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08-01-2019, Turner International India, Section 144C, 27 l(l)(c), Tribunal Delhi

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1 week 5 days ago #12003 by amit
Section - 144C, 27 l(l)(c)
Order Date - 08-01-2020
Favouring - Assessee
Court - Tribunal Delhi
Appellant - Turner International India Pvt. Ltd.
Respondent - ACIT
Justice - R.K. PANDA AM & SUDHANSHU SRIVASTAVA JM
Citation - 120Taxpundit74
Appeal No. - ITA No.5377/Del/2017
Asstt. Year - 2013-14

Order

PER : R.K. PANDA, AM

This appeal filed by the assessee is directed against the order dated 29th June, 2017 passed u/s 143(3) r.w.s. 144C(13) of the IT Act, 1961, relating to assessment year 2013-14.

2. The grounds raised by the assessee read as under:-

“On the facts and circumstances of the case and in law, the learned Assessing Officer (“Ld. AO”) has erred in passing an assessment order under section 143(3) read with section 144C of the Income-tax Act, 1961 (“the Act”) dated June 29, 2017 giving effect to directions of the Learned Dispute Resolution Panel (“Ld. DRP”) dated May 01, 2017. Each of the ground is referred to separately, which may kindly be considered independent of each other and without prejudice to each other.

1. That on facts and circumstances of the case and in law, the Ld. AO / Ld. TPO / Ld. DRP has erred in making a transfer pricing addition of Rs. 9,83,63,207 to the total income with respect to the distribution segment of the Appellant and a transfer pricing addition of Rs. 40,84,256 to the total income by imputing interest on alleged overdue receivables from the Associated Enterprises on an ad hoc basis.

2. That in relation to the transfer pricing addition with respect to the distribution segment of the Appellant, the Ld. AO / Ld. TPO / Ld. DRP has erred

2.1. in completely disregarding the order passed by Hon’ble Income Tax Appellate Tribunal (“ITAT”)in he Appellant’s own case for Assessment Years 2007-08 and 2008-09 and Assessment Years 2005-06 and 2006-07 which is squarely applicable in the instant case as well, thus violating the principal of judicial discipline;

2.2. in not accepting the economic analysis undertaken by the Appellant in ac ordan e with the provisions of the Act read with the Income Tax Rules, 1962 (“the Rules”). Further, the Ld. AO / Ld. TPO / Ld. DRP grossly erred:

2.2.1 by not accepting the use of multiple year data, as adopted by the Appellant in its Transfer Pricing (“TP”) docum ntation; and

2.2.2. in determining the arm’s length margins / prices using data pertaining only to financial Year (“FY”) 2012-13 which was not available to the Appellant at the time of complying with the Indian TP documentation requirements.

2.3. in conducting a fresh comparability analysis based on application of incorrect keywords and filters, in contradiction of the Hon’ble ITAT’s direction in Appellant’s own case, without providing any cogent reasons;

2.4. in failing to understand and appreciate the functions performed, assets employed and risks assumed by the Appellant and its Associated Enterprises, thereby comparing companies which are functionally incomparable vis-a-vis the distribution segment of the Appellant;

2.5. in rejecting functionally comparable companies; and instead selecting functionally dissimilar companies to determine the ALP for the distribution segment of the Appellant based on the fresh search conducted by the Ld. TPO;

2.6. by denying the benefit of economic adjustment on account of working capital to the Appellant in arriving at the arm’s length margin even though it was accepted by the Ld. DRP in Assessment Year 2011-12 and Assessment Year 2010-11 with same facts and nature of business as in Assessm nt yea 2013- 14;

2.6.1. that the Ld. AO / Ld. TPO / Ld DRP grossly erred in not appreciating and considering the judicial pronouncements in relation to working capital adjustments.

3. That in relation to transfer pricing addition with respect to alleged overdue receivables, the Ld AO / Ld. TPO / Ld. DRP has erred

3.1. in re-characterizing the receivables due as unsecured loans advanced by the Appellant to its Associated Enterprises;

3.2. in not appreciat ng that receivables is a consequence of the main transaction and cannot be considered as a separate international transaction;

3.3. that the Ld. AO / Ld. TPO / Ld. DRP has grossly erred in denying the benefit of economic adjustment on account of working capital, which if taken into consideration would take into effect the alleged overdue receivables and thus no further addition would be warranted in the instant case; and

3.4. in not appreciating that the Appellant is a debt free company & it does not pay any interest to its creditors, hence the question of charging interest to the Associated Enterprises does not arise;

3.5. without prejudice, in selecting an ad hoc interest rate of LIBOR plus 250 basis points while computing the addition

4. The Ld. AO has grossly erred in initiating penalty proceedings under section 27 l(l)(c) of the Act.

The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.

The Appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case.”

3. Facts of the case, in brief, are that the assessee is a subsidiary of Historic TBS Asia LLC and is a part of Time Warner Group for the impugned assessment year. During the year, the assessee company is engaged in activities that are primarily directed towards distribution of foreign owned television networks, media products, television programmes and rendering of production related support services of television programmes in India. The AO referred the matter to the TPO for determination of the ALP of the international transaction entered into by the assessee during the F.Y. 2012 12. The TPO, during the course of TP assessment proceedings, noted that the assessee has undertaken the following international and specified domestic transactions:-

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