TMI Blog2016 (3) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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. Obligation of the assessee u/s 201(1) - Held 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 account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by 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 sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax at source u/s 194C and 195 of the Act, made payments to certain TV channels in India and abroad. The dispute in the instant appeal is only qua the payments made to channels in India on which the assessee deducted tax at source u/s 194C of the Act. During the course of verification 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 pay a license fee to the channels which, in the opinion of the AO, was a payment of `Royalty within the meaning of clause (iv) of Explanation 2 to section 9(1)(vi). He, therefore, passed an order u/s 201(1) and (1A) of the Act, creating a demand of ₹ 40,56,14,101/- inclusive of interest u/s 201(1A) amounting to ₹ 9,36,03,254/-. It is a matter of record that the assessee moved application u/s 154, which led to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,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 contention about the applicability of section 194C on the payments made by it to the TV Channels as against section 194J held by the authorities below. 5.1. Before delving into the core issue, we deem it befitting to have an in-depth insight into the factual matrix. In this regard, we find that the assessee obtained DTH License from Ministry of I B, Government of India and commenced its DTH service under the brand name of `Dish TV . The assessee has requisite infrastructure comprising of Up-linking 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 passed by the AO pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record a copy of Memorandum of Understanding (MOU) executed on 12.03.2009 with ESPN 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 amount of ₹ 70 crore for the period July 1, 2008 to July 30, 2009. Choice of producing programs rests solely with TV channels, in which the assessee has no interference. The contents can be any programs produced or got produced by the TV Channel as per its wisdom or in respect of which it holds license to commercially exploit. The assessee, by means of this Agreement, has got a simple right to distribute the contents without any modification, which always continues to remain the exclusive property of the Channel, on which the assessee exercises no right except distribution as such. What to talk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of the channels; second is uplinking of such programs by the TV Channels, which are amplified and then relayed in the footprint area through transponder on satellite; and third is the actual transmitting of such programs to the viewers, which is called telecasting or broadcasting. TV Channels produce or purchase rights of programs after spending a lot of money on them and thus exercise IPRs over them. No one else can telecast such programs without the prior 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 telecommunication for reception by the public by means of broadcasting receiving apparatus, but does not include any such transmission of programs that is made solely for performance or display in a public place; . Thus broadcasting o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt 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 examining the attractability or otherwise of the provisions of section 194J, which requires deduction of tax at source from fees for professional or technical services. Sub-section (1) of section 194J provides that : `Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of- (a) fees for professional services, or (b) fees for technical services or . (c) royalty, or shall, deduct an amount equal to 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 ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oaches DTH/cable operators for telecasting its programs on its own behalf, under the second model, right to use in programs are transferred by TV channel to DTH/cable operators for value. In such later case, revenue from ultimate viewership goes to the DTH/Cable 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 operators for `broadcasting and telecasting their TV programs, which is covered u/s 194C, under the second business model, payment is made by DTH/cable operators to TV Channel for transfer of IPRs in programs to be used by DTH/cable operators in `connection with television , which is covered under clause (v) of Explanation 2 to section 9(1)(vi) requiring deduction of tax at source u/s 194J of the Act. The case under consideration clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 business of distributing cable connections to customers. It entered into contract with a licensor of various TV channels for local cable distribution systems. These licensors were not the owners of the TV channels and they only had the exclusive right to market and distribute satellite based television service. The assessee in that case did not deduct any tax at source from the payments made to the licensors. In the opinion of the Revenue, the tax was required to be deducted at source u/s 194C 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 that, the instant assessee is it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s case, such a nondecision cannot have a precedent value. The ld. AR 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 . After making an elaborate analysis, we have hereinabove held that section 194J is attracted to the facts of the instant case. Merely because in earlier years this issue was not examined and the assessee s contention got accepted without verification, cannot give license to it claim 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. 18. Lastly, the ld. AR resorted to the argument of follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount received from the assessee in their respective income. 21. After considering the rival submissions and perusing the relevant material on record, we find that the view taken by the ld. CIT(A) in directing the AO to reduce the amount u/s 201(1) for which the payee had already paid tax on the income, is otherwise in conformity with the judgment in the case of Hindustan Coca Cola Beverages Pvt. Ltd. (supra). Moreover, the legislature has inserted proviso to section 201(1) by the 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 account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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