ACIT 16(1), MUMBAI vs. BUSINESS BROADCAST NEWS P.LTD, MUMBAI

Briefly stated facts are that during the year under consideration, the assessee paid carriage fee of ₹ 39,61,12,085/- and when the AO perused the details he noticed that the assessee had deducted TDS under section 194C of the Act on payment of such fee at the rate of 2%. But, according to him, it should have deducted tax under section 194J of the Act at the rate of 10% because these payments are in the nature of royalty as per explanation 6 to section 9(1)(vi) of the Act and therefore, covered by section 194J of the Act. Accordingly, the AO disallowed these carriage / channel placement fee by invoking the provisions of section 40(a)(ia) of the Act. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) deleted the disallowance relying on the Tribunal’s decision in assessee’s own case by observing in para 4.4 as under: - “4.4 I have considered the submissions of the appellant and perused the material available on records. The said issue is directly covered by the appellant’s own case in 2698, 4206 and 4207/Mum/2012, order dated 16.10.2015. The Hon’ble Mumbai Tribunal has held that provisions of section 194J of the Act are not applied on payment of carriage fees to cable operations hence, the disallowance carriage/ channel placement fees amounting to ₹ 39,61,12,085/- under section 40(a)(ia) of the Act is deleted.”

The learned Counsel for the assessee stated that the Tribunal in assessee’s own case in & 4207/Mum/2012 vide order dated 16.10.2015 for AY 2008-09 to 2011-12 has deleted the addition vide Para 3 to 10 as under: - “3. Subsequently, the assessee came in appeal before the learned CIT(A) and the learned CIT(A) arrived at the conclusion that the case of the assessee falls within the purview of Section 194C of the Act instead of Section 194J. Hence, he set aside the order of the AO in this regard. Being aggrieved, the Revenue is in appeal before the Tribunal.

On the other hand, the learned Representative of the assessee [hereinafter referred to “the AR”] argued that the assessee company is engaged in the business of broadcasting business news through TV Channels and submitted that the payment is covered specifically under the provisions of section 194C. He has referred to the Explanation to section 194C and submitted that as per clause (iv) of the Explanation, “the work” shall include inter alia Broadcasting and Telecasting including production of programme for such Broadcasting and Telecasting. Therefore, he has submitted that when the payment is in relation to broadcasting work which is specifically provided u/s 194C, then the general provisions u/s 194J cannot be applied. He has further referred to the CBDT Circular No. 720 dated 30.08.1995, wherein it was clarified that each section under chapter XVII, deals with a particular kind of payment to the exclusion of all other sections in this chapter. The payment of any sum shall be liable for tax deduction only under one section. In support of his contention he has relied upon the decision of Hon’ble Punjab & Haryana High Court in the case of Kurukshetra Darpans (P) Ltd. Vs. CIT (supra) and submitted that the Hon'ble High Court has held that the receipt of telecasting signals from the licensor is essentially under the contract to obtain broadcasting and telecasting facility of TV channels. Therefore, section 194C is attracted to the payments made to the licensor for obtaining TV signals and the assessee was required to deduct tax at source on such payments. He has also relied upon the decision of Hon'ble Delhi High Court in the case of CIT Vs. Prasar Bharati (Broadcasting Corporation of India) (292 ITR 580) and submitted that the Hon'ble High Court has held that Explanation 3 to section 194C is very specific in its application not only to broadcasting and telecasting but also includes production of programmes for such broadcasting and telecasting. If on the same date two provisions are introduced in the Act, one specific to the activity sought to be taxed and the other (194J) in more general terms, resort must be had to the specific provisions which manifests the intention of the legislature. The learned AR has also relied upon the decision of this Tribunal dated 9-7-2014 in the case of CIT Vs. NGC network in and in the case of UTV Entertainment Television Ltd. In ITA No.2699, 4202, 4205 and 2700/Mum/2012 order dated 29-10-2014.

We have considered the rival submissions and relevant material on record. There is no dispute that the payment in question was made by the assessee to the cable operators/ MSOs for placing the TV channels in the prime band in order to enhance the viewership and better advertisement revenue. In the case of Kurukshetra Darpans (P) Ltd. Vs. CIT (supra), the Hon‟ble High Court of Punjab & Haryana while dealing with an identical question has held in Para 13 to 18 as under:-

In terms of the said Explanation. it is provided that expression 'work' shall include inter alia broadcasting and telecasting including production of programmes for such broadcasting and telecasting. By way of such Explanation, it is evident that where the payment is for a work involving broadcasting and telecasting, the same shall be subject to deduction of. tax at source in terms of section 194 of the Act, the assessee is a cable network operator through which it provides telecasting of programmes to the ultimate consumers/subscribers. The assessee in turn enters into a contract with the licensor of various TV channels. On the payment so made, s. 194C of the Act" is attracted. This is for the reason that the licensor, is a person who is performing the work which is covered within the meaning of c1. (b) of Expln. III to s. 194C(2) of the Act.

It is also relevant to mention here that in the agreement between the assessee and the licensor, the licensor is referred to as 'company engaged in the business of distribution of satellite based television channel(s) services including the service and has exclusive rights to market and distribute the services in India to various customers and users of the service'. Further, the agreement refers to the assessee subscriber as a party, which is desirous to subscribe for and receive the telecast signals of the service from the company in order to further distribute the same to the customers).

From the recital of the agreement "Itself, it is clear that the service that the assessee subscriber is availing is the receipt of 'telecasting signals' from the licensor or the company. The expression 'service' has also been referred to mean the TV channel which is dealt with by the licensor or the company. Therefore, what the assessee has transacted for with the licensor or company certainly includes within its ambit broadcasting and telecasting facility. The essence of the contract is to obtain broadcasting and telecasting of TV channels and thereafter its distribution amongst ultimate customers through the cable network of the assessee.

Another plea of the assessee/subscriber was that the licensor or the person to whom the assessee is making payment by itself does not do the work of broadcasting' and telecasting and is therefore outside the purview of s. 194C of the Act. This argument deserves to be negated at the threshold. As we have pointed out earlier what the assessee subscriber is looking for is to obtain the telecast signals from the licensor, which is enough, to deduce that the impugned contract involves broadcasting and telecasting of TV signals. Moreover, the licensor or the company, as is evident from the specimen agreement on record, in the business of distribution of satellite based TV channels and has exclusive rights to market and distribute said services in India, the service that is referred to in the agreement is the broadcasting and telecasting of TV signals.

For the reasons recorded above, we have no hesitation in concluding that the Tribunal was correct in holding that the assessee was required to deduct tax at source in terms of s. 194C of the Act on payments made to the licensor for obtaining TV signals, Cable TV network owned by the assessee.

Thus after examination of the Explanation III to the then section 194C, the Hon'ble High Court held that the payment for obtaining the telecast licenses from the licensor falls under the provisions of section 194C. We find that the work of broadcasting/telecasting including production of programme or such broadcasting or telecasting falls under the definition of “work” as provided under clause (iv) of the Explanation to section 194C which reads as under:-”

The Hon‟ble Delhi High Court in the case of CIT Vs. Prasar Bharati (Broadcasting Corporation of India) (supra), has observed in Para 11 as under:-

The Hon‟ble Delhi High Court has made it clear that when two provisions are simultaneously introduced in the Act, one is specific and another is more general in terms then the resort must be to the specific provision. Therefore, when the work of broadcasting and telecasting of the programmes specifically falls under the ambit of provisions of section 194C, then in view of the decision of Hon‟ble Delhi High Court (supra), the provisions of section 194J cannot be applied on such payments. The CBDT Circular No. 720 dated 30.08.1995, also supports this view as it was clarified in the said circular as under:-

It is hereby clarified that each section, regarding TDS under Chapter XVII, deals with a particular kind of payment to the exclusion of all other sections is this Chapter. Thus, payment of any sum shall be liable for deduction of tax only under one section. Therefore, a payment is liable for tax deduction only under one section.

In view of the above discussion as well as the decisions of Hon‟ble Punjab & Haryana High Court, Hon‟ble Delhi High Court and the decisions of the Co-ordinate Benches of the Tribunal deciding the issue in controversy i.e. order dated 09-07-2014 in the case of CIT Vs. NGC Network in and in the case of UTV Entertainment Television Ltd. in ITA No.2699, 4202, 4205 and 2700/Mum/2012 order dated 29-10-2014, we do not find any error or illegality in the impugned order of CIT(A) qua this issue. Furthermore, no contrary decision on the issue has been referred to or produced before us by the learned DR. Therefore, following the decisions of the Hon‟ble Punjab & Haryana High Court, Hon‟ble Delhi High Court and the decisions of the Co-ordinate Benches of the Tribunal, we do not find any reason to interference in the order of the learned CIT(A). Accordingly, we uphold the action of the learned CIT(A) and dismiss all the appeals preferred by the Revenue”