ITO(TDS) 3(4), MUMBAI vs. VIACOM 18 MEDIA P. LTD, MUMBAI

This appeal by the Revenue is directed against the order of the CIT(A)-14, Mumbai dated 16.06.2014 passed in respect of the order under section 201(1)/201(1A) of the Income Tax Act, 1961 (in short 'the Act') for A.Y. 2012-13. 2. The grounds raised by the Revenue in this appeal are as under: -

1. Grounds of Appeal: i) The Ld. CIT(A) has erred in law and on facts in holding that section 1940 applies to the payments made on account of outsourcing of production work without appreciating the correct nature of these charges, as is clearly brought out in the order u/s. 201(1) of the Income Tax Act,1961. ii) The Ld. CIT(A) has erred in law and on facts in holding that section 194C applies to the payment of placement charges without appreciating the nature of services rendered by the cable operator/D.T.H. operators which require application of human mind with technical skill and falls within the ambit of section 194J of the Act. iii) Without prejudice to Ground No. (H) of appeal, since providing the services of preferred channel placement on account of which placement charges are paid requires use of industrial, commercial or scientific equipment within the meaning of sub clause (iva) to M/s. Viacom18 Media P. Ltd. Explanation to sub clause (vi) of Section 9(1) of the Income tax Act, 1961, the said payment is on account of royalty and therefore, section 194J is clearly applicable. Accordingly, CIT(A) has erred in law and on facts in not appreciating this factual and legal position and in giving relief to the assessee. iv) The Ld. CIT(A) has further erred on facts and in law in not appreciating that in any case the nature of services rendered by the cable operator/ multi service operators consists of implied agency, such payment on account of carriage fee is in nature of commission or brokerage as defined in Explanation to section 194H of the Income tax Act. 1961. v) The Ld. CIT(A) has erred in law and on facts in holding that section 194C applies to the payment of uplinking charges without appreciating that uplinking involve operation of complex equipments at the uplink centre and assessee is paying uplinking charges and hence provisions of section 194J are attracted.

2. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary at the time of the hearing of the case or thereafter.

3. The order of the CIT(A) being erroneous be set aside and Ld. A.O's order be restored.”

3. At the outset the learned A.R. for the assessee submitted that the issues in appeal are all covered in favour of the assessee by the decisions of the Coordinate Benches of this Tribunal in the assessee’s own case for A.Y. 2009-10 to 2011-12. 4.1 Ground No. 1(i) (supra) relates to whether the payments for production of programmes for broadcasting and telecasting was liable for deduction of tax under section 194C or 194J of the Act. 4.2 In this regard, assessee deducted TDS under section 194C of the Act. The AO, however, rejected the contentions of the assessee that section 194C of the Act was applicable to such payments. He was of the view that such payments, made by the assessee for getting his programmes for Television serials, films, etc. made by outside producers/studios, are in the nature of royalty and technical fees and therefore the provisions of section 194J of the Act are applicable in the case on hand. 4.3 On appeal, the learned CIT(A) decided the issue in favour of the assessee, following the decision of the Hon'ble Delhi High Court in the case M/s. Viacom18 Media P. Ltd. of CIT vs. Prasar Bharati 292 ITR 580 (Del) and by relying on the CBDT Circular No. 720 dated 30.08.1995. 4.4 The learned D.R. placed strong reliance on the order of the Assessing Officer (AO). 4.5 Per contra, the learned A.R. for the assessee submitted that this issue stands covered in favour of the assessee by the decisions of Coordinate Benches of this Tribunal in the assessee’s own case for A.Y. 2009-10 in and others vide order dated 14.10.2015 and for A.Y. 2011-12 in ITA No. 2201/Mum/2014 dated 16.12.2015. A copy of the cited decisions was placed before the Bench. 4.6.1 We have heard both parties and perused and carefully considered the material on record, including the judicial pronouncement cited. We find that the issue of whether TDS is to be made under section 194C of the Act as contended by the assessee or under section 194J of the Act as held by the AO on payments made on account of outsourcing of production works has been considered and held in favour of the assessee by the decision of the Coordinate Bench of this Tribunal in the assessee’s own case for A.Y. 2009- 10 in ITA No. 3515/Mum/2012 and others vide order dated 14.10.2015 at paras 18 to 24 thereof and at paras 24 & 25 it has been held as under: - “24. We have considered the rival submissions and also perused the relevant material on record. We find that this issue regarding payment for production of programmes for broadcasting and telecasting has been considered and decided by the Hon'ble Delhi High Court in the case of CIT Vs. Prasar Bharati (supra) as discussed above. Respectfully following the same, this issue is accordingly decided in favour of the assessee.

25. In view of the above finding, we find that there is no merit in the appeal of the Revenue and the same is hereby dismissed.” 4.6.2 Respectfully following the aforesaid decisions of the Coordinate Bench in the assessee’s own case for A.Y. 2009-10 (supra) in which the Coordinate Bench followed the decision of the Hon'ble Delhi High Court in the case of Prasar Bharati (supra), we decide this issue in favour of the assessee and consequently dismiss ground No. 1(i) raised by Revenue. 5.1 Ground No. 1(ii) to (iv) - These grounds relate to the issue of whether the payment of placement charges to cable operator/D.T.H. operators was M/s. Viacom18 Media P. Ltd. liable for deduction of tax at source (TDS) under section 194C or 194J of the Act. 5.2 The assessee, a company incorporated in India, is primarily engaged in broadcasting and telecasting of television serials/films/other programmes from India, viz., Colours, MTV, Nick and VHI and also in marketing of advertising air time on these channels, distribution of channels, marketing and distribution of films through its film division and production of programme content/television software. Such type of broadcasting and telecasting of programmes requires the assessee to place its programmes on the bandwidth or frequency in order to reach its end viewers. The cable operators/DTH operators are the last rung of broadcasting and telecasting and thus are in an inherent position to decide which programme is to be released on which frequency or bandwidth; to whom placement charges were paid by the assessee for placing a particular channel on a preferred bandwidth in order to telecast programmes during peak hours so that better viewership and revenues are realised by the TV channels. The assessee deducted TDS on such payments @ 2% thereon under section 194C of the Act. The AO, however, did not accept the assessee’s view and held that the said payments were in the nature of technical services and therefore the assessee ought to have deducted tax @10% under section 194J of the Act and treated the assessee to be in default under section 201(1) of the Act. 5.3 On appeal, the learned CIT(A), following the decision of the Hon'ble Delhi High Court in the case of CIT vs. Prasar Bharati (292 ITR 580(Del) decided the issue in favour of the assessee, holding that placement charges/ carriage fees is covered under the definition of work contracts and therefore tax was to be deducted at source on such payments under section 194C of the Act. 5.4 The learned D.R. was heard in support of the grounds raised and he placed reliance on the order of the AO on this issue. 5.5. Per contra, the learned A.R. for the assessee submitted that this issue stands covered in favour of the assessee by the decisions of Coordinate Benches of this Tribunal in the assessee’s own case for A.Y. 2009-10 in ITA M/s. Viacom18 Media P. Ltd. No. 3515/Mum/2012 and others vide order dated 14.10.2015 and for A.Y. 2011-12 in dated 16.12.2015. A copy of the cited decisions was placed before the Bench. 5.6.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial pronouncements cited. We find that the issue of whether TDS on payments made on account of placement charges/carriage fees to cable operators/DTH operators is to be made under section 194C of the Act as contended by the assessee or under section 194J of the Act as held by the AO has been considered and decided in favour of the assessee by the Coordinate Bench of this Tribunal in the assessee’s own case for A.Y. 2009-10 in ITA No. 3515/Mum/2012 and others vide order dated 14.10.2015 at paras 3 to 10 thereof and at paras 9 &10 thereof it has been held as under: - “9. We have considered the rival submissions, decisions referred to above and carefully perused the materials on record. We find that the issue regarding deduction of tax at source for the payment made to cable operators as placement charges is fully covered in favour of the assessee by the various decisions and also by the Circular no. 720 of 30.08.1995. The Hon’ble Delhi High Court in the case of CIT Vs. Prasar Bharati [2007] 292 ITR 580 (Del.) on a similar issue has held as under:- “We are unable to agree with this submission. We observe that Explanation III, which was introduced simultaneously with section 194J, is very specific in its application to not only broadcasting and telecasting but also include “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 t0061ed and the other in more general terms resort must be had to the specific provisions which manifests the intention of the Legislature. It is not, therefore, possible to accept the contention of the Revenue that programmes produced for television, including “commissioned programmes”, will fall outside the realm of section 194C, Explanation III of the Act. In this view of the matter we hold that these appeals do not involve any substantial question of law. The appeals are accordingly dismissed with no order as to costs.

10. In view of the facts and circumstances of the case and the Judgment of Hon’ble Delhi High Court in the case of CIT Vs. Prasar Bharati (supra), we do not find any reason to interfere with the order of CIT(A) qua this issue and the same is hereby affirmed. Accordingly, the grounds no. 1 to 5 are dismissed.”

M/s. Viacom18 Media P. Ltd. 5.6.2 Respectfully following the aforesaid decision of the Coordinate Bench of this Tribunal in the assessee’s own case for A.Y. 2009-10 (supra), in which the Coordinate Bench followed the decision of the Hon'ble Delhi High Court in the case of Prasar Bharati (supra), we decide this issue in favour of the assessee and consequently dismiss grounds Nos. 1(ii) to (iv) raised by Revenue. 6.1 Ground No. 1(v) - This ground relates to the issue of whether uplinking charges were liable for deduction of tax at source under section 194C or 194J of the Act. 6.2 The facts of the matter are that the assessee is in the business of telecasting, broadcasting TV channels for which signals/channels require to be uplinked from the earth station to satellites. The assessee deducted TDS on payment of uplinking charges under section 194C of the Act. The AO, however, did not concur with the view taken by the assessee and held that uplinking involved operation of complex equipments at the uplink centres and payments in this regard were in the nature of royalty payments and therefore the provisions of section 194J of the Act were attracted for making TDS thereon. 6.3 On appeal, the learned CIT(A) reversed the finding of the AO following the decision of the Hon'ble Delhi High Court in the case of Prasar Bharati (supra) and CBDT Circular No. 720 dated 30.08.1995 and held that uplinking was an integral part of broadcasting/telecasting and as such is covered by the Explanation to section 194C of the Act. 6.4 The learned D.R. placed strong reliance on the decision of the AO on this issue. 6.5 Per contra, the learned A.R. for the assessee submitted that this issue stands covered in favour of the assessee by the decisions of Coordinate Benches of this Tribunal in the assessee’s own case for A.Y. 2009-10 in and others vide order dated 14.10.2015 and for A.Y. 2011-12 in ITA No. 2201/Mum/2014 dated 16.12.2015. A copy of the cited decisions was placed before the Bench.