercises authority to utilize the said funds. In the present case, none of the directors in the assessee exercises the authority over the bank account of the assessee independent of nominee of the parent. Therefore, the authority to utilize/ appropriate funds was also not in the hands of the assessee. Further ZEE entertainment Ltd has given guarantee to various sports Association and boards for acquiring the licensing rights for matches in various territories in return, the assessee was paying 1% finance charges for corporate guarantee. Therefore, all these cumulative effects leave no doubt that assessee has arranged it affairs to claim Double Taxation Avoidance Agreement benefit to evade taxes on income, which is accruing or arising in India. xliii. Therefore, the learned departmental representative special counsel made a serious allegation that the transaction involving Zee Entertainment Ltd selling its Sports broadcasting business for India and some other territories to Sony is a colourable device, which has been frowned upon by the Honourable Supreme Court even in the case of Azadi Bachao Andolan. Therefore, according to him, the learned assessing officer is justified in taking note of the non-existence of the corporate veil, which has not been torn out by the revenue, but the assessee itself, its ultimate parent and making the assessee company disentitled for any treaty benefits. He submits that once the corporate structure is derecognized, the income Page | 63 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 63 of 121 becomes chargeable to tax in India, as the benefit of the treaty would no longer be available. Therefore, income attributable to the Indian territory is chargeable to tax in India even though the arrangement/transaction has been so arranged to acquire a legal form that allows it to evade taxes on the said income. xliv. Accordingly he concluded his submission on ground number 1 stating that that capital gain arising on the slump sale of global business sports of the assessee is chargeable to tax in India as per the Income Tax Act as well as per DTAA despite the fact that agent of the assessee is paid remuneration at arm's-length. xlv. With respect to ground number 2 and 3, the learned special counsel submitted that the issue relates to the chargeability of the income of the year from business operation in India. He submitted that as submitted earlier the assessee has a permanent establishment in India and therefore its income from such permanent establishment is chargeable to tax in India. The reliance by the learned authorized representative on the decision of the coordinate bench in earlier years would not be applicable, as those decisions have been obtained by misrepresentation of facts. Accordingly, he urged that the addition made by the learned assessing officer deserves to be upheld. xlvi. With respect to ground number 4 and 5 he relied on the findings of the learned assessing officer he submitted that the learned assessing officer has correctly held that tax is required to be deducted at source on programming cost, transponder fees and up linking charges as same are royalty on which tax should have been deducted accordingly these payments are taxable in India Page | 64 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 64 of 121 and therefore failure on part of assessee to deduct tax at sources results in to disallowance, it deserves to be upheld. Rejoinder of Assessee 019. The learned authorized representative in rejoinder heavily relied on his submissions made earlier. He vehemently reiterated content of business purchase agreement, decision of the coordinate bench in assessee's own case, the agreement for distribution and advertisement subscription, as well as submission made before the learned assessing officer and learned dispute resolution panel. It was reiterated that gain on transfer of global sports broadcasting business is not taxable under the income tax act as well as non-chargeability of tax on the above transaction as per the Double Taxation Avoidance Agreement submitting that provisions of article 13 (4) of the treaty applies and revenue is grossly erred in invoking article 13 (2) of the treaty. It was vehemently submitted that holding of tax residency certificate is of Paramount importance in granting benefit of Double Taxation Avoidance Agreement to the assessee. 020. The learned authorized representative submitted that argument of the revenue that production is done at the Zee entertainment Ltd.‟s facility at Noida in India and therefore necessarily the assets are located in India of the assessee is incorrect. It was also stated that the allegation of the learned departmental representative that the critical functions of the undertaking are functioning from India and therefore undertaking is situated in India and the premises of Zee entertainment Ltd constitute fixed place of permanent establishment. It was further stated that the learned departmental representative has specifically referred to the slump sale agreement to allege that the assessee is owner of the various Page | 65 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 65 of 121 assets and the same are located in India that the assessee is the owner of various information technology assets and the same are located in India. It was further stated that the transfer pricing study report shows that the assessee's production and transmission facility are situated at Noida. It was also the claim of the learned departmental representative that an offshore company like assessee, cannot hold any immovable property in Mauritius and therefore the assessee has an immovable property in India. 021. In rebuttal of the same learned authorized representative submitted that i. assessee is engaged in the business of satellite television broadcasting of sports events taking place outside India. The production facility lies at the place of the event i.e., outside India. The assets related to the same are also located outside India. ii. He referred to the submissions before the learned assessing officer stating that it was repeatedly submitted before the learned assessing officer that the production takes place outside India and therefore the assets are located outside India. iii. The learned authorized representative referred to the letter dated 14/3/2019, 23/10/2019, 23/10/2019 and 18/11/2019 to say that production facilities are at the place of the event, which is outside India, and therefore assets related to the same are not located in India. It was submitted that these letters have not been disputed by the AO, learned dispute resolution panel, and learned departmental representative. Page | 66 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 66 of 121 iv. It was further submitted that the appellant's registered office is situated in Mauritius. It has a property in Dubai, which has been leased out as is evident from the financials of the company submitted at page number 876 of the assessee's paper book. There is a lease agreement with Gulf DTH FZ LLC of its Dubai property to show that the appellant even after losing some part of the premises has retained two studios. v. It was further submitted that the assessee has leased premises in Dubai from Real media FZ LLC for its operation as is evident from the annexure to schedule 6 at point number C of slump sale agreement. Therefore, the allegation of the revenue that if the assets of the assessee are not in Mauritius, then they must be in India is factually wrong and contrary to the facts on record. vi. Further it was submitted that the revenue cannot now argue that the assets must be in India without actually pointing out as to which assets of the assessee are in India. He vehemently submitted that the allegation of the revenue that if property is not situated in Mauritius and therefore it is situated in India is fallacious. vii. It was submitted that as the critical operation of the undertaking are functioning outside India, the undertaking is situated outside India. viii. It was further submitted that the reliance placed by the learned departmental representative on the transfer pricing study report that the studio must be in India is contrary to record and based on presumption. It was Page | 67 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 67 of 121 submitted that production is separate from play out services availed from Zee entertainment Enterprises Ltd. Production has always been outside India while the play out facility for quality maintenance is availed from the ZEE entertainment Enterprises Ltd. The agreement does not contemplate to have Zee entertainment Enterprises Ltd as establishment of any permanent or enduring nature in India at the disposal of the appellant. Therefore, it cannot be said to be a permanent establishment in India merely because it provides the services to the assessee. ix. Transmission services have been availed from third party service providers like Intelsat Corporation and that the transmission happens outside India and not at the facility of the Zee enterprises entertainment Ltd. x. With respect to the applicability of MAURITIUS OFFSHORE BUSINESS ACT (MOBA), learned authorized representative submitted that the appellant is registered under The Financial Services Development Act, 2001 and the provisions of Mauritius Offshore Business Act do not apply to it. It was further stated that MOBA applies to activities approved in section 34 of the act and not the activities of the assessee. It was even otherwise submitted that that act was repealed by the Financial Services Development Act, 2001 as per the provisions of section 48 of that act. The learned authorized representative referred to page number 30 of the paper book filed by the revenue. Then it was submitted that assessee is now governed by the Financial Services Act, 2007 that does not have any restriction of holding any Page | 68 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 68 of 121 property in Mauritius. Therefore the reliance placed by the learned departmental representative on that provision and thus holding that assessee was not capable of doing any business or holding any property in Mauritius is devoid of any merit. xi. In the end, it was submitted that the learned departmental representative by casting suspicion and merely on surmises and conjunctures has alleged that the production facility and assets are situated in India. The statement of the learned departmental representative travels beyond the case of the learned assessing officer and the same must be rejected on this count alone. It was submitted that the learned departmental representative cannot improve upon the assessment order itself. He placed reliance on the decision of Bangalore tribunal in case of Joint Commissioner Of Income Tax Versus Flipkart India Private Limited, Assistant Commissioner Of Income Tax Versus Balaji Trust, Mahindra And Mahindra Ltd Versus Deputy Commissioner Of Income Tax 30 SOT 374 (Special Bench) and Assistant Commissioner Of Income Tax Versus Parkash L shah 115 ITD 167. xii. The learned authorized representative further submitted that the revenue submitted that Taj India constitutes a permanent establishment of the assessee in India and that it had entered into contract on behalf of the appellant as is evident from schedule 7 of the share purchase agreement placed at page number 50 of the department‟s paper book volume 3. It was further stated that even the down linking guidelines provide for a foreign telecasting company to have a company, which has authority to Page | 69 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 69 of 121 conclude contracts in India is not correct. It was submitted that Taj India had been appointed by the assessee as a distributor of various sports channel in India as per agreement dated 28/4/2016, which is similar to the prior year‟s arrangement as per agreement dated 25/9/2014. Entering of contracts by the Taj India with Videocon, Tata sky, Dish TV, DEN network are on principal-to-principal basis and therefore the Taj India does not constitute a permanent establishment in India. xiii. It was submitted that the Honourable Bombay High Court in assessee's own case for the assessment year 2004 – 05 and 2005 – 06 has categorically held that Taj India was acting independently for its distribution rights and entire agreement was on principal-to-principal basis and therefore there was not a permanent establishment of the assessee. Therefore, reference to schedule 7 of the share purchase agreement is irrelevant. xiv. It was further stated that Taj India has entered into contract for distribution of channels in India but the same was on principal-to-principal basis. xv. It was further stated that the revenue failed to appreciate that the argument of the assessee that Taj India has not concluded contracts was with respect to the advertisement revenue and hence Taj India does not constitute a permanent establishment for advertisement revenue segment as well. xvi. It was further submitted that whether the Taj India constitutes a permanent establishment of the assessee for Page | 70 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 70 of 121 distribution (subscription income) has been settled by the Honourable Bombay High Court in favour of the assessee and therefore the revenue now cannot agitate that issue. xvii. With respect to the advertisement income assessee submitted that Taj India had been appointed by the assessee as its advertising sales agent to Solicit orders for sale of commercial advertising from clients in India as per agreement dated 4/05/2002 along with several amendments. However, it was submitted that as per article 5 (4) of DTAA , Taj India would constitute a permanent establishment only if (1) Taj India has the authority to conclude contract binding the assessee and (2) Taj India habitually exercises such authority. It was stated that in the present case, while Taj India in line with the guidelines issued by the Ministry of information and broadcasting has been given the authority to conclude contract, however it has not been exercised and contracts are concluded by the appellant itself. Taj India has not habitually concluded contract on behalf of the appellant in the present case. Therefore, xviii. it cannot constitute a permanent establishment in terms of article 5 (4) of the DTAA. xix. It was further stated that the assessee as per letter dated 23/10/2019 submitted the copy of the various advertisement invoices which clearly demonstrate that the same have been concluded by the assessee itself and not by Taj India. Page | 71 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 71 of 121 xx. Even otherwise, it was submitted that, the revenue has failed to show the any contract relating to the advertisement income has been concluded by Taj India or the fact that Taj India has habitually exercises such authority. In absence of any evidence contrary to the submission of the assessee, that Taj India has not concluded any contracts or does not habitually exercises such authority, negative presumption made by the revenue is unjustified. xxi. The learned authorized representative was also concerned about the submission of the learned departmental revenue that the assessee had not submitted various documents in the course of the assessment proceedings as mentioned in the draft assessment order at paragraph number 4 point 3. He referred to that paragraph and submitted that the learned AO has alleged that the assessee was not forthcoming in filing details regarding sale of its broadcasting business in the form of any copy of the valuation report, details of global financials, up various approvals taken from any government or statutory or regulatory authority and details of authorized bank signatories for the period relevant to the transaction. It was submitted that the assessee as per letter dated 27/12/2019 had submitted point -wise reply wherein in point number 1 it has categorically mentioned that the assessee has not obtained any valuation report for the purposes of sale of its global sports broadcasting undertaking and nor any valuations are required under the Indian foreign exchange regulations or any other statute. Page | 72 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 72 of 121 This is a transaction between two unrelated parties. Those parties are competitors and the consideration has been determined based on the negotiation entered into between the parties that are concluded. Therefore, the question of filing any valuation report does not arise. It was categorically mentioned that assessee has not obtained any valuation report. If the assessee has not taken any such report, there is no question of filing of such valuation report. With respect to the submission of the audited financial data of India operation along with the segmental accounts of the company relevant for computation of income was submitted to the learned assessing officer on 3/12/2019 as per submission dated 19/12/2019. He specifically referred to page number 583 of the assessee's paper book, which shows the audited financials of India operations along with segmental accounts of the assessee company, which are relevant for computation of income. It was submitted that the learned AO has accepted it even for computing the capital gains for the transfer of undertaking. It was submitted that the global financial results are therefore not relevant for computing the income arising on transfer of undertaking and may be submitted if still required. The learned assessing officer did not again asked for the global financial statement and therefore before the learned assessing officer same are not filed. The learned authorized representative specifically referred to page number 835 of the paper book of the assessee wherein as per letter dated 9/3/2021 assessee has submitted global financial statements before the learned dispute resolution panel. It was submitted that learned DRP after Page | 73 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 73 of 121 examination of the same, did not mention anything about it. This itself clearly prove that non-submission of it before ld. AO of global financial results by the assessee could not have gone against the assessee. xxii. With respect to any approvals taken from any governmental or statutory or regulatory authority in India for the said transfer, the learned authorized representative submitted that the submission of the assessee dated 19/12/2019 clearly states that the assessee being a Mauritius resident under foreign company is not required to take approval from government authorities of India for the purpose of selling of its global sports broadcasting undertaking. The learned authorized representative specifically referred to the assessment order and stated that the approval of the competition commission of India was obtained by the buyer and not by the assessee. He even otherwise submitted that the purpose of obtaining the permission before the competition commission of India is with respect to the dominant undertaking of the buyer and compliance with the provisions of the competition commission act. It has nothing to do with the tax liability of the assessee with respect to the sale of global sports business. xxiii. With respect to the operation of the bank account of the assessee and authorized bank signatories, assessee submitted that as per letter dated 18/12/2019 which is placed at page number 511 of the assessee's paper book it was submitted together with the copies of the board resolution which are taken on record and also referred in Page | 74 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 74 of 121 the draft assessment order. According to that it is evident that Mr. Anil Maurya is a tax resident of Mauritius who is a director of ATL Mauritius, holding company of the assessee and he is jointly authorized to operate along with the other directors of Taj Ltd since 30/11/2015. He specifically referred to that letter and submitted that there are two classes of the signatory jointly operate the bank account. One is Mr. Anil Murya and another one is any of the four persons including two directors of the assessee company. He submitted that even otherwise it does not make any adverse reference that a person of the holding company is made the joint signatory to the banking operation of the assessee. Therefore, it was submitted that the learned assessing officer has proceeded on the factual incorrect basis to make the above allegations. xxiv. With respect to the orders of the coordinate bench in earlier years, the learned authorized this representative submitted that there is no misrepresentation of facts from the side of the assessee. The coordinate benches have passed its order as per the information available on record before the assessing officer. Appeal of the revenue against the order of the coordinate benches has reached the Honourable High Court and therefore the allegation of the learned departmental representative that those orders have been obtained by misrepresentation of facts is clearly incorrect. xxv. Accordingly, the learned authorized representative submitted that the taxing of the capital gain on sale of global sports business is neither chargeable to tax in India Page | 75 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 75 of 121 under section 9 as well as under the various articles of the Double Taxation Avoidance Agreement in absence of any permanent establishment. Accordingly, the addition made by the learned assessing officer on that account is devoid of any merit. xxvi. With respect to ground number 2 – 5, the learned authorized representative submitted that the written submission of the learned departmental representative clearly accepts that this issue is already been decided in favour of the assessee and is now concluded. Decision and Reasons 022. We have carefully considered the rival contention and perused the orders of the lower authorities. Assessee has submitted factual paper book in two volumes, one volume of Case law compilation and written submission. On behalf of learned AO, three volumes of the paper books and one written submission was made. Both the parties have referred to several judicial precedents to buttress their contentions. We have considered all of them. 023. Briefly, the fact at the cost of repetition shows that assessee is a company Incorporated in January 2001, being a wholly owned subsidiary of Asia today Limited Mauritius, which in turn is also a fully owned subsidiary of Zee entertainment Enterprises Ltd. It is stated to be a full-service television concern having its registered office at St Louise business center, Mauritius, and the branch office at Dubai. It is stated to be a foreign telecasting company and the principal activities of the company includes television transmission, sale of commercial line on television, cable broadcasting, syndication of broadcasting rights, title sponsorships, producing Page | 76 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 76 of 121 serials. It derives revenue from the Indian entities in respect of advertisement appearing on it sports channel and distribution revenue from the cable systems for the sports channel. It is engaged in the business bringing to the Indian sub continents and Middle East the best in sports programming and production. The assessee is having a Tax Residency Certificate [ TRC] issued by the Director-General, Mauritius Revenue Authority having a validity period from 25 March 2016 – 24 March 2017 stating that the assessee is registered in Mauritius on 12 July 2002, is a company resident in Mauritius for income tax purposes under the income tax act. Its certificate of Registration By Continuation was issued to the assessee on 12 July 2002 by The Registrar Of Companies, Mauritius. Assessee has also Global Business License Category 1 issued on 15 July 2002 for a validity period of 15 July 2002 – 14 July 2003 under section 20 (5) of The Financial Services Development Act 2001. According to that, the company was entitled to conduct such business or activities as a set out in the application and supplementary document submitted. 024. It has appointed an another entity Taj Television India Private Limited (Taj TV), a closely held Indian company which is engaged in the commissioning and marketing of sports programs events and distribution and dissemination of TV channels, as its advertising sales agent to Solicit orders for sale of commercial advertising time in India under the distributors for licensing Ten sports channel cable systems in India. The main functions of this entity with respect to advertising sales agency is identification of the prospective advertisers, coordinating between assessee and the advertisers, collection and remittance of advertisement revenue on behalf of assessee and providing market information. With respect to the distribution revenue, it promotes function, network Page | 77 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 77 of 121 function, coordination with assessee and the cable operators, transmission protection and arrangement of the collection and remittance of the subscription revenue. 025. Zee Entertainment Enterprises Ltd,[ ZEEL] is one of the India's leading television, media and entertainment companies. It is engaged in the business of television broadcasting. It is providing services to the assessee with respect to play out cost. Assessee arranges to telecast the advertisements worldwide in between various programs or events telecasting as per schedule of Ten sports . It controls the traffic of advertisements and ensures that the entire inventory of spots available on Ten sports channel is consumed to maximum extent. Assessee makes arrangement for displaying the contents in the channels specified as per the agreement and it complies with the rules and regulation including maintenance of requisite licenses. Legal and other compliances are also the responsibility of the assessee. With respect to the play out cost, Zee entertainment Enterprises Ltd maintains agreed technical specifications in providing the broadcasting operations and engineering facilities to channels mentioned as per the agreement and provide quality support relating to latest broadcast features. This entity raises invoices on assessee for services performed as specified in the agreement. 026. Assess filed its return of income on 29/3/2019 declaring a total income of ₹ 185,593,487/– being the interest on income tax refund received by it shown as income from other sources. It submitted two different computation of total income. In the first computation of total income offered only income from other sources as interest amount as taxable income. In the same computation, income from business or profession was referred to Page | 78 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 78 of 121 by the note. In that note to computation of total income, it stated that without prejudice to its income is not liable to tax in India the company showed its indicated taxable income from its Indian operations stating that net profit before tax as per the profit and loss account is ₹ 4,620,563/–, to which it considered several items not allowable as deduction of ₹ 340,136 and reduced the allowable items of expenses allowable on payment basis of ₹ 121,117/- resulting into gross business income of ₹ 313,791,751 which was reduced by forward business losses of assessment year 2011 – 12 of the same amount. Even from income from other sources, unabsorbed depreciation of earlier years was claimed and net taxable income of only ₹ 48,015,879/– was shown. Along with the return of income balance sheet of India operations of the assessee for the year ended on 31st of March 2017 was drawn wherein in the balance sheet in the current assets only trade and other receivables amounting to US$ 19,593,547, trade and other creditors of US$ 15,797,564. No other assets and liabilities were shown. The share of net profit and loss are allocated to India operation of US$ 4620,563 was shown. With respect to the breakup of the above amount of profit, as per note number 3 details of revenue derived from India operations and cost of sales to the same was shown. Accordingly, in the revenue, assessee disclosed advertisement sports revenue of US$ 5,022,923, distribution income of US$ 38,636,702 and exchange gain of US$ 479,834 totaling to US$ 44,139,460. The cost of sales was derived at net programming cost of 2,88,74,566 US$ , transponder fees of $ 1,793,183, production cost of US$ 2,672,623, up linking charges of $ 1,790,261 and license fee of US$ 53,362. It incurred general and administrative expenditure of US$ 1,201,917 and finance charges of US$ 2,957,837 after observing the depreciation on fixed assets of US$ 175,148. It resulted into US$ 4,620,563 as share of net profit Page | 79 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 79 of 121 located to India operations. Assessee also submitted form number 3CEB along with its transfer pricing study report. 027. On 27 October 2016, The Deputy Commissioner Of Income Tax, International Tax Circle – 4 (1) (2), Mumbai issued a certificate authorizing assessee to pay ₹ 22,672,800,000 after deducting income tax at the rate of 0% to Aqua holding investment private limited, c/o, Sony pictures network India private limited, Mumbai. This was with reference to the fact that during the year financial year 2016 – 17 assessee has disposed its global sports broadcasting business to another Mauritius company namely Aqua holding investment private limited by way of a slump sale. 028. A Business Purchase Agreement was entered into on 31st of August 2016 by assessee i.e. Taj TV Limited as a seller, Aqua holding investment private limited, as purchase, ATL media Ltd as a third-party, SPE Mauritius Holdings Ltd as purchasers parent 1 and SPE Mauritius investments Ltd as purchasers parent 2. According to the agreement, the seller is wholly owned subsidiary of ATL Ltd and is engaged in the sports broadcasting business. Further ATL is wholly owned subsidiary of ZEE Entertainment Enterprises Ltd . The seller proposes to sell to the purchaser the sports broadcasting business on going concern, encumbrance free basis by way of a slump sale free of all income and on the terms and conditions of this business purchase agreement. 029. According to the agreement, sports broadcasting business means 'the entire business of the seller, other than the retained business, in relation to the channels undertaking which includes, (A) distribution and broadcasting sports content as part of the linear feeds of the channels and all ancillary activities associated with the broadcast, play out and distribution of linear channel in the Page | 80 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 80 of 121 territory (other than in Pakistan) and (B) distribution of the channels across all media platforms capable of carrying and distribution in a linear feed of a television channel in the territory (other than in Pakistan) and (C) syndicated sports content to 3rd parties across all media platforms in the territory (other than in Pakistan). Other than the business of sports broadcasting business, all other businesses were categorized as a retained business and were not part of this agreement. Pakistan business was also not part of this agreement. The channels undertaking means all undertakings of the seller pertaining to or used in connection with the sports broadcasting business and existing as on the closing date includes all the assets, contracts, permits and licenses, intellectual property, all employees, the records, the insurance policies, claims and rights, all goodwill and other intangibles as well as all information technology systems to the extent those are used solely by the sports broadcasting business and is transferable. The business purchase agreement referred to the channels which are known as Ten 1, Ten 1 HD, Ten 2 , Ten 2 Golf, Ten Cricket (International/Middle East,) and Ten Cricket (Caribbean). It excluded the Ten Sports channel comprised in the Pakistan business . 030. The purchase consideration was agreed at US$ 338,400,000. This clause has the reduction clause of distribution revenue shortfall adjustment, which means the aggregate amount computed on the basis of reduction of US$ 1,920,000 from the purchase consideration for every shortfall of ₹ 10 lakhs in the committed distribution revenue. The committed distribution revenue means an aggregate monthly subscription amount of Rs. 35,50,00,000 net of applicable taxes in the month immediately preceding the month of Page | 81 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 81 of 121 the closing date under the distribution agreements pursuant to India distribution contract. 031. As agreed between the parties, the agreement shall be governed and interpreted by and construed in accordance with the substantive laws of India. The arbitration shall be conducted in accordance with the rules of the Singapore International arbitration Centre and the seat or legal place of arbitration shall be at the Delhi. 032. As per agreement :- i. According to schedule 1, it has several conditions precedent of Seller, purchases and joint conditions. One of the joint condition precedents was to obtain approval from The Competition Commission In India in terms of The Competition Act 2002 of India of the proposed consummation of the transaction contemplated in this agreement. It also included no objection or endorsement from the Ministry of information and broadcasting recording the change of ownership of the channel in the downlink permission issued. It was also the joint precedent for which counterparties for the various agreements are to be informed/intimated about this agreement. These are various sports Association or sports organizations. ii. As per schedule 2 there were certain closing actions where it is mentioned at serial number 5 that the closing of the transaction contemplated under this agreement sale take place, concurrently and contemporaneously with the consummation of the transaction relating to the transfer of all equity shares of Taj India to SPNI and the transfer of the Page | 82 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 82 of 121 Pakistan business to the purchaser and/or its affiliates and not otherwise. iii. As per schedule 3 there were 272 trademarks registered in the name of the assessee registered in various jurisdictions including India. Out of this, 158 trademarks are registered in India. Other specific indemnities between the parties and five employees which are directly employed by the seller in relation to the sports broadcasting business and who are associated with the sports broadcasting business were listed. These 5 employees are based at Mauritius. Others are various general warranties between the parties. According to clause 8 and 9, it is stated that the sports broadcasting business is the sole and exclusive property of the seller and other than the seller no other person has any right or interest in the sports broadcasting business. The seller owns all of the assets necessary to conduct the business of sports broadcasting business and there are no arrangements with any other person that creates any encumbrance or the right to acquire any other rights in relation to any part of the assets. The properties were also not leased out or licensed to others but the seller has obtained the necessary permission from its affiliates to use the premises from where it is operating. No written agreement has been entered into by parties for such arrangement and no payments are due and shall be required to be made by the purchaser for use of such premises after the closing date. According to clause 19 of the warranties it is mentioned that " Currently plays out of all the channels take place in Noida (India), which the feeds for this channel are sent via fiber to Germany. From Germany (except 10 Page | 83 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 83 of 121 Cricket (Caribbean) which is distributed via fiber using ECG Canara), the signals of all these channels ( Ten12 HD, Ten Golf HD, Ten Sports Pakistan, Ten Cricket ME, Ten 1 and Ten 2) is uplinked onto the satellite named. IS -20 , which has a footprint over the Indian subcontinent, the Middle East, of Rica, Singapore and Hong Kong, where the linear feet of one or more of the channel is distributed in each of these regions. There is no play out the channels anywhere else in the world." This schedule also refers to several contracts, which are to be invited for the consummation of the transaction. It has also reference of all related party transactions relating to the sports broadcasting business. According to that, there were contracts of commission payable by the assessee to Taj television (India) private limited in the form of agency commission on India advertisement revenue and distribution commission. With respect to the transmission cost the channel play out cost is payable by the assessee to see entertainment Enterprises Ltd. With respect to rent and electricity of office rent of the buy office payable by the assessee to real media FZ LLC were mentioned. The advertisement revenue contracts receivable by the assessee from group channel promotions was also mentioned. It also referred to content agreements for various sports such as cricket, football, golf, tennis, WWE, MotoGP, others, volleyball and technical contracts, syndication contracts, facility contracts, maintenance contracts, advertisement contracts and several other contracts including distribution contracts. Page | 84 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 84 of 121 iv. This agreement was signed on behalf of ATL media Ltd and assessee by one Shri Anil Maurya, who is stated to be the director of ATL media Ltd and authorized signatory of the assessee. v. The agreement is also supported by the written resolution of the assessee company dated 30/08/2016 signed by two directors of the assessee company. 033. On 31 August 2016 and agreement was entered into by Zee entertainment Enterprises Ltd as the seller and Sony pictures network India private limited as the purchaser titled as The Share Sale And Purchase Agreement where the seller holding 100 % of the outstanding share capital of Taj Television (India) Private Limited were sold for USD 76 Lacs. 034. On 1 March 2017, assessee confirmed to the buyer about the closing of the transaction. According to that closing date purchase consideration amounts to US$ 322.7 million received by the assessee and purchase of sports broadcasting business by Aqua holdings investments private limited is complete and now the buyer is the lawful owner of the sports broadcasting business. 035. Assessee has entered into an advertising sales agency agreement on 4 May 2002 by which assessee appointed Taj Television ( India) Private Limited as its advertising sales agent. The details of the agreement as well as the subsequent addendum thereto are as under:- i. The assessee has an agreement with Taj television India private limited titled as advertising sales agency agreement dated 4 May 2002. According to that assessee appointed Taj India private limited its non-exclusive advertising sales agent for:- Page | 85 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 85 of 121 a) soliciting orders for placement of advertisement on the channel and forwarding them to assessee for acceptance b) promote awareness regarding the channel c) reporting to assessee unauthorized duplication and users of the program of which assessee has knowledge d) facilitating arrangements with advertisement agencies, sales representative and advertisers for sale of advertisement line and establishing effective communication with them, e) assistance in creating from time to time rate card both in rupees and US dollars, f) conducting market studies and research in preparing market reports g) submitting to assessee periodic reports on the market and its advice with regard to the market h) collect advertisement revenue on behalf of assessee and remit the same in accordance with the prevailing regulations i) using its best efforts to ensure that Taj receives all sums due to it under this agreement j) remitting services are commissioned to advertisement agencies, sales representative and media agents k) other services incidental to acting as advertising sales agent. ii. According to clause 5 (a) of the agreement relates to the duties and responsibilities of Taj India private limited as under:- Page | 86 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 86 of 121 a) in providing the services pursuant to this agreement, Taj – India shall not have any writer authority to assume or create, in writing or otherwise, any obligation of any kind express or implied, in the name of all on behalf of Taj, unless expressly authorized by Taj. Taj and Taj India expressly acknowledges that Taj India is a ability to (i) enter into contracts with third parties (ii) incurred any cost and expenses (other than reasonable and customary advertising sales agency costs and expenses, in connection with the service), or (iii) otherwise obligate Taj in respect of the services to be provided by Taj India here under (including, without limitation, arranging and facilitating the sale of advertising time) shall at all times be subject to prior approval by Taj in its absolute discretion, such approval to be granted or withheld by Taj in accordance with the procedures specified herein. b) Taj India agrees to submit all proposed agreements and contracts in respect of the services, and a periodic budget of all costs and expenses to be incurred in connection with the services (including, without limitation, Taj India is estimated major marketing costs), to Taj fourth Taj approval which approval shall be granted or rejected by Taj within a reasonable time after such submission. However, if Taj does not grant or rejected approval within a reasonable period of time, and decides to keep its approval on hold, it will intimate Taj India accordingly. Taj (and not Taj India) shall be responsible for confirming all agreements relating to the services and the sale of advertising time for the channel and for directly booking advertising time for exit addition on the channel. Taj shall confirm all advertising time and book all Page | 87 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 87 of 121 advertising time agreements within a reasonable time of its receipt thereof from Taj India. iii. On 27 April 2006, an addendum to the advertising sales agency agreement entered into between assessee and Taj television India private limited was entered into. According to that clause 5 (a) of the agreement was replaced with effect from 1 April 2006 as under:- "in providing the services pursuant to this agreement, Taj India shall have the right and authority to assume or create, in writing or otherwise, and obligation of any kind express or implied, in the name of and on behalf of Taj, relating to activities undertaken in India. Subject to exercising due diligence and care and pursuant to the interest of Taj including but not limited to adherence to the rate card as is agreed to between Taj India and Taj, getting any arrangements at brands to the rate card agreed with Taj and ensuring that the advertisement procured meet the requirements as laid down under the advertising code prescribed under the Cable Television Network (Regulation) Act, 1995." iv. A further addendum was made on 28 December 2007 to the advertising sales agency agreement wherein no substantive changes were made to the rights and authorities of the parties. However on 23 January 2008 one more addendum was made according to that clause 5 (B) of the agreement entered into on 4 May 2002 was deleted. Page | 88 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 88 of 121 v. The agreement was further amended on 26 March 2008 where the remuneration was changed with effect from 1 April 2006. vi. The agreement was further amended on first day of April 2013 as the addendum earlier had the terms up to 31 March 2013, by this agreement the term got extended up to 31 March 2014. vii. Further addendum was entered into on 1 May 2013 to change rates of the commission/fees as per clause 4 effective from 1 April 2013. viii. On 20 February 2015, the terms were extended up to 31 March 2015 and as per amended dated 20 February 2016, it was further extended up to 31 March 2018. 036. Assessee has also entered into a Channel Subscription Agreement with Taj Television ( India) Private Limited with effect from 1 May 2016 on 28 April 2016 wherein Taj Television India Private limited was granted an exclusive license to distribute and conduct related marketing of the channels. It was further amended by agreement dated 1 November 2016 wherein a further channel was launched and rights of distribution were granted to Taj India. 037. Based on above facts, the claim of the assessee is always that assessee does not have any permanent establishment in India and its income is not liable to tax in India because of that. It has also cited the decisions of ITAT for assessment year 2006 – 07 to 2011 – 12 wherein the coordinate bench held that assessee does not have a permanent establishment in India. 038. Honourable Bombay High court In COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) v. TAJ TV LTD. [2020] 425 ITR 141 Page | 89 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 89 of 121 (Bom) for assessment year 2004-05 , 2005-06 (February 6, 2020) upheld the order of the coordinate bench holding as under:- "24. The Tribunal noted that the first appellate authority, after due deliberation, had returned a finding of fact that Taj India was not acting as agent of the assessee but it had obtained the right of distribution of the channel for itself and subsequently, it had entered into contracts with other parties in its own name in which the assessee was not a party. The distribution of the revenue between the assessee and Taj India was in the ratio of 60 : 40 and the entire relationship was on principal-to-principal basis. The Tribunal noted that this finding by the first appellate authority is corroborated by the terms and conditions of the distribution agreement as well as the sub- distributor agreement. After examining the requirement of article 5 of the Double Taxation Avoidance Agreement to constitute agency permanent establishment, the Tribunal actually held that none of the conditions as stipulated in article 5(4) was applicable because Taj India was acting independently qua its distribution rights and the entire agreement was on principal-to-principal basis. Therefore, it was held that the distribution income earned by the assessee cannot be taxed in India because Taj India does not constitute an agency permanent establishment under the terms of article 5(4) of the Double Taxation Avoidance Agreement. The order of the first appellate authority was accordingly upheld." 039. It is further the claim of the assessee about the functions and activities performed by it stating as under:- Page | 90 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 90 of 121 Serial number Functions//activities performed Outside India In India 1 Acquisition of programming contains/rights Yes No 2 Hiring of transponder facility Yes No 3 Venus of major events held during the year yes no 4 on ground activities like up linking facilities yes no 5 production of program and production crews yes no 6 fixed assets/telecasting facilities like studio et cetera yes no 7 Schedule of Programs Yes No 8 contract with advertisers yes No 9 Collection of advertising revenue from Indian No Yes Page | 91 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 91 of 121 advertisers 10 collection of distribution revenues from Indian distributors no yes 11 promotional and auxiliary activities for sports channels in India no yes Accordingly, the claim of the assessee is that the majority of the functions for telecasting of the sports channel carried out from outside India and Taj television India Ltd is only engaged in the marketing of sports channel in India for which it is paid at arm's-length consideration. 040. It is further the claim of the assessee that (1) the place of the effective management of the assessee is situated in Mauritius because, all the meetings of the board of directors were held outside India, (2) the main activity of telecasting is carried on by it outside India, (3) all the significant contracts are finalized and executed outside India, (4) all the employees of assessee are based outside India. 041. It is also the claim of the assessee that agent is paid at arm's-length and therefore, even if there is a permanent establishment of the assessee, no further profits can be attributed to the assessee with respect to the advertisement and distribution income. This is Page | 92 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 92 of 121 refuted by the revenue submitting that there is a stark difference between the article 5 (4) of The Double Taxation Avoidance Agreement of India and Mauritius. There is no such clause that if the dependent agent is remunerated at arm's-length, nothing is required further to be attributed to the assessee as income. Indo US double taxation agreement provided in article 5 (5) as under:- "5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent, or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise and the transactions between the agent and the enterprise are not made under arm's length conditions, he shall not be considered an agent of independent status within the meaning of this paragraph." Whereas in the India Mauritius double taxation avoidance agreement there is no such condition, article 5 (5) provides as under:- "5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, where such Page | 93 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 93 of 121 persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted exclusively or almost exclusively on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph." 042. Therefore, it is apparent that there is no such condition that if a dependent agent is paid at arm's-length price, there cannot be any further attribution of profit in the hands of assessee. However, it needs to be established that dependent agent has performed the function on behalf of the non-resident entity and not for the services provided to the non-resident resident enterprises. If, it is shown that the dependant agent permanent establishment has performed functions on behalf of the non-resident entity by employing assets and assuming risk along with sufficient free capital to support those assets and risk, then only, further profit can be attributed. Therefore, it needs to be first established that there is a dependent agent PE of the assessee and it has performed functions on behalf of the assessee complying the assets and assuming the risk. 043. While holding so, we are conscious of the fact that in case of decision of the Honourable Bombay High Court in case of Set satellite (Singapore) PTE Ltd versus Deputy Director Of International Taxation(2008) 307 ITR 205/173 taxman 475 (Bom) and CIT versus B4U international Holdings Ltd (2015) 374 ITR 453 as well as in assessee‟s own case coordinate bench in 77 taxmann.com 355 for assessment year 2006 – 07 to 2008 – 09 dated 23 December 2016 has categorically held that no income could be said to be attributable to assessee, a foreign entity , in India from its Indian Page | 94 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 94 of 121 subsidiary when transfer pricing officer had accepted that the transaction between them was at arm‟s-length. The Double Taxation Avoidance Agreement before the Honourable Bombay High Court in case of Set satellite (Singapore) PT Ltd was with respect of India Singapore DTAA and in case of B 4U international Holdings Ltd case, it was India Mauritius DTAA. We are also concerned in this case with India Mauritius DTAA. However, this issue could only arise when we reach the decision that whether the assessee has a dependent agent permanent establishment or not. For the time being, this issue is parked separately 044. Therefore, first it needs to be established whether the assessee has a Dependent Agent permanent establishment in India or not. For assessment year 2003 – 04 to 2005 – 06 coordinate bench in Additional Director Of Income Tax Versus Taj Tv Limited 161 ITD 339 (Mumbai) dated 5/7/2016 has decided the issue that the distribution revenue in terms of distribution agreement has been allocated in the ratio of 60: 40 and the entire relationship is principal-to-principal basis. There is no evidence to show that Taj India was acting as an agent of the assessee for the distribution business in any manner. This finding has been arrived after considering the terms and conditions of the distribution agreement as well as sub distributor agreement, in absence of any contrary material, the coordinate bench held that there is no agency permanent establishment of the assessee in India. Accordingly, distribution income of the assessee was held not to be taxable in India because Taj India does not constitute an agency PE under article 5 (4) of the Double Taxation Avoidance Agreement. This was held by the coordinate bench in paragraph number 17 of the decision. This decision was challenged by revenue before the Honourable High Court and Honourable High Court in (2020) 425 ITR Page | 95 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 95 of 121 141 dated 6/2/2020 has upheld the order of the coordinate bench. Subsequently for assessment year 2006 – 07 to 2008 – 09 on 23 December 2016, coordinate bench in 162 ITD 674 has further held for distribution income that Taj India has been remunerated at arm‟s-length therefore, without deciding whether the assessee has a permanent establishment in India with respect to distribution income as well as advertisement income , coordinate bench decided the issue in favour of the assessee by following the decision of the honourable Bombay High Court holding that when the permanent establishment is remunerated at arm‟s-length, no further profit attribution is required. For assessment year 2009 – 10 and 2010 – 11, in assessee‟s own case in ITA number 6326 – 6327and 6366 – 6367/M/2016 in paragraph number 8 coordinate bench has held that the Taj India does not constitute agency permanent establishment in terms of India Mauritius DTAA for distribution income. It further held that as the permanent establishment is being remunerated at arm‟s-length price, no further attribution can be made. Further for assessment year 2011 – 12, in ITA number 1313 and 1501/M/2018 dated 22/5/2019, though the grounds mentioned the chargeability of income on the basis of advertisement revenue, the coordinate bench following the decision in assessee‟s own case for earlier years, (which was with respect to distribution income,) held that even for advertisement revenue, the Taj India does not constitute agency permanent establishment and further as the AE has been remunerated at arm‟s-length price, the addition was deleted. Further in the same appeal, where the learned CIT – A following the decision of the coordinate bench in assessee‟s own case held that distribution income stream does not have a permanent establishment in India, coordinate bench following the decision of the coordinate bench in assessee‟s own case for earlier year held that assessee does not Page | 96 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 96 of 121 have a permanent establishment in India with respect to distribution income. Further for assessment year 2012 – 13 in ITA number 6588/M/2019 and 6741/M/2019 dated 22/3/2022 the coordinate bench when the learned CIT – A held against the assessee holding that in respect of advertisement revenue assessee has a permanent establishment and against the revenue on permanent establishment with respect to the distribution revenue. In this order, at paragraph number 11 there was a specific reference made by the learned departmental representative with respect to the addendum in distribution agreement where Taj India had been granted an authority to enter into an agreement with third parties on behalf of the assessee. In paragraph number 12 onwards coordinate bench considered those addendum and thereafter held that with respect to the distribution income there does not exist any permanent establishment as the twin conditions as per article 5 (4) (i) i.e., (a )person has concluded the contract and (b) person habitually exercises the authority to conclude the contract needs to be satisfied, revenue except merely showing the clause did not bring any material on record either at the assessment stage or at the ITAT stage that Taj India had a PE which habitually exercised the authority to conclude the contract on behalf of the assessee. Coordinate bench also referred to the decision of special bench in case of Motorola incorporation versus DCIT (2005) 95 ITD 269 holding that the burden is first on the revenue to show that the assessee had a taxable income under the Double Taxation Avoidance Agreement and then the burden is on the assessee to show that its income is exempt under DTAA. It further followed the decision of coordinate bench in case of Right florists private limited (2013) 143 ITD 445. It held that Taj India cannot be held to be dependent agent permanent establishment of the assessee in India under article 5 (4) (i) of India Mauritius DTAA Page | 97 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 97 of 121 with respect to the distribution revenue. However, with respect to the advertisement revenue it accepted alternative plea of the assessee with respect to advertisement revenue that as Taj India was remunerated at arm‟s-length price, no further profit is required to be attributed with respect to advertisement revenue. It did not decide whether for advertisement revenue there exists a permanent establishment or not. Therefore it is apparent that the issues are squarely decided against the revenue on following issues:- i. Assessee does not have a permanent establishment with respect to the distribution revenue of the assessee. ii. When the permanent establishment has been remunerated at arm‟s-length, there is no further attribution of profit to the income of the assessee iii. Even in case of advertisement of revenue, in one year, the coordinate bench has decided that it does not have a permanent establishment. However, apparently, coordinate bench followed the decision in earlier years of the coordinate bench where it was held that it does not have a permanent establishment with respect to the distribution income. Therefore, even in case of advertisement of revenue, it was held that assessee does not have permanent establishment. This decision has not been challenged by the revenue by filing the miscellaneous application before the ITAT or before the honourable High Court. Therefore, the decision taken in that case will have a binding precedent. 045. Now the challenge has been made by revenue before us is with respect to the binding precedent of those decisions. It is Page | 98 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 98 of 121 specifically argued that principles of res Judicata does not apply and each year is a separate assessment year. Further, it is also the claim that all those decisions have been obtained on account of misrepresentation and concealment of vital facts. 046. The first challenge was with respect to the fixed place of business of the assessee in India at its disposal which was referred to in clause 9 of schedule 6 of the business purchase agreement dated 31/8/2016 was never disclosed to the ITAT or the revenue authorities below. Further, it was also not stated that that a share purchase agreement has been entered into with Sony where Sony was stepping into the shoes of ZEE. We find that, this issue of fixed place permanent establishment was never raised in earlier years. This has come into contention for this year itself. Business purchase agreement was entered into on 31/8/2016. In earlier years, only dispute was with respect to the dependent agent permanent establishment. When the share purchase agreement was entered into on 31/8/2016, relevant to this assessment year, how the assessee could have submitted before the lower authorities that Sony has entered into shoes of Zee. Therefore, on this account, we do not agree that there is any misrepresentation of fact or concealment by the assessee at the time of rendering of those decisions. 047. The next challenges with respect to the addendum entered into with respect to the advertisement agreement. We find that at page number 68 of the paper book the original agreement was executed on 4 May 2002, firstly amended on 27 April 2006, then on 28 December 2007, further on 23 January 2008, on March 26, 2008, on 1 April 2013, 1 May 2013, 20 February 2015 and 28 February 2016. If we carefully considered the order of the coordinate bench for Page | 99 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 99 of 121 assessment year 2012 – 13 rendered on 22/3/2022, in paragraph number 11 the impact of the addendum was submitted before ITAT by the learned departmental representative. It was the specific argument that by these amendments now the agreement gives Taj India the right and authority to assume or create an obligation of any kind in the name of and on behalf of the assessee and therefore in terms of article 5 (4) of Indo Mauritius DTAA, there is a dependent agent permanent establishment. It was the specific argument of the learned departmental representative that Taj India had the authority to enter in to agreement with third parties on behalf of the assessee and thus it constitutes dependent agent permanent establishment in India. The coordinate bench after considering the amendment in the agreement, as per paragraph number 12 has held that that though the Taj India has a right to conclude the contracts on behalf of the assessee but the second condition that it habitually exercises that authority is not proved. One of the twin conditions fails, that is the decision of the coordinate bench, therefore held that according to article 5 (4) (i) assessee does not have a dependent agent PE in India. Hence, it cannot be said that addendum has not been considered by the coordinate bench with respect to advertisement sales agency agreement. There is no amendment with respect to the channel subscription agreement produced before us by either party. Hence, on this ground, it cannot be said that this fact was concealed before the ITAT. Contrary to this, these agreements and its addendum were produced by the learned departmental representative. 048. The next argument was that that the policy guidelines of TRAI for up linking and down linking of channel was never placed before the coordinate bench. We find that when the addendums to the Page | 100 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 100 of 121 agreement, which resulted only because of the guidelines of down linking and up linking of the channel, was considered by the coordinate bench, we find no reason that non-production of these guidelines results into misrepresentation of facts or concealment of and evidence. Even otherwise, such policy guidelines are available in public domain. When there are amendments to agreements are available with the assessing officer and the learned departmental representative, he could have asked the reasons for the amendments to the agreement. Failure of learned AO to make necessary enquiries cannot be used against assessee to state that assessee has failed to produce government policies and circulars before the AO. 049. However, we do not agree with the arguments of the ld AR that, ld special counsel is improving up on the arguments / findings of the ld AO or ld DRP. Ld AR has only argued the facts that emerges from the assessment order, directions of Ld DRP or based on record produced before lower authorities. 050. The learned special counsel has stated that Transfer Pricing Study Report of ZEE Ltd and assessee as well as of the India operations shows many functions, which could not be performed without the presence of the assessee in India through either itself or personnel or agents. As this information was never disclosed by the assessee, the orders of the coordinate bench should not be followed as they have been obtained by misrepresentation of facts for concealment of the item particulars. We find that transfer pricing study report is for a particular year. Further, it is not the assumption of the learned special counsel that these facts were not disclosed by the assessee in transfer pricing study report for earlier years. Therefore, disclosure of the facts for the current year would be Page | 101 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 101 of 121 considered in the assessment of current year. Further it is merely an assumption of revenue that functions could not have been performed without agent or other parties, cannot be accepted because, it is for revenue to show who performed these functions. It is also not the allegation of TPO in any of TP Assessment of those parties to show disparity in functions performed. This does not make the orders of the earlier years erroneous or obtained by misrepresentation of facts. 051. For the play out agreement which was entered into for assessment year 2018 – 19 ( placed at page number 830 of paper book ) entered on 19 April 2017 between Zee entertainment Enterprises Ltd and assessee which came into effect from 1 April 2016 up to 28th of February 2017, the learned special counsel submits that how such an arrangement suggest that the transmission done from Noida was not a business operation of the assessee even in earlier years. This argument is coupled with paragraph number 5.3 of the draft assessment order (page 79 – 84 of the draft assessment order) where the learned AO has held that the assessee has a fixed place permanent establishment. It is necessary to appreciate the findings of the learned AO which are as under:- „5.3 fixed place permanent establishment 5.3.1the assessee has contended that during the year under consideration there is no change in the facts and circumstances of the case and that it has neither a fixed place of business in India not having any branch/office et cetera. In India as defined in paragraph number 1 and 2 of article 5 of the DTAA between India and Mauritius. The assessee has further contended that management and control of Taj is situated outside India. The assessee‟s contention is factually incorrect. As discussed in Page | 102 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 102 of 121 paragraph number 3 above, that during the year under consideration, A) the assessee had shifted its play out and production facilities to India. In addition, that there is no play out of the channels anywhere else in the world. The assessee company pays play out fees to its associated enterprises ZEE for use of its premises for Channel play out. The assessee has paid the play out fees to its associated enterprises ZEEL and it is duly reported in its transfer pricing study report for assessment year 2017 – 18. This is further corroborated by LinkedIn profiles of some senior personal involved in the process which again confirmed that the assessee indeed had a fixed place of business in India during the year under consideration (as discussed in Para 3 above). Referring to play out fees details as per the transfer pricing study report:- 4.2.6 play out cost During the year, ZEEL has provided broadcasting operations and engineering facility to Taj/work of channels. The facilities provided by ZEEL covers play out for each channel, encoding and up linking incidental functions. During the FY 2016 – 17, Taj has paid US$ 1,048,289 for play out cost, encoding and up linking incidental functions . As per the agreement, ZEEL provides following services to Taj:- Maintaining agreed technical specification in providing the broadcasting operations and engineering facilities to each of the channel of TTL Page | 103 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 103 of 121 Provide quality support relating to latest broadcast features viz multiformat play out facility, automation features, we deal storage server capacity -wise, logo bug, scroll and interactive facility. Referring to play out details as per business purchase agreement:- 19. Technical Arrangements 19.1 Currently, play out of all the channels takes place in Noida (India),. Which, the feeds for this channel are sent via fiber to Germany. From Germany (except ten Cricket (Caribbean) which is distributed via fiber using ECG Canada), the signals of all these channels ( Ten 1HD, Ten Golf HD, Ten Sports (Pakistan) , Ten Cricket (ME) , Ten 1 and Ten 2) ESOP linked onto satellite named IS -20 , which has a footprint over the Indian subcontinent, the Middle East, Africa, Singapore and Hong Kong, where the linear feet of one or more of the channel is distributed in each of these regions. There is no play out the channels anywhere else in the world. 5.3.2 And the assessee in the present case fulfils all the conditions prescribed in the OECD model commentary on the model tax Convention is relating to fixed place permanent establishment. The assessee in the present case has a place of business, such place s fixed , activities have been performed by the assessee through the said fixed place of business, and the said fixed place of business was at the disposal of the assessee and its employees. This equipment when installed in the premises of other entities creates PE as it is a fixed place at the disposal of the applicant through which the business of the applicant is being carried on. OECD commentary at note 5 of commentary on article 5 clearly says that:- Page | 104 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 104 of 121 “5.... It is immaterial how long an enterprise of a contracting state operates in the other contracting state if it does not do so at a distinct place, but this does not mean that the equipment constituting the place of business has to be actually fixed to the soil on which it stands. It is enough that the man remains on a particular site.” Further, there is no requirement of ownership of the space of equipment, which constitutes PE. Note 4.1 of the same commentary also clarifies that there is no requirement of legal right. It states that:- “4.1 As noted above, the mere fact that an enterprise has a certain amount of space at its disposal which is used for business activities are sufficient to constitute a place of business. No formal legal right to use that place is therefore required. Thus, for instance, a permanent establishment could exist where an enterprise illegally occupied a certain location where it carried on its business.” In a recent Supreme Court ruling in the case of Formula One Word Championship Ltd versus CIT(394 ITR 80 (SC)) held that with the international circuit though on by the Jaypee is the permanent establishment of the non-resident since it was at its disposal, (even though not owned). There is no doubt that play out centers are at the disposal of the applicant. Further reliance is placed on German Swiss case quoted in Delhi High Court order in the case of Formula One world championship Ltd versus CIT (2016) 76 taxmann 6 (Delhi Page | 105 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 105 of 121 High Court) . The learned AO further placed reliance on the decisions mentioned in Taxman's Law & Practice Relation To Permanent Establishment written by Shri Ashish Kurundia page number 56 and 57 of the book. From the above cases, it can be clearly seen that equipment similar to those used for play out for Channel has been held to be a permanent establishment if the business of the non-resident enterprises carried out through it. Further, in Swiss server case and Sweden data center case, it was held that there is no requirement that the employees of the German/overseas Company should operate the server/data center. It is situation here. There is no requirement that employees of the applicant should run the play out centers. in Swiss server case, affiliate of German company in Switzerland was managing the server. Here affiliate of the applicant in India is providing play out services. The AO further placed reliance on page number 176 of the same book wherein it has been held that the “ The enterprise can carry out its business activities through itself or, through its employees or dependent agents. The presence of personnel is not necessary to consider that an enterprise value your partly carries on its business at a location when personnel are in fact required to carry on business activities that location.(note 42.6 article 5, OECD commentary 2003). A permanent establishment may also exist where the business of the enterprises carried on through automatic equipment and the activities of the personnel in such cases are restricted setting up, operating, controlling and maintaining such equipment only. (Note 9, article 5, OECD commentary 1977). Examples of such cases are Page | 106 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 106 of 121 gaming and vending machines operating automatically (note 9, article 5, OECD commentary 1977). In the famous German pipeline ( IIR 12/92 dated 30 October 1996 [BFH]) case, the pipelines through which crude oil was transported by the taxpayer was considered as permanent establishment in Germany despite the fact that there were no employees, and the pipeline was operated automatically in Germany, by the German Federal tax court. In another case, a German company installed a server in a rented premise in Switzerland, which started computer programs and dealt with German companies' Swiss clients. The same server was functioning without involvement of any human beings and was managed by Swiss affiliates German company. The German tax court of first instance, Holstein held that the server amounted to fixed place permanent establishment of German company insisted land and it is not necessary that the server has to be operated by Newman beings. (II 1224/97 dated 6 September 2001 (FG, Holstein)).” 5.3.3 Hence, it is not relevant whether the said premises was leased out and not actually owned by the assessee. It is also not relevant that the assessee may or may not have acquired the said premises for the entire year. What is relevant is that the assessee has a fixed place with a certain degree of permanence available to it for running its play out activities related to its channels in India. The third condition for a fixed PE is that such place of business should be at the disposal of the foreign entity. As noted above, the assessee was running play out of its channel through a premise in India. The said premises were at its disposal. In addition, to run its business activities, the assessee had access to the said premises. Page | 107 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 107 of 121 5.3.4 As per article 5 (1) of the India Mauritius DTAA, a permanent establishment means a fixed place of business through which the business of the enterprises is only or partly carried on. Hence, even part of the business activities of the assessee are carried out through a fixed place in India, the assessee would be deemed to have a permanent establishment in India. 5.3.5 In view of the above, it is held that the assessee has a fixed place permanent establishment in India during the year under consideration.” 052. Based on above findings, the learned AO held that the assessee has a fixed place permanent establishment in India in the form of play out stations. 053. According to Article 5 (1) of DTAA "For the purposes of this Convention, the term "permanent establishment" means a fixed place of business through which the business of the enterprise is wholly or partly carried on" 054. Therefore there has to be (i) Fixed Place (ii) of Business (iii) through which (iv) business of the enterprises ( Foreign entity) (v) is (vi) carried on (vii) wholly or partly . 055. The main contention of the assessee is that :- i. Production facility was always based out of India and cannot be mixed up with play out service availed by Taj. ii. There was no corroborative evidence established by the learned assessing officer for shifting for production facilities to India. Page | 108 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 108 of 121 iii. It is only one of the components of entire telecasting operations and cannot be deemed entire telecasting facility in India. iv. Assessee has obtained the play out services from the ZEEL on independent basis and had paid arm‟s-length remuneration. v. The allegation of the learned assessing officer that the play out facility is at the disposal of assessee is completely misplaced. There is no substance in such fact. vi. Play out facility is actually at complete disposal of the service provider and not the assessee. vii. The assessee further referred to the LinkedIn profiles of to employees and submitted that those personnel are not employees of the assessee and have no connection with the transactions in question and therefore reliance on their LinkedIn profile is misplaced. viii. Therefore, it cannot be interpreted that Taj has control over play out facility and hence it cannot be deemed the fixed place permanent establishment of Taj in India as per the India Mauritius DTAA. 056. The above objections raised by the assessee before the learned dispute resolution panel as per Para number 8.12 at page number 15 of 82 of the directions of the learned dispute resolution panel. This was specifically against the fixed place permanent establishment alleged by the learned AO. 057. The learned Dispute Resolution Panel in paragraph number 10.3 while dealing with the territorial nexus with India made the Page | 109 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 109 of 121 reference of the finding of the learned AO however has categorically dealt with only the dependent agent permanent establishment of the assessee with respect to the advertisement and distribution revenue only. Therefore, it is apparent that the learned dispute resolution panel did not render any reasoned direction on fixed place permanent establishment of the assessee. 058. The learned departmental representative has challenged the fact that ZEE Entertainment enterprises limited is not a service provider to the appellant assessee. The main reason being that the play out agreement dated 19/4/2017 is entered more than eight months after the acquisition of the sports broadcasting business by Sony. Further, the play out agreement came into effect retrospectively from April 2016 and would be valid only until 28/2/2017 for a consideration of US$ 1,048,290. He further referred to the financial statement of ZEEL for the year ended on 31st of March 2017 and stated that for that year 71 million was charged by that company however, no amount was charged for transmission from the assessee in the financial year March 16 under the head transmission income. Thus, there is no play out agreement for earlier years. According to him now, it is not open for the assessee to argue that assessee was getting the services of that company as a service provider. Therefore, according to him if at all ZEEL was rendering play out functions for the channels owned by the assessee, it was in operation done for and on behalf of the assessee and not as a service provider to whom such an operation was outsourced. It was the claim of the learned DR that the play out facility was used all along by the assessee and ZEEL was not a service provider but a group entity acting for and on behalf of the assessee without any consideration and without any agreement or arrangement to show otherwise. This together with the fact that in the business purchase Page | 110 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 110 of 121 agreement in warranties, properties are mentioned as per clause 9 and technical arrangements as per clause 19.1. According to him, it proved that the seller has obtained the necessary permission from its affiliates to use the premises. It is operating as no agreements have been entered and no payments are required for use of such premises. Further technical arrangements shows that the current play out of all the channels takes place in Noida and there is no play out of channels anywhere else in the world. Accordingly, it was claimed that clearly there is a fixed place, which is being used by the assessee from where the assessee is operating. The premises belong to the affiliates and are made available to the assessee for its business operations. Moreover, it satisfies all the conditions of paragraph 1 of article 5 of the double taxation avoidance agreement. 059. Argument of the assessee is that the agreement does not contemplate ZEEL to have an establishment/place of permanent or enduring nature in India at the disposal of the assessee. That company has merely provided services to the assessee from their premises using their own assets. The premises were not at the disposal of the assessee. None of the assessee's employees has travelled to India during the year and therefore it does not constitute a fixed place permanent establishment of the assessee in India. Assessee heavily relied on the decision of honourable Supreme Court in case of ADIT V E Funds IT Solutions Inc. 86 taxmann.com 240 (SC). 060. We have carefully considered these contentions with respect to the fixed place permanent establishment of assessee. It is to be noted that ZEEL is carrying out play out facilities not only for the assessee but also for many other broadcasters. It is not for this year but for Page | 111 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 111 of 121 past several years, ZEEL is providing the service of play out station. During this year, undisputedly there is an agreement for payment of services of play out facilities. No doubt, the agreement was made on 19/4/2017, which is given effect to from April 2016 till 28th of February 2017 at total consideration of US$ 1,048,290. The claim rose before us is that this is merely an afterthought. However, this is not the finding of the learned assessing officer. Ld AO has accepted that there is an agreement during the year for play out facilities. If for the earlier years, such facilities were not remunerated to the ZEEl, that does not make the service provider a fixed place permanent establishment of the assessee for this year, especially when, for this year, there is an agreement and remuneration for using such facilities are paid. For this year, facts clearly show that ZEEL is a service provider to the assessee. Non-payment, subsistence of any agreement for this facility in earlier years, is also not the case of the LD AO or the learned Dispute Resolution Panel. We may refer to the Model Tax Convention On Income And Capital (OECD) (2017) Wherein paragraph number 8 of the commentary deals with such an issue saying that clearly, whether or not a permanent establishment exists in the state during a given period must be determined on the basis of the circumstances applicable during that year and not those applicable during a past or future., Such as a period preceding the adoption of new arrangements that modified the way in which businesses carried on. Therefore, it may be possible that at any one point in time the facts may suggest one thing and change in the facts may suggest another thing at a different point of time. Further with respect to the claim of the learned departmental representative that if this play out facilities are not used by the assessee then from where the play out is being carried out. For this purpose the assessee has placed a lease agreement between the assessee and Page | 112 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 112 of 121 Gulf DTH FZ LLC which clearly says that there are two studio accommodation already available with the assessee of 3603 ft² on the ground and Mezzanine Floor on rent in UAE for which the rent agreement is placed on record. Therefore, it is not the cases that play out facility is not available with the assessee other than at Noida. Further, it cannot be said that the play out facility is at the disposal of the assessee, no evidence exists for such test. It is also not challenged that none of the assessee's employees have travelled to India during the year. Therefore, it is apparent that from the play out stations, ZEEL is carrying out its own business and not the business of the assessee. Even otherwise production is separate from play out services availed from ZEEL and further transmission services have been availed from third-party service providers, which happens outside India and not at the facility of ZEEL. 061. One of the most important tests while determining the existence of fixed place permanent establishment is the business connection test. The definition of the permanent establishment requires a specific connection between the business activity and the fixed place of business. This condition is titled as the business connection test. It is always necessary to first determine whose business activity is conducted through the place of business. It is necessary, in order to apply the business connection test, to identify the party whose business activity is carried on at the place of business i.e. in this case play out is. The need for this test cannot be undermined when the activity performed through the place of the business may not be the business of the taxpayer but of somebody else. Undoubtedly, the play out are the place of business. However, can it be said that that through that play out, business of the assessee is carried out or the business of Zee Page | 113 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 113 of 121 Entertainment Enterprises Ltd. Although, a fixed place of business (play out) exist, but there has to be necessarily a connection between the business activity of the assessee and the actual place of business. If through the play out, the business activity of the assessee is carried out, there is no doubt that fixed place permanent establishment of the assessee exist. In this case, the core activity of the assessee is broadcasting of a sports event. "The moot question whether the business is being carried on must depend in each case on its own facts and not on any general theory of law. Thus, the use of the place of business for the activity of the enterprises is a question of fact and need to be established." [Page numbers 181 – 183 Chapter 7 – connection between place of business Law And Practice Relating To Permanent Establishment Ashish Karundia]. On the facts, assessee has clearly stated that play out activities are minuscule part of operation of the sports broadcasting business of the assessee which is assigned to a group company i.e. ZEEL. For the services of the group company, there is an agreement through which the payments are made. Undoubtedly, manner of entering into that agreement is doubted by the learned special counsel, but the fact of payment and play out activities carried out from that fixed place cannot be denied. Unless, there are specific evidences led by the revenue that it was not the business of the service provider but the business of the assessee itself was carried on from those play out facilities, fixed place permanent establishment of assessee cannot be established. It is generally the obligation of the party who alleges to prove the allegation. The defendant of the allegation cannot be asked to prove negative. 062. Coming to the observation of the learned officer wherein she referred page number 176 of the book of learned author Shri Page | 114 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 114 of 121 Ashish Kurundia which dealt with whether the carrying on of the business by human beings or automated machines / equipments are considered as fixed place permanent establishment or not. That deals with the fact that when the permanent establishment may also exist where the business of the enterprises is carried on through automatic equipments and the activities of the personnel in such cases are restricted to certain activities. There is no quarrel on the issue that when testing the connection between the business and the place of the business i.e. the business connection test, the business activity of the enterprises does not have to involve human beings or any decision-making activity as long as the activities are performed there. Thus, fully automatic machinery, computers etc. may comply with the business connection test. This is also clear by reading paragraph number 41 of the commentary on article 5 of OECD. Therefore, we find that reliance on that portion of the book is misplaced because it applies only when the business of the assessee is carried out by such equipments. It is nobody's case that playout activities do not require human efforts. In this case, business is not of the assessee that is being carried out from that play out facilities , but it is used for carrying out the business of ZEEL. The learned AO has further referred to page number 56 and 57 of that book which dealt with the permanent establishment with respect to server, data centre, and computer Reservation Systems. The reliance on the same is also rejected for the same reason that it is not the business of the assessee that is being carried out from play out facilities but of the service provider ZEEL. In view of this, in our opinion assessee does not have a fixed place permanent establishment in India. 063. We do not find that several connecting facts such as registration of trademarks in India, standalone ca[ability of Business Purchase Page | 115 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 115 of 121 agreement coupled with share sale agreements of Taj TV India Pvt Ltd etc do have any impact on determination of Fixed Place permanent Establishment. 064. With respect to the permanent establishment in respect of advertisement and distribution revenue, the learned dispute resolution has dealt with at paragraph number 16 wherein the learned DRP confirmed so only because of the reason that the revenue has been continuously holding that the applicant has a permanent establishment in India. However, with respect to the subscription agreement is the honourable Bombay High Court in assessee's own case for assessment year 2004 – 05 and 2005 – 06 has held that Taj India was acting independently, its distribution rights and entire agreement was on principal-to-principal basis and therefore Taj India does not constitute a permanent establishment of the assessee. Therefore, with respect to the subscription agreements, the issue is squarely covered in favour of the assessee by the above decision. With respect to the advertisement agreement, though the subsequent amendments, gives an authority to enter into an agreement to an Indian entity on behalf of the assessee but those have not been habitually exercised by that entity. Therefore, the assessee does not have dependent agency permanent establishment in India. 065. The Burden of proving that assessee has a Permanent Establishment in India and must suffer taxation from business generated from such PE is initially on the revenue as held by Assistant Director of Income tax V E Funds It Solutions Inc. 399 ITR 34 (SC) [ Para 10],. Now it cannot be grievance of the revenue that any information is withheld by the assessee. Page | 116 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 116 of 121 066. Thus, we hold that, assessee does not have either fixed place permanent establishment or dependent agent permanent establishment in India. 067. Now, it is necessary that whether the assessee is entitled to the treaty benefits or not. This is necessary to examine whether the benefit of article 13 of the Double Taxation Avoidance Agreement would be available to the assessee or not. It is undisputed that assessee holds a valid tax resident certificate granted by the Mauritius tax authorities from financial year 2002 – 03 till date. Revenue has challenged the fact that assessee is run and controlled by ZEEL. This is submitted because of the language of resolution as well as disclosure made by ZEEL to the stock exchange. The fact shows that assessee was originally promoted by UAE based Bukhatir investment Ltd and is running sports broadcasting division since 2002 from Mauritius. It became the wholly owned subsidiary of ATL media Ltd only in 2010. The business of the assessee has been run for more than 15 years; it was never the allegation of the revenue that the business is run by parent company and not by the assessee. Since then for all these years, the Treaty provisions have been applied by the revenue for determination of taxable income of the assessee. The disclosures to the stock exchange are mandated by the listing agreement of ZEEL as the ultimate parent is listed on Bombay stock exchange and National stock exchange. The challenge to the treaty benefits of the assessee is only for the reason to bring the taxation of capital gains in India. The operation of the bank account of the assessee was also jointly, where the directors of the assessee company were one of the signatories. Merely because one Mr. Anil Maurya was authorized to sign the agreement cannot lead to the conclusion that business is run by the parent of the assessee, especially when, that person is a director of Page | 117 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 117 of 121 ATL media Ltd and properly authorized by the assessee to carry out the necessary agreements. It is also a fact that assessee is denied treaty benefit for the purpose of taxation of the capital gain on sale of an undertaking however on other issues of advertisement and subscription revenue are held to be taxable, Treaty provisions are applied. Even otherwise the learned dispute resolution panel has accepted the applicability of the Treaty provisions to the transaction of the sale of undertaking holding that it is covered by article 13 (2) of the Double Taxation Avoidance Agreement. Therefore, we reject the contentions of the AO that assessee should be denied the treaty benefit. 068. Now the issue arises that whether the provisions of article 13 (2) of the treaty is applicable or article 13(4) of the treaty should be applied. 069. Provisions of article 13 (2) provides that:- 2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or together with the whole enterprise) or of such a fixed base, may be taxed in that other State.' 070. Article 13 (4) provides that:- 4. Gains from the alienation of any property other than that referred to in paragraphs 1, 2, 3 and 3A shall be taxable only in the Contracting State of which the alienator is a resident. Page | 118 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 118 of 121 071. It is apparent that article 13 (2) applies when i. There is an alienation ii. of movable property iii. which forms part of the business property of a permanent establishment in India or fixed base available iv. or of permanent establishment itself 072. As we have already held that assessee does not have a permanent establishment in India, either in the form of a fixed place permanent establishment or dependent agency permanent establishment, article 13 (2) of DTAA does not apply. 073. According to article 13 (4) of DTAA when any property other than the property is covered in earlier articles, gain arising on alienation of such property would be chargeable to tax only in the state of residence of the alienator. It may also include movable property, which is not forming part of the business property of permanent establishment or fixed base available to the alienator. As the alienator is a resident of Mauritius, according to us the capital gain on sale of global broadcasting business shall be chargeable to tax only in Mauritius and not in India. 074. Accordingly, we hold that the gain of ₹ 17,902,115,124/– on sale of sports broadcasting undertaking by the assessee is not chargeable to tax in India. Hence, ground number 1 of the appeal is allowed. 075. Ground number 2 of the appeal is with respect to the taxing advertisement and subscription income of ₹ 1,020,335,861. The fact shows that the assessee's businesses of telecasting of sports channels are carried out from outside India. The assessee has Page | 119 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 119 of 121 received services from Taj India in respect of advertisement and distribution as well as for play out services from Zee entertainment Enterprises Ltd. As we have already held that assessee does not have a permanent establishment in India, the article 7 of the treaty will trigger only if such profits are attributable to a permanent establishment in India. This issue has already been decided by the honourable Bombay High Court in assessee's own case for assessment year 2004 – 05 and 2005 – 06 in 425 ITR 141. Further starting from assessment year 2003 – 04 till 2016 – 17 this issue has been decided in favour of the assessee. We do not find any reason to hold that about decisions are obtained by any misrepresentation of fact or withholding any vital facts. Further, there is no change in the facts and circumstances of the case, therefore respectfully following the decisions of the coordinate bench, which is upheld by the honourable High Court, we hold that the advertisement and subscription income is not chargeable to tax in India. 076. With respect to the plea that if the assessee even if has a permanent establishment in India but is remunerated at arm's-length, further tax liability in India would extinguish, we hold that, though there is no such provision as it exists in India US DTAA, in Indo Mauritius DTAA, even for attributing further profit to the income of the assessee, the revenue is required to bring on record further functions performed, risks assumed and assets used along with capital infused. Before us, revenue could not bring on record any such fact. Therefore, we hold that no further tax liability arises in the hands of the assessee in India. 077. Accordingly, ground number 2 and 3 of the appeal are allowed. 078. Ground number 4 is with respect to the disallowance of programming cost of 108,14,810 US dollars for non-deduction of tax Page | 120 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 120 of 121 at source under section 195 of the income tax act and therefore disallowable under section 40 (a) (i) of the act. The fact shows that the during the year the assessee has incurred ₹ 70.12 crores towards purchase of program rights from non-resident entities which included consideration for broadcasting of live events. The assessing officer has disallowed these expenses holding that the payments made for acquisition of rights in respect of various content acquired by the assessee including live feed for broadcasting in India is in the nature of Royalty requiring tax deduction at source and therefore, as assessee has failed to deduct tax at source, disallowance was made under section 40(a) (i) of the act. The learned dispute resolution panel while disposing of the objection number 5 has held that the coordinate bench has decided the issue in favour of the assessee in earlier years and the order of the coordinate bench has not been accepted by the Department by preferring an appeal under section 260A of the act and therefore to keep the issue alive no directions were issued to the learned assessing officer. As the learned dispute resolution panel has accepted that this issue is covered in favour of the assessee by the order of the coordinate bench in assessee's own case in earlier years, we do not find any reason to deviate from the same, accordingly we direct the learned assessing officer to delete this disallowance. Accordingly, ground number 4 of the appeal is allowed. 079. Ground number 5 of the appeal is with respect to disallowance of transponder fees of US$ 1,793,183 and up linking charges of US$ 1,790,261 on account of non-deduction of tax under section 195 of the act and therefore disallowed under section 40 (a) (i) of the act. As on objection before the learned dispute resolution panel the direction were similar to disallowance of programming cost holding Page | 121 ITA No. 821/Mum/2021 Taj TV Ltd.; A.Y. 17-18 Page 121 of 121 that though the disallowance has been deleted by the coordinate bench in earlier years in the case of the assessee but the issue is pending before the honourable High Court, no direction was issued. As the learned dispute resolution panel has accepted that this issue is covered in favour of the assessee by the order of the coordinate bench in assessee's own case in earlier years, we do not find any reason to deviate from the same, accordingly we direct the learned assessing officer to delete this disallowance. Accordingly, ground number 5 of the appeal is allowed. 080. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 31.03.2023. Sd/- Sd/- (SANDEEP SINGH KARHAIL) (PRASHANT MAHARI SHI) (JUDICI AL ME MBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 31.03.2023 Dragon Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai