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2016 (3) TMI 214 - ITAT DELHI

2016 (3) TMI 214 - ITAT DELHI - TMI - TDS u/s 194J or 194C - payments made to various TV channels - assessee, Dish TV India Limited, is an Indian company engaged in the business of distribution of channels from its DTH (Direct to Home) network - Held that:- Revenue has taken similar stand in the succeeding years by holding the magnetizing of the provisions of section 194J to the similar payments, for which the matter is sub judice. Be that as it may, the rule of res judicata is not applicable in .....

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im in the later years that the correctly applicable section be put under carpet. Since the statute requires such an amount to be considered u/s 194J, we cannot permit a wrong provision of section 194C to be applied in the garb of consistency. This contention is therefore, jettisoned.

The payment made by the assessee to the TV channels is covered u/s 9(1)(vi) and, as such, deduction of tax at source was required u/s 194J of the Act as has been rightly held by the authorities below.

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him in such return of income, and the person furnishes a certificate to this effect. In view of the judgment in Hindustan Coca Cola Beverages Pvt. Ltd. (2007 (8) TMI 12 - SUPREME COURT OF INDIA ), we hold that the ld. CIT(A) was fully justified in reducing the obligation of the assessee u/s 201(1) to this extent.

Proviso to sub-section (1A) of section 201 provides in unambiguous terms that in case any person fails to deduct the whole or any part of the tax in accordance with the prov .....

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ncluding receipts from the person responsible in their respective income. On a pertinent query, the ld. AR was fair enough to accept that the calculation of ₹ 2.25 crore as made by the AO in his final order u/s 201(1)/(1A) is otherwise correct if the provisions of section 194J are held to be attracted. - Decided against assessee - ITA No. 5310/Del/2013, ITA No.6066/Del/2013 - Dated:- 29-2-2016 - Shri R. S. Syal, AM And Shri A. T. Varkey, JM For the Petitioner : Shri Sanjiv Sapra, CA For th .....

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after also called the Act ) as against under section 194C as was done by it. The Revenue is aggrieved against the direction of the ld. CIT(A) to the Assessing Officer (AO) for looking into the claim of the assessee w.r.t the payment of taxes by the deductees and then allowing appropriate relief to the assessee while determining liability u/s 201 of the Act, without appreciating that the same is tantamount to setting aside of the case, which is ultra vires his power u/s 251(1) of the Act. 3. Brie .....

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rification of TDS returns filed by the assessee, it was noticed by the AO (TDS) that tax withholding done by the assessee u/s 194C was incorrect inasmuch as it was required to be done u/s 194J. It was held so after going through Agreement of the assessee with Sun TV Network Ltd. and others under which the assessee obtained non-exclusive right to distribute programs of such channels from its DTH platform to the ultimate viewers/subscribers. As per these agreements, the assessee was required to pa .....

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1A) amounting to ₹ 6.09 crore. The assessee assailed the order before the ld. CIT(A), who came to hold that the assessee paid License fee to the TV channels which was in the nature of royalty covered under Explanation 2(v) of section 9(1)(vi) and as such, deduction of tax at source was required to be made u/s 194J of the Act. In reaching this conclusion, he relied, inter alia, on an order passed by the Chennai Bench of the Tribunal in ACIT vs. Shri Balaji Communications (2013) 140 ITD 687 .....

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o a copyright of a film or video tape, which is to be used in connection with television or tapes, consideration paid would be royalty only. Without prejudice to its main argument that deduction of tax at source was rightly made u/s 194C of the Act, the assessee also argued before the ld. CIT(A) that the judgment of the Hon ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd. vs. CIT (2007) 293 ITR 226 (SC) was applicable inasmuch as the payments made by it to various TV channe .....

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.67 lac which was not offered to tax by the concerned TV channels. Apart from that, he also upheld the chargeability of interest u/s 201(1A) to the extent of ₹ 2.19 crore. This resulted into reduction in the assessee s liability from the original amount of ₹ 40.56 crore to the final determination at ₹ 2,25,48,341. Both the sides are in appeal on their respective stands. 4. We have heard the rival submissions and perused the relevant material. First, we take up the assessee s co .....

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king facilities, Digital Headend, Conditional Access System (CAS), Subscriber Management Systems (SMS), Satellite Transponders and other requirements for providing encrypted signals. The assessee made payments to various TV channels for obtaining rights in their programs so as to make them directly available to the ultimate viewers through its distribution and transmission network. Such payments made after deduction of tax at source u/s 194C of the Act have been tabulated on page 1 of the order .....

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ffective from 14th June, 2006, has been placed at pages 112 onwards of the paper book. As per this Agreement, the assessee got non-exclusive right to distribute ESPN and Star Sports Services channels in India. The Right to distribute has been set out in Article 2 of the Agreement, whose relevant part reads as under:- (i) Subject to the provisions hereof and in consideration of Dishtv s payment of the Subscription Fees, the Company grants to Dishtv, non-exclusive right: to receive; to decrypt, tu .....

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6 of the Agreement provides that ESPN shall have sole right and privilege to determine which sports events and other programs, advertisements, messages and the like shall be included in the service and the assessee agrees and undertakes to distribute the service in its entirety as and how it is delivered by ESPN without any cutting, editing. Article 7(iii) of the Agreement provides that the assessee : shall not remove, modify, misuse or tamper with the IRS including the seal or any signals eman .....

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covering the period from July 1, 2008 to 30.6.2012 for a total consideration of ₹ 322 crore. As per this MOU, ESPNL shall continue to provide its channels to Dish TV on a fixed subscription fees amounting to ₹ 70 crore for the period 1.7.2008 to 30.6.2009. 5.4. It is discernible from a careful perusal of various clauses of the Agreement read with the MOU that the assessee acquired a non-exclusive right to distribute the contents of channels of ESPN through its DTH network for a fixed .....

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property of the Channel, on which the assessee exercises no right except distribution as such. What to talk of the assessee removing or modifying the signals, the assessee cannot even copy or tape programs for resale or sub-licensing. The assessee can neither transfer any part of such contents in favour of any third party nor even authorize them to copy, tape, use, distribute or reproduce any part of the content at its own. The assessee simply holds license, which is again simply non-exclusive .....

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ny work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to …… . The term work has been defined under clause (iv) of the Explanation to include, inter alia, … (b) broadcasting and telecasting including production of programs for such broa .....

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e of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to …… . This, in simple terms, indicates that in order to cover an amount u/s 194C read with Explanation (iv)(b), it is essential that the assessee must enter into contract with another resident for carrying out the work of broadcasting and telecasting. 7. The entire exercise of viewing TV programs can be broadly split into three parts, viz, first is the .....

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permission of the channel. The second step is simply a medium of picking up signals of the program produced etc. by TV channel and dropping it the DTH/Cable operator for onward relay to the ultimate viewers, which is called broadcasting or telecasting, being the third step. In common parlance, the word telecast means transmit by television . Section 2 of the Broadcasting Act defines broadcasting to mean : any transmission of programs, whether or not encrypted, by radio waves or other means of t .....

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ignals containing TV programs. 8. Largely, there can be two business models in this line of business. First, when a TV channel takes upon itself the task of telecasting its programs as well; and the second when rights in such programs are transferred by it to DTH/cable operators for value. In both the business models, the end result is same, being the TV programs relayed to ultimate viewers. Adverting to the facts of the instant case, we find that out of the three steps discussed above, first tw .....

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hat section 194C is attracted when payment is made for carrying out the work of broadcasting and telecasting. So, the pertinent question to ask is the purpose for which the assessee paid to the TV channels. If a person responsible pays to a contractor for the work of telecasting , then, of course, the provisions of section 194C are attracted. In the instant case, we find that the assessee has made payment to the TV channels not for any broadcasting or telecasting, but, to receive programs for pr .....

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self and payment is made by it to the DTH/Cable operator for using their infrastructure for telecasting. It is this amount paid by the TV Channel to the DTH/cable operator, which can be categorized as payment for carrying out broadcasting and telecasting to fall within the sweep of section 194C. As the assessee has not made payments to the TV channels for telecasting programs on its behalf, it is held that the provisions of section 194C are not attracted in the extant case. 11. Now we turn to ex .....

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ten per cent of such sum as income-tax on income comprised therein . The term royalty as used in clause (c) of section 194J(1) has been defined in the Explanation to: have the same meaning as in Explanation 2 to clause (vi) of subsection (1) of section 9. . When we consider Explanation 2 to section 9(1)(vi), we get the meaning of royalty , whose relevant part is as under:- Explanation 2.- For the purposes of this clause, "royalty" means consideration (including any lump sum considerat .....

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tographic films ; or…… 12. The case of the Revenue is that the assessee paid royalty to TV channels within the meaning of clause (v) of the Explanation 2. On going through the mandate of this provision, it becomes vivid that royalty means consideration for the transfer of all or any rights (including the granting of a license) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television. A circumspection of .....

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e the TV programs for value, which payment is under consideration. The assessee can simply use such TV programs, which eventually continue to remain the exclusive property of the Channel. Such Right to distribution is a limited right confined to using the contents of programs without any modification whatsoever. The quid pro quo for the payment by the assessee is transfer of rights by the TV channels in their programs, which are in the nature of copyright, literary, artistic work including films .....

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ble operators and TV Channel ends up by receiving consideration from DTH/cable operator for transfer of rights in its programs. While the third step, namely, telecasting and broadcasting of TV programs under the first business model is done by DTH/Cable operators for and on behalf of TV channels, and under the second business model is done by DTH/cable operators for and on their own behalf and not the TV channels. Whereas under the first business model, payment is made by TV channel to DTH/cable .....

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inion, the authorities below were fully justified in holding the applicability of the provisions of section 194J of the Act. 14. Now, we will espouse the case law relied by the ld. AR to canvass the view that deduction of tax at source was required u/s 194C. First is the judgment of the Hon ble jurisdictional High Court in CIT vs. Prasar Bharati (Broadcasting) Corporation of India (2007) 292 ITR 580 (Del). The assessee in that case made certain payments to outside producers for programs under co .....

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was introduced simultaneous with section 194J is very specific in its application to not only broadcasting and telecasting, but also includes production of programs for such broadcasting and telecasting . That is how, the case was held to be falling u/s 194C of the Act. When we peruse the nature of payment made in the case of Prasar Bharati (Broadcasting) Corporation of India (supra), it comes up that the same was made to outside producers for making programs on behalf of Prasar Bharati. Since .....

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in connection with television, which is directly covered under Explanation 2(v) of section 9(1)(vi) and not for producing any programs . As such, the decision in Prasar Bharti (Broadcasting) Corporation of India (supra), does not support the case of the assessee. 15. The next decision relied by the ld. AR is judgment of the Hon ble Punjab & Haryana High Court in Kurukshetra Darpans (P) Ltd. vs. CIT (2008) 217 CTR 326 (P&H). In that case, the assessee, a cable network operator, was in the .....

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of the Act. When the matter finally went before their Lordships, it was held that the provisions of section 194C were attracted. Here again, we find that this judgment does not advance the case of the assessee in any manner. The assessee in that case entered into contract with the licensors of various TV channels for local cable distribution systems who were not the owners of TV channels and they only had the exclusive right to market and distribute satellite based television service. As against .....

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s of deduction of tax at source were attracted and the assessee was liable to deduct tax at source u/s 194C of the Act as was held by the AO. We, therefore, hold that this case does not fortify the assessee s stand. 16. The last reliance of the ld. AR is on an order passed by the Mumbai Bench of the Tribunal in ACIT vs. NGC Networks (I) Pvt. Ltd. (ITA No.1382/M/2014). We have gone through this order, whose copy has been placed in the paper book. It is noticed that the dispute in that case was ab .....

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on in its factual backdrop. The dispute in that case was only about deduction of tax at source on Channel placement charges which is not the case before us. We, therefore, find this case also of no assistance to the assessee. 17. The ld. AR then pressed into service the Principle of consistency by arguing that the assessee made similar payments in past also to the TV Channels after deduction of tax at source u/s 194C, which view has not been disturbed by the Revenue. It was, ergo, argued that th .....

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R admitted in all fairness that the Revenue has taken similar stand in the succeeding years by holding the magnetizing of the provisions of section 194J to the similar payments, for which the matter is sub judice. Be that as it may, the rule of res judicata is not applicable in fiscal statutes like income-tax. The contention of the ld. AR about the applicability of the rule of consistency , in our considered opinion cannot be allowed to dethrone the rule of no estoppel against the statute . Afte .....

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rb of consistency. This contention is therefore, jettisoned. 18. Lastly, the ld. AR resorted to the argument of following a view favourable to the assessee where two views are available. It was submitted that albeit the decision of the Chennai bench in Shree Balaji (supra) is in favour of the Revenue, but the other decisions as cited by him in favour of the assessee, be preferred. This contention again, in our considered opinion is bereft of any force. We have examined all the three decisions re .....

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lowing relief in respect of payment of taxes by the deductees. The assessee without prejudice to its main ground of the applicability of section 194C, argued in the alternative before the ld. first appellate authority that liability u/s 201 be proportionately reduced to the extent of inclusion of receipts by the payees in their respective income. The ld. CIT(A) accepted this contention and directed the AO to verify the claim of the assessee in this regard and allow appropriate relief. In doing s .....

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and tax u/s 201(1) amounting to ₹ 6.05 lac. The relief came to be allowed by considering the amounts paid by the assessee to TV channels and corresponding amounts included by the deductees in their respective income. Only a sum on which tax withholding comes to ₹ 6.05 lac, was not considered by the deductees in their respective income for which the liability of the assessee has been sustained u/s 201(1). The remaining demand under sub-section (1) has been erased because of the payees .....

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e Finance Act, 2012 giving recognition to the principle laid down by the Hon ble summit Court in Hindustan Coca Cola Beverages Pvt. Ltd. (supra). This proviso stipulates that that any person who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid/credited to a resident shall not be deemed to be an assessee in default in respect of such tax if such resident (i) has furnished his return of income under section 139; (ii) has taken into .....

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terest u/s 201(1A) notwithstanding the obliteration of demand u/s 201(1) of the Act. Their Lordships in para 10 of this judgment have categorically upheld the liability of the assessee towards interest by relying on Circular No. 275/201/95-IT(B), dt. 29th Jan., 1997 issued by the CBDT, declaring that this will not alter the liability to charge interest under s. 201(1A) of the Act till the date of payment of taxes by the deductee. It is further observed that proviso to sub-section (1A) of section .....

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