ZEE TV USA INC, MUMBAI v. A.D.I.T.(I.T.)-2(2), MUMBAI

CO 15/MUM/2011 | 2006-2007
Pronouncement Date: 06-05-2021 | Result: Partly Allowed

Appeal Details

RSA Number 1519923 RSA 2011
Assessee PAN AAACF1291K
Bench Mumbai
Appeal Number CO 15/MUM/2011
Duration Of Justice 10 year(s) 2 month(s) 2 day(s)
Appellant ZEE TV USA INC, MUMBAI
Respondent A.D.I.T.(I.T.)-2(2), MUMBAI
Appeal Type Cross Objection
Pronouncement Date 06-05-2021
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 06-05-2021
Date Of Final Hearing 12-12-2011
Next Hearing Date 12-12-2011
First Hearing Date 12-12-2011
Assessment Year 2006-2007
Appeal Filed On 04-03-2011
Judgment Text
!'#$ %&'#'' IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI PRAMOD KUMAR VICE-PRESIDENT & SHRI VIKAS AWASTHY JUDICIAL MEMBER '. 3161 / /201 0 (&.. . 2006-07 ) ITA NO.3161/MUM/2010 (A.Y. 2006-07) THE ADIT(IT)-2(2) ROOM NO.116 1 ST FLOOR SCINDIA HOUSE BALLARD ESTATE N.M. ROAD MUMBAI 400 038 ...... $0 / APPELLANT . VS. M/S. ZEE TV USA INC. C/O. MGB & CO JOLLY BHAVAN 2 1 ST FLOOR NEW MARINE LINES MUMBAI 400 020 PAN: AAACF1291K ..... &1/ RESPONDENT C.O. NO.15/MUM/2011 (ARISING OUT OF ITA NO.3161/MUM/2010-A.Y. 2006-07) M/S. ZEE TV USA INC. C/O. MGB & CO JOLLY BHAVAN 2 1 ST FLOOR NEW MARINE LINES MUMBAI 400 020 PAN: AAACF1291K ...... CROSS OBJEC TOR VS. THE ADIT(IT)-2(2) ROOM NO.116 1 ST FLOOR SCINDIA HOUSE BALLARD ESTATE N.M. ROAD MUMBAI 400 038 ...... APPELLANT IN APPEAL ASSESSEE BY : S/SHRI NIRAJ SETH AND JAY BHA NSHALI REVENUE BY : SHRI VIJAY KUMAR S UBRAMANIYAM ' .2&1 $/ DATE OF HEARING : 11/02/2021 34 2&1 $/ DATE OF PRONOUNCEMENT : 06/05/2021 2 ITA NO.3161/MUM/2010(A.Y. 2006-07) C.O. NO.15/MUM/2011 '/ ORDER PER VIKAS AWASTHY JM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-11 MUMBAI [IN SHORT THE CIT( A)] DATED 31/01/2010 FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSEE HAS FILED C ROSS OBJECTIONS IN THE APPEAL OF REVENUE. 2. THE REVENUE IN APPEAL HAS ASSAILED THE ORDER OF CIT(A) BY RAISING FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT (APPEALS) RIGHT IN HOLDING THAT THE ASSESSEE DOES NOT HAVE A PE IN INDIA AND ACCORDINGLY ITS BUSINESS PROFITS ARE NOT TAXABLE IN INDIA. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT (APPEALS) RIGHT IN HOLDING THAT THE INTEREST U/S 234B IS NOT PAYABLE BY A NON-RESIDENT WHOSE TOTAL INCOME IS SUBJECT TO DEDUCTION OF TAX AT SOUR CE AND ACCORDINGLY DELETED THE INTEREST U/S. 234B OF THE INCOME TAX ACT 1961. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. C IT (A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. THE ASSESSEE IN CROSS OBJECTIONS HAS RAISED FOLL OWING GROUNDS: 1. WITHOUT PREJUDICE TO THE DECISION OF THE HON. CI T (A) (WHEREIN IT IS HELD THAT THE ASSESSEE HAS NO PE IN INDIA HENCE ITS INCOME IS NOT TAXABLE IN INDIA) EVEN IF IT IS HELD THAT ASSESSEE HAS PERMANENT ESTABLISHMENT IN INDIA ITS I NCOME IS NOT TAXABLE IN INDIA AS IT HAS PAID ARMS LENGTH REMUNERATION/COMMISSION TO ITS AGE NT IN INDIA HAVING REGARDS TO THE FUNCTIONS AND RISK PERFORMED BY THE AGENT WHICH IS TAXED IN INDIA AS HELD BY SUPREME COURT IN THE CASE OF MORGAN STANLEY 292 ITR 416 AND BOMBAY HIGH COURT IN THE CASE OF SONY ENTERTAINMENT TELEVISION (SINGAPORE) LIMITED 1 73 TAXMAN 475. 2. WITHOUT PREJUDICE TO THE DECISION OF THE HON. C IT (A) (WHEREIN IT IS HELD THAT THE ASSESSEE HAS NO PE IN INDIA HENCE ITS INCOME IS NOT TAXABLE IN INDIA) EVEN IF IT IS HELD THAT ASSESSEE IS TAXABLE IN INDIA INTEREST U/S 234B OF THE ACT IS NOT LEVIABLE AS THE WHOLE INCOME OF THE ASSESSEE IS LIABLE TO TAX DEDUCTION A T SOURCE UNDER THE ACT HENCE NO ADVANCE TAX WAS PAYABLE RELYING UPON THE DECISIONS CIT VS. MADRAS FERTILIZERS LTD 149 ITR 703 SEDCO FOREX INTERNATIONAL DRILLING INC. VS. DC IT 72 ITD 415 (ITATDELHI) RHEIBRAUN ENGINEERING & WASSER GMBH 1915/BOM/96. 3 ITA NO.3161/MUM/2010(A.Y. 2006-07) C.O. NO.15/MUM/2011 4. SHRI NIRAJ SETH APPEARING ON BEHALF OF THE ASSES SEE SUBMITTED AT THE OUTSET THAT THE TRIBUNAL IN PRECEDING ASSESSMENT YEAR I.E. 2005-06 AND SUCCEEDING ASSESSMENT YEAR I.E. 2007-08 HAS GRANTED RELIEF TO THE ASSESSEE ON THE GROUND THAT THE INTERNATIONAL TRANSACTIONS BETWEEN THE ASSESSEE AND THE ASSOCIATED ENTERPRISE(AE) ARE AT ARMS LENGTH AND HENCE NO AD JUSTMENT IS REQUIRED TO BE MADE. ONCE THE INTERNATIONAL TRANSACTIONS ARE HELD TO BE AT ARMS LENGTH THE GROUNDS RAISED IN DEPARTMENTAL APPEAL WOULD BECOME ACADEMIC. THE LD.AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURNISHED COPY OF TRIBUNAL ORDER IN ITA NO.5608/MUM/2008 & CO NO.47/MUM/2010 FOR ASSESSMENT YEAR 2005-06 DECIDED ON 23/04/2018. 5. SHRI VIJAY KUMAR SUBRAMANIYAM REPRESENTING THE D EPARTMENT FAIRLY ADMITTED THAT ON IDENTICAL SET OF FACTS AND GROUNDS OF APPEA L THE TRIBUNAL HAS ADJUDICATED THE ISSUE WITH REGARD TO ARMS LENGTH TRANSACTION IN FA VOUR OF THE ASSESSEE IN 2005-06. 6. BOTH SIDES HEARD ORDERS OF AUTHORITIES BELOW EX AMINED. THE ASSESSEE IS A U.S BASED COMPANY AND IS ENGAGED IN BROADCASTING SATELL ITE T.V CHANNELS IN USA. THE ASSESSEE COLLECT ADVERTISEMENTS FROM INDIA FOR TELE CASTING THE SAME ON CHANNELS IN THE USA. THE ASSESSEE ENTERED INTO AN AGREEMENT WI TH AMBIENCE SPACE SELLERS LTD. NOW MERGED WITH ZEE TELEFILMS LTD. (IN SHORT ZEEL ) WHICH PROVIDES THAT ZEEL WOULD ACT AS EXCLUSIVE AGENT IN INDIA FOR THE PROVISION O F INFORMATION TO ZEE TV US REGARDING ADVERTISERS AND TO HELP IN ARRANGING FOR SALE OF AD VERTISEMENT AND SPONSORSHIP. THE ASSESSING OFFICER AFTER EXAMINING THE AGREEMENT BET WEEN THE PARTIES HELD THAT ZEEL IS A PERMANENT ESTABLISHMENT (PE) OF THE ASSESSEE I N INDIA. ZEE TV USA HAS ULTIMATE CONTROLLING POWER FOR ADVERTISEMENT PROCUREMENT IN INDIA BY ZEEL. THE ADVERTISER APPROACHES ZEE TV US THROUGH ZEEL. THE ADVERTISEMEN T CHARGES ARE PAID TO ZEEL WHO IN TURN AFTER DEDUCTING ITS COMMISSION REMITS T HE BALANCE TO THE ASSESSEE. THE ASSESSING OFFICER MADE ADJUSTMENT OF RS.27 94 180/- ON ACCOUNT OF INCOME FROM ADVERTISEMENTS IN INDIA. 4 ITA NO.3161/MUM/2010(A.Y. 2006-07) C.O. NO.15/MUM/2011 IN FIRST APPELLATE PROCEEDINGS THE CIT(A) DELETED THE ADDITION HOLDING THAT THE ASSESSEE DOES NOT HAVE PE IN INDIA AND HENCE NO AD DITION COULD HAVE BEEN MADE IN THE HANDS OF ASSESSEE. HENCE THE PRESENT APPEAL BY THE REVENUE. 7. THE ASSESSEE IN CROSS OBJECTIONS HAS RAISED A GR OUND THAT EVEN IF IT IS ASSUMED THAT THE ASSESSEE IS HAVING PE IN INDIA NO ADJUSTM ENT IS WARRANTED AS THE TRANSACTION BETWEEN THE ASSESSEE AND THE INDIAN ENTITY IS AT AR MS LENGTH. 8. WE FIND THAT THE REVENUE AND THE ASSESSEE IN IMM EDIATELY PRECEDING ASSESSMENT YEAR I.E. AY 2005-06 HAD ASSAILED THE OR DER OF CIT(A) ON IDENTICAL SET OF GROUNDS. BOTH SIDES ARE UNANIMOUS IN STATING THAT T HE FACTS GERMANE TO DISPUTE IN AY 2005-06 AND THE IMPUGNED ASSESSMENT YEAR ARE IDENTI CAL. THE CO-ORDINATE BENCH OF TRIBUNAL IN IN CO NO.47/MUM/2010 IN ITA NO.5608/MUM /2008 FOR ASSESSMENT YEAR 2005-06 DECIDE ON 23/4/2018 IN IDENTICAL SET OF FA CTS ACCEPTED GROUND NO.1 RAISED IN CROSS OBJECTIONS BY THE ASSESSEE. THE TRIBUNAL HELD THAT THE TRANSACTION BETWEEN THE ASSESSEE AND ITS AE ARE AT ARMS LENGTH THEREFORE NO FURTHER INCOME CHARGEABLE TO TAX IN INDIA CAN BE SAID TO BE ATTRIBUTABLE FOR THE PE OF THE ASSESSEE. 9. HERE WE WOULD ALSO LIKE TO REFER TO THE DECISIO N OF TRIBUNAL IN THE CASE OF ADDITIONAL DIRECTOR OF INCOME TAX (INTERNATIONAL TA XATION)-1 VS. ASIA TODAY LIMITED IN ITA NO.1878/MUM/2008 DECIDED ON 29/01/2021 WHERE T HE TRIBUNAL IN SOMEWHAT SIMILAR SET OF FACTS AFTER CONSIDERING CATENA OF JU DGMENTS ON THE ISSUE OF TAXABILITY OF DEPENDENT AGENCY PERMANENT ESTABLISH (DAPE) WHERE THE TRANSACTIONS WERE FOUND TO BE AT ARMS LENGTH HELD AS UNDER:- 16. ONCE WE HOLD AS WE HAVE HELD ABOVE THAT IN T HE LIGHT OF THE PRESENT LEGAL POSITION EXISTENCE OF DEPENDENT AGENCY PERMANENT E STABLISHMENT IN WHOLLY TAX- NEUTRAL UNLESS IT IS SHOWN THAT THE AGENT HAS NOT BEEN PAID AN ARM'S LENGTH REMUNERATION AND WHEN IT IS NOT THE CASE OF THE AS SESSING OFFICER AS WE HAVE NOTED EARLIER THAT THE AGENTS HAVE NOT BEEN PAID AN ARM' S LENGTH REMUNERATION THE QUESTION REGARDING THE EXISTENCE OF DEPENDENT AGENC Y PERMANENT ESTABLISHMENT I.E. UNDER ARTICLE 5(4) IS A WHOLLY ACADEMIC QUESTION. WE HUMBLY BOW TO THE LAW LAID DOWN BY HON'BLE COURTS ABOVE. THE LIMITED ARGUMENT BEFORE US IS THAT HERE IS A CASE OF DEPENDENT AGENCY PERMANENT ESTABLISHMENT AND TH E EXISTENCE OF A DAPE IN THE 5 ITA NO.3161/MUM/2010(A.Y. 2006-07) C.O. NO.15/MUM/2011 LIGHT OF THESE DISCUSSIONS IS WHOLLY TAX-NEUTRAL P ARTICULARLY IN THE LIGHT OF THE LEGAL POSITION REGARDING PROFIT ATTRIBUTION TO THE DAPE. WE NEED NOT THEREFORE DEAL WITH THE QUESTION ABOUT THE EXISTENCE OF A DAPE AS IT I S AN ACADEMIC EXERCISE WITH NO TAX EFFECT INVOLVED. THE RELATED GROUNDS OF APPEAL ARE THUS INFRUCTUOUS. THUS WHERE THE TRANSACTION BETWEEN DAPE AND OVERSE AS ENTITY IS ESTABLISHED TO BE AT ARMS LENGTH THE TRANSACTION WOULD BE TAX NEUTR AL AND NO ADJUSTMENT IS WARRANTED. 10. IN LIGHT OF UNDISPUTED FACTS OF THE CASE AND TH E DECISIONS REFERRED ABOVE THE ASSESSEE SUCCEEDS ON GROUND NO.1 OF THE CROSS OBJEC TIONS. 11. AS WE HAVE HELD THAT THE TRANSACTIONS BETWEEN T HE ASSESSEE AND ZEEL ARE AT ARMS LENGTH THE GROUND NO.1 RAISED BY REVENUE IN APPEAL HAS BECOME INCONSEQUENTIAL HENCE THE SAME IS DISMISSED AS IN FRUCTUOUS. 12. IN GROUND NO.2 OF CROSS OBJECTIONS THE ASSESSE E HAS ASSAILED CHARGING OF INTEREST U/S. 234B OF THE INCOME TAX ACT 1961 (IN SHORT THE ACT). THE REVENUE HAS RAISED CORRESPONDING ISSUE IN GROUND NO.2 OF THE AP PEAL. CHARGING OF INTEREST UNDER SECTION 234B OF THE ACT IS CONSEQUENTIAL HENCE TH E GROUND NO.2 OF CO AND APPEAL ARE DISMISSED. 13. IN THE RESULT APPEAL BY THE REVENUE IS DISMISSED A ND CROSS OBJECTIONS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY THE 06 TH DAY OF MAY 2021. SD/- SD/- (PRAMOD KUMAR) (VIKAS AWASTHY) / VICE PRESIDENT %&'# / JUDICIAL MEMBER / MUMBAI 6./ DATED: 06/05/2021 VM SR. PS(O/S) 6 ITA NO.3161/MUM/2010(A.Y. 2006-07) C.O. NO.15/MUM/2011 COPY OF THE ORDER FORWARDED TO : 1. $0 / THE APPELLANT 2. &1 / THE RESPONDENT. 3. 71 ( )/ THE CIT(A)- 4. 71 CIT 5. !89&1&. . . . / DR ITAT MUMBAI 6. 9:;<= / GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT MUMBAI