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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: SHRI SHAMIM YAHYA (AM) & SHRI RAM LAL NEGI (JM)
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES “D”, MUMBAI BEFORE SHRI SHAMIM YAHYA (AM) AND SHRI RAM LAL NEGI (JM) Assessment Year: 2011-12 The ACIT -16(1), M/s T.V. Vision Ltd., Room No. 439, 4th Floor, 4th Floor, Adhikari Chambers, Aayakar Bhavan, M.K. Marg, Oberoi Complex, New Link Road, Mumbai - 400020 Vs. Andheri (West), Mumbai – 400053 PAN: AACCT7276Q
(Appellant) (Respondent) Revenue by : Shri Ram Tiwari (DR) Assessee by : Shri Madhur Aggarwal (AR) Date of Hearing: 08/01/2018 Date of Pronouncement: 28/02/2018
O R D E R PER RAM LAL NEGI, JM This appeal has been filed by the revenue against order dated 29.02.2016 passed by the Ld. Commissioner of Income Tax (Appeals)-4, Mumbai, for the assessment year 2011-12, whereby the Ld. CIT (A) has partly allowed the appeal filed by the assessee against assessment order passed u/s 143 (3) of the Income Tax Act, 1961 (for short ‘the Act’).
The brief facts of the case are that the assessee company, subsidiary of Shri Adhikari Brothers Television Network Ltd., filed its return of income for the assessment year under consideration declaring nil income. Later on copy of tax audit report u/s 44B in Form No. 3CA and 3CD along with statement of account was submitted by the assessee. The return was processed u/s 143 (1) of the Act. Since, the case was selected for scrutiny notices u/s 143 (2) and 2 Assessment Year: 2011-12
142 (1) were issued and in response thereof the authorized representative of the assessee attended the proceedings and furnished the details called for by the AO. Since, the assessee had debited an amount of Rs. 16,32,21,556/- under the head distribution expenses the AO asked the assessee to furnish the details of expenses. Accordingly, the authorized representative submitted the details. The AO noticed that the assessee had deducted the tax at source @ 10% on the amount of Rs. 22,66,752/- and on the remaining amount the tax was deducted @ 2% u/s 194C instead of 194J of the Act. Accordingly, the AO asked the assessee to show cause as to why disallowance of expenses for less TDS should be made u/s 40(a)(ia) of the Act. The authorized representative of the assessee submitted a detailed reply and contended that TDS u/s 194C is applicable for carriage/placement fees. However, the AO rejected the contention of the assessee and disallow the expenditure holding that carriage fees is Royalty as defined in explanation 2 to section 9(1)(vi) and the tax at source has been deducted at the lesser rate. The assessee challenged the assessment order before the Ld. CIT (A). The Ld. CIT (A) after hearing the assessee in the light of the various case laws relied upon by the assessee directed the AO to delete the disallowance in question. The revenue is in appeal against the impugned order passed by the Ld. CIT (A).
The revenue has challenged the impugned order passed by the Ld. CIT
(A) on the following effective grounds:-
“On the facts and circumstances of the case and in law, whether the Ld. CIT (A) was justified in directing to delete the disallowance u/s 40(a)(ia) r.w.s 194J of ‘Carriage Fees’ and failing to appreciate that the payments made for use/right to use of ‘process’ are ‘royalty’ as per Explanation 6 to section 9(10(vi) hence such payments are covered u/s 194J of the Income-tax Act, 1961. 3 Assessment Year: 2011-12
“On the facts and circumstances of the case and in law, whether the Ld. CIT (A) was justified in directing to delete the disallowance u/s 40(a)(ia) rws 194J of ‘Carriage Fess’ placing reliance on the judgment in the case of CIT Vs S.K. Tekriwal [2014] 46 taxmann.com 444 (Calcutta) without appreciating that in the latest judgment dated 20th July, 2015, the Hon’ble Kerala High Court, CIT-1 Kochi Vs PVS Memorial Hospital Ltd. [2015] 60 taxmann.com 69 (Kerala), had held as under:-
“In so far as the judgment of the Calcutta High Court in S.K. Tekriwal (supra) which was relied on by the Tribunal is concerned, with great respect, for the aforesaid reasons, we are unable to agree with the views that if tax is deducted even under a wrong provision of law, Section 40(a)(ia) cannot be invoked”. 3. On the facts and circumstances of the case and in law, whether the Ld. CIT (A) was justified in directing to delete the disallowance u/s 40(a)(ia) rws194J of ‘Carriage Fess’, whereas the jurisdictional ITAT, Mumbai ‘L’ Bench, in its order dated 28.03.2014 in the case of ADIT-(IT)-2(2), Mumbai Vs Viacom 18 Media Pvt. Ltd. Answered in the affirmative, the following questions of law raised by the Department- a) Whether definition of term ‘process’ in Explanation 6 to section 9(1)(vi), by way of retrospective amendment is clarificatory in nature and did not amend definition of ‘royalty’ per se – Held, yes; and b) Whether payments made for use/right to use of ‘process’ are ‘royalty’ in terms of the Income-tax Act, 1961-Held Yes.”
Before us, the Ld. departmental representative (DR) relying on the assessment order submitted that the order passed by the Ld. CIT(A) is contrary to the law laid down by the Hon’ble Kerala High Court in CIT-1 Kochi vs. PVS Memorial Hospital Ltd.[2015]60taxmann.com (Kerala) and the decision of the Mumbai Tribunal rendered in the case of ADIT Mumbai vs.
4 Assessment Year: 2011-12
Viacom 18 Media Pvt. Ltd. The Ld DR further submitted that the carriage fees /channel placement fees paid by the assessee falls under the definition of process as per the explanation 2 of section 9(1)(vi) of the Act and the definition of term ‘process ’as amended by Explanation 6 to section 9(1)(vi) is clarificatory in nature and has no altered the definition and ambit of the term Royalty per se. Therefore the assessee was liable to deduct the tax u/s 194J of the Act. Since the impugned order is not in accordance with the cases referred above, the same is liable to be set aside. 5. On the other hand the Ld. counsel for the assessee submitted that the order under challenge does not suffer from any legal infirmity as the same has been passed in the light of the law laid down by the various Benches of the Tribunal and the High Courts including the Hon’ble jurisdictional High Court. The Ld. counsel further submitted that in CIT vs. M/s UTV Entertainment Television Ltd. in Income Tax Appeal No525 of 2015,732 of 2015,741 of 2015 and 1035 of 2015, the Hon’ble Bombay High Court has decided the identical issue in favour of the assessee. The Ld counsel further submitted that the Hon,ble Gujarat High Court in CIT vs. Prayas Engineering Ltd., Tax appeal No 1237 of 2014 and the Karnataka High Court in CIT vs. Kishore Rao & others (HUF) 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.
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:
5 Assessment Year: 2011-12
“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 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. ITA No. 3931 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.15,58,00,575/--.”
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 6 Assessment Year: 2011-12
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.
Hence, in our considered opinion, the findings of the Ld CIT(A) are based on the evidence on record and in accordance with the principles of law laid down by the High courts including the jurisdictional High Court discussed above. We therefore do not find any reason to interfere with the same. Accordingly, we uphold the decision of the Ld. CIT(A) and dismiss the sole ground of issue of the revenue.
In the result, appeal filed by the revenue for assessment year 2011- 2012 is dismissed.
Order pronounced in the open court on 28th February, 2018. (SHAMIM YAHYA) JUDICIAL MEMBER म ुंबई Mumbai; दिन ुंक Dated: 28/02/2018
Alindra, PS आदेश प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT
7 Assessment Year: 2011-12
दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.
आदेशानुसार/ BY ORDER, सत्य दपि प्रदि //// उि/सहायक िंजीकार (Dy./Asstt.