Case nº A.A.R. Nos. 1083 of 2011 of Authority for Advance Rulings, December 13, 2013 (case Endemol India Private Limited applicant Vs Commissioner of Income Tax-XI)
| Judge | For Appellant: Mr. Rajan R. Vora, C.A., SRBC & Associates, Mr. Ashish Gupta, Endemol India, Mumbai Mr. Sachin Shah, C.A., SRBC & Associates Mr. Aditya Modani, C.A. and Ms Priyanka Minawala and For Respondents: Mr. R.S. Rawal, CIT- DR, AAR and Mr. Rajkumar, ACIT-II(1) |
| President | Arijit Pasayat, J. (Chairman) and T.B.C. Rozara, Member |
| Resolution Date | December 13, 2013 |
Order:
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The applicant M/s. Endemol India Private Limited (EIPL) is a resident company incorporated under the Companies Act, 1956. It is engaged in the business of providing and distributing television programmes. It mainly produces reality shows and has also ventured lately into soap operas. The company started its operation in 2006 with the non-fiction format show Big Boss (Big Brother) and has also other reality shows in India such as Fear Factor - Khatron Ke Khiladi etc. During the financial year 2010-11 the applicant had produced the reality show 'Wipe Out' ('the show') which was aired by Viacom 18 Media Private Limited on Imagine TV. As per the format of the show the shooting was to take place outside India (primarily in Argentina). For the purpose of show the programme outside India the applicant has engaged Endemol Argentina SA (Endemol ARG) for providing line production services in Argentina and for that purpose an agreement in the form of DEAL MEMO for production services agreement was entered into. Endemol ARG is a company incorporated in Argentina and is a tax resident of Argentina. The applicant makes payment to Endemol ARG for the services rendered in Argentina.
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Based on the facts and circumstances of the case, the applicant seeks ruling from the Authority for Advance Rulings on the following questions:--
1) Whether the payments made by the Applicant towards line production services provided by Endemol ARG in accordance with the agreement entered into with the Applicant is in the nature of Fees for Technical services ('FTS') within the meaning of the term in Explanation 2 to clause (vii) of section 9(1) of the Act?
2) Whether the payments made by the Applicant to Endemol ARG in respect of provision of equipment and services are in the nature of 'Royalty' within the meaning of the term in Explanation 2 to clause (vi) of section 9(1) of the Act?
3) If the answer to Question (1) or (2) is not in the affirmative, whether the payments made by the Applicant to Endemol ARG for availing the line production services under the terms of the Agreement would be charged to tax as per the provisions of section 9(1)(i) of the Act?
4) Based on the above, would the receipts by Endemol ARG from the Applicant suffer withholding tax under section 195 of the Act, and at what rate?
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The application was admitted under section 245R(2) of the Income-tax Act, 1961 (in short the Act) and while admitting the application the Authority reserved for consideration the question whether the transaction is designed for avoidance of tax in India. The applicant was also directed to take out notice of the application alongwith the admission order and copy itself to Endemol ARG to file an affidavit confirming service of such notice on Endemol ARG. A No Objection Certificate from Endemol ARG was accordingly filed and placed on record.
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Main submission of the applicant is that the payment made by the applicant to Endemol ARG for line production services under the terms of the agreement do not fall within the purview of "Fees for Technical Services (in short FTS) as per Explanation 2 to section 9(1)(vii) of the Act or royalty as per Explanation 2 to section 9(1)(vi) of the Act. It was contended that the services provided by Endemol ARG were administrative and logistical services and relate to the show...
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