INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Determination of ALP - Selection of comparables - Functional dissimilarity

Assessee was engaged in distribution of subscription rights of satellite channels of Cartoon Network, WB, CNN, POGO and HBO. Also assessee was engaged in imports, promotion marketing, distribution and provision of sub-distribution rights to cable and broadcast entities. It entered into transactions with its AE abroad such as purchase of distribution and advertisement rights and provision of support and production services, etc. Assessee aggregated international transactions mentioned above, under 'distribution segment'. TPO rejected set of companies engaged in distribution of software selected by assessee in its TP documentation for the reason that comparable companies identified by assessee were not functionally similar to distribution activity undertaken by the assessee. TPO considered seven companies, namely, Malayalam Communications Ltd., Raj Television Network Ltd., TV Today Network Ltd. and Zee Media Corporation Ltd. as comparable to assessee's case.Held: Functionality of distribution and production activities which were, in fact, independent had to be separately benchmarked and these two activities could not be mixed up for distorting functionality and justifying selection of channel owner companies such as Malayalam Communications Ltd., Raj Television Network Ltd., TV Today Network Ltd. and Zee Media Corporation Ltd., therefore, same were excluded.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13 & 2009-10

INCOME TAX ACT, 1961

Section 92C

SUBSCRIBE FOR FULL CONTENT