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08-02-2019, Viacom 18 Media, Tribunal Mumbai

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1 week 1 day ago #8628 by amit
Section -
Order Date - 08-02-2019
Favouring - Assessee
Court - Tribunal Mumbai
Appellant - ACIT
Respondent - Viacom 18 Media Pvt. Ltd.
Justice - MAHAVIR SINGH, JM & MANOJ KUMAR AGGARWAL, AM
Citation - 219Taxpundit118
Appeal No. - ITA No. 8406/Mum/2010
Asstt. Year - 2005-06

Order

PER : MAHAVIR SINGH, JM

This appeal filed by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-15, Mumbai [in short CIT(A)], in appeals No. CIT(A)-15/IT-197/08-09 vide orders dated 20.09.2010. The Assessments was framed by the Asst. Commissioner of Income Tax, Central Circle 11(1), Mumbai (in short ‘ACIT’/ ‘ITO’/ AO’) for the A.Y. 2005-06 vide order dated 15.12.2008 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

2. The first issue in this appeal of Revenue is against the order of CIT(A) holding that the broadcasting companies are not comparables with content producers like assessee and further directing that Creative Eye Limited is to be included in the final list of comparables, while making transfer pricing adjustment. For this Revenue has raised the following ground No. 1: -

“1. On the facts and in the circumstances of the case and in law, the IA. CIT(A) Mumbai has erred in directing the A.O to delete the transfer pricing adjustment of Rs. 7,33,23,877/- made to the content segment of the assessee on the ground that broadcasting companies were to be excluded and Creative Eye Ltd is to be included in the TPO set of comparables thus changing the Arm's Length adopted by the AO.”

3. Briefly stated facts are that the assessee company is engaged in the export of entertainment programs/concern, acting as advertising agent in India for MTVA LDC, Singapore (MTVA) and Nickelodeon Asia Pte Ltd., Singapore (NICKA), Distribution of channels of MTVA and NICKA, Licensing and merchandising. In regard to the first issue of export of contents segment and transfer pricing adjustment made by the TPO while computing the Arms Length Price ofInternational transaction of export of contents at ₹ 59,36,86,881/- as against the transaction disclosed by assessee at ₹ 52,03,63,004/- and thereby made adjustment of ₹ 7,33,23,877/-. The assessee submitted before the AO that it produces the certain contents for its associated enterprises and arose cost plus 10% on the same and had benchmark its transaction under Transaction Net Margin method (TNMM) which given Arithmetic Mean at 11.09% as under:

4. The TPO did not accept assessee’s analyses and used the mean margin of 25.50%.

“Asianet Communications Ltd.
ETC networks Limited (merged)
Innetwork Entertainment Ltd.
Jain studios Ltd.
Malayallam Communications Ltd.
NDTV Media Ltd.
Raj Television network Ltd.
Television Eighteen India Ltd.”

5. The assessee also admitted that it had itself inadvertently selected the following broadcasting companies as comparable, and which should be excluded from the comparables.

(i) Jain studios Ltd.
(ii) ETC Networks Ltd.
(iii) Television Eighteen India Ltd.”

6. The assessee before the AO contended that the broadcasting companies taken by assessee as comparables is a mistake and the same should be excluded. Even it was contended that the broadcasting companies taken as comparable should be excluded and cannot be taken as comparables for making adjustment under transfer pricing under the TNMM. But the AO by taking fresh comparables and mean margin of 25.50 % made adjustment of transfer pricing adjustment of ₹ 7,03,23,877/-. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) after considering the submissions of the assessee noted that whether the
TV broadcasting and Media content are functionally one and the same or different. He held that TV broadcasting and content companies are two different set off of business and accordingly, he directed the AO to exclude all broadcasting companies from comparables while making Transfer pricing adjustment by observing in Para 4.4 to 4.6 as under: -

“4.4 I have considered the TPO’s order and the written and submission of the appellant. The core issues which needs to be addressed on this ground are

(I) Whether TV broadcasting and Media Content are functionally one and the same.

(ii) Whether it was fair and proper to exclude Creative Eye Ltd. which is Media Content Company but has suffered a loss this year.

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