ACIT 16(1), MUMBAI vs. TV. VISION LTD, MUMBAI

The learned Authorized Representative for Assessee (AR), at the outset, submitted that the issue is covered by the orders of this Tribunal for AY 2011-12 vide order dated 28/02/2018, AY 2012-13 vide ITA No. 3387/Mum/2016 order dated 28/02/2018 which has been followed in AY 2013-14 vide ITA No.5862/Mum/2017 order dated 23/10/2019. The copies of the orders have been placed on record. It has also been submitted that learned first appellate authority has followed the aforesaid decisions. The Ld. CIT-DR could not controvert the same but supported the stand taken by Ld. AO in the assessment order.

Facts on record would reveal that the assessee being resident corporate assessee stated to be engaged in the business of broadcasting television channels, was saddled with additions u/s 40(a)(ia) for Rs.21.66 Crores in an assessment framed u/s 143(3) on 27/12/2016. The said amount represents carriage fees paid to cable operators as per contractual terms, on which tax was deducted at source @2% u/s 194C. However, Ld. AO opined that tax was required to be deducted at higher rates of 10% u/s 194J / 194H. The assessee defended the same, inter-alia, by submitting that the services provided by the cable operators was a standard service of placing the channels on desired frequency and not for providing any technical services. Reliance was placed on the decision of Hon’ble Delhi High Court rendered in CIT V/s Prasar Bharti Broadcasting Corporation of India (292 ITR 580) which was followed by Tribunal in various subsequent decisions. However, disregarding the same, Ld. AO formed an opinion that the payment was made towards right to use the process which was embedded in the definition of royalty as defined in explanation 2 to Section 9(1)(vi) read together with clarification inserted in explanation 6 to Section 9(1)(vi). Therefore, wrong deduction of tax would attract disallowance u/s 40(a)(ia). Accordingly, the said amount was disallowed and added to the income of the assessee.

The learned first appellate authority deleted the disallowance in view of the fact the similar issue was decided in assessee’s favor by its predecessor for AYs 2011-12 & 2012-13 which was upheld by the Tribunal. The learned first appellate authority also concurred with assessee’s submissions that short deduction of tax at source would not 4 Assessment Year :2014-15 M/s. T.V. Vision Ltd. attract the rigors of Section 40(a)(ia) in view of ratio of various decisions of Hon’ble High courts. Aggrieved, the revenue is in further appeal before us.

Upon careful consideration, we find that identical issue arose in assessee’s case for AY 2011-12, 2012-13 & 2013-14 (cited supra). The Tribunal in its latest decision for AY 2013-14 order dated 23/10/2019 held as under: - 7. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought by the revenue to adjudicate as to whether the CIT(A) is right in law and the facts of the case in concluding that no disallowance under Sec. 40(a)(ia)was called for in respect of the payments made by the assessee towards “carriage fees” to the cable operators, which had been subjected to deduction of tax at source under Sec.194C of the Act. As observed by us hereinabove, the A.O held a conviction that the “carriage fees” paid by the assessee to the cable operators was liable to be subjected to deduction of tax at source under Sec.194J of the Act. Observing, that the assessee had subjected the aforesaid payment of carriage fees amounting to Rs.25,32,42,535/- to deduction of tax at source under Sec.194C of the Act, the A.O had disallowed the entire amount by invoking the provisions of Sec.40(a)(ia) of the Act.

The core issue involved in the present appeal is as to whether any obligation was cast upon the assessee to subject the “carriage fees” paid to the cable operators for deduction of tax at source under Sec.194J, or not. We find that the aforesaid issue had been permeating in the assesses own case for the immediately preceding year i.e A.Y. 2011-12 and A.Y. 2012-13. As is discernible from the order of the ITAT “D” bench, Mumbai in the assesses own case for A.Y. 2012-13, the Tribunal had observed that as “carriage fees” paid by the assessee to the cable operators did not fall within the realm of the definition of “Royalty”, therefore, no obligation was cast upon the assessee to deduct tax at source under Sec.194J of the Act. Apart there from, the Tribunal had also approved the alternative view taken by the CIT(A), that in case of shortfall due to any difference of opinion as to the taxability of any item or the nature of payment falling under the various TDS provisions, no disallowance could be made by invoking the provisions of Sec.40(a)(ia) of the Act. In fact, the Tribunal while concluding as hereinabove had observed as under: “6. We have heard the rival contentions of the parties and carefully gone through the material on record including the decisions relied upon by the parties. The only grievance of the revenue is that the Ld. CIT(A) has wrongly deleted the disallowance made by the AO u/s 40(a)(ia) of the Act. The operative part of the order of the Ld. CIT(A) reads as under: “3.3. I have considered the issue under appeal carefully. I find that carriage fees is not at all royalty as defined in Explanation 2 to section 9(1)(vi) of the 5 Assessment Year :2014-15 M/s. T.V. Vision Ltd. Act. The AO has not properly appreciated the fact and nature of payment. Further, such carriage fees is subject to TDS u/s 194C paid to cable operators and such fees do not qualify as fees for technical services or royalty, hence section 194J of the Act is not applicable. Further, it is pertinent to mention that this case is not of “no TDS” but it is a case of “less TDS” u/s 194C, hence no such disallowance can be made/s 40(a)(ia) as has been held by Hon‟ble Calcutta High Court in the case of the CIT vs S. K. Tekriwal 48 SOT 515. Recently in the case of the DCIT vs Zee Entertainment Ltd. to 3935/MUM/2013, it has been held that such payment to cable operators should be subject to TDS @2% u/s 194C. Further appellant gets support from the jurisdictional ITAT, decision in the case of a CIT vs M/s Star Den Media Services pvt .Ltd( ITA No 1413/MUM/2014) and Chandabhoy & Jassobhoy vs DCIT 49 SOT 448 (Mumbai ITAT). Respectfully following the decision over the issue, the AO is directed to of genuine expenditure of Rs.30,42,13,444/-.”

We notice that the Ld. CIT(A) has deleted the disallowance in question holding that carriage fees does not come within the ambit of the definition of Royalty. Therefore, the assessee was not required to deduct the tax at source u/s 194J. Further the Ld. CIT(A) has held that it is not the case of „no TDS‟ but the case of „less TDS‟ therefore, the disallowance made by the AO is bad in law. The Ld. CIT(A) has relied on the decision of the Hon‟ble Calcutta High Court rendered in CIT vs S. K. Tekriwal 48 SOT 515 and the decisions of coordinate Bench of the Tribunal in the cases of CIT vs M/s Star Den Media Services pvt .Ltd( ITA No 1413/MUM/2014) and Chandabhoy & Jassobhoy vs DCIT 49 SOT 448 (Mumbai ITAT). As pointed out by the Ld. counsel for the assessee this issue is covered by the judgment of the Hon‟ble Bombay High Court delivered in CIT vs. M/s UTV Entertainment Television Ltd. in Income Tax Appeal (supra) in favour of the assessee. Similarly, the Hon,ble Gujarat High Court in CIT vs. Prayas Engineering Ltd., (supra) and the Karnataka High Court in CIT vs. Kishore Rao & others (HUF) (supra) have held that in case of shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provisions, no disallowance can be made by invoking provisions of 40(a)(ia) of the Act.

Resultantly, the appeal filed by the revenue is dismissed.