ACIT Vs Discovery Networks Asia-Pacific Pte Limited (ITAT Delhi)
Summary: The Delhi Bench of the Income Tax Appellate Tribunal dismissed the Revenue’s appeal against deletion of a penalty levied under section 270A of the Income-tax Act, 1961 for alleged under-reporting of income for AY 2020-21. The assessee, a Singapore tax resident engaged in broadcasting television programmes through TV channels and digital platforms, had an Indian associated enterprise, Discovery Communications India (DCIN), involved in distribution of channels/digital platforms and sale of commercial airtime. The assessee had disclosed its Indian advertisement and distribution receipts but claimed that the receipts were not taxable in India under the India-Singapore DTAA in the absence of a permanent establishment and on the footing that DCIN was remunerated at arm’s length.
In the assessment proceedings, the Assessing Officer treated DCIN as a dependent agent permanent establishment and attributed 10% of gross advertisement revenue to the alleged DAPE. The dispute was subsequently resolved through the Mutual Agreement Procedure (MAP), under which it was mutually agreed that 10% of the net advertisement and distribution revenue, after DCIN’s share, would be taxed as business profits in India. The Assessing Officer thereafter passed an order giving effect to the MAP resolution. Separately, penalty proceedings were initiated under section 270A and penalty of Rs.6,98,28,285/- was imposed for under-reporting of income. The CIT(A) deleted the penalty.
