STAR INDIA P. LTD,MUMBAI vs. ASST CIT 16(1), THANE

Brief facts, as explained by Ld Counsel, recorded by AO/TPO and DRP, are that the assessee was engaged as a sub-agent in the business of providing services for distribution of channels to Fox International Channels Asia Pacific Ltd (earlier known as Star Television Asian Region Ltd or "STAR Ltd"). STAR Ltd who was appointed as an agent by the overseas channel owning companies' ('Channel Companies) for the 4 | P a g e ITAs No. 1724 & 1901/Mum/2016 purpose of undertaking the distribution activity for their channels. (i.e. Star Plus, Star One, Star Utsav, Star World, Star Movies and Channel V). Under the distribution activity, SIPL was engaged in providing services in connection with the distribution of the Channels in India to STAR Ltd. In consideration to the above services rendered by SIPL, STAR Ltd remunerated by way of cost plus 10% mark-up.”

It was explained that the functions performed by SIPL as sub-agent are as follows:

The assessee was characterized as a low-risk service provider. Ld Counsel referred to page nos. 59 to 61 of the assessee paper book for the FAR of the distribution segment. Based on the activities performed and functional analysis of SIPL for distribution of channels and pursuant to a detailed search process; SIPL adopted business support service providers as functionally comparable to its activities in its TP study. The comparable companies selected by SIPL in its study report were after undertaking a detailed search process and by applying quantitative filters. The entire documentation was stated to be done in accordance with section 92D of the Act read with Rule 10B of the Rules. For detailed search process on Prowess database, Ld Counsel referred page no 63 and page nos. 48 to 57 of the assessee paper book.

We noted that TPO did not dispute the functional Role or FAR analysis of the assessee but rejected the comparables selected in the TP

We further noted that the TPO inserted his comparables but Ld Counsel for the assessee made contentions for exclusion of specific comparables (i.e. APITCO Limited and TSR Darashaw Limited) as to why these companies selected by the TPO as comparable ought to be rejected. The updated chart provided with reasons for rejecting the companies as comparables was filed before the Bench. It was contended that if the ITAT reject the above mentioned two comparables, the assessee shall fit within +/- 5% of the range, and hence the adjustment stands deleted, and the other comparables issues become academic. In light of the above, SIPL does not wish to press for the balance comparables for the statistical purpose for the year under consideration; however, reserves its right if required in future. Provision of services for distribution of television channels (adjustment value of ₹ 2,52,14,041/-). The ld. Counsel also explained in regard to provision of support services for distribution of channels (adjustment value of ₹ 9,32,822/-). He stated that during the year under consideration, the assessee had entered into an agreement with ESPN Star Sports (*ESS') for provision of support services in connection with distribution of ESPN and Star Sports channels. These services are similar to provision of services for distribution of channels by SIPL to STAR Ltd (refer to Part A above). Accordingly, SIPL had used the same set of business support service provider comparables for benchmarking this transaction in the TP study report. He contended that approach of TPO/DRP was the same and used similar set of comparable companies, which is considered for distribution of channels above. Therefore, it was contended that the above

On the other hand, Ld CIT DR contended that though the assessee provides services for distribution of channels to Fox International Channels Asia Pacific Ltd (FICAPL) and to ESPN Star Sports (ESS) also, the TPO has made the adjustment only in respect of services provided to Star Ltd. The OP/OC of the assessee from this activity is claimed to be 10%. The assessee benchmarked these transactions against a set of 6 companies and incidentally the same set is used by the assessee to benchmark its activity of sale of advertising airtime also. The assessee had chosen unrelated concerns in the field of education, consultation, security service providers and concerns which are basically engaged in retail sector. These were clearly and functionally different from the activities of the assessee. Since the comparables of the assessee were not relevant (except IDC India Ltd) and since the assessee had not explained why the comparable set chosen for earlier years by the TPO did not figure in the assessee's TP study report. The TPO rejected the TP study report and took the set of comparables of AY 2010-11. (The DRP for AY 2010-I1 had approved the set in that year). The assessee has not given any other comparables. The AR has argued that the there are some Principal Concerns (not named) who have appointed Star Ltd as an agent for distribution of channels in India. Star Ltd has appointed the assessee as a sub-agent. The assessee, in turn, collects distribution fees from Star Den, another step down entity. The AR argues that the assessee undertakes advertisement and publicity of the channels in India, collects fee from Star Den, procures Integrated Receiver and Decoder (IRD) boxes for Star Den; and manages Subscriber Management System. The assets employed are IRD boxes, SMS and 7 | P a g e ITAs No. 1724 & 1901/Mum/2016 smart cards. The risks are claimed to the minimal as it operates on cost plus basis. However, it is apparent that the set of comparables chosen by the assessee do not have the same FAR.

He contended that the AR made submissions to dispute the inclusion of only two comparables by the TPO i.e. APITCO Ltd and TSR Darashaw Ltd. The arguments of the Revenue are therefore confined to these two concerns only. He narrated fact that as regards to APITCO Ltd. the AR has argued that this is a Government Company and has cited certain case law to claim that 100% Government owned companies should not be taken as comparable since they do not have a profit motive etc. This contention of the assessee is wrong. The company APITCO Ltd is jointly promoted by All India Financial Institutions like IDBI, IFCI, ICICI along with Government Corporations like APIDC, APSFC besides banks. Presently SIDBI is a main shareholder. Therefore, it is not correct to claim that this is a 100% Government Company having no profit element. All the case laws cited by the assessee are on 100% owned government companies. Further, the AR has referred to page 230 of the Assessee Paper Book to allege that the concern has a close connection with Government. However, page 230 is of no relevance. It only mentions that the company has issued Bank Guarantees to various Organizations including some government bodies as part of its business. The AR has also argued citing page 204 of the Assessee Paper Book that this company has a different work profile and it is engaged in developing business clusters. However, the facts are different. The company APITCO Ltd is involved in implementation of MSME Clusters in sub- sectors like engineering, food, textiles, traditional industries, handlooms & handicrafts but its activities involve primarily the preparation of Diagnostic Study Reports (DSRs), Detailed Project Reports (DPRs) for Common

As regards to TSR Darashaw Ltd Ld CIT DR argued that the AR has argued that this company is an entrepreneur and not an agent. This argument of the assessee is not relevant because the assessee is also an entrepreneur. What has to be seen is the nature of activities performed. The company is a Marketing & Support Service Provider only. He stated that the AR has claimed that in the Information given under Part IV of Schedule VI to the Companies Act, 1956 (page 263 of the Assessee Paper Book) in the Final Accounts of the Company mentioned the Generic Name of the Principal Service of the Company as a "Registrar and Share Transfer Agents". This argument is basically unacceptable since the generic description given at the time of incorporation of company is not determinative of the profile of the company and the nature of its activities in the year under consideration. This company provides documentation services which are akin to the 9 | P a g e ITAs No. 1724 & 1901/Mum/2016 services rendered by the assessee of subscriber management system. Besides TSR Darashaw Ltd has earning from Record Management, Payroll business which are Support Service Activities. He further argued that the AR has also argued that the company has made a Provision for Diminution of value of assets which is taken to suggest that the FAR of the company is different. However, the Director's Report at page 235 of the Paper Book Paper Book mentioned that this diminution is only on capital account due to reduction in value of investments of the company in the shares of Ankur Drugs Ltd and Vijay Shanthi Builders Ltd. This expense has in fact reduced the profit of the company for comparability purposes and technically it should have been ignored by the TPO and higher profit margins should have been computed by him.

We have heard the rival contentions and gone through the facts and circumstances of the case. We have gone through the arguments of the both the sides and noted that as per web site of APTICO is owned by a Public Sector undertakings. As per director’s report for AY 2011-12, the Revenue of APTICO is influenced by Govt. Procedures and budget allocation. We also notice that the share holding is by public sector undertakings and the support received by the government and its public sector share holders in the functioning of APTICO. For practical purposes it is a Government company. Even, the company is not functionally comparable as per the Director’s of the Company and Schedules to the profit and loss account. It can be seen that the company generates revenue from services such as cluster development, project development services, entrepreneurship development and training, asset reconstruction and management services, micro enterprises development, tourism and research studies, skill development, energy and environment management related services. APTICO also offers wide

As regards to TSR Darashaw Limited, we noted that this company is a registrar and transfer agent and also engaged in provision of pay roll services. We have gone through the annual report Schedule ‘J’ and as per note 7 revenue recognition of this company provides share registry and transfer services, depository services, record management, pay roll and provident fund management and corporate fixed deposit management services. We also noted from the directors report that this company has completed implementation of a new global pay roll ERP application called RAMCO pay roll business which will enable it to withstand competition and service clients in the overseas market. Accordingly, we are of the view that TSR Darashaw is a registrar and share transfer agent, who has also forayed into pay roll business as in house software development and cannot be compared as a sub agent as 11 | P a g e ITAs No. 1724 & 1901/Mum/2016 the functions are wholly different. Accordingly, we direct the AO to exclude this from comparable to support service provider like SIPL. We direct the AO accordingly. This issue of assessee’s appeal is allowed.

The next common issue in this appeal of assessee for AY 2011-12 in IT(TP)A No. 1901/Mum/2016 is as regards to international transaction captured under the broadcasting segment for franchise channels and international transaction undertaken by merged entities respectively. For this assessee has raised following ground Nos. 3 & 4: - “Ground number 3 have erred in rejecting the transfer pricing undertaken, including comparable companies identified by the Appellant and considering certain other companies as comparable, thereby undertaking an enhancement of taxable income.

Brief facts are that during the year under consideration SIML and V Partnership had entered into a franchise agreement with the assessee from 01.10.2010. Under the said agreement, SIML and V Partnership have granted the assessee an exclusive franchise right to broadcast ('Broadcasting Rights') Star World, Star Movies and Channel [V] channels ('Franchise Channels') in India, Bangladesh, Nepal, Bhutan, Pakistan and Sri Lanka ('Specified Territories'). The assessee has earned advertisement and distribution revenues from broadcasting of these Franchise Channels in the Specified Territories. The international transactions entered by the assessee were obtaining franchise rights, availing content procurement services and procurement of content from its AEs. Consequent to this agreement, the assessee has undertaken the economic analysis. The assessee in the TP study report for the AY 2011- 12 has aggregated the above international transactions, adopting Transaction Net Margin Method (TNMM) as the Most Appropriate Method ('MAM') and comparing the margins earned by the assessee under the broadcasting segment of franchise channels with the margins earned by 13 | P a g e ITAs No. 1724 & 1901/Mum/2016 external comparable companies engaged in similar activities (i.e. companies engaged primarily in television broadcasting).

The TPO did not dispute the FAR analysis neither search process nor the final list of comparable companies. However, out of total nine comparables, the TPO rejected four comparable companies accepted by the assessee in its TP Study Report. The TPO rejected one comparable company stating reasons of consistent loss-making with accumulated losses; one comparable company due to consistent loss-making; one comparable company due to functionally not similar; and one comparable company due to high related party transaction. The DRP upheld the said action of the TPO. Aggrieved, assessee came in appeal before Tribunal.

The assessee has made contentions for comparables as to why the companies rejected by the TPO ought to be considered and accordingly to be included as comparable. The arguments to accept the companies as comparables are argued by the learned Counsel for the assessee in detail. He argued and raised objection for comparable companies in broadcasting segment in regard to UTV Software Communication Limited, which is in television segment. It was contended that UTV is an India based integrated media company engaged in broadcasting of television channels, television content production and has developed into a media an entertainment company. It operates in the segments of television, movies, games and interactive segments. The details are given in assessee’s paper book pages are 570 to 573 and page No. 616. The television business segment includes broadcasting of four specialty genre channels i.e. UTV Action, UTV World Movies, UTV Movies and UTV Bindas. It also operates production of television content, airtime sales and dubbing services. UTV is engaged in the business of 14 | P a g e ITAs No. 1724 & 1901/Mum/2016 broadcasting of channels, and thus, for the purpose of benchmarking the “Television” segment from the consolidated financials of UTV has been considered by the assessee. The assessee is also engaged in broadcasting of similar entertainment channels like Star Plus, Star Utsav, Star Movies, Star Gold, Chanel V, etc., owns dubbing studios, procures contents and over the years it is also engaged in production of television content for one of the channel company. Hence, the ‘television segment’ of UTV is to be considered appropriate segment as comparable to that of SIPL’s broadcasting segment. The learned Counsel stated that in AY 2003-04 SIPL was only an agent procuring content for its AEs. It was neither a broadcaster nor was the content producer as is the case today, i.e. from AY 2011-12 onwards SIPL is engaged as broadcaster of channels i.e. Star Plus, Star Gold, Channel V, etc. In AY 2003-04, the international transaction being benchmarked was not from channels owned/ franchised by SIPL as in the year under consideration. In the present year, SIPL procures and produces content for its own broadcasting business similar to UTV and hence, the assessee submitted that UTV is a comparable company and to be accepted.

The next comparable argued by the learned counsel is as regards to TPO rejected IBN 18 stating that the comparable company is consistent loss making company with accumulated losses and no dispute on functional comparability. In this regard the learned Counsel stated that the “Broadcasting and Content” segment from the consolidated financials has earned operating profit in the year under consideration i.e. FY 2010- 11 relevant to AY 2011-12. According to him, it is not a consistent/ persistent loss making entity at operating level for broadcasting segment. The learned Counsel drew our attention to a table of the segmental profitability of the company over the period for FY 2007-08 to FY 2010-

Hence, the learned Counsel for the assessee stated that the company has earned operating profits in the year under consideration in one out of three preceding previous years. Thus, it is evident that IBN 18 is not a consistent loss-making company. Finally, he argued that functionally comparable companies should not be rejected unless they are persistent loss making.

The next comparable argued by the learned counsel for the assessee is as regards to Raj Television Network. He stated that TPO/ DRP rejected Raj on the basis that it is consistent loss making company and not disputed on functional comparability. He argued that the profit and loss account of the company is provided in page no 866 of the assessee paper book. He stated that the said company has earned income from broadcasting activities. The learned Counsel stated that there is no issue that Raj’s Broadcasting segment is comparable to the assessee. He further brought the facts on record that Raj has earned operating profits in FY 2007-08 and 2008-09 and hence not a consistent

In regards to Broadcasting segment for merged entities (adjustment value of Rs. 62,108,738), Ld Counsel stated the facts that during the year under consideration, pursuant to merger of three channel companies (i.e. STEL, SAML and SAR) with SIPL being effective from April 2009/May 2009 respectively, effectively 2 months’ transactions were being reflected as transaction undertaken by assessee. Based on functional and risk profile of the transactions undertaken by merged channel companies TNMM was selected as the most appropriate method. Since these transactions were entered into by SIPL in the 17 | P a g e ITAs No. 1724 & 1901/Mum/2016 capacity of a broadcaster, the transactions of merged entities were benchmarked using same set of comparable companies as identified above for broadcasting of franchise Channels. Therefore, the above arguments shall equally apply to broadcasting segment of merged entities also.

On the other hand, the learned CIT DR argued that the assessee had obtained exclusive franchise right to exploit certain TV channels of SIML and V Partnership in the territory of India, Nepal. Bhutan etc. (India Territory). The assessee pays 4% of the revenues to the AEs. Then the assessee has also appointed SIML as an intermediary between the assessee and the third parties from whom certain content is procured. The assessee also gets content from the libraries of SIML and TCF. Thus the assessee procures franchise rights/content/services in its capacity of a broadcaster. The assessee had claimed that in respect of these streams clubbed together, it earned a margin on cost at 15.02%. The TPO rejected four comparables of the assessee and determined the margin on cost in the case of the remaining comparables at 28.42%. He contended that the assessee before ITAT now has only contested the rejection of three comparables by the TPO i.e. UTV Software Communications Ltd; IBN 18 Broadcast Ltd and Raj Television. The assessee accepted the rejection of Raj Television as a comparable.

As regards to UTV Software Communications Ltd he stated that the TPO has rejected this concern on account of it having a different revenue stream. This company is into animation programming, dubbing and home video sales which are different activities than those of the assessee. He contested the arguments of LD AR that this company is essentially a broadcaster and has claimed that the TV segment is a 18 | P a g e ITAs No. 1724 & 1901/Mum/2016 broadcast segment. The claims of the AR are not accepted. It is a fact that UTV is not a broadcaster in a true sense for the purposes of comparability. This company has a TV Segment (page 617 of the Assessee Paper Book) but this segment is not of broadcasting. In this connection Ld CIT DR invited our attention to Page 562 of the Assessee Paper Book (Annual Accounts of UTV) which mention that the TV segment comprise of four main functions:

As regards to IBN 18 Broadcast Ltd Ld CIT DR argued that the assessee had considered the broadcasting segment of this company as a comparable. The TPO had rejected the same due to consistent loss making by the company (see page 676 of Paper Rook which is the standalone result of the company as part of the Director's report). Also see page 726. He contradicted the argument of Ld AR that the Broadcasting Segment of TV18 at Page 776 can be taken for comparison and this segment has a profit. The AR also mentions that prior to FY 20 10-11 TV 18 was not having any Segment Reporting and admits that the company was running into continuous losses. The assessee has given a comparative chart at Page 872B of the Assessee Paper Book. The contentions of the assessee are wrong and cannot be accepted. The standalone account of TV 18 show continuous losses. The AR wants the ITAT to take the Segment Reporting (Page 776 of Assessee Paper Rook) but this page has segmental reporting of the consolidated accounts of TV 18 and includes the accounts of all its subsidiaries and Joint Ventures like RVT Media Pvt. Ltd (consolidated): IBN 18 Media & Software Ltd (Jagran TV): IBN Mauritius Ltd: IBN Lokmat News Pvt. Ltd and Viacom 18 Media Pvt. Ltd (Colors channel) (pages 679 & 765 of Assessee Paper Book). The inclusion of all these broadcasting companies' accounts further make the argument of the assessee totally irrelevant. Besides TV 18 has a RPT of over 37%, which makes it unfit for comparability. It has been held by the Mumbai ITAT in the case of Capgemini India (P.) Ltd. Vs. ACIT (2013) 33 taxmann.com 5 (Mumbai-Trib.) that consolidated results which include profit from different jurisdictions having different geographical and 20 | P a g e ITAs No. 1724 & 1901/Mum/2016 marketing conditions are not to be taken into consideration while making a comparability analysis. Therefore, it was argued that the ITAT has been taking a consistent stand that persistent loss making companies or companies failing RPT filter cannot be taken as a comparable. Some decisions in this regard are the case of ITO vs. CRM Services India (P.) ltd [2011] 14 taxmann.com 96 (Delhi); DCIT vs. Willis Processing Services (India) (P.) Ltd [2014] 51 taxmann.com 459 (Mumbai –Trib.) etc. In the case of Curam Software International (P.) Ltd. Vs. ITO [2013] 37 taxmann.com 141 (Bangalore - Trib.) it has been held that while selecting a comparable RPT filter has to be on standalone basis and not on a consolidated basis.

As regards to Raj Television Network Ltd, Ld CIT DR stated that the TPO had rejected this company on account of being a continuous loss making company. (page 860 of Assessee Paper Book). The AR claimed that it is not a continuous loss making company and that in FY 2008-09 it had a minor profit of 1.27% though it is in loss since then. (page 872A of Assessee Paper Book). Further the company is not comparable because it is also involved in movie production and distribution business in the same broadcasting segment (Page 847-848 of Assessee Paper Book). Therefore, this company was rightly rejected by the TPO/DRP. He also referred to assessee's own case the ITAT had recently held that since comparables selected by TPO were content developers and, thus, there exited functional difference impugned addition made to ALP was to be set aside. The citation is Star India (P.) Ltd vs. ACIT [2016] 70 taxmann.com 272 (Mumbai - Trib.).

We have heard rival contentions and gone through facts and circumstances of the case. We noted that this comparable companies in 21 | P a g e ITAs No. 1724 & 1901/Mum/2016 broadcasting segment in regard to UTV Software Communication Limited, which is in television segment is an India based integrated media company engaged in broadcasting of television channels, television content production and has developed into a media as an entertainment company. It operates in the segments of television, movies, games and interactive segments. The details are given in assessee’s paper book pages are 570 to 573 and page No.

We are in agreement with the argument of the learned counsel that the television business segment includes broadcasting of four specialty genre channels i.e. UTV Action, UTV World Movies, UTV Movies and UTV Bindas. It also operates production of television content, airtime sales and dubbing services. UTV is engaged in the business of broadcasting of channels, and thus, for the purpose of benchmarking the “Television” segment from the consolidated financials of UTV has been considered by the assessee. The assessee is also engaged in broadcasting of similar entertainment channels like Star Plus, Star Utsav, Star Movies, Star Gold, Chanel V, etc., owns dubbing studios, procures contents and over the years it is also engaged in production of television content for one of the channel company. Hence, the ‘television segment’ of UTV is to be considered appropriate segment as comparable to that of SIPL’s broadcasting segment. We also noted that in AY 2003-04 SIPL was only an agent procuring content for its AEs. It was neither a broadcaster nor was the content producer as is the case today, i.e. from AY 2011-12 onwards SIPL is engaged as broadcaster of channels i.e. Star Plus, Star Gold, Channel V, etc. In AY 2003-04, the international transaction being benchmarked was not from channels owned/ franchised by SIPL as in the year under consideration. In the present year, SIPL procures and produces content for its own

As regards to next comparable rejected by TPO i.e. IBN 18 stating that the comparable company is consistent loss making company with accumulated losses and no dispute on functional comparability. We noted that the “Broadcasting and Content” segment from the consolidated financials has earned operating profit in the year under consideration i.e. FY 2010-11 relevant to AY 2011-12 and moreover, it is not a consistent/ persistent loss making entity at operating level for broadcasting segment. We have gone through the facts and gone through the table of the segmental profitability of the company over the period for FY 2007-08 to FY 2010-11, which is enclosed in assessee’s paper book Page No. 872B. The consolidated financial results are also on page No. 776 of the assessee’s paper book. The learned Counsel for the assessee also drew our attention to operating margins from FY 2007-08 to FY 2010-11 and a table capturing the segmental profitability of the company for the relevant year is provided at page No. 872B of the paper book. From these facts it is clear that the company has earned operating profits in the year under consideration in one out of three preceding previous years. Thus, it is evident that IBN 18 is not a consistent loss-making company. In view of these facts, we are of the view that functionally comparable companies should not be rejected unless they are persistent loss making as in the present case. Hence, we direct the AO / TPO to include this as comparable i.e. IBN 18 Broadcasting Ltd.

We have considered this comparable i.e. Raj Television Network and noted that TPO/ DRP rejected Raj on the basis that it is consistent loss making company and not disputed on functional comparability. We

This next issue of assessee’s appeal for AY 2012-13 in is as regards to international transaction captured under the broadcasting segment for franchise channels and international transaction undertaken by merged entities respectively. For this assessee has raised following ground Nos. 2 to 5 as under: - “Ground No. 2

We find that this issue is already taken into consideration vide paras 14 to 29 of this order for earlier assessment year i.e. AY 2011-12. The Ld. Counsel for the assessee as well Ld. DR also not argued because the issue is same and facts and circumstances are also same. The facts and circumstances are exactly identical in the present appeals on this issue, hence, taking a consistent view, we allow this issue of assessee’s appeal in this year also.

The next issue in this appeal of assessee for AY 2011-12 in IT(TP)A No. 1901/Mum/2016 is as regards to international transaction of availing of management services (adjustment value of Rs.3,56,38,917/-). For this assessee had raised the following ground No. 5: - “Ground number 5 have erred in rejecting transfer pricing analysis undertaken, including the comparable companies identified by the Appellant, thereby undertaking an enhancement of taxable income.

Brief facts leading to the above issue are that STAR Ltd. a Group company, based in Hong Kong had over a period of time more than 15 years developed and built a team of resources that include appropriately qualified personnel capable of undertaking corporate management and administrative services ('management services'). Since the Channel Companies, amongst others, required such services for the benefit of their own business, they have approached STAR Ltd to provide management services in consideration for service fees, and hence such services are not duplicative in nature. The five Channel Companies of STAR group are as follows:

As the effective date of merger was 01.04.2009 Star Ltd had charged services fee of cost plus 5% mark up for the provisions of management services to the channel companies for the entire Assessment year 2009-10. Star Ltd was paid a services fees of ₹ 372,670,363/-. The TPO and AO have accepted the fee in the hands of the assessee to be at arm's length price. The nature of services rendered by STAR Ltd are as under:

The TPO held that SIPL had not demonstrated the cost allocated commensurate with benefits derived to justify the payment on arm’s length and determined the ALP to be 'NIL'. The DRP upheld the said action of the learned TPO. The assessee contended that the Channel Companies are availing management services from STAR Ltd since July 2005. Ld Counsel referred to agreement between STAR Ltd and SIMI, which is available on page 873 of the assessee paper hook. Therefore, it can be observed that the management charges were paid to STAR Ltd by Channel companies in prior years also and were accepted in the hands of STAR Ltd till AY 2011-12 and neither in the hands of Channel companies till AY 2010-11 who were making the payment of management services to STAR Ltd.

Hence, the above activities are management and administration activities undertaken for STAR Ltd and the channel companies as accepted by the TPO over the years. It was explained that STAR Ltd has identified a pool of general and administration costs which were incurred for the purpose of providing management services to the channel companies and for STAR Ltd’s own business. The portion of G & A costs were charged to channel companies at a mark-up of 5% as management fees. The management fee is allocated to each channel companies in the 31 | P a g e ITAs No. 1724 & 1901/Mum/2016 proportion of revenues generated by individual channel companies to the consolidated revenues of all the channel companies taken together. At the time of hearing the calculation for monthly invoice of the management fees paid to STAR Ltd. was sought and the details were filed vide Annexure 5. Ld Counsel explained that TPO in its order stated that the assessee has not provided details of personnel involved, their timesheets but the details called for by TPO were not relevant as the management costs were allocated in the ratio of Revenue, which is an accepted methodology internationally and in several judicial precedents. The assessee placed its reliance on the following decision wherein allocation of management charges based on sales revenue were accepted as appropriate cost allocation methodology. The decision of Co-ordinate bench in the case of N LC Nalco (India) Ltd. vs. DCIT – [2016] 71 taxmann.com 57 was referred. The relevant extract is reproduced below:

The assessee also placed its reliance on OECD guidelines wherein the guidelines acknowledge that turnover is an appropriate method (i.e. indirect charge method) to allocate the intra-group service charges. Relevant extract is reproduced below for reference: - "the allocation should be based on an appropriate measure of the usage of the service that is also easy to verify example turnover, stuff employed, or an (Activity bused key such as orders processed." Page 328 of the OECD TP Guidelines - Chapter on intra Group services.

The assessee also argued that there is no intention to shift profits and to explain this it stated that the recipient AK (STAR Ltd) had been regularly assessed to tax in India and had duly offered this income to tax in India even for AY 2011-12. Therefore, the question of India tax base erosion does not arise as contended by the TPO.

Ld CIT DR argued that as per the TP Study Report, (given at page 89 of Assessee Paper Book), prior to the effective date of merger, the concerns namely STAR, STEL and SAML had availed certain management services from Star Ltd and that these transactions have been captured separately in the TP documentation maintained in the case of these three concerns. This has not been provided in the assessee's TP Study Report. The TPO noted that the TP Study of Star Ltd simply mentions that it has decided to charge cost plus 5% to India as management service charges but the TP Study does not provide the nature of the management services provided, the time sheets, the benefit derived etc. The TPO has given detailed reasons on pages 11-22 of his Order holding the ALP of such unknown services to be Nil. The DRP has exhaustively dealt with the matter in pages 21-28 of its Order. The same

We have heard rival contentions and gone through the facts and circumstances on this issue of international transaction of availing of management services. We have noted the arguments of both the sides. We noted from the facts of the case that the above activities are management and administration activities undertaken for STAR Ltd and the channel companies as accepted by the TPO over the years. The 36 | P a g e ITAs No. 1724 & 1901/Mum/2016 STAR Ltd has identified a pool of general and administration costs which were incurred for the purpose of providing management services to the channel companies and for STAR Ltd’s own business and the portion of G & A costs were charged to channel companies at a mark-up of 5% as management fees. The management fee is allocated to each channel companies in the proportion of revenues generated by individual channel companies to the consolidated revenues of all the channel companies taken together. At the time of hearing the calculation for monthly invoice of the management fees paid to STAR Ltd. was sought and the details were filed vide Annexure 5. We noted from the information submitted by the assessee in its paper book and the fact that the management costs were allocated in the ratio of Revenue, which is an accepted methodology internationally and in several judicial precedents. The assessee placed its reliance on the decisions, which we have already discussed in the arguments of both the sides above, wherein allocation of management charges based on sales revenue were accepted as appropriate cost allocation methodology.

Another aspect also favour assessee that there is no intention to shift profits and to explain this it stated that the recipient AE (STAR Ltd) had been regularly assessed to tax in India and had duly offered this income to tax in India even for AY 2011-12. Therefore, the question of India tax base erosion does not arise as noted by the TPO. Another aspect is that even on the Principle of commercial expediency / business rationale of a particular expenditure incurred by an assessee for smooth functioning and furtherance of its business is the prerogative of the assessee. The reasonableness of the expenditure has to be judged from the point of view of the businessman and not of the Revenue authorities. We are of the view that the TPO cannot question the commercial viability

The next issue in this appeal of assessee for AY 2011-12 in IT(TP)A No. 1901/Mum/2016 is in relation to international transaction of payment of brand license fees. For this assessee has raised the following Ground No.6 & 7: - “Ground number 6 have erred in determining the arm's length price in respect of the international transaction of avail' 'of management services by the Appellant from its Associated Enterprise ('AE') at Rs Nil by:

Brief facts relating to the issue of adjustment in relation to international transaction of payment of brand license fees by disallowance of depreciation (adjustment value of ₹ 41,19,46,313/-) are that prior to the merger of the overseas channel companies [STEL. SAM L SAR -'merged entities] into the assessee, both STAR Ltd and Channel companies operated as entrepreneurs vis-a-vis the television business of the group with each entity contributing through their respective responsibilities and roles, towards earning of the subscription and the advertisement sales revenue from India. The channel companies owned an extensive inventory of content to be broadcasted. STAR Ltd, on the other hand, was an aggregator and distributor of channels and relied on the reputation of 'STAR' brand (which it develops) and its technical capabilities to effectively broadcast channels and negotiate favorable terms with distribution platforms. During these years, the assessee acted as an agent for the channel companies and rendered services in connection with these channels. Pursuant to the merger, the ownership of the channels held by the Merged Entities (i.e. Star Plus, Star Utsav, Star

During AY 2011-12 SlPL was a broadcaster, in order to be able to carry on it's broadcasting business under the STAR brand it sought a license for the brand name and design of the channels featuring the Star marks and Star Corporate mark. Accordingly, during AY 2011-12, STAR Ltd, granted SIPL, all right to use the Channel marks and Star corporate marks solely to be incorporated or contained in the applicable Channels for the Indian Territory. SIPI had obtained license to use the Star Mark for Iump sum consideration of USD 36.02 million (i.e. Rs 1624 million). The consideration for the payment towards brand license was determined based on valuation of the brand by an independent valuer and the said payment towards brand license was capitalized in the books of accounts and depreciation was claimed under the Act only on year basis. The payment for the said consideration was also subjected to RBI approvals. Further, it would be relevant to note that the department has taxed the entire amount received by Star Ltd from the assessee in AY 2011-12.

In the light of the above facts the TPO determined the arm's length price of brand licensing fees to be at NIL and disallowed the entire amount of depreciation claim on the brand license for the year under consideration. The DRP upheld the above observations of the TPO.

Ld Counsel for the assessee contended that prior to SIPL becoming a broadcaster, SIPL was acting as an agent for selling advertisements on Channels owned by the Channel companies and 41 | P a g e ITAs No. 1724 & 1901/Mum/2016 rendered services in connection with of the channels owned by the said companies. SIPL was not a broadcaster of the channels and hence did not require a license of the brand to carry on broadcasting business. The channel companies owned all inventory of content to be broadcasted and had benefit of various channel brands which were distinct from the “STAR” name and logo (the benefits of which solely accrued to STAR Ltd. STAR Ltd, on the other hand, was all and distributor of channels and relied on reputation of 'STAR' brand (which it develops) and its technical capabilities to effectively broadcast channels and negotiate favorable terms with distribution platforms. As part of this business arrangement, STAR Ltd was remunerated 50% of the profits for its functions performed, risks undertaken and assets ('FAR) employed (including Star brand name). Channel companies, similarly, were held to be entitled to 50% of the broadcasting revenue for their ownership of content, etc. the Star marks and Star Corporate mark. Accordingly, during AY 2011-12, STAR ltd granted SIPL all right to use the Channel marks and Star corporate marks solely to be incorporated or contained in the applicable Channels for the Indian Territory. SIPI had obtained license to use the Star Mark for Iump sum consideration of USD 36.02 million (i.e. Rs 1624 million).

We noted that the assessee placed reliance on the case law in case of N L C Nalco (India) Ltd. vs. DCIT - [2016] 71 taxmann.com 57 (Kolkata Tribunal) wherein 'NIL' arm's length price as determined by TPO was disregarded and royalty paid @ 2% of net sales, approved by RBI under the automatic approval scheme was considered to be at arm's length. The relevant extract is reproduced below for easy reference:

Further Ld Counsel argued that the TPO/ DRP in their orders have not challenged the approach/ methodology adopted by the assessee in determining the value of the consideration to be made in connection with the licensing of brand. Against the TOP's contention that the lump sum payment was an afterthought to remit money out of India, the assessee contended that the external third party valuer was appointed as soon as the High court order approving the scheme of merger of channel companies was approved. On review of publicly available data, the assessee has identified various third-party franchise rates and brand

He further explained from the facts that the effective rate of brand license fees for the next 4 years which shows the reasonableness of the amounts vis the revenues taxed in India. In fact, the amounts paid by the assessee way below than the automatic approval limit sanctioned by the RBI of 5% vide press note no 8 (2009 series). For the year under consideration, the depreciation on the brand license fee as per financial statements is Rs 166.08 million as against the total revenue of Rs 27,041.74 million. The effective rate of expenses for brand license fee is 0.61% is significantly lower than the average of above external effective royalty pay-out rates of 4.72%. Accordingly, considering the above external reference points, 0.61% license fee paid should be considered to be at arm's length.

Further, he explained that there is no erosion of base of profits taxable in India for the reason that the entire amount of brand license fee

Ld CIT DR on the other hand, argued that it is to be kept in view that the registered owner of the Brand or the Star Mark is STPL, and not Star Ltd. The assessee has claimed to make payment to Star Ltd only. This makes the payment an internal and mutually benefitting exercise only. Secondly the agreement has been backdated. It was entered into on 30.03.2011 and made effective from 01.06.2010 which is irregular. Thirdly, STPL can still use the Star Mark without breaching the agreement between the assessee and Star Ltd, which proves that the claim of exclusivity is bogus. Fourthly, STPL is not even required to take anybody's consent before using the brand. Fifthly the TPO has given detailed reasons as to why the valuer's report has no basis (see page 78)

During the course of the hearing the DR has argued that in earlier years Star Ltd was charged 50% of its income as brand royalty and this was claimed as evidence that the brand licensing fee is justified. However, the attention of the ITAT was invited to the establish that 50% that the treatment of an amount in the hand of another person is not determinative of the allowability of an expense in the hands of the first person. This can be explained with the help of various examples as will he done orally. The reliance placed by the assessee on the TPO order of Star Ltd for AY 2008-09 (Sr. No. 30 of paper book for AY 2012-13) to claim 50% share under the Profit Split Method is not appropriate. There is no evidence that the 50% share was for brand value. This figure was only

It is also a moot point as to what rights have been obtained by the assessee from Star Ltd. Can it assign the rights to a third party or not? Does it have an interest in the brand now? There is no transfer of the rights also. Normally royalty or license fee is never a percentage of cost or value of the intangible. It is always linked to its impact on the performance of the recipient company. This is not the case here because the present agreement is a colorable device. Without prejudice and as an alternative it can argued that the license fee be calculated for each year

After hearing both the sides, we noted that the consideration for the payment towards brand license was determined based on valuation of the brand by an independent valuer and the said payment towards brand license was capitalized in the books of accounts and depreciation was claimed under the Act only on yearly basis. The payment for the said consideration was also subjected to RBI approvals. Further, it would be relevant to note that the department has taxed the entire amount received by Star Ltd from the assessee in AY 2011-12. The TPO also accepted this FAR analysis between STAR Ltd and Channel companies in it is order for STAR Ltd for AY 2008-09 which was considered as appropriate while upholding the profit split of 50:50 mechanisms as appropriate on basis of the same. The said order of the TPO forms part of the legal paper book (refer case law at Sr. no. 30 of legal paper book of assessee for ÀY 2012-13). After considering the FAR analysis, the TPO concluded and accepted profit split of (50:50 i.e. profit split of 50% to channel companies and 50% to Star Ltd) at page 13 of the order (refer case law at sr. no. : 30 of legal paper book for ÀY 2012-13).

In light of the said observations of the TPO, the remuneration (50%) of the profits taxed in the hands of STAR Ltd included remuneration for the brands, etc. The TPO in it is order for STAR Ltd for AY 2008-09 has observed that over a period of time STAR Ltd. has nurtured and invested significantly in the creation anti promotion of the STAR brand including the logo, along with Channel name in form of Star Cropped box / Star logo. Therefore, it said that STAR Ltd has developed

We noted that the channel companies, i.e. STEL, SAML, SAR, which were owners of various channel at the time of merger, merged with SIPL who then carried on broadcasting business under its own umbrella. The STAR brand, however, continued with STAR Ltd. Thus, the STAR brand which was earlier utilized by the channel companies as part of their arrangements did not form part of the merger since the same was owned by STAR Ltd. Thus, in order to be able to earn from broadcasting business using STAR brand, SIN, had to enter into a license agreement with STAR Ltd. In the current assessment year, the entire profits of the broadcasting business of the channel companies, i.e. STEL SAML and SAR was assessed by the department in SIPL’s hands, unlike in the past years wherein it was assessed on the agency commission received. This income represented around 80% of the assessee's revenue taxed in India. Further, having acquired the channel company’s business, the assessee could not carry on the business under the “STAR” brand nor earn the revenue, taxed by the department, without payment of license fees. It was contended that the affiliation to the 'STAR' name is a significant driver in the Indian television market and in the revenue earning potential of the channels, on account of the fact that the brand 'STAR' has a reputation for quality. Any new channel which is introduced in the market with the Star affiliation suffers lesser entry constraints as compared to other channels, significantly reducing the possible gestation cycle for the channel. The association of a channel with 'STAR' assists in offering channels to the cable operators as a bouquet. Also, the use of a 52 | P a g e ITAs No. 1724 & 1901/Mum/2016 common brand makes marketing exercise more feasible and effective. Thus, SIPL's channels are able to attract loyal Star customers and thereby garner higher Television Rating Points ('TRPs'). Higher TRPs enable the assessee to attract better prices from the sale of its advertisement airtime.

The brand is the communication interface between the consumers and the products. Facing the constantly evolving Television market and increasing consumer demands, the STAR brand has achieved a position of reliability and credibility in the market over the period. Thus, without this payment, it cannot be possible for SIPL to carry on the business. Further, where SIPL were to decide that the channels that came within its ownership shall he treated as completely new channels and broadcasted with a new look and re- branding approach, the same would not have come without a substantial additional cost and effort. Not only would the assessee be needed to expend money but would also need to develop new strategies for promoting its channel, creating awareness amongst viewers and work towards achieving brand loyalty and credibility. Thus, since SIPL could not run its operations without the Star brand, it entered into a licensing arrangement for 10 years.

We also noted that the approval of the RIB to brand license fee was taken and for the purpose of making lump sum payment to STAR Ltd, had determined the total value of brand license to be of USD : 36.02 million for the use of STAR mark for a tenure of two years on the basis of a valuation by third party valuer. SIPL, intended to pay the above payment in six installments. Considering the deferral in the payments, an interest component was considered to the overall value based on which the total value was determined to of USD 36.95 million. After

This next issue of assessee’s appeal for AY 2012-13 in is in relation to international transaction of payment of brand license fees. For this assessee has raised the following Ground No.6 to 8 as under: - “Ground No.

We find that this issue is already taken into consideration vide paras 45 to 61 of this order for earlier assessment year i.e. AY 2011-12. The Ld. Counsel for the assessee as well Ld. DR also not argued because the issue is same and facts and circumstances are also same. The facts and circumstances are exactly identical in the present appeals on this issue, hence, taking a consistent view, we allow this issue of assessee’s appeal in this year also.

The next issue in this appeal of assessee for AY 2011-12 in IT(TP)A No. 1901/Mum/2016is as regards to corporate ground raised on the issue of disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (hereinafter the Rules). For this assessee has raised the following ground No. 10: - “Ground number 10 a) have erred in making a disallowance under Section 14A read with Rule 8D ignoring

The learned Counsel for the assessee stated that the assessee has not earned any exempt income and hence, no disallowance can be made by invoking the provisions of section 14A of the Act read with Rule 8D of the Rules. This fact is noted by AO in its order and the contentions of the assessee were also before AO as well as before DRP. We note that this issue is squarely covered by the decision of Hon’ble Bombay High Court, Nagpur Bench in the case of Pr. CIT vs. Ballarpur Industries Limited in Income Tax Appeal No. 51 of 2016, wherein this issue has been considered and finally following the judgment of Hon’ble Delhi High Court in the case of Cheminvest Limited vs. CIT (2015) 378 ITR 33 (Delhi) held as under: - “On hearing the learned Counsel for the Department and on a perusal of the impugned orders, it appears that both the Authorities have recorded a clear finding of fact that there was no exempt income earned by the assessee. While holding so, the Authorities relied on the judgment of the Delhi High Court in Income Tax Appeal No. 749/2014, which holds that the expression “does not form part of the total income” in Section 14A of the Income Tax Act, 1961 envisages that there should be an actual receipt of the income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. The Income Tax Appellate Tribunal held that the provisions of 59 | P a g e ITAs No. 1724 & 1901/Mum/2016 Section 14A of the Income Tax Act, 1961 would not apply to the facts of this case as no exempt income was received or receivable during the relevant previous year. It is not the case of the Assessing Officer that any actual income was received by the assessee and the same was includible in the total income. In the facts of the case, the Authorities held that since the investments made by the assessee in the sister concerns were not the actual income received by the assessee, they could not have been included in the total income.”

This fact is noted by the AO on page 13 para 8.1 of the assessment order stating, “During the year under consideration, SIPL has not earned any exempt income, which is evident from the computation of income.” Once there is no exempt income, the issue is squarely covered by the decision of Hon’ble Bombay High Court in the case of Ballarpur Industries Limited (supra). Respectfully following the Hon’ble Jurisdictional High Court, we direct the AO/ TPO to delete this addition.

The next issue in this appeal of assessee for AY 2011-12 in IT(TP)A No. 1901/Mum/2016 is against the order of AO/ DRP not allowing deduction of property tax reimbursed to Precision Components Private Limited. For this assessee raised the following ground No. 11: - “Ground number 11 have erred in not allowing deduction for property tax amounting to Rs 27,67,124 reimbursed to Precision Components Private Limited (hereinafter referred to as 'PCPL').

We have heard the rival contentions and gone through the facts and circumstances of the case. We noted from the arguments of the both the sides, that this issue is covered by the decision of assessee’s own case for AY 2006-07 in vide order dated 01.04.2016, wherein Tribunal has already remanded the matter back to the file of the AO by observing as under: - “7. According, to this issue the matter of controversy is that whether, the learned CIT(A) has erred in upholding the disallowance of Rs.30,63,248/- represented the expenditure incurred by the Appellant in respect of reimbursement of property taxes to Precision Component(P) Ltd.(PCPL). It is argued by the assessee that in accordance with the letter dated 01.04.2001 to the PCPL, the assessee company was under obligation to pay that property tax and the said tax was paid. Therefore, the expenditure to the tune of Rs.30,63,248/- is required to be allowed. The learned A.O. recorded the findings that in view

Respectfully following the same, we set aside the order of lower authorities and restore the matter back to the file of the AO for afresh adjudication, this issue of assessee’s appeal is allowed for statistical purposes.

This next issue of assessee’s appeal for AY 2012-13 in is against the order of AO/ DRP not allowing deduction of property tax reimbursed to Precision Components Private Limited. For this assessee raised the following ground No. 11 :-

We find that this issue is already taken into consideration vide paras 67 to 69 of this order for earlier assessment year i.e. AY 2011-12. The Ld. Counsel for the assessee as well Ld. DR also not argued because the issue is same and facts and circumstances are also same. The facts and circumstances are exactly identical in the present appeals on this issue, hence, taking a consistent view, we allow this issue of assessee’s appeal in this year also.

The next issue in this appeal of assessee for AY 2011-12 in IT(TP)A No. 1901/Mum/2016 is against the order of AO/ DRP in not allowing depreciation in relation to computer software held as capital in nature in earlier years. For this assessee has raised the following ground No. 12: - “Ground number 12 have erred in non-grant of depreciation amounting to Rs 56,12,259 in respect of the expenditure held as capital in nature incurred in 64 | P a g e ITAs No. 1724 & 1901/Mum/2016 relation to the computer software in earlier years.

We noted that the DRP has already directed the AO to verify records and grant depreciation on opening WDV of software expenses earlier held as capital expenditure. We find no infirmity in the directions and AO can allow depreciation accordingly.

This next issue of assessee’s appeal for AY 2012-13 in is against the order of AO/ DRP in not allowing depreciation in relation to computer software held as capital in nature in earlier years. For this assessee has raised the following ground No. 13 as under: - “Ground No 13. Without prejudice to the above, have erred in non-grant of depreciation amounting to ₹ 4,48,08,542/- in respect of the expenditure held as capital in nature incurred during the year and in relation to the computer software in earlier (opening balance).”

We find that this issue is already taken into consideration vide paras 72 & 73 of this order for earlier assessment year i.e. AY 2011-12. The Ld. Counsel for the assessee as well Ld. DR also not argued

The next issue in this appeal of assessee for AY 2011-12 in IT(TP)A No. 1901/Mum/2016 is against the order of DRP not allowing depreciation on cumulative addition made to lease hold improvements in earlier years. For this assessee has raised following ground No. 13 as under: - “Ground number 13 have erred in not allowing depreciation on cumulative additions made to leasehold improvements in earlier years TP 10% of Rs 3,70,54,570.

We noted that the DRP has already directed the AO to verify from records whether in earlier years the additions made to leasehold agreements have been capitalized or not and in case the same is capitalized, allow depreciation accordingly. We find no infirmity in the directions. Hence, we direct the AO accordingly.

We find that this issue is already taken into consideration vide paras 76 & 77 of this order for earlier assessment year i.e. AY 2011-12. The Ld. Counsel for the assessee as well Ld. DR also not argued because the issue is same and facts and circumstances are also same. The facts and circumstances are exactly identical in the present appeals on this issue, hence, taking a consistent view, we allow this issue of assessee’s appeal in this year also

The first issue in this appeal of Revenue’s for AY 2011-12 in is as regards to allowability of depreciation of computer peripherals. For this Revenue has raised the following ground No.1: -

We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the devices like Printer, scanner etc. are devices which are connected to the computer and are used for performing functions of the computer viz. storage, processing etc. Hence, the same form part of the block of assets under the head computer and accordingly, are eligible for depreciation at the rate of 60%. We noted that this issue is squarely covered in assessee’s own case for AY 2006-07 in vide order dated 01.04.2016, wherein the Tribunal held in Para 10 as under: - “10. The revenue has raised an objection on account of allowance of depreciation @ 60% on computer peripherals like rack, printer, port, routers, cord etc. This controversy has been decided by the Tribunal in case filed as DCIT Vs. Datacraft India Ltd. cited as (2011)9 ITR (Trib) 712 (Mumbai)(SB) and by the Hon’ble High Court of Delhi while the deciding the case of CIT Vs. BSES Rajdhani Powers Ltd. The plea which has been taken by the revenue is that the depreciation which has been allowed @ 60% and the value of the paper and other materials, is higher but the matter has been considered by the learned CIT(A) who allowed the same on the 68 | P a g e ITAs No. 1724 & 1901/Mum/2016 basis of the assessment held in the year of 2003-04, 2004-05 and 2005-06. We find no reason to interfere with the order passed by the learned CIT(A). Hence, the plea of the revenue is hereby declined.”

Respectfully following Tribunal’s decision in assessee’s own case, we are of the view that the DRP has rightly directed the AO to allow depreciation at the rate of 60% on computer peripherals. This issue of Revenue’s appeal is dismissed.

This next issue of assessee’s appeal for AY 2012-13 in is as regards to allowability of depreciation of computer peripherals. For this assessee has raised the following grounds No.8&9: - “Ground No.

We find that this issue is already taken into consideration vide paras 80 to 81 of this order for earlier assessment year i.e. AY 2011-12 in revenue’s appeal. The facts and circumstances are exactly identical in the present appeals on this issue, hence, taking a consistent view, we allow this issue of assessee’s appeal in this year also

The next issue in this appeal of Revenue’s for AY 2011-12 in is as regards to allowability of software expenses. For this, Revenue has raised the following ground No. 2: -

We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the DRP has accepted the software expenses as revenue in nature amounting to ₹ 5,91,18,868/- by following earlier years precedence vide Para 16.2.2 as under: -

We find no infirmity in the order of the DRP and hence, we confirm the same. This issue of Revenue’s appeal is dismissed.

This next issue of assessee’s appeal for AY 2012-13 in is as regards to allowability of software expenses. For this, assessee has raised the following ground No. 12: - “Ground No 12. Have erred in not allowing a deduction in respect of the expenditure incurred in relation to computer software amounting to ₹ 9,40,82,972/- as revenue in nature.

We find that this issue is already taken into consideration vide paras 85 to 87 of this order for earlier assessment year i.e. AY 2011-12 of revenue’s appeal. The Ld. Counsel for the assessee as well Ld. DR also not argued because the issue is same and facts and circumstances are also same. The facts and circumstances are exactly identical in the present appeals on this issue, hence, taking a consistent view, we allow this issue of assessee’s appeal in this year also.

The next issue in this appeal of Revenue’s for AY 2011-12 in is as regards to DRP deleting the disallowance of Channel Placement Fee expenses. For this, Revenue has raised the following ground No. 3: - “3. On the facts and circumstances of the case and in law, whether the Hon'ble DRP was justified in directing to delete the disallowance u/s. 40(a)(ia) rws 194J of 'Channel Placement Fees' whereas the Hon'ble ITAT, 'L' Bench, in its order dated 28.03.20 14 in the case of ADIT- (I7)2(2), Mumbai Vs. Viacom

We have heard the rival contentions on this issue and gone through the facts and circumstances of the case. We noted that the DRP has considered this issue and following assessee’s own case of co- ordinate Bench of this Tribunal for AY 2009-10 deleted the disallowance by observing in Para 19.4.1 and 19.4.2 as under: - “19.4.1 The DRP has considered the submissions of the assessee. It has been brought to the notice of DRP that Hon’ble Mumbai Tribunal in assessee’s own case for AY 2009-10 (ITA No. 1414/Mum/2014 and CO No. 72/Mum/2014) has held that there is no requirement to withhold tax at source while making payments of channel placement fees to cable operators/ multi system operators and that with reference to order under section 201(1) and 201 (1A) also the Hon’ble Mumbai Tribunal has decided the channel placement issue in favour of the assessee, been for AY 208-09 and AY 2009-10 (ITA No. 699 & 700/Mum/2012 and CO No. 22/Mum/2012), by upholding the CIT(A)

Since, the issue is covered in earlier years’ decision for AY 2009- 10 in we find no infirmity in the order of CIT(A). Hence, this issue of Revenue’s appeal is dismissed.

This next issue of assessee’s appeal for AY 2012-13 in is as regards to deleting the disallowance of Channel Placement Fee expenses. For this assessee has raised following ground Nos. 14 to 21 as under: - “Ground No 14. Have erred in holding payment of channel placement fees/ carriage fee as process royalty within the meaning of explanation 6 to Section 9(1)(vi) of the Act.

We find that this issue is already taken into consideration vide paras 90 to 92 of this order for earlier assessment year i.e. AY 2011-12 of Revenue’s appeal. The Ld. Counsel for the assessee as well Ld. DR also