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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Chandra Poojari, AM & Shri George George K, JM
Per Bench :
All these appeals are filed by the assessee. Appeals ITA Nos.606 to 610/Coch/2010 are directed against different orders of the CIT(A) dated 24.09.2010 passed u/s 201(1) and 201(1A) of the Income-tax Act, 1961 relating to assessment years 2004-2005 to 2008-2009, and appeals in ITA Nos.611 to 615/Coch/2010 are directed against different orders of the CIT(A) dated 24.09.2010 passed u/s 271C of the I.T.Act, for assessment years 2004-2005 to 2008-2009.
ITA No.606/Coch/2010 & Ors. 2 M/s.Jeevan Telecasting Corporation Ltd.
Originally these appeals were came up for hearing before this Tribunal and the Tribunal vide order dated 10.02.2011, passed a common order observing as follows:-
“5. We have heard rival submissions and perused the materials available on record. Section 201(1) spells out the consequences of failure to deduct or pay the tax. Section 201(1A) enables the Assessing Officer to charge interest as simple interest on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. The ld.Counsel for the assessee while advancing his arguments relied on the decision o the Hon’ble Supreme Court in the case of CIT v. Eli Lilly and Co. (India) P Ltd. (2009) 312 ITR 225 wherein the Hon’ble Supreme Court in the last page of its order at page 253 held as under:-
We are directing the Assessing Officer to examine each case to ascertain whether the employee-assessee (recipient) has paid the tax due on the home salary/ special allowance(s) received from the foreign company. In case taxes due on home salary/special allowance(s) stand paid then the Assessing Officer shall not proceed under section 201(1). In cases where the tax has not been paid, the Assessing Officer shall proceed under section 201(1) to recover the shortfall in the payment of tax. Similarly, in each of the 104 appeals, the Assessing Officer shall examine and find out whether interest has been paid/recovered for the period between the date on which tax was deductible till the date on which the tax was actually paid. If, in any case, interest accrues for the aforestated period and if it is not paid then the adjudicating authority shall take steps to recover interest for the aforestated period under section 201(1A). For the reasons mentioned hereinabove, however, no penalty proceedings under section 271C shall be taken in any of these cases as the issue involved was a nascent issue. Accordingly, we quash the penalty proceedings under section 271C.
Further, the ld.,Counsel for the assessee relied upon one more decision of the Hon’ble Supreme Court in the case of CIT v. Bharti Cellular Ltd. (2010) 234 CTR 146 which is on the TDS u/s 194J wherein also the Apex Court observed at para 10 that :
Accordingly, we are directing the AO(TDS) in each of these cases to examine a technical expert from the side of the Department and to decide the matter within a period of four months. Such expert(s) will
ITA No.606/Coch/2010 & Ors. 3 M/s.Jeevan Telecasting Corporation Ltd. be examined (including cross-examined) within a period of four weeks R from the date of receipt of the order of this Court. Liberty is also R given to respondent No. 1 to examine its expert and to adduce any other evidence.
Further, their Lordships directed the CBDT to issue directions to its Officers, as envisaged in para 11 of its order at page 150 of the said decision. The observation of the Hon'ble Apex Court has to be followed at the level of the Assessing Officer and the Assessing Officer has to verify the same whether under the given set of facts and circumstances the assessee can be treated as assessee in default. Accordingly we set aside the impugned orders of the income-tax authorities and remit the matter back to the' file of the Assessing Officer to decide the issue afresh in the light of above observations. While doing so, the Assessing Officer may keep in mind the decision of the Hon'ble Supreme Court in the case of Transmission Corporation of A.P.Ltd. vs. CIT - 239 ITR 587. It is needless to mention that the assessee should be afforded adequate opportunity of being heard.
Coming to the penalty levied u/s.271C for the very same assessment years, i.e. assessment years 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09, as we have set aside the orders of the authorities u/s.201(1) and 201(1A), the levy of penalty u/s.271C should also go back to the file of the Assessing Officer for proper adjudication as this is consequential and only to be taken after the decision in the quantum appeal u/s.201(1) and 201(1A) for the relevant assessment years. Accordingly the impugned orders of the Assessing Officer as well as the Id. CIT(Appeals) are set aside and remitted back to Assessing Officer for proper adjudication on merits, after giving reasonable opportunity of being heard to the assessee.”
Against this, the Department went in appeal before the Hon’ble High Court. The Hon’ble High Court in ITA No.100 to 112 of 2011 vide its judgment dated 10th August, 2018 considered the following issues for adjudication as follows:-
ITA No.606/Coch/2010 & Ors. 4 M/s.Jeevan Telecasting Corporation Ltd. “2. ITA Nos .100, 104, 105, 106 and 107 of 2011 arise from the orders passed under sub-Sections (1) and (lA) of Section 201 of the Income Tax Act, 1961 ('Act' for short). ITA Nos.108, 109, 110, 111 and 112 of 2011 arise from the orders of penalty passed under Section 271C of the Act. The allegation against the assessee was with respect to there being no deduction of tax at source on the various transactions entered into by the assessee in the said years as also delay in payment of Tax Deducted at Source (TDS) in certain instances. The transactions on which the allegations were raised were five in number:
(1) Tax deductions to be made from the payment against contracts, commission, rent, salary, professional and consultancy charges not deposited or deposited late for the aforesaid years.
(2) Tax deduction under Section 194J as against payment of uplink charges.
(3) Tax deduction under Section 194J from payment of backhaul link usage charges.
(4) Tax deduction on equipment hire charges and
(5) Tax deducted on camera rental payments.
The Tribunal followed the directions of the Honourable Supreme court in (2009) 312 ITR 225 (SC) [Commissioner of Income Tax v. Eli Lilly And Co. (India) P. Ltd.] and 2010 (234) CTR(SC) 146 [Commissioner of Income Tax v. Bharati Cellular Ltd.]. The Honourable Supreme court had in Eli Lilly (surpa) directed the AO to examine and find out whether interest has been paid or recovered for the period between the date on which tax was deductib1e ti11 the date on which the tax was actually paid. The Tribunal hence directed the AO in the present case also so to do, on the question of tax deduction as raised under issues (1), (4) and (5). On the question of the tax deduction under Section 194J, the direction in Bharati cellular Ltd. (supra) was followed insofar as directing examination of a
ITA No.606/Coch/2010 & Ors. 5 M/s.Jeevan Telecasting Corporation Ltd. technical expert to ascertain as to whether there is a human intervention which alone could lead to the TDS being deducted as has been laid down in Bharati cellular Ltd. (supra).
The learned standing counsel, Government of Indi a (Taxes) appearing for the Revenue would submit that the Tribunal ought not to have issued such directions as issued by the Honourab1e Supreme Court. The Tribunal ought to have first examined whether the facts and 1aw apply and only then could have directed the AO to make an enquiry. It is pointed out that Eli Lilly (supra) arises in a totally different context where there was a dispute as to whether the home salary received by foreigners in their home State in foreign currency was assessable to tax within India as income arising in India. There was a bona fide dispute raised for the first time on which dispute the Honourable Supreme Court answered finally by the above decision and in that context directed an enquiry into the payment of tax by the employee itself. This cannot have any application to the facts of the present case is the submission. On the question of deduction under Section 194J, it is the submission that the Tribunal itself could have examined the expert and there was no requirement for a remand to the AO.
We cannot but observe that the Tri buna1 being the fact finding authority ought to have looked into facts without making a remand on the basis of the directions issued by the Honourable Supreme Court. The Tribunal being a creature of the statute, cannot adopt the directions issued by the Honourab1e supreme Court without looking into the distinction on facts, on which the directions were issued as against the facts available in the case before it. The Honourable Supreme Court's powers to issue directions cannot be assumed by the Tribunal to issue directions in a similar manner. In any event, we notice that the issues could be dealt with by the Tribunal itself.
ITA No.606/Coch/2010 & Ors. 6 M/s.Jeevan Telecasting Corporation Ltd. 6. Eli Lilly (supra) was a case in which the question arose as to whether the employees of the foreign company deputed to an Indian company are liable to tax for the amounts received as salary from the foreign company paid in their home country, which was termed as home salary by the Hon'ble supreme Court. The first question to be decided was whether there was any liability on such expatriates; who were at the time residing and working in Indi a, for the amounts they received outside the country . The Honourab1e supreme Court found that Section 9(1)(ii) speaks of tax 1iabi1ity on the amount accrued within India and the test to be applied is whether the payments of home salary paid abroad by the foreign Company to the expatriates had any connection or nexus with his rendition of service in India. On facts, it was found that expatriates were working within India for the Indian Company in the said period and were not at all discharging any duties for the foreign Company. On reading Sections 9(1)(ii) and 5(2)(b) it was held that income which falls under the head salaries, if it is deemed to accrue or arise in India, the same would be taxable even if it is paid to the expatriates at their home country in foreign currency. The Honourable Supreme Court had also noticed that therein the recipient of salary was clearly identifiable and in such circumstances, there was a direction issued to the AO to verify whether they had satisfied the tax even with respect to their home salary, in which event, the assessee was found to have been absolved from the liability. We cannot but observe that this decision was on the peculiar facts and cannot apply across the board with respect to all instances of failure to deduct and pay to the Government TDS.
We observe so especially 1ooking at the decision of the Honourable Supreme court in Eli Lilly (supra) and the caveat made, at the outset itself, as herein below: "At the outset, we wish to clarify that our judgment is confined strictly to the question of deductibility of tax from the income chargeable under the head "salaries" under section 192(1). This introduction is important
ITA No.606/Coch/2010 & Ors. 7 M/s.Jeevan Telecasting Corporation Ltd. for the reason that unlike other sections in chapter XVII-8 regulating deduction of tax at source out of other payments, section 192 requires such deduction on "estimated income" chargeable under the head "Salary" and at the time of payment of salary." (sic- para22)
It is in this context that the Honourable Supreme Court dealt with the scope of sections 201(1) and 201(1A) finding the liability to be a vicarious liability especially noticing the master-servant relationship insofar as the assessee company and the recipient of salary. We are unable to find a broad application of the principles laid down therein to every instance of failure to deduct tax at source. The decision on the scope of section 271C was also rendered on the peculiar facts arising therein, which was stated so:-
"The concept of aggregation or consolidation of the entire income chargeable under the head "salaries" being exigible to deduction of tax at source under section 192 was a nascent issue. It has not been considered by this court before. Further, in most of these cases, the tax deductor-assessee has not claimed deduction under section 40(a)(iii) in computation of its business income. This is one more reason for not imposing penalty under section 271C because by not claiming deduction under section 40(a)(iii), in some cases, higher corporate tax has been paid to the extent of Rs.906.52 lakhs."(sic-para 36)
The said principle on which the penalty under section 271C was avoided, would also not apply in the present case. In the circumstances, we are not convinced that there could be any remand, by the Tribunal, as has been made by the Honourable Supreme Court in Eli Lilly (supra).
The further directions in the order of the Tribunal was relying upon Bharati Cellular Ltd.
ITA No.606/Coch/2010 & Ors. 8 M/s.Jeevan Telecasting Corporation Ltd. (supra) wherein the Honourable Supreme Court had dealt with the cellular services provided, wherein there was no human intervention, there could be no fee for technical services was the specific finding. This also could be looked into by the Tribunal on examination of evidence as adduced by the assessee.
On the question of hire and rental charges, the learned Senior Counsel points out that the rent on machinery or plant or equipment was introduced first with the Finance Act, 2007 with effect from 1.6.2007. Hence we are of the opinion that between financial years 2003-04 to 2006-07, there can be no allegation raised of failure to deduct tax at source. For the hire charges and the rental charges are concerned, the issue assumes relevance only for the financial year 2007-08 which has to be looked at.
On the question of TDS, the learned Senior Counsel also has a case that even before the present amendment bringing in the proviso to section 201(1) there was a circular issued by the Central Board of Direct Taxes, which was referred to by the Honourable Supreme Court in (2007) 293 ITR 226 (SC) [Hindustan Coca Cola Beverage P.Ltd. v. Commissioner of Income Tax]. The relevant paragraph is quoted hereunder:-
"Be that as it may, circular No. 275/ 201/95-IT(B) dated January 29, 1997, issued by the central Board of Direct Taxes, in our considered opinion, should put an end to the controversy. The circular dec1ares "no demand visualized under section 201(1) of the Income-tax Act shou1 d be enforced after the tax deductor has satisfied the officer-in-charge of TDS, that taxes due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest under section 201(IA) of the Act ti1 the date of payment of taxes by the deductee-assessee or the liability for penalty under Section 271c of the Income-tax Act."
ITA No.606/Coch/2010 & Ors. 9 M/s.Jeevan Telecasting Corporation Ltd. 11. On the tax deduction from payment of contracts, commission, rent, salary, professional and consultancy charges for the financial years 2003-04 to 2007-08, the assessee shall produce sufficient evidence before the Tribunal as has been laid down in Circular No.275/201/95-IT(B) dated 29.1.1997. The Tribunal shall look into it and after verification, pass appropriate orders as per the directions of the Hon’ble Supreme Court in Hindustan Coca Cola Beverage P.Ltd. (supra).
With respect to the payments of uplink charges and backhaul link usage charges, the Tribunal shall examine an expert as produced by the assessee and the Department shall be permitted to cross examine the expert as also produce any further evidence or witnesses on their behalf. The issue shall be decided on the basis of the decision in Bharati Cellular Ltd. (supra). It is made clear that there can be no liability on hire charges and camera rental payments for the financial years 2003-04 to 2006-07. The order of the AO as confirmed by the appellate authority is deleted for the said years. The Tribunal shall pass appropriate orders as pr the directions issued. The income Tax Appeals are remanded for fresh consideration as per the directions hereinabove.
The rental charges and hire or equipment charges shall be sustained only for the financial year 2007-08, the assessment year of which is 2008-09. However, the assessee shall be given an opportunity to produce sufficient evidence as per the circular aforementioned on which appropriate orders shall be passed on the liability of the assessee.
The Income Tax Appeals are partly allowed and remanded with the above directions. No order as to costs.”
Hence, these appeals were once again heard and disposed of by this common order as under:
ITA No.606/Coch/2010 & Ors. 10 M/s.Jeevan Telecasting Corporation Ltd. 5. The first issue for our consideration is whether the tax deductions to be made from the payment against contracts, commission, rent, salary, professional and consultancy charges not deposited or deposited late for the aforesaid years.
The Hon’ble High Court observed in paragraph 11, on this issue, as follows:-
“11. On the tax deduction from payment of contracts, commission, rent, salary, professional and consultancy charges for the financial years 2003-04 to 2007-08, the assessee shall produce sufficient evidence before the Tribunal as has been laid down in Circular No.275/201/95-IT(B) dated 29.1.1997. The Tribunal shall look into it and after verification, pass appropriate orders as per the directions of the Hon’ble Supreme Court in Hindustan Coca Cola Beverage P.Ltd. (supra).”
Before us, the assessee has submitted that the assessee itself has paid the deducted TDS to the Government account, as such there is no impact of Circular cited supra. Our attention was also drawn the details of TDS remitted to the Government account, which is placed at paper book page No.38 filed by the assessee. In our opinion, this requires examination by the A.O. Hence, for the limited purpose of examining of details of TDS remittance on the above components, we remit the issue to the file of the Assessing Officer for his consideration. It is ordered accordingly.
The next issue for our consideration is with regard to the tax deduction u/s 194J as against payment of uplink charges and backhaul link usage charges.
ITA No.606/Coch/2010 & Ors. 11 M/s.Jeevan Telecasting Corporation Ltd.
On these issues the Hon’ble High Court has observed as follows:-
“12. With respect to the payments of uplink charges and backhaul link usage charges, the Tribunal shall examine an expert as produced by the assessee and the Department shall be permitted to cross examine the expert as also produce any further evidence or witnesses on their behalf. The issue shall be decided on the basis of the decision in Bharati Cellular Ltd. (supra). It is made clear that there can be no liability on hire charges and camera rental payments for the financial years 2003-04 to 2006-07. The order of the AO as confirmed by the appellate authority is deleted for the said years. The Tribunal shall pass appropriate orders as pr the directions issued. The income Tax Appeals are remanded for fresh consideration as per the directions hereinabove.”
On this issue, the learned AR submitted as follows:-
(i) The above appeals arises pursuant to the judgment of the Hon. High Court of Kerala in ITA No. 100, 104, l05, 106, 107, 108, 1'09, 110, 111 and 112 of 2011 dated 10th August 2018, as per which the Hon. High Court has restored the matter to this Hon. Tribunal.
(ii) ITA Nos. 100, 104, l03, 106 and 107 of 2011 relates to the orders under sub sections (1) and (lA) of section 201 of the Income Tax Act and ITNs 108,109,110, 111 and 112 of 2011 arise from the orders of penalty u/s.271 C. The assessment years involved are 2004-05, 2005-06, 2006-07, 2007 -08 and 2008-09. A copy of the High Court order, in ITA No.l05/2011 dated 10th day of August 2018, which is similar for all the above years is at pages 1 to 14 of the Paper Book
ITA No.606/Coch/2010 & Ors. 12 M/s.Jeevan Telecasting Corporation Ltd. 2. The findings of the Hon. High Court, in respect of the remand made by the Hon. Tribunal in its order in ITA No. 606 to 610/COCH/2010 dated 10th February 2011, can be seen from para 5 to 7 of the High Court order. Copy of the Tribunal order is at pages 15 to 22 of the Paper Book.
It is the observation of the Hon. High Court, please see para 5 at page 4 of the High Court order (running page 5), the Tribunal ought to have looked into the facts before making a remand by adopting the principles in the case of CIT Vs. Eli Lilly & Co. as reported in 312 ITR 225 (SC).
As per para 8 of the order of the Hon. High Court at page 8 (running page 9) it was further observed that Tribunal ought to have looked into by examination of the evidence adduced by the assessee as to whether any human intervention was involved in respect of fees for technical services and if there was no such human intervention, there could be no fees for technical services.
In para 9, at page 8 (running page 9), the Hon. High Court, on the issue of Hire and Rental charges paid, observes that TDS on Hire and Rental charges on machinery or plant or equipment, being introduced by Finance Act 2007, with effect from 01-06-2007, would be applicable only for the financial year 2007-08.
As per para 10 of the order of the Hon. High Court, at page 10 of the Paper Book, reference is made to Circular No.275/201/95-IT (B) dated 29- 01-1997. As per the extract from the said circular referred to by the Hon. Supreme Court, "No demand visualized under section 201(1) of the Income Tax Act should be enforced after the Tax deductor has satisfied the Officer in charge of TDS, that taxes due have been paid by the deductee assessee. However this will not alter the liability to charge interest under section 201 (lA) of the Act till the date of payment of taxes by the deductee
ITA No.606/Coch/2010 & Ors. 13 M/s.Jeevan Telecasting Corporation Ltd. assessee or the liability for penalty under section 271 C of the Income Tax Act".
Hence, as per the directions of the Hon. High Court, the assessee has to prove before this Hon. Tribunal that
(i) The deductees have paid the tax in respect of the payments made to them by the assessee.
(ii) Whether the payments in respect to Backhaul charges and Uplink charges involve any human intervention in view of the decision of the Hon. Supreme Court in the case of Bharati Cellular Ltd. and to produce any further evidence in this behalf. The further direction is to examine an expert as produced by the assessee and the department shall be permitted to cross examine the said expert
(iii) Remittance of TDS on Equipment Hire charges from FY 2007-08.
(i) As per the assessment order u/s.201(1)/201(1A) dated 25-08-2008, which is a common order for all the years referred to above, the summary of TDS defaults are narrated at para 10 of the order. Copy of the order is at pages 23 to 37 of the Paper Book. Please refer running page 24 and 25.
(ii) As regards payments relating to Contracts, Commission, Rent, Salary and Professional & Consultancy charges, please refer para 11 of the High Court order at page 9 (running page 10 of the Paper Book) the direction is that the assessee shall produce sufficient evidence before the Tribunal as laid down in circular No.275/201/95-IT(B) dated 29/01/1997.
However it is submitted that the assessee has made good the default as per the assessment order by remitting the tax dues along with interest.
ITA No.606/Coch/2010 & Ors. 14 M/s.Jeevan Telecasting Corporation Ltd.
(iii) The default in respect of contract, commission, fees, rent and salary, professional & Consultancy fees is worked out as per Annexure I to the order which is at pages 27 to 28 of the Paper book.
Asst.Year Balance Tax & Interest as Amount paid Date of per assessment order payment 2003-04 Interest Rs.18,267 Interest Rs.18,267 27.01.2009 2004-05 Tax Rs.3,77,434 Tax Rs.3,77,434 27.01.2009 Interest Rs.1,91,516 Interest Rs.2,02,853 Total Rs.5,68,950 Total Rs.5,80,287 2005-06 Tax Rs.2,79,926 Tax Rs.4,15,203 As per schedule Interest Rs.96,719 Interest Rs.85,560 Total Rs.3,76,645 Total Rs.5,03,763 2006-07 Tax Rs.1,70,040 Tax Rs.1,70,040 As per schedule Interest Rs.85,560 Interest Rs.78,436 Total Rs.2,55,600 Total Rs.2,48,476 2007-08 Tax Rs.6,53,707 Tax 6,53,707 As per schedule Interest Rs.39,080 Interest Rs.45,361 Total Rs.6,92,787 Total Rs.6,99,068
As against the total tax of Rs.14,81,107/- and interest of Rs.4,31,142/- as per the assessment order the assessee has remitted Rs.16,16,384/- as tax and Rs.4,33,477/- as interest in respect of the dues for the above years as per the challan Nos noted against each and on the dates mentioned therein. Please see Schedule of Arrears of TDS Remittance at page 38 of the Paper Book. The relevant challans can be produced for verification. The said payments are certified by the Director which is at page 39 of the Paper Book.
(i) As per the assessment order, for the assessment year 2006-07 an amount of Rs.6,73,200/- is determined as tax due u/s.201(1) and interest of Rs.l,44,695/- u/s.201(lA) relating to Equipment hire. As per para 13 of the High Court order, Equipment hire charges shall be sustained only for the financial year 2007-08 relevant to the assessment year 2008-09. Please also refer to para 9 of the High Court order as per which rent on equipment assumes relevance only for the financial
ITA No.606/Coch/2010 & Ors. 15 M/s.Jeevan Telecasting Corporation Ltd. year 2007-08 since it was introduced by Finance Act 2007.
(ii) Hence it is submitted that the tax and interest liability worked out for the assessment year 2006- 07 of Rs.8,17,895/- (Rs.6,73,200/-+Rs.l,44,695/-) on Equipment Hire may kindly be directed to be deleted. Please see Annexure 4 to the assessment order at page 35 of the Paper Book.
(iii) For the financial year 2007-08 TDS on Equipment rent of Rs.l,21,128/- and interest thereon of Rs.9,690/- totaling to Rs.l,30,818/- is paid as per challan No.l0 of SBT on 13/12/2008. The Equipment on hire was from Bharati Airtel. Kindly see running page 48 of the Paper Book.
(iv) However as per assessment order the tax demand on Equipment and Camera rentals for the FY 2007-08 is worked out at Rs.4,65,785/- (Rs.4,43,640/-+ Rs.22,145/-) and interest thereon at Rs.51,471/- (Rs.50,218/- + Rs.l,253/-). Please see Annexure 4 & 5 of the assessment order at running page 35 & 36. It is submitted that dues in this respect, if not paid, will be paid or may be adjusted from the tax demanded and paid of Rs.8,17,895/- for the year 2006-07.
(i) As per the assessment order, Backhaul charges and Uplinking charges have been assessed for levy of TDS u/s.201(1) and interest u/s.201(lA). Kindly see Annexure 2 & 3 of the assessment order. Uplink charges is as per Annexure 2 which is at pages 29 to 31 of the Paper Book and Backhaul charges are as per Annexure 3 which are at pages 32 to 34 of the Paper Book.
(ii) As per para 8 of the High Court order, relying on the decision of the Hon.Supreme Court in Bharati Cellular Ltd. as reported in 234 CTR 146, it was found that "If there was no such human intervention, there could be no fees for technical services was the specific finding". This could also be
ITA No.606/Coch/2010 & Ors. 16 M/s.Jeevan Telecasting Corporation Ltd. looked into by the Tribunal on examination of evidence as adduced by the assessee. Further in para 12 of the High Court order it is stated that (please see running page 11)
'With respect to the payment of Uplink charges and Backhaul link usage charges the Tribunal shall examine an expert as produced by the assessee and the department shall be permitted to cross examine the expert as also produce any further evidence or witnesses on their behalf. The issue shall be decided on the basis of the decision in Bharati Cellular Ltd." Copy of the decision is at pages 50 to 51 of the Paper Book. (iii) Backhaul charges and Uplink charges: Backhaul: (a) This is a process whereby the content prepared at a studio is transmitted to a point from where it can be distributed over a network. (b) The transmission is through fibre cable or though satellite (c) In the case of the assessee the content prepared at Jeevan Telecasting Corporation, Palarivattom is transmitted to the receiver at Asianet, Puliyarakkonam, Trivandrum. Uplink: (a) Uplinking is a process whereby the content in Video or Audio signal received via backhaul is transmitted to the Uplink Antenna through a process of Compression Encoder and Modulator to an Up Convertor and thereon vide High Power Amplifier (HPA). (iv) It can be seen that once the content, either in audio or video form, is uploaded from the site of [eevan Telecasting Corporation, the entire process is through cables, electromagnetic waves, satellite and other sophisticated equipments. There is absolutely no human intervention at any point through Backhaul to Uplink or till the final receipt of the said content on the subscribers TV screen.
ITA No.606/Coch/2010 & Ors. 17 M/s.Jeevan Telecasting Corporation Ltd. (v) As per the decision of the Hon. Supreme Court in the case of Bharati Cellular Ltd. technical data and technical assistance are required for a decision in such matters. Accordingly in addition to the technical data comprising of the flow chart which shows the transmission details and diagram of equipments as stated above, and as directed by the Hon. High Court, we are presenting a technical expert in this field Mr. James K Sebastian, Senior Manager-Technical, Quaid Live Media Pvt. Ltd., Ernakulam whose bio data is at page 58 of the Paper Book.He may be permitted to explain the process in detail and subjected to cross examination, if required.
(vi) Hence the provisions of section 194J is not applicable to the payment of Backhaul charges and Uplink charges for the above years.
(vii) As per the assessment order Uplink charges and Backhaul charges have been paid to Asianet Communications Pvt. Ltd., Essel Shyam Communications Ltd., Prerana Consultants Pvt Ltd., Jeevan Satellite Communications Ltd. and Unique Broadcast Details of year wise payment under the above heads is at page 59 of the Paper Book.
Without prejudice to our above submissions that the provisions of section 194J is not applicable, it is submitted that Asianet Communications Pvt Ltd., Essel Shyam Communications Ltd. have confirmed that Backhaullink charges and Uplinking charges received by them from Jeevan Telecasting Corporation Ltd. have been received by them and included in the total income declared by them in the respective assessment years. Copy of the said confirmations are at pages 60 to 64 of the Paper Book.Confirmation from Prerana Consultants Pvt Ltd. is not readily available however the same can be verified with them and their PAN No. is AACCP8227D. As regards Jeevan Satellite Communication it relates to rent Confirmation can be obtained as to whether the same has been
ITA No.606/Coch/2010 & Ors. 18 M/s.Jeevan Telecasting Corporation Ltd. included in the total income. Their PAN No. is AABCJ7379R. In the case of Unique Broadcast the said entity is understood to be not in existence at the given address. Their PAN No. is AMZPK1239J. In any view of the matter, as there is no human intervention, in the stated process, sec. 194J is not applicable. Hence it is submitted that (i) There is no liability under the provisions of section 194 J in respect of payments relating to Backhaul charges and Uplink charges as there is no human intervention in any form. (ii) The deductees, in respect of receipt of Backhaul and Uplink charges have confirmed that they have included the said receipts in their total income in the respective years.
(iii) Assessment on Equipment Hire charges for the years 2006-07 and prior may kindly be directed to be deleted.
The learned AR has also filed an expert opinion, on behalf of the assessee, from Mr.James K.Sebastian, as follows:-
Backhaul and Uplink services are part of the processes in satellite communication. Communication satellites are widely used for television, telephone, radio, internet and military applications. It enables communication between widely separated geographical points. The satellite relays and amplifies radio telecommunications signals via a transponder and it creates a communication channel between a source transmitter and the receiver at different locations on the earth.
Television is a widely used communication channel which enables audio and video communication in a wide range of application especially in news, entertainment, business, sports etc. There are channels that cater exclusively under the above segment and which is viewed world over by a mere selection of a channel of one's taste.
ITA No.606/Coch/2010 & Ors. 19 M/s.Jeevan Telecasting Corporation Ltd. Jeevan Telecasting Corporation Ltd. is such a channel which concentrates mainly on current affairs and news through Malayalam medium targeting the Malayalee population spread around the world.
The programmes referred to above, which is mainly current affairs and news are prepared at the studio owned by Jeevan Telecasting Corporation, at Palarivattom, Cochin. It owns a satellite space like every other TV channel but does not possess the highly automated and expensive equipment to transmit the said programmes, whether live or recorded, to its satellite. Hence like many other TV channels, they also use the equipment and facility owned by the bigger players who owns such equipment and facility, but at a cost. The process of such transmission involves various steps which are narrated hereunder:
Backhaul Service Once the programme is prepared and ready at the studio, the content both video and audio, requires to be transferred to the facilitation centre, in this case that of Asianet Communications located at Puliyarkonam, Trivandrum. This transmission is through fiber or satellite. As such any human intervention ends at this stage once the programme content is played from jeevan tv play out. The said service of transmission to Asianet Communications is known as Backhaul service and this was enabled by Essel Shyam Communications Ltd. through their transmitter.
Uplink service Once the programme content is backhauled and received at Asianet Communications, the process of Uplink commences. The programme is then transmitted through the uplink chain which involves.
(i) Compression For encoding the content (ii) Modulator To modulate the video and audit to an intermediate frequency (iii) Up convertor To convert the frequency intermediate to desired
ITA No.606/Coch/2010 & Ors. 20 M/s.Jeevan Telecasting Corporation Ltd. satellite signal frequency. (iv) High Power Amplifier To boost the signal with sufficient power to reach the satellite. (v) Wave Guide To carry the electromagnetic waves to the Antenna. (vi) Uplink Antenna Which transmit the waves to INSAT 2 E, the satellite in which space is owned by Jeevan Telecasting Corporation , to uplink the signal.
In a live schedule all these processes happens in less than a second and there is no buffer from the time the programme is backhauled, uplinked and then downlinked to reach the viewer on their independent television screens. It is also same in the case of a recorded programme, which once when backhauled is uplinked and aired at the fixed time slot scheduled for viewing the programme.
As such it is confirmed that from the point of backhaul through uplink and downlink there is no human intervention in any form. It is a completely automated process.
On the other hand, the learned Departmental Representative, on this issue, submitted as follows:-
In this case the ITO(TDS) treated payment made by the assessee to Prerna Consultants, Essel Shyam Communications, Asianet Sattelite Telecommunications etc towards back haul charges and uplinking charges as falling under 194J (TDS @lO%) and not under sec 194C (TDS @ 2%) as claimed by the assessee. The Kerala High Court held relying on the decision of hon SC in Bharti Cellular as reported in 234 CTR 146 that if there is no human intervention, there could be no fee for technical services. The HC also held that the Tribunal shall examine an expert as produced by the assessee and the
ITA No.606/Coch/2010 & Ors. 21 M/s.Jeevan Telecasting Corporation Ltd. dept shall be permitted to cross examine the expert as also produce any further evidence or witnesses on their behalf. The expert who appeared explained that Back Haul charges are paid by the assessee to service providers like Asianet and Prerna Consultants. Back haul is a process by which the content prepared by the studio is transmitted to a point from where it can be distributed over a network. Transmission can be through cable or satellite. The content prepared at Jeevan Telecasting Corporation, Palarivattom is transmitted to the receiver at Asianet, Puliyarakkonam, Trivandrum. There are two types of back haul services. Where a live football match is happening, video signals are back hauled by optical fibre cable or satellite system to the facility elsewhere. From there it is 'uplinked' to the satellite from where viewers could view the broadcast by receiving it in a 'downlink' from the satellite at their individual terminals. Back hauling is also used to get non live audio and video material to distribution points at the major broad cast news organizations for broadcast. The department produced a qualified person from BSNL to explain. His findings was more or less on similar lines. I would like to add a few more points to clarify things better.
As per the understanding in the context of broadcasting, Back haul refers to uncut programme content that is transmitted point to point to an individual television station or radio station, broad cast network or other receiving entity where it will be integrated into a finished TV show or radio show. The medium used to send the back haul is satellite transmission. Back hauls are also referred to some times as 'clean feeds' in the sense that they lack any of the post production elements that are added to the content like on-screen graphics.
Electronic news gathering, including `live via satellite’ interviews are examples of radio or television content that is back hauled to a station or network before being
ITA No.606/Coch/2010 & Ors. 22 M/s.Jeevan Telecasting Corporation Ltd. made available to the public through that station or network. Back haul capacity can also be leased from another network operator, in which case the other network operator generally selects the technology being used. This could possibly be the back haul charges that are referred to by the assessee.
Up linking charges are payment towards uplinking to the satellite for the purpose of down linking to the earth stations. Both the process of uplinking and back haul charges involve highly sophisticated broad casting equipments with highly advanced technology. To say that they are fully automated and there is no human intervention is not true. To operate these equipments technically skilled personnel are required. Assessee needs to clarify the nature of service provided by Asianet Communications, Essel Shyam communications etc. as to whether they are developing the uncut programmes and finalizing the finished products needs to be looked into. It has to be clarified by the assessee whether there is leasing involved between assessee and these service providers.
The learned Departmental Representative also submitted an export opinion on behalf of the Revenue, as follows:-
(i) Back Haul Service to Jeevan Telecasting Corporation Limited is provided from Kochi to Thiruvananthapuram by M/s.Asianet Satellite Communications Limited / M/s ESSEL SHYAM and Uplink / Down Link to / from Satellite at Thiruvananthapuram by M/s. Asianet Satellite Communications Limited.
(ii) Once the network is established and Connection is provided to M/s Jeevan Telecasting Corporation Limited, no human intervention is required from the provider for uplinking, until a failure in the link is happened, since network is fully automated.
ITA No.606/Coch/2010 & Ors. 23 M/s.Jeevan Telecasting Corporation Ltd. (iii) But there is human involvement required from M/s.Jeevan Telecasting Corporation Limited in preparation of the program.
Conclusion In a condition that Connectivity is established and no failure occurred on any of the links in back haul and Satellite links, no human involvement from the service provider is required from M/s Jeevan Telecasting Corporation for preparation of the program.
We have heard the rival submissions and perused the material on record. In the present case it was observed by the Assessing Officer in his order passed u/s 201(1) and 201(1A) of the I.T.Act that the payment made by the assessee towards uplinking charges and backhauling charges to Asianet Communications Pvt. Ltd., Essel Shyam Communications Ltd. and Prerana Consultants Pvt Ltd. was in the nature of fees for technical services and TDS to be deducted u/s 194J of the Act. The A.O. made this observation without giving any reasons whatsoever in his order, but simply observed that it is in the nature of Satellite uplink charges, such as fees for technical services u/s 194J of the Act. It was explained on behalf of the assessee-company by an expert that the said charges paid to various parties towards transmission of Video or Audio signals through a process of compression for encoding and modulator to up convertor and thereon wide high power amplifier without any human intervention. It is a complete automated process. According to the AR, such charges being paid only for transmitting of data as explained by him as follows:-
ITA No.606/Coch/2010 & Ors. 24 M/s.Jeevan Telecasting Corporation Ltd. Backhaul Service Once the programme is prepared and ready at the studio, the content both video and audio, requires to be transferred to the facilitation centre, in this case that of Asianet Communications located at Puliyarkonam, Trivandrum. This transmission is through fiber or satellite. As such any human intervention ends at this stage once the programme content is played from jeevan tv play out. The said service of transmission to Asianet Communications is known as Backhaul service and this was enabled by Essel Shyam Communications Ltd. through their transmitter.
Uplink service Once the programme content is backhauled and received at Asianet Communications, the process of Uplink commences. The programme is then transmitted through the uplink chain which involves.
(i) Compression For encoding the content (ii) Modulator To modulate the video and audit to an intermediate frequency (iii) Up convertor To convert the frequency intermediate to desired satellite signal frequency. (iv) High Power Amplifier To boost the signal with sufficient power to reach the satellite. (v) Wave Guide To carry the electromagnetic waves to the Antenna. (vi) Uplink Antenna Which transmit the waves to INSAT 2 E, the satellite in which space is owned by Jeevan Telecasting Corporation , to uplink the signal.
In a live schedule all these processes happens in less than a second and there is no buffer from the time the programme is backhauled, uplinked and then downlinked to reach the viewer on their independent
ITA No.606/Coch/2010 & Ors. 25 M/s.Jeevan Telecasting Corporation Ltd. television screens. It is also same in the case of a recorded programme, which once when backhauled is uplinked and aired at the fixed time slot scheduled for viewing the programme.
As such it is confirmed that from the point of backhaul through uplink and downlink there is no human intervention in any form. It is a completely automated process.
14.1 According to him, backhaul services charges and uplink service charges are in no way in the nature of consultancy or fees for technical services. The learned AR has also placed on record the expert opinion, which supports assessee’s explanation that what had been made available by Asianet Communications Pvt. Ltd., Essel Shyam Communications Ltd. and Prerana Consultants Pvt Ltd. whereby Video data were transmitted from assessee’s place to various customers. All the details furnished by the assessee clearly show that the charges paid by the assessee-company to the various parties for backhaul and uplink service charges were not in the nature of fees for technical services as there is no human intervention in rendering these services and the same were paid merely for availing communication facilities for transmitting the data without their being any kind of human intervention from the recipient of payments made by the assessee. As held by the Hon’ble Madras High Court in the case of Skycell Communications Ltd. & Anr. v. DCIT [(2001) 251 ITR 53 (Mad.)] and ITAT Delhi Bench in the case of Expeditors International (India) (P) Ltd. v. Addl.CIT [(2008) 118 TTJ 652 (ITAT-Delhi)] wherein mere payment of fees for use of standard facility provided to all those willing to pay for it does not
ITA No.606/Coch/2010 & Ors. 26 M/s.Jeevan Telecasting Corporation Ltd. amount to the fees having been received for technical services. It was also held that the fact that the service provider had installed the sophisticated technical equipment does not on that score make it provision for technical services. In the case of DCIT v. Panamsat International System Inc. [(2006) 103 TTJ 861 (ITAT-Delhi) the ITAT Delhi Benches has held that the payment of service fees by Broadcaster for use of transponder to transmit these signals and not for the use of any process does not amount to royalty and same cannot be considered and taxed as “fees for technical services”. Keeping in view of these judicial pronouncements sited supra and having regard to the facts of the case and there was no human intervention in availing the services by the assessee from various parties to transmit the data, both, Video and Audio, the payment made by the assessee to various parties cannot be construed as fees for technical services. The expert from the Department side also fairly conceded that there was no human intervention, which is evident from his submissions. Hence, in our opinion there is no question of deduction of TDS u/s 194J of the I.T.Act. Accordingly, we allow the grounds of appeal on both these issues.
The next issues for our consideration are equipment hire charges and TDS on camera rental payments. This issue involved only for the assessment year 2007-2008. The Hon’ble High Court has observed on this issue as under:-
“9. On the question of hire and rental charges, the learned Senior Counsel points out that the rent on
ITA No.606/Coch/2010 & Ors. 27 M/s.Jeevan Telecasting Corporation Ltd. machinery or plant or equipment was introduced first with the Finance Act, 2007 with effect from 1.6.2007. Hence we are of the opinion that between financial years 2003-04 to 2006-07, there can be no allegation raised of failure to deduct tax at source. For the hire charges and the rental charges are concerned, the issue assumes relevance only for the financial year 2007-08 which has to be looked at.
On the question of TDS, the learned Senior Counsel also has a case that even before the present amendment bringing in the proviso to section 201(1) there was a circular issued by the Central Board of Direct Taxes, which was referred to by the Honourable Supreme Court in (2007) 293 ITR 226 (SC) [Hindustan Coca Cola Beverage P.Ltd. v. Commissioner of Income Tax]. The relevant paragraph is quoted hereunder:-
"Be that as it may, circular No. 275/201 /95-IT (B) dated January 29, 1997, issued by the central Board of Direct Taxes, in our considered opinion, should put an end to the controversy. The circular dec1ares "no demand visualized under section 201(1) of the Income-tax Act shou1 d be enforced after the tax deductor has satisfied the officer-in-charge of TDS, that taxes due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest under section 201(IA) of the Act ti1 the date of payment of taxes by the deductee-assessee or the liability for penalty under Section 271c of the Income-tax Act." 16. We have heard both the parties on these issues. The Hon’ble High Court has remitted the issue for our consideration. The learned AR submitted before us that on this count also the assessee has remitted the TDS to the Government account. Therefore, we remit this issue to the Assessing Officer to examine the details of payment of remittance of TDS by the assessee. It is ordered accordingly.
ITA No.606/Coch/2010 & Ors. 28 M/s.Jeevan Telecasting Corporation Ltd.
The appeals in ITA No.611 to 615/Coch/2010 are with regard to sustenance of penalty u/s 271C of the I.T.Act. Since we have deleted the addition or remitted the issue to the file of the Assessing Officer in respect of orders passed u/s 201(1) and 201(1A) of the I.T.Act, as such the penalty orders are not surviving under these sections. Hence, at this stage the assessee cannot be held as assessee in default to levy penalty u/s 271C of the I.T.Act. Accordingly, these appeals filed by the assessee are allowed.
In the result, ITA Nos.606 to 610/Coch/2010 are partly allowed and ITA Nos. 611 to 615/Coch/2010 are allowed. Order pronounced on this 25th day of September, 2019.
Sd/- Sd/- (George George K) (Chandra Poojari) JUDICIAL MEMBER ACCOUNTANT MEMBER
Cochin ; Dated : 25th September, 2019. Devdas*
Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT (Appeals)-III, Kochi. 4. The CIT (TDS) Kochi. 5. DR, ITAT, Cochin 6. Guard file.
BY ORDER,
(Asstt. Registrar) ITAT, Cochin