Warner Media India Pvt. Ltd. Vs ACIT (ITAT Delhi)
ITAT Delhi held that companies owning and operating channels cannot be compared with distribution company for the purpose of transfer pricing. Accordingly, directs TPO to exclude such comparables for benchmarking distribution segment and determination of ALP.
Facts- The present appeal is preferred by the appellant. It is mainly contested that the seven comparables selected namely Vision Corporation Ltd., News 24 Broadcast India Ltd, TV Vision Ltd, Enter 10 Television Pvt. Ltd, Malayalam Communications Pvt. Ltd, Odisha Television Ltd. and TV Today Network Ltd. are functionally different.
AO held that there was little difference between these comparables being “channel owner” and the risk assumed by the assessee while distribution of such channels.
Conclusion- Held that the issue in appeal is decided in favour of the assessee by the Tribunal for AY 2006-07. The said order was affirmed by the High Court observing that So far as production activity is concern, the same has been found at arm’s length by the TPO and once these are two different segments then there is no justification to mix up the functions of such ancillary activities with that of distribution activity so as to justify selection of such channel/content owner companies, especially when transaction from such ancillary services constitutes only 4% of the value of the international transaction of the assessee. Apart from that, the assessee is providing these services as a captive service provider for which it is remunerated separately and ALP of such transaction is not in dispute. Accordingly, we reject the DRPs and TPO action for mixing the functionality of distribution and production activities which are in fact independent and also separately benchmarked. We are in tandem with the contention of the learned counsel that these two activities cannot Sun TV be mixed up for distorting, the functionality and justifying the selection of channel owner companies. Thus, we hold that the seven comparable companies.
