ITO(TDS) WD - 57(2),KOLKATA., KOLKATA vs. BROADCAST WORLD WIDE LTD., KOLKATA

Per Bench These are appeals filed by the Revenue against two orders both dated 10.10.2012 of CIT(A)-I, Kolkata relating to A.Y.2008-09 and 2009-10.

2. Whether in the facts And circumstances of the case the Ld. CIT(A) erred in holding that the carriage fees paid by the assessee to various multi service operators (MSOs)are contractual in nature within the purview of Sec. 194C ? 3. whether the Ld. CIT(A) erred in not appreciating the fact that with the recent amendments in Sec. 9(1) (vi) read with its explanations the payments made by the asseessee company on account of Uplinking, VSAT and transponder fee and carriage fee are" royalty" in nature and covered u/s 194J of the Act?

4. Whether in the facts and circumstances of the case the CIT(A) was correct in giving relief to assessee relying upon the judgment of the Hon'ble Supreme Court in case of Hindustan Coca Cola Beverages Pvt. Ltd.(293 ITR 226) (2007) when the assessee had not discharged its onus of satisfying the AO that the Payments made by the deductor

2 Broadcast World Wide Ltd. A.Yr.2008-09&2009-10 assessee have been duly ref1ected in the IT returns of the respective deductees., and that the due taxes have been paid by the deductees?

Nature of Amt. of Tax deductible Tax deducted Short deduction payment payment @ 10.30% (Rs.) (Rs.) (Rs.) (Rs.) Uplinking, Vsat 2,84,51,168 29,30,470 NIL 29,30,470 & Transponder Fee Carriage Fee 4,02,38,546/- 41,44,570 8,93,747 32,50,823 TOTAL 6,86,89,714 70,75,040 8,93,747 61,81,293

3 Broadcast World Wide Ltd. A.Yr.2008-09&2009-10 3.1. The AO computed the tax and interest due u/s 201(1) and 201(1A) of the Act as follows :- AY 2008-09: The assessee was treated as an assessee in default u/s 201(1)/201(1A) in respect of short deduction of Rs.54,81,924/- plus interest @36% @ 1% P.M. for 36 months). Short Deduction as per notice : Rs.54,81,924/- Interest on Short deduction @36% : Rs.19,73,493/- Interest for late deposit of TDS : Rs. 14,986/- Tax payable : Rs.74,70,403/- AY 2009-10: The assessee was treated as an assessee in default u/s 201(1)/201(1A) in respect of short deduction of Rs.61,81,293/- plus interest @24% @ 1% P.M. for 24 months). Short Deduction as per notice : Rs.61,81,293/- Interest on Short deduction @24% : Rs.14,83,510/- Interest for late deposit of TDS : Rs. 17,455/- Tax payable : Rs.76,82,258/- 3.2. Aggrieved by the aforesaid order of the AO the assessee preferred appeal before CIT(A). The contention of the assessee before CIT(A) was that in respect of up- linking Vsat & Transponder fees the assessee had deducted tax at source at 2% and treated it as payment made for contractors fall within the section 194C of the Act. It was submitted that the payment in question was not a payment in the nature of “Fees for Technical Services (FTS) falling u/s 194J of the Act. The assessee claimed before CIT(A) that since tax has been deduced in accordance with law, the order u/s 201(1) and 201(1A) of the Act is bad in law and should be cancelled. In support of the contention of the assessee that the payment of up-linking, Vsat and Transponder charges and carriage fees was not in the nature of FTS, the assessee relied on the definition of the word “fees for technical services” as given in Explanation 1 to section 9(1)(vii) of the Act. As per the said definition FTS means consideration received for rendering any managerial, technical or consultancy services is alone to be considered as FTS. The assessee submitted that the Hon’ble Delhi High Court in the case of CIT vs Bharati Cellular Limited [2008] 175 Taxman 573 has held that the expression “Fees for technical Services” in Section 9(1)(vii) includes only services provided by human element and not services provided by machine or robot. The assessee therefore contended that since the up-linking, Vsat and Transponder fees as 4 Broadcast World Wide Ltd. A.Yr.2008-09&2009-10 well as carriage fees were provided by machines and not by intervention of human element and therefore the payment in question cannot be considered as FTS. The assessee also relied on the decision of the Hon’ble Delhi ITAT in the case of Expeditors International (India) Pvt.Ltd., Vs. ACIT 118 TTJ 652 (Delhi) and the decision of the Hon’ble Mumbai bench in the case of Pacific Internet (India) (P)Ltd vs ITO [2009] 27 SOT 524 (Mum) wherein it was held VSAT uplinking charges were not in the nature of fees for technical services and the same being not liable for deduction of tax at source, the disallowance made by the AO by invoking the provisions of s. 40(a)(i) was not sustainable.

3.3. The next submission of the assessee before the CIT(A) was that M/s India Sign Pvt. Ltd to whom the assessee made payment in question is assessed to tax and have included the amount received by the assesse in their return of income. The assessee submitted that since the sum in question has already been brought to tax the assessee cannot be treated as assessee in default in respect of tax due and payable on the payments in question u/s 201(1) of the Act. In support of the assessee’s contention as above reliance was placed on the decision of the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. Vs CIT [2007] 293 ITR 226 (SC) and the Circular of CBDT in Instruction No.275/201/95-IT(B) dated 29.01.1997 wherein it was laid down that payment for non deduction or short deduction of tax should not be enforced against the payer if he satisfies the Income tax Authorities that such taxes have been paid by the payee.

3.4. CIT(A) on consideration of the submissions made by the assessee allowed the appeal of the assessee observing as follows :- “Decision : After careful consideration of the assessment order u/s 201(1)/201(1A) of the Income Tax Act, 1961 and the written submissions along with paper book, it is noticed that assessee was engaged in business of Media broadcasting and Telecasting (Tara Channel). The assessee company entered into with Up-linking Service Agreement with M/s. INDIA SIGN PVT. LTD, (ISPL) and paid on account of Up-linkikng, Vsat and Transponder fees and carriage fees as per agreement dated 12.11.2007. Assessee- company deducted TDS u/s 194C on the charges paid to this company as per the terms of the agreements with them. Assessing Officer applied section 194J and held that the 5 Broadcast World Wide Ltd. A.Yr.2008-09&2009-10 services were technical in nature. The ISPL was holding license from Ministry of Information & Broadcasting, Govt. of India for providing these services. The services of Up-linking of channels and carriage through satellite were related to broadcasting and telecasting which is covered specifically by definition of “work” in section 194C(iv)(b) in the explanation part of the section itself. These services requi5red use of sophisticated equipment for transmission of assessee’s programes and this equipment was made available to the assessee company for which assessee had made payments after deduction TDS u/s 194C of the I.T.Act. Keeping in view these facts and circumstances, section 194J is not applicable to the facts of the case. Moreover, assessee had provided the details of Income-tax assessment orders u/s 143(3) for A.Y.2008-09 passed by Central Circle Delhi, of ISPL Ltd. And their PANs of all these companies with whom the transactions were made and relied upon judgement of Supreme Court 293 ITR 226 (SC) in the case of Hindustan Coca Cola Ltd. & CBDT Circular dt.29.01.1997. Keeping in view the above facts and circumstances, the ground of the appellant are allowed.”

6. We have heard the submission of the learned DR who submitted that the CIT(A) has considered the payments as broadcasting and telecasting related which is covered by the definition of “WORK" in the section 194C(iv)(b) of the I.T.Act,1961 and allowed relief to the Assessee. It was submitted that the CIT(A)-I, failed to appreciate that after the amendments made by the Finance Act 2012 in Section 9(1) of the I.T.Act 1961, consideration for services provided by the machines is royalty and will be subject to the provisions of Section 194 J of the I.T.Act, 1961. In the said amendment, expenditure incurred on roaming charges, uplinking charges, interconnection, portcharges, transponder fees VSAT charges etc. are all covered under the ambit of section 194J of the I.T.Act 1961. It was further submitted that similar issue in case of another assessee, M/ s Brand Value Communications Ltd. (TAN CALB10224E) for the F.Y.s 2009- 10 & 2010 -11 had come up for consideration. M/ s Brand Value Communications Ltd., having four television

6 Broadcast World Wide Ltd. A.Yr.2008-09&2009-10 channels viz., Rupashi Bangla, News Time Bangla, News Times Assam & Dhoom Music, also made TDS @ 2% u/ s 194 C of the I.T.Act 1961 on "distribution Carriage charges" (paid to teleport owned by T AT A Communications Ltd.) & "Transmission expenses" (paid to various multi service operators). The TDS liability was recomputed by the Assessing Officer applying 10% u/ s 194 J considering these payments as technical in nature. The CIT(A)-I ,Kolkata, in his order dated 28.02.2013 has considered that these payments covered within the purview of Section 9(1)(vii) of the I.T.Act 1961 and has held that Section 194 J of the Act is applicable in this case. It was submitted expenditure in the case of M/ s Broadcast World Wide Ltd., and the nature of expenditure in the case of the present Assessee remains the same.

5.1. We have considered the grounds of appeal raised by the revenue as well as the submissions made by the learned DR before us. It is also noticed that in the order of the AO it has been mentioned that in respect of up-linking, Vsat and transponder fees no tax has been deducted at source whereas the order of CIT(A) and the submissions made by the assessee before CIT(A) proceeded on the basis that tax at 2% had been deducted on the payments made treating the payment as falling u/s 194C of the Act. As far as the question whether it can be said that the payments in question would be in the nature of payment falling within the ambit of section 194J of the Act, it is seen that section 194J of the Act covers payment of fees for professional for technical services as well as royalty. The order of AO is silent as to whether the payment in question is being considered as royalty or fees for technical services rendered. The submissions of the assessee before CIT(A) proceeded on the footing that the AO has treated the payment in question as FTS. In the submissions made by the learned DR before us as well as grounds of appeal raised by the revenue, the payment in question is claimed to be in the nature of royalty. In our opinion the parameters for judging the payment as to whether they fall in the category of FTS or Royalty are different. Neither the order of AO nor the order of CIT(A) spells out as to under which clause of section 9(1)(vii) of the Act or section 9(1)(vi) of the Act are applicable to treat the payment in question either by royalty or FTS. We also find that the definition of royalty has undergone a change and the explanation 6 to section 9(1)(vi) of the Act has been inserted whereby 7 Broadcast World Wide Ltd. A.Yr.2008-09&2009-10 the transmission by satellite is also considered as “process”. The said explanation introduced by Finance Act 2012 is with retrospective effect from 01.06.1976. The impugned order of the CIT(A) was passed on 10.10.2012 but this retrospective amendment have not been considered in the order of CIT(A). In the given facts and circumstances, we are of the view that it would be just and appropriate to set aside the impugned orders of CIT(A) on this issue and remand the question as to whether the provision of section 194J of the Act would apply to the payments in question, to the AO for fresh consideration.AO will take into consideration the fact that even in respect of up-linking, Vsat and Transponder fees tax is stated to have been deducted at source by the assessee. This aspect has to be verified by the AO. AO will afford opportunity of being heard to the assessee before deciding the issue afresh. AO will thereafter decide the question as to whether the assessee can be treated as assessee in default u/s 201(1) of the Act and consequently order u/s 201(1A) of the Act towards interest. 5.2. Without prejudice to the decision rendered as above, we are of the view that if the assessee establishes that the payee has declared the amounts received from the assessee in their return of income and offered them to tax, than to that extent the assessee should not be treated as assessee in default u/s 201(1) of the Act. In other words the assessee should be entitled to the benefit of ruling of the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd vs CIT (supra) as well as CBDT Circular dated 29.01.1997 (supra). Therefore to this extent we confirm the order of CIT(A) in so far as the provisions of Sec.201(1) of the Act are concerned.