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ITO (TDS) & Others Versus M/s Times Global Broadcasting Co. Ltd. & Others

2015 (4) TMI 256 - ITAT MUMBAI

Short deduction of TDS - payment of channel placement charges to cable operators/MSOs - TDS u/s 194J @ 10% or 194C @ 2% - CIT(A) held that assessee was not in default on account of short deduction of tax u/s 201(1) as well as interest levied thereon u/s 201(1A) - Held that:- The assessee had utilized the services of dubbing studio Ninety Degrees by using their equipments as well as the artists who were working for Studio Ninety Degrees. The assessee had thus carried out the work of dubbing by en .....

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ng the order of the Tribunal in assessee’s own case we hold that channel replacement charges paid by assessee were liable for deduction of tax u/s 194C of the Act and the assessee has correctly deducted tax at source u/s 194C of the Act, therefore, there is no liability u/s 201(1) and 201(1A) of the I.T. Act. - Decided in favour of assessee. - I.T.A. No.669/Mum/2012, C.O. No. 16/Mum/2013, I .T.A. No.670/Mum/2012, /C.O. No. 17/Mum/2013 - Dated:- 27-3-2015 - Shri R.C. Sharma And Shri Sanjay Garg J .....

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the assessee is a company engaged in the business of distribution of television channels. A survey operation u/s 133A of the Act was conducted in the premises of the assessee on 04.03.2011 to verify the compliance of TDS provisions by the assessee. Thereafter, vide letter dated 08.03.2011, the Income Tax Officer(TDS)-3(4), Mumbai (the AO) issued a show cause notice under Section 201 (1) of the Income-tax Act, 1961 ('the Act'), asking for explanation as to why TDS was not deducted under .....

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- and levied interest under section 201(1A) of the Act amounting to ₹ 1,59,98,78 lt is against this order passed under section 201 (1 )/(1A), the assessee filed appeal fore the ld. CIT(A). 3. By the impugned order, the ld. CIT(A) held that assessee was not in default on account of short deduction of tax u/s 201(1) as well as interest levied thereon u/s 201(1A) of the Act, after having following observation:- 3.15 I have considered the submissions and the arguments of the Ld. A.Rs. The abov .....

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e 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 siqnals on some frequency. By agreeing to place the channel on any preferred band, the cable operator does not render any technical service to the distributor/ TV channel. In terms of the provisions of section 194C of the Act, it is provided that expression 'work' shall include, inter alia, broadcasting and telecasting including production of progra .....

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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 vie,,:, has been taken by the Hon'ble Punjab & Haryana High Court's decision in the case of Kurukshetra Darpans (P) Ltd. Vs. CIT, 169 Taxman 344. In the case of Prasar Bharti (Broadcasting Corpn .....

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ith the stand adopted by the TDS officer in the impugned order that the placement fee should be treated as Fees for technical services for the purpose of TDS under section 194J of the Act. It is a settled position in law that merely because, as part of providing any service or facility, if the service provider requires technical equipments that does not mean that any technology or technical service is provided by the service provider. Under the current arrangement, what the cable operator does i .....

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and various other judicial precedents relied upon by the Appellant, placement of channels being a standard facility, the consideration in respect thereof would not qualify as fees for technical services for the purpose of section 194J of the Act. 3.18. So far as the alternative argument of the AO, vide letter dated 15.11.2011 that the payment of placement fees is in the nature of brokerage or commission as defined in' explanation to section 194H of the I.T Act 1961, is concerned, the same is .....

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person, without engaging any resources or assets of his own and, if at all, any such assets or resources are required, the same are provided/supplied by the other person. The other instances of commission or brokerage are payments for services in the course of buying or selling of goods or transactions relating to any asset, valuable article or thing as defined in Explanation to section 194H. Although the meaning of these terms as per explanation to section 194H is inclusive, largely the 'c .....

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age'. The case laws cited by the appellant which are directly on this issue also support this view. Therefore, in my opinion, this argument of the AO is also devoid of merits, and deserves to be rejected. 3.19. Since the appellant has already deducted TDS under section 194C of the Act on the placement fee, the TDS officer is directed not to consider the Appellant as assessee in default under section 201(1) of the Act as there is no short deduction of tax by the Appellant. The demand of tax u .....

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ssee to the cable operators/ MSOs for placing the TV channels in the prime band in order to enhance the viewership and better advertisement revenue. In the case of Kurukshetra Darpans (P) Ltd. Vs. CIT (supra), the 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 t .....

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h 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 tems 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 reaso .....

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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 als .....

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he 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 co .....

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ayments made to the licensor for obtaining TV signals. cable TV network owned by the assessee. 7. Thus after examination of the Explanation III to the then section 194C, the Hon'ble High Court held that the payment for obtaining the telecast licenses from the licensor falls under the provisions of section 194C. We find that the work of broadcasting/telecasting including production of programme or such broadcasting or telecasting falls under the definition of work as provided under clause (iv .....

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fication of a customer by using material purchased from such customer, But does not include manufacturing or supplying a product according to the requirement of specification of a customer by using material purchased from a person, other than such customer.] 8. The 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 are unable to agree with this submission. We observe that Explanation III, which was int .....

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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. 9. The 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 to the specific p .....

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brought to the notice of the Board that in some cases persons responsible for deducting tax at source are 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, rega .....

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ssue. 11. Ground No. 2 is regarding the payment for subtitling and editing charges, treated by the Assessing Officer as fee for technical service and thereby applied provisions of section 194J. 12. We have heard the Ld. DR as well as Ld. Authorized Representative and considered the relevant material on record. The CIT(A) while deciding this issue has relied upon the decision of this Tribunal in the case of ACIT Vs. Manish Dutt (12 taxmann.com 50), wherein, the Tribunal held in para 8 to 12 as un .....

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ayment of ₹ 1,60,000. According to the assessee, the payment was made to a sub-contractor for execution of a contract and, therefore, in terms of section 194C the assessee deducted tax at source at 2 per cent. The Assessing Officer however, was of the view that the payment in question was rent paid by the assessee and, therefore, in terms of section 194-1 of the Act the assessee ought to have deducted tax at source at 20 per cent. Since the assessee did not deduct tax at source at the prop .....

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udio equipment, staff etc. The word Studio Hire is a term generally used by industry to denote the various services rendered by the dubbing studio. But the real nature of work is a contract for carrying out work. The assessee relied on Explanation to section 194C(7) where at (iv) 'work' would include broadcasting and telecasting including production of programmes for such broadcasting or telecasting. The assessee furnished details of the work carried out by it from Studio 90 Degree which .....

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e studio was hired for utilizing the dubbing facilities which included service through the studio staff. Condition of section 194C(7) Explanation (iv) are met also. As such the payment made was coverable under section 194C under which tax was deduced. On facts, therefore, the disallowance made under section 40(a)(ia) is deleted." 11. Aggrieved by the order of the CIT(A) the revenue has raised ground No.2 before the Tribunal. 12. We have heard the rival submissions. As can be seen from the o .....

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able and the assessee has rightly deducted tax at source at 2 per cent treating the payment as a payment to sub-contractor for carrying out a work. We do not find any ground to interfere with the order of CIT(A). Consequently ground No.2 raised by the revenue is dismissed. 13. No contrary decision has been referred or produced before us. Therefore, following the decision of this Tribunal, we do not find any error or illegality in the order of CIT(A) qua this issue. 14. In the Cross Objection, th .....

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