ITO (TDS) 3(5), MUMBAI vs. WIRE & WIRELESS (INDIA) LTD, MUMBAI

आदेश / O R D E R Per Ashwani Taneja (Accountant Member):

These three appeals have been filed by the Revenue against the separate orders of Ld. Commissioner of Income Tax (Appeals), Mumbai {(in short ‘CIT(A)’}, for the assessment

2 Wire & Wireless India Ltd. years 2006-07, 2007-08 & 2008-09 involving common issues for failure in deduction of tax as source u/s 201(1) of the Act. With the consent of both the parties, assessment year 2007-08 was taken as lead year in this batch of three appeals.

ITA No.2384/Mum/2013 for A.Y. 2007-08 3. Ground No.1: In this ground, the Revenue has challenged the action of Ld. CIT(A) in accepting the stand of the assessee that TDS was required to be deducted by the Assessee u/s 194C on the payments of “Pay TV Channel Subscriptions”, thereby, reversing the action of Ld. AO in holding that TDS was required to be deducted u/s 194J on these payments.

3.1. Brief facts in this case as culled out by us from the orders of the lower authorities are that during the year under consideration, the assessee was engaged in the business as a Multi System Operator (MSO) in Indian Cable Industry, which is principal mode of distribution of Television Channels. The assessee company was having a presence in over 43 cities in India with over 4000 Franchisee Local Cable Operators. The assessee subscribed to various TV Network Pay Channels like Star, Sony, Zee, etc. and paid them subscription charges for redistribution of the TV Channels through cable operators by

3 Wire & Wireless India Ltd. de-encryption of signals, with the help of IRDs and viewing Cards. Payment of subscriptions of channels was debited in its books of accounts as Pay Channel Subscription. In consideration of redistribution and viewing, the assessee recovered subscription from ultimate subscribers through cable operators. Such receipts were shown as Subscription Income in the books of the assessee. The assessee deducted TDS on the Pay Channel Subscription paid to Broadcasters u/s 194C of the Act. The AO asked the assessee to justify the same. It was explained by assessee that as provided under explanation III(b), to section 194C, the expression ‘work’ includes “broadcasting and telecasting including production of programs for such broadcasting or telecasting”. Hence deduction of TDS u/s 194C was in compliance of the provisions of the Act. But AO was of the opinion that TDS should have been deducted u/s 194J of the Act on the ground that impugned payment was in the nature of ‘Royalty’ as defined under explanation (ba) to Section 194J read with explanation 2(iva) to section 9(1)(vi). Thus, the assessee company was treated as assessee in default for ‘short deduction’ of TDS.

3.2. Being aggrieved, the assessee filed an appeal before the Ld. CIT(A) and made detailed submissions on the ground that the impugned transactions were in the nature of ‘work’ as covered u/s 194C and not in the nature of ‘royalty’, liable to deduction of tax at source u/s 194J of the Act as alleged by the AO. Ld. CIT(A), after considering detailed submissions and

4 Wire & Wireless India Ltd. case laws relied upon by the assessee, accepted the stand of the assessee and reversed the order passed by the AO.

3.3. Being aggrieved, the Revenue filed this appeal before the Tribunal.

3.4. During the course of hearing, detailed submissions have been made before us by both the sides. Ld. DR has relied upon the order of the AO to contend that the impugned payments were covered in the nature of reality and thus covered u/s 194J and therefore, stand of the AO should be accepted and order of Ld. CIT(A) should be reversed. On the other hand, Ld. Counsel of the assessee has read before us detailed findings of Ld. CIT(A) and drew our attention to various case laws which were in favour of the assessee and requested that the order of Ld. CIT(A) should be upheld as the issue was covered in favour of the assessee, in view of following judgments:

3.5. We have gone through the submission made by both the sides as well as order passed by the lower authorities and also judgment placed before us on this issue and noted that Ld.

5 Wire & Wireless India Ltd. CIT(A) has considered the issue in detail before deciding the same in favour of the assessee. He has considered facts of this case as well as correct position of law as has been explained in the aforesaid judgments. Relevant findings of Ld. CIT(A) are reproduced below for the sake of ready reference: “3.12 I have considered the submissions and arguments of the Ld. AR as well as the order passed by the AO. The Appellant has made payment of pay channel fees to channel companies. The appellant is in the business of distribution of satellite based TV channels and had non-exclusive rights to market and distribute the said services in India. Therefore the appellant was receiving the telecasting signals' from the TV Channels and re-broadcasting and telecasting the signals to ultimate subscribers through cable operators. Therefore, the services of the appellant are included within the ambit of broadcasting and telecasting facility as defined u/s 194 C of the Act. In terms of the provisions of section 194C of the Act, the expression 'work' shall include, inter alia, broadcasting and telecasting including production of programmes for such broadcasting and telecasting. Hence, 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 194C of the Act. It is not in dispute that the appellant is a multi system operator (MSO) who was in the business of re- distributing TV Channels to the customers and is charging subscription fee from them.

3.13 The appellant made payments to the TV Channels as airing charges for broadcasting of programmes. The essence of the transaction is the telecast of TV signals. Therefore, there cannot be any doubt that such transactions are covered by section 194C of the Act. Similar view has been taken by the Hon'ble Punjab & Haryana High Court in the case of Kurukshetra Darpans (P) Ltd. Vs. CIT (supra) cited by the appellant. Therefore, I hold that the payment of

6 Wire & Wireless India Ltd. pay channel subscription charges by the Appellant to channel companies is liable to tax deduction at source @ 2% as per the provisions of section 194C of the Act. Since the Appellant has already deducted TDS under section 194C of the Act on the pay channel fees, the AO is directed not to consider the Appellant as an assessee in default under Section 201(1) of the Act. Also the demand raised by the AO against the appellant on this ground is directed to be deleted. 3.14 I do not agree with the stand adopted by the TDS officer in the impugned order that the pay channel subscription fee should be treated as 'royalty' for the purpose of TDS under section 194J of the Act. It is a settled position in law that merely because a service provider requires technical equipments to provide services to its customers, the same does not mean that any technology is transferred or technical service is provided by the service provider. As per the arrangement in this regard, what the appellant does is only re-distribute the TV channels on which it has non-exclusive rights. Having regard to the various judicial precedents relied upon by the Appellant, pay channel subscription being a standard facility, the consideration in respect thereof would not qualify as 'royalty' for the purposes of section 194J of the Act.”

3.6. We have also gone through the relevant position of law in this regard as contained in the Income Tax Act. In our considered opinion these payments shall be covered in the specific provisions contained u/s 194C, wherein it has been provided in the explanation III(b) to section 194C ( prior to amendment by the Finance Act,2009 wef 1.10.2009) that ‘work’ shall include broadcasting and telecasting etc. Even in post amended section, situation remains same, as clarified by explanation (iv) to section 194C, wherein similar definition has

7 Wire & Wireless India Ltd. been given to explain scope and meaning of the term ‘work’. It is well established rule of interpretation of law that when a particular situation is covered in a specific provision of law then its inclusion in the general provisions of the law is ruled out. Therefore, the contention of the Revenue that impugned payments should be covered u/s 194J under the head ‘royalty’ is not acceptable. It is noted that in the explanation to section 194J, it has been mentioned in explanation (ba) that ‘royalty’ shall have the same meaning as given in explanation 2 to clause (vi) of sub section (1) of section 9. When we refer to the said provision, we find that the AO appears to have applied clause (iva) of explanation 2 (of Section 9(1)(vi)), which provides that ‘royalty’ means consideration for the use or right to use any industrial, commercial or scientific equipment. It has been contended by Ld. DR that payment made by the assessee should be covered in the aforesaid provisions defining nature and scope of payments that would be covered under the head royalty.

3.7. We are not able to accept the arguments of Ld. DR for the simple reason that the dominant purpose of the impugned payment is not for the purpose of use of the equipments provided to the assessee. But the dominant purpose is transmission, broadcasting and telecast of the programme contents. A careful analysis of the plain provisions clearly indicates that Assessee’s case fall u/s 194C. We further find that this issue is no more res-integra.

8 Wire & Wireless India Ltd. 3.8. It is noted that 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:- “……. 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 taxed and the other in more general terms, resort must be had to the specific provision 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. We find no infirmity in the view taken by the Income-tax Appellate Tribunal which we hereby affirm.” 3.9. 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 made 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. The Board clarified in the said circular as under:-

“1. Payment of any sum shall be liable for deduction of tax only under one section. It has been brought to the notice of the Board that in some cases persons responsible for deducting tax at source are

9 Wire & Wireless India Ltd. deducting such tax by applying more than one provision for the same payment. In particular, it has been pointed out that the sums paid for carrying out work of advertising are being subjected to deduction of tax at source under section 194C as payment for work contract as also under section 1941 as payments of fees for professional services. 2. 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.”

3.10. Further, in the case of Kurukshetra Darpans (P) Ltd. Vs. CIT (supra), Hon‟ble High Court of Punjab & Haryana, while dealing with an identical question, has held in Para 13 to 18 as under:-

“13. After hearing learned counsel for the parties, we are of the view that the contentions of the counsel for the appellant are liable to be rejected. Sec. 194C of the Act creates an obligation on a person responsible for paying any sum specified therein to a person for carrying out any work, to deduct the tax at source. Presently, we are concerned with the ‘work' as referred to in clause (b) of Expln. III below s. 194C(2) of the Act. 14. 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

10 Wire & Wireless India Ltd. performing the work which is covered within the meaning of c1. (b) of Expln. III to s. 194C(2) of the Act. 15. 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. 16. 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. 17. 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. 18. For the reasons recorded above, we have no hesitation

11 Wire & Wireless India Ltd. 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.”

3.11. Thus, in view of the facts of this case and discussion made by us in earlier part of this order read with aforesaid judgments and other judgments as were relied upon by the Ld. Counsel, we do not find any error or illegality in the order of Ld. CIT(A) on this issue. It is further noted that no contrary decision on this issue has been brought to our notice by Ld. DR. Therefore, following these decisions coupled with the given facts of the case, we uphold the finding of the Ld. CIT(A) and dismiss the ground raised by the Revenue.

4.1. During the course of assessment proceedings, it was observed by the AO that the assessee had made payments to various cable operators under the caption ‘carriage sharing fee’. According to the AO these payments were in the nature of commission for facilitating business to the assessee, and therefore, assessee should have deducted tax at source u/s 194H @ 5.61% but the assessee has deducted TDS u/s 194C @ 2% and thus there was short deduction on the part of the

12 Wire & Wireless India Ltd. assessee, and accordingly he held the assessee in default on account of short deduction of tax at source.

4.2 Being aggrieved, the assessee filed an appeal before the ld. CIT(A) wherein detailed submissions were made by the assessee. After considering the submissions of the assessee, the ld. CIT(A) found force in its submissions and held that payments made by the assessee to cable operators on account of placement of channels in prime bands was not meant for bringing and facilitating more business, and therefore, could not have been categorized as commission liable for deduction of TDS u/s 194H and it was in the nature of work as envisaged u/s 194C, and therefore, liable for TDS u/s 194C. Thus, he upheld the stand of the assessee and reversed the order of the AO. Being aggrieved, the revenue filed appeal before the Tribunal.

4.3. During the course of hearing before us, the ld. DR has relied upon the order of the AO and submitted that the impugned payments were in the nature of commission, and therefore, the AO had rightly held that TDS should have been deducted u/s. 194H. On the other hand, the ld. Counsel of the assessee has relied upon the detailed findings of the ld. CIT(A) and also relied upon few judgements in support of the proposition that payment of these types would fall u/s 194C and not u/s. 194H. He relied upon the following judgments :

13 Wire & Wireless India Ltd. 1) ACIT v. UTV News Ltd. dt. 16.10.2015 (ITA No. 2697/Mum/1998 & 4206-4207/Mum/2012) (ITAT, Mumbai); 2) DCIT v. Zee Entertainment Enterprises Ltd. dt. 20.2.2015 (ITA No. 3931-3935/Mum/2013) (ITAT, Mumbai); 3) ACIT v. NGC Networks India Pvt. Ltd. dt. 9.7.2014 (ITA No. 1382/Mum/2014) (ITAT, Mumbai)

4.4. We have gone through the orders of the lower authorities, submissions made by both the sides as well as judgements relied upon by the parties before us. The brief facts relating to the issue before us are that during the year, as stated above, the assessee was engaged in the business of distribution of TV channels belonging to various broadcasters. These TV channels are distributed by the assessee through cable operators. Cable networks in India face bandwidth constraints and due to the same, the cable operators enjoy discretion to decide which channel would reach the end viewer at what frequency (also called as ‘placement of channels’). Therefore, in order to gain preference for their channels, the broadcasters make payment to the cable operators through the distributor (i.e. the assessee-company) to carry their channels at a particular frequency. These types of payments are commonly called as ‘carriage fee’ or ‘placement fee’. The payment of placement fee leads to placement of channels in prime band, which in turn enhances the viewership which further leads to more advertising revenue for that TV channel. The assessee-

14 Wire & Wireless India Ltd. company has thus made payment to cable operator for gaining placement of channels of various broadcasters in prime bands. The assessee-company, has in turn, received lump sum payments from the TV broadcasters/TV channels. Thus, the assessee-company has acted like a conduit in this work between the broadcasters/TV channels and cable operators. Thus, in a way, the assessee-company acted only as a pass- through entity and no technical services were provided or no knowledge was imparted by the assessee-company to the cable operators. After considering all the facts and circumstances, it was held by the ld. CIT(A) that the impugned payments did not fall in the category of ‘commission or technical services’ and therefore not liable for TDS u/s. 194H or 194J but would fall under the category of ‘work’ as envisaged u/s. 194C liable for TDS u/s. 194C. The relevant findings of the ld. CIT(A) are reproduced below :

“4.9. I have considered the submissions and the arguments of the Ld. AR. The Appellant has made payment of placement charges to cable operators. It is evidenced from the placement agreement that the cable operators agree with the Appellant to place the channels on certain preferred frequencies. It is only consideration for providing choice of the desired placement of the channels that the Appellant agrees to make payment of placement fee to the cable operators. In order to transmit the TV signals to the ultimate viewers, the cable operators are as such required to place the signals on some frequency. By agreeing to place the channel on any preferred band, the cable operator does not render any service which involves principal-agent relationship. In terms of the provisions of section 194C of the Act, it is

4.11 1 do not agree with the stand adopted by the AC in the impugned order that the

15 Wire & Wireless India Ltd. provided that expression 'work' shall include, inter alia, broadcasting and telecasting including production of programmes for such broadcasting and telecasting. Therefore, 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 194C of the Act.

4.10 It is not in dispute that cable operators disseminate signals received from the broadcaster through cables to various subscribers. Thus, carriage of channels through cables, which also involves placing them at certain bands/ frequencies, is an integral part of the broadcasting process, which work is contracted to cable operators. Thus, payment made to cable operators for placement charges should be regarded to be in the nature of carrying out work of broadcasting and telecasting and hence, subjected to TDS under section 194C of the Act Similar view has been taken by the Hon'ble Punjab & Haryana High Court's decision in the case of Kurukshetra Darpans (P) Ltd. v. CIT (2008) (169 Taxman 344). Therefore, I am of the view that payment of placement fee by the Appellant to the cable operators should be subjected to TDS @ 2% as per the provisions of section 194C of the Act. Since the Appellant has already deducted TDS under section 194C of the Act on the placement fee, the AO is directed not to consider the Appellant as an assessee in default under Section 201(1) of the Act. Also the demand raised by the AO against the appellant on this ground is directed to be deleted.

4.11 I do not agree with the stand adopted by the AO in the impugned order that the placement fee should be treated as commission paid by the appellant for the business brought in by the cable operators for the purpose of TDS under section 194H of the Act. As per the arrangement in this regard, what the cable operators do

16 Wire & Wireless India Ltd. is to only give preference to a particular channel over the other, to place it on a particular band for which they charge a consideration. Having regard to the facts of the case and judicial precedents relied upon by the Appellant, placement of channels being a standard facility, the consideration in respect thereof would not qualify as commission for the purpose of section 194H (or even fees for technical services for the purpose of section 194J) of the Act.”

4.5. We find that the analysis made by ld. CIT(A) is correct as per law and facts of the case. It is noted that payment was not made for bringing or referring any business, but payment was of the nature of work for ensuring that a particular channel is assigned a particular frequency. On this issue, we find that the judgements relied upon by the ld. Counsel are also applicable.

4.6. In case of UTV Entertainment Television Ltd. (supra) it was held that the payment 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 for better advertising revenue was in the nature of ‘work’ liable for TDS u/s 194C.

4.7. Further, in the case of Zee Entertainment Enterprises Ltd. (supra), similar view has been taken by the coordinate Bench by making the following observations:

“11. We have heard the arguments and have pursued the orders of both the revenue authorities and we find that

17 Wire & Wireless India Ltd. the CIT(A) had correctly applied the provisions of law, i.e. in section 194C, “work includes broadcasting and telecasting including production of programmes”. We are also helped by the order of the coordinate Bench of ITAT Mumbai in the case of ACIT(TDS) vs UTV Entertainment Television Ltd., ITA No. 2699/Mum/2012, wherein the ITAT held that while making the payment of carriage fee to cable operators, TDS has to be deducted u/s. 194C.

4.8. Further, we have gone through another judgement relied upon by the ld. Counsel in the case of NGC Networks India Pvt. Ltd. (supra) and noted that, after making detailed discussion in the order it was held by the Hon'ble Bench that, payment made to cable TV operator/DTH provider for placing a channel at a particular frequency to get better viewership on account of good picture and sound quality was not covered u/s 194J since no technical services were provided, and accepted the stand of the assessee for deduction of tax @ 2% u/s 194C.

4.9. In view of the above discussion, we find that the order of the ld. CIT(A) is in accordance with law. Nothing wrong therein could be pointed out by the ld. DR and thus, respectfully following the aforesaid judgements and keeping in

18 Wire & Wireless India Ltd. view the facts of this case, we uphold the order of the ld. CIT(A) and dismiss ground no. 2 raised by the revenue.

Ground nos. 3 to 8

5.1. During the course of hearing, it was argued by the ld. DR that additional evidences were considered by the ld. CIT(A) and there was contravention of Rule 46A of the Income Tax Rules, 1962, but ld. DR was not able to point out as to what exactly was the additional evidences since the perusal of the order of the ld. CIT(A) does not show that the ld. CIT(A) had considered additional evidences. In response, the ld. DR was not able to point out what exactly were the additional evidences.

5.2. On the other hand, the ld. Counsel of the assessee submitted that no additional evidences were submitted by the assessee and drew our attention to the certificate given in the paper book filed by the assessee showing that all the documents were before the AO.

5.3 We have noted that it is not coming out clearly from the combined reading of orders of lower authorities that what evidences were filed before the AO and what more evidences

19 Wire & Wireless India Ltd. were brought before the Ld CIT(A). It is admitted fact that no remand report was called from the AO by the CIT(A). The Paper Book filed by the assessee is also not comprehensive and complete. Thus, none of the parties could bring clarity on this issue.

5.4. Be that as it may, on merits, it has been argued by the ld. Counsel that the AO had held that the assessee should have made deduction of tax at source on the amount of provision of expenses credited by the assessee in the books of accounts. The ld. Counsel has submitted that the AO had wrongly held that the assessee was liable to deduct TDS on the amount of provisions. It was submitted that either some of the expenses were disallowed by the assessee itself or these expenses were reversed or TDS was deducted, and therefore, the ld. CIT(A) has rightly reversed the action of the AO on this issue, but in response to our query as to showing the exact break-up of treatment of these expenses in the books of accounts to show whether the expenses were reversed or these were paid, no details were shown by the ld. Counsel.

5.5. We have gone through the order of the AO as well as the ld. CIT(A) in this regard. The relevant facts of this issue are that, on perusal of the tax audit report, the AO noted that the amount on which tax was deductible, but was not deducted, was Rs. 25,94,60,398/-. The AO required the assessee to furnish details in respect of this amount and subsequent compliance with the TDS provision, if any. Since, as per the

20 Wire & Wireless India Ltd. order passed by the AO, any such details were not furnished, he held the assessee in default in respect of an amount of Rs.22,50,65,550/- [Rs. 25,94,60,398/- (pay channel subscription Rs.65,74,285 + carriage/placement fees Rs.,278,20,563)] and computed the tax deduction liability of the assessee at Rs. 53,67,505/-.

5.6. Being aggrieved, the assessee filed an appeal before the ld. CIT(A) wherein detailed submissions and evidences were filed showing that there was either reversal of expenses or deduction of tax in respect of the expenses in subsequent years. The ld. CIT(A) after considering the detailed submissions of the assessee held that the assessee was not liable to deduct TDS on the amount of provisions since the same was disallowed u/s 40(a)(ia) of the Act or some of these expenses were paid in the subsequent year on identification of the creditor or these were reversed in the subsequent year. It has been vehemently argued by the ld. DR that there is no clarity on this crucial aspect and ld. CIT(A) has decided this issue in a consolidated manner without discussing the exact facts and figures, and therefore, this issue should be sent back to the file of the AO for deciding this issue after discussing the correct facts and figures even if, in principle, the order of the ld. CIT(A) was to be accepted. The ld. Counsel also could not rebut the contention of the ld. DR in the absence of the exact facts and figures brought before us but he relied upon another judgement of coordinate Bench in the case of Aditya Birla Nuvo Ltd. v. DCIT (ITA No. 8427/Mum/2010 dt. 17.9.2014)

21 Wire & Wireless India Ltd. wherein it was held that no TDS was required to be deducted on mere provision where payee was not identified.

5.7. We have carefully gone through, once again, the order of the ld. CIT(A) and the submissions made by both the sides on this issue. We uphold the order of the ld. CIT(A), in principle, in view of the judgement of the coordinate Bench in the case of Pfizer Ltd. (order dt. 31.10.2012) (ITAT Mumbai) as well as Aditya Birla Nuvo Ltd. (supra). Recently, Hon’ble Karnatka High Court in the case of Karnatka Power Transmission Corporation Ltd vs DCIT (dt 2nd February 2016 in ITA No 750) has made detailed analysis of requirement of law regarding deduction of TDS on mere provision of interest, without there being any actual liability of payment of interest as per the terms between the parties, and held that as per law TDS was not required to be deducted under such circumstances. Thus, we hold the order of the ld. CIT(A), in principle, and send this issue back to the file of the AO for verification of facts with the following guidelines :-

i) If provision is made without making specific entries into account of parties and payee was not identifiable, then, TDS provisions would not be applicable.

ii) Once the amount has been disallowed u/s 40(a)(ia) for non-deduction of tax, it cannot be subjected to TDS provision again so as to make the assessee liable to pay tax u/s 201 and interest u/s 201(1A).

22 Wire & Wireless India Ltd.

iii) It has to be shown by the assessee that whenever payment has been made out of the provision after crediting the amount in the account of the payees, as and when identified, then, TDS has been deducted before making the said payment or crediting the amount in the account of the payee, whichever has occurred first.

iv) Wherever, payees were not identified, the amount of provision was reversed.

5.8. Thus, with these directions these grounds are sent back to the file of the AO for deciding the same afresh. The AO shall give adequate opportunity of hearing to the assessee before deciding these grounds. As a result, these grounds are partly allowed for statistical purpose.

ITA NO. 2385/Mum/2013 (A.Y 2008-09)

23 Wire & Wireless India Ltd. therefore, the AO is directed to follow our order for A.Y 2007- 08 with respect to all these grounds mutatis mutandis.

ITA NO. 2383/Mum/2013 (A.Y 2006-07)

Ground no. 1 10. In this ground the revenue has challenged action of the ld. CIT(A) in questioning the order passed by the AO by holding that the assessee was not liable to tax on the expenses incurred by the erstwhile Siti Cable Network Ltd. which had demerged its cable business into assessee-company consequent to the order of the Hon'ble High Court.

10.1 The brief facts of this case are that the erstwhile Siti Cable Network Ltd. had merged into the assessee-company vide order of the Hon'ble High Court dt. 17.11.2006 and the business of the said company was closed on 31.3.2006. The assessee also took over the provisions and liabilities of the said company. The AO alleged that while discharging these liabilities, the assessee has not deducted tax at source. The assessee submitted that the said company had accounted all income and expenditure for the year ended 31.3.2006 and complied with the TDS and other applicable laws and also filed its return of income and it also suo moto disallowed expenses aggregating to Rs. 18.45 crores u/s. 40(a)(ia) of the Act but the

24 Wire & Wireless India Ltd. AO did not accept the submissions of the assessee and held the assessee liable for non-deduction of tax at source. Being aggrieved, the assessee filed an appeal before the ld. CIT(A) wherein complete details and documents were submitted to show that the said company had made compliance of all the TDS provisions and that as per law and facts, the assessee was not liable to deduct tax at source on the amount of expenses booked by the said company in its books of accounts. After considering the submissions in detail, the ld. CIT(A) accepted the stand of the assessee and held that the assessee could not have been treated as an assessee in default in respect of the expenses incurred or provisions for expenses made by the erstwhile company by making following observations :

“3.8. I have considered the above submissions and the arguments of the Ld. AR. I have also considered the impugned order passed by the AO as well as the facts of the case. The appellant was incorporated on 24.03.2006. It commenced its business on 27.03.2006 as per certificate of commencement dated 27.03.2006 issued by the Registrar of Companies. The first previous year of the appellant declared in its return of income was from 24.03.2006 to 31.03.2007. Thus the first assessment year for which the appellant was assessable was assessment year 2007-08. In view of these facts therefore it is evident that the appellant was not an assessable entity for assessment year 2006-07. Furthermore, it is also clear from the facts that when the expenses under consideration were incurred, same were incurred by erstwhile Siticable Network Limited and the said Siticable Network Limited accordingly had accounted for these

25 Wire & Wireless India Ltd. expenses. Since, tax was not deducted and paid as per law, in respect of these expenses or provisions made in regard to such expenses, the Siticable Network Limited had also disallowed the same in its Return of Income under the provisions of section 40(a)(1a) of the Act. The Appellant did not book these expenses as it has not commenced its commercial activities. The Appellant cannot be held responsible for deduction of tax at source on various payments or provisions made in respect of the same.

3.9 The AO, in the impugned order has held the appellant to be 'an assessee in default' u/s 201(1) of the Act, without disputing the fact that the expenses were incurred and accounted-for by the erstwhile Siti Cable Network Ltd. Therefore, in my view the AO was not justified in holding the appellant to be 'an assessee in default' in respect of these expenses incurred by or provisions for expenses made by the erstwhile Siticable Network Limited. In the circumstances, the order passed by the AO cannot be upheld and the same is liable to be quashed. I hold accordingly.”

10.2. During the course of hearing before us it has been fairly accepted by the ld. DR that, in fact, there was no loss to the revenue because compliance of TDS provision has actually been made by the erstwhile company viz. Siti Cable Network Ltd. It is further noted by us that a finding of fact has been recorded by the ld. CIT(A) that the said company has made compliance with TDS provisions as applicable. In any case, the assessee company cannot be held liable for the compliance of TDS provision with respect to expenses which were incurred or booked by the erstwhile company. Nothing wrong has been pointed out by the ld. DR in the well reasoned finding of the ld.

26 Wire & Wireless India Ltd. CIT(A) on this issue. Thus, we uphold the same and dismiss the ground raised by the revenue in this regard.

10.3. With respect to the other grounds on provision of expenses relating to the assessee-company, it is noted by us that the facts are identical with A.Y 2007-08, and therefore, the AO is directed to follow our order for A.Y 2007-08 with respect to other grounds.

10.4. As a result, appeal of the revenue is partly allowed for statistical purposes.

Order pronounced in the open court on 24th February, 2016.

Sd/- Sd/- (Saktijit Dey ) (Ashwani Taneja) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER मुंबई Mumbai; �दनांक Dated : 24/ 02/2016 ctàxÄ? P.S/.�न.स. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, मुंबई / ITAT, Mumbai