SPORTS BROADCAST P.LTD,MUMBAI vs. PR CIT 10, MUMBAI

This appeal by the assessee is directed against the revision order of Principal CIT-10, Mumbai passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) vide order dated 23.03.2015. The assessment was framed by DCIT (OSD) Range-8(1), Mumbai u/s. 143(3) of the Act for AY 2010-11 vide order dated 06.03.2013.

On the facts and circumstances of the case, the learned CIT erred in setting aside the order passed u/s 143(3) dated 06-03-2013 with the direction to the AO to make assessment afresh after proper verification of the facts and law applicable thereto.”

The brief facts of the case are that the CIT-10, Mumbai issued Show Cause Notice (SCN) dated 22.09.2014 stating that the assessment framed under section 143(3) dated 06.03.2013 is erroneous and prejudicial to the interest of Revenue for the reason that the assessee has reimbursed bank guarantee expenditure of Rs. 21,31,28,528/- to Nimbus Communication Ltd. (NCL) without deduction of TDS u/s194C of the Act. The CIT observed that NCL has acquired telecast right from BCCI in respect of matches to be played in India and in terms of that agreement entered into between BCCI and NCL, NCL was not obliged to provide bank guarantee of Rs. Two thousand crores. Subsequently, NCL entered into an agreement with the assessee on 27.11.2007 and assessee agreed to reimburse 80% of the bank guarantee to NCL. BCCI was not a party to the agreement between the assessee and NCL. Accordingly, as per the CIT, the assessee was under obligation to deduct TDS @2% on such reimbursement of expenses but was not done by the assessee. Similarly, another issue in this revision proceeding is that the assessee has paid a sum of RS.45 lakhs to Noida Software Technology Park Ltd. for technical and professional services without deduction of TDS @ 10% under section 194J of the Act. According to him tax was deducted @ 2% u/s 194C of the Act.

In response to the SCN, the assessee replied that as per TDS assessment order under section 201(1)/(1A) of the act dated 18.03.2012 the assessee has deducted TDS and paid before the due dates and also filed details before the AO. Accordingly to the assessee, the AO framed 3 M/s. Neo Sports Broadcast Pvt. Ltd. assessment after considering all the facts and if at this stage this issue would be raised it will tantamount to change in opinion, but the CIT was of the view that the assessee has not deducted TDS on reimbursement and there is shortfall of TDS in respect of payments to Noida Software Technologies Park Ltd. amounting to Rs.45 lakhs and hence the assessment frames by the AO is erroneous and prejudicial to the interest of Revenue. Hence, he wrongly directed the AO to make fresh assessment after proper verification of facts and law applicable for tax deduction at source on these two payments. Aggrieved, assessee preferred appeal before the Tribunal.

Before us the learned counsel of the assessee, in respect of applicability of TDS on reimbursement of bank guarantee charges paid to NCL explained that assessee has acquired telecasting right from NCL of cricket matches to be played in India under the banner of BCCI vide agreement dated 16.09.2010 for India and other specific territories which constitutes approximately 80% of the total rights of NCL. The agreement between assessee and NCL is towards granting of broadcast rights of cricket matches to be played in India in its TV Channel Neo Cricket. To assure regarding timely and full payment of charges, BCCI had laid down a condition on NCL to provide bank guarantee from certain banks for which NCL has to make payment of bank guarantee charges to banks. Assessee has not provided any guarantee to the NCL for payment of license fees and assessee has deducted TDS under section 194J on payment of license fees for obtaining broadcast rights from NCL. With respect of applicability of TDS on reimbursement of bank guarantee charges by assessee to NCL, according to assessee, the same is not covered within the provisions of section 194C, since the payment is neither made by assessee for carrying out any work nor it is towards broadcasting and telecasting services or rights. According to assessee’s counsel this payment is reimbursement by assessee and NCL has not carried out any work for assessee and since the payment is 4 M/s. Neo Sports Broadcast Pvt. Ltd. towards reimbursement of actual expenditure without any profit element, it is not covered under section 194C of the Act. With respect to another issue of shortfall in deduction of TDS as pointed out by the CIT in respect of payment of Rs.45 lakhs to Noida Software Technology Park Ltd. for technical and professional services, the assessee has deducted tax @ 2% as per provisions of section 194C of the Act and this payment does not fall under section 194J of the Act and this is merely a shortfall of payment and the issue is covered by the decision of the Hon'ble Calcutta High Court in the case of CIT vs. S.K. Tekriwal (2014) 361 ITR 432 (Cal). In view of the above argument learned counsel of the assessee stated that the assessment order framed by the AO is neither erroneous nor prejudicial to the interest of Revenue.

On the other hand, the learned CIT-DR relied on the revision order of the CIT passed under section 263 of the Act.

We have heard the rival contentions and gone through the facts and circumstances of the case. The above stated facts are undisputed in respect to the first issue of reimbursement of bank guarantee charges. Now the question arises whether the reimbursement of bank guarantee charges paid by assessee to NCL falls under section 194C of the Act or not. We find that bank guarantee charges paid by assessee to NCL was neither payment for carrying out any work nor it is made towards broadcasting and telecasting services. From the agreement entered into by the assessee with NCL, it is clear that bank guarantee is to be provided to BCCI as joint and several liability of both the parties and therefore reimbursement of bank guarantee commission to NCL is with respect to the guarantee provided by the bank to BCCI for which payment is made by NCL and subsequently 80% is reimbursed by the assessee. We find that NCL has not carried out any work for assessee and since the payment is towards reimbursement of actual expenditure and hence the same cannot be presumed to be covered under section 5 M/s. Neo Sports Broadcast Pvt. Ltd. 194C of the Act. Even otherwise assessee has reimbursed 80% of bank guarantee commission reflected under the head Financial expenditure of its audited Profit & Loss Account. The assessee relied upon the CBDC circular No. 715 dated 08.08.1995 wherein CBDT, vide question No. 30 answered the proposition as under: - “Q.30: Whether the deduction of tax at source u/s 194C and 194J has to be made out of the gross amount of the bill including reimbursement or excluding reimbursement for actual expenses? Ans: Section 194C and 194J refer to any sum paid. Obviously, reimbursement cannot be deducted out of the total amount for the purpose of tax deduction at source.”

In view of these facts and the Board Circular No. 715 and payment made by the assessee of Rs. 21,31,25,582/- to NCL by way of reimbursement of actual expenditure incurred by NCL on payment of bank guarantee commission is merely a reimbursement. In the light of the above, we are of the view that tax is not required to be deducted from bank guarantee commission in the absence of agent/principal relation. Consequently tax is not required to be deducted from reimbursement of actual expenses by assessee as incurred by NCL under any of the provisions of the Act. This issue is squarely covered by the Coordinate Bench decision in assessee’s own case, wherein the issue under adjudication was revision proceedings under section 263 of the Act in respect to reimbursement of bank guarantee commission under section 194A of the Act in place of deduction under section 194C of the Act. The Tribunal, vide its order in ITA Nos. 4010 & 4011/Mum/2014 for A.Y. 2010-11 and A.Y. 2011-12 dated 19.02.2016 has considered this issue and held as the issue to be debatable vide para 12 as under: - “12. In the instant case, there is no money borrowed or debt incurred. Therefore, provisions of sec. 2(28A) and sec. 194A do not apply. Payment made to NCL is not “income by way of interest. The impugned receipt would be in the nature of reimbursement of expenses incurred by it. In view of the above discussion, we do not find any merit in the order passed u/s. 263 in respect of one of the possible view taken by the AO.

In regard to the second issue of short deduction of TDS on the payment made by the assessee to Noida Software Technology Park Ltd. of an amount of Rs. 45 lakhs for technical and professional services, for which assessee has deducted tax @2% instead of @ 10% to be deducted under section 194J of the Act as held by CIT in his revision order. We find that the payment made to Noida Software Technology Park Ltd. is as per the agreement entered into between the assessee and the said party, the assessee has obtained services only for uplinking of two channels owned by assessee on satellite involving no technical services and hence the same is covered under section 194C of the Act and there is no shortfall in tax to be deducted. In this regard the issue of the assessee is very clear on merits also that assessee has rightly deducted tax @ 2% u/s. 194C of the Act on payments made to Noida Software Technology Park Ltd. Even otherwise in view of the decision of the Hon'ble Calcutta High Court in the case of S.K. Tekriwal, supra wherein it has been held that if there is any shortfall due to any difference of opinion as to taxability of an item or nature of payment falling under various provisions of TDS, the only solution left with this is that the assessee can be declared as assessee in default under the provisions of section 201 of the Act but no disallowance can be made by invoking provisions of section 40(a)(ia) of the Act. This clearly shows that it is a highly debatable issue. Once it is a debatable issue, provisions of section 263 of the Act, i.e. revision proceedings cannot be initiated.

In view of the above, we are of the view that on both of the issues the revision proceedings will not stand as both these issues are highly debatable and there can be two opinions for both the issues. The AO