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2013 (9) TMI 187 - AT - Income TaxTDS on Payment of transponder fee by assessee to its subsidiary M/s. Expand Fast Holding Ltd. - royalty nor fee for technical services - Disallowance of transponder fee u/s 40(a) - The assessee is engaged in the business of broadcasting T.V. programmes under brand name Zee i.e. zee T.V., Zee cinema etc. These channels are uplinked to satellite in a foreign territory and through the transponder on the satellite, the uplinked programmes are transmitted over the entire footprint of the satellite. The assessee claimed that it had taken space on transponder on Asiasat, through its subsidiary M/s. Expand Fast Holding Ltd. (EFHL), a non resident company – Held that:- It is M/s. EFHL which had made payment to the Asiasat for use of transponder bandwidth - M/s. EFHL has business connection in India and has permanent establishment (PE) through its holding company i.e. the assessee - Therefore, the income arising in case of M/s. EFHL on account of payment made by the assessee may be taxable as business income. It was a contractual payment by the assessee in connection with the business which is chargeable to tax in India and, therefore, the provisions of section 40(a) are apparently attracted - Provisions of Section 40(a) only on the limited ground of royalty/fees for technical services. Though, the assessee, as is clear from the assessment order, had filed copies of separate agreements between Zee Telefilms and M/s. EFHL as well as between M/s. EFHL and Asiasat but these have not been examined – Restored the matter back to Commissioner(A) for passing a fresh order after necessary examination in the light of the observations made – Decided against the Assessee. Expenditure on issuance of Foreign currency convertible bond (FCCB) - Within section 35D as preliminary expnediture or is allowable as revenue expenditure – Held that:- from assessment year 2004-06 even the interest on capital borrowed which otherwise was allowable as revenue expenditure is required to be capitalized if the same had been borrowed in connection with extension of existing business. Therefore, expenses incurred on borrowing the capital cannot, in our opinion, be considered as revenue expenditure. Further, the expenditure has been incurred in connection with extension of business in the field of television and setting up of new channels, which will result in addition to the existing profit earning apparatus giving advantage in the capital field. Any expenditure incurred existing into any advantage in the capital field has to be considered as capital in nature as held by the Hon'ble Supreme Court in the case of Empire Jute Co. Ltd. v. CIT [1980 (5) TMI 1 - SUPREME Court]. Expenses incurred for issue of debenture for the purpose of extension of business has to be considered as capital expenditure and, accordingly has to be amortized under section 35D. - Decided against the assessee.
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