Case Law Details
Star Television Entertainment Ltd. Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that exclusion of comparables for the reason that those companies are loss making or low profit making is not correct. Accordingly, TPO directed to include these comparables and re-compute the Arm’s Length Price (ALP).
Facts- The assessee is a non resident company and is a tax resident of Hong Kong belonging to the Star Television group of companies.
The case of the assessee was selected for scrutiny and statutory notices were duly served on the assessee. A reference was made to the Transfer Pricing Officer (TPO) in order to determine the arm’s length price of the transactions the assessee has entered into with its Associated Enterprises (AEs). The TPO made an adjustment of R.25,64,77,167/-. AO was of the view that the income arising to the assessee in India out of the non-AE transactions, was out of the purview of TPO and had to be determined by assessing officer. Accordingly he proceeded to compute the income from non-AE transactions at a reasonable percentage of the turnover which is determined at 28%. AO applied the said percentage on the gross turnover in non-AE transactions to make an addition of Rs.215,71,87,007 towards income from non-AE transactions. AO also revised the income from AE transactions to Rs.32,92,61,172 as against the ALP adjustment proposed by the TPO.
In addition AO also made an addition of Rs.42,55,32,513/- towards capital gains on transfer of channel “Star World” to “Star International Movies Ltd”, a Hong Kong based company. Aggrieved, the assessee filed its objections before the Dispute Resolution Panel (DRP), who confirmed the TPO adjustment as well as the addition made by AO.
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