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DCIT-1 (3) , Mumbai Versus M/s. VJM Media (P) Ltd. and Vica-Versa

2016 (5) TMI 31 - ITAT MUMBAI

TDS u/s 194C - placing the magazines on the back of the seats of the aircraft - payment made by the assessee to KAL on account of sharing of incremental advertisement - Held that:- The agreement between the two was on account of sharing of incremental advertisement only and nothing else. According to Ld. DR, displaying of magazine to the captive audience by KAL in its flight would itself fall within the definition of 'work'. In this regard we beg to differ with the views of Ld. DR. The admitted .....

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he assessee, nor it could be said that by placing the magazines on the back of the seats of the aircraft, KAL had done a 'work' for the assessee. KAL provided magazines to its guest passengers as part of its effort for creating a five star in-flight experience for its customers. Thus, increase in the advertisement revenue cannot be said to have occurred directly as a result of any 'work' done by KAL for on behalf of the assessee. Further, no such 'work' could have been recognized or merged in an .....

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ight of the items. Even if we presume, although denied by the assessee, that photograph will fall in any one or more of the items mentioned in the above said definition, even, then it is mandatory on the part of the revenue before applying these provision to show that the payment was for use of 'copyright' and not 'copyrighted article'. In our opinion, use of copyright and 'copyrighted article' are altogether two different things as has been held in many judgments also. The admitted fact is that .....

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ownloading of photographs for exclusive one time use for publication in the magazine did not fall within the provisions of relevant Article 12 of DTAA and therefore, assessee was not liable to deduct tax on the payments made for the same.

It is further brought to our notice that in the assessment year 2009-10 also payments were made to these very parties namely M/s Getty Images and M/s Famous-Pictures & Features Agency, for downloading of photos. But no disallowance has been made by t .....

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the order of Ld. Commissioner of Income Tax (Appeals), Mumbai-2 [(in short 'CIT(A)'], dated 04.11.2010 passed against assessment order u/s 143(3) dated 14.12.2009 for the Assessment Year 2007-08. 2. During the course of hearing, arguments were made by Shri Nitesh Joshi, Authorised Representative (AR) on behalf of the Assessee and Ms. Ramapriya Raghavan, Departmental Representative (DR) on behalf of the Revenue. First we take up Revenue's Appeal: 3. The revenue has filed the appeal o .....

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sallowance made by the AO u/s 40(a)(ia) of the Act for non deduction of tax at by the assessee in respect of the payment made by it to M/s. Kingfisher Airlines Ltd. 4.1 The brief facts are that during the year the assessee was engaged in the business of publishing of magazines. It paid an aggregate amount of ₹ 2,53,47,173/- to Kingfisher Airlines Ltd. (hereinafter called as KAL) on account of share of KAL in the advertisement income earned by the assessee for advertisements published in th .....

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e of the competition with the television media affecting the business of assessee in a substantial way. Therefore, the assessee entered into an agreement with Kingfisher Airlines Ltd under which a variant of the magazine Hi-Blitz was to be brought out as 'in-flight' magazine of Kingfisher Airlines. As a result, there would be one separate issue of the magazine over which there would be exclusive right of assessee and there will be an 'in-flight' magazine for Kingfisher Airlines. .....

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rtisement revenue that assessee shall obtain over and above ₹ 3 million per quarter shall be shared with Kingfisher Airlines in the ratio of 50:50. It is this amount which has been paid by assessee to Kingfisher Airlines which has been disallowed by Assessing Officer on the ground that assessee has not deducted tax at source on these payments. 4.3 Being aggrieved, the assessee filed an appeal before the Ld. CIT(A) wherein detailed submissions were made agitating the action of the AO. After .....

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ct and therefore, the assessee was liable to deduct tax at source u/s 194C and since no TDS was deducted, therefore disallowance was rightly made by the AO. All the contentions made by the AO in his order were read and reiterated before us. Ld. DR also relied upon the judgment of Hon'ble Delhi Bench of ITAT in the case of ITO v. Bhasin Motors India P. Ltd. 16 SOT 319. 4.6. Per contra, Ld. Counsel of the assessee vehemently relied upon the order of the Ld. CIT(A) and reiterated most of the ar .....

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in-house magazine on its flights. As per Ld. Counsel, the impugned amount was reimbursed as share of KAL and was not on account of any work done by KAL or any advertisement done by it. He emphasized on the fact that no work was done by KAL for the assessee, rather KAL had purchased magazines from the assessee and just placed them on the back of the seat in the aircraft. The advertisement revenue increased at its own and no element of work done by KAL was involved. It was further submitted by hi .....

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at where no work is carried out by the payee and payment is done on account of share of revenue, then provisions of section 194C shall not be applicable and no TDS will be required to be deducted. 4.7 We have gone through entire material and arguments placed before us by both the sides. It is noted by us that Ld. CIT(A) has correctly analysed the fact and provisions of law applicable. Therefore, before making our own analysis and discussion, we find it appropriate to reproduce the relevant findi .....

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hat Kingfisher Airlines is aware of its captive distribution network in terms of its fleet of aircraft's and the high class audience represented by the aviation customers. The airline is also aware of its potential as revenue financing for appellant. Therefore, Kingfisher Airlines has sought compensation from appellant. There can be several modes through which compensation to the said arrangement can be fixed like piecemeal payments, lump-sum payments etc. According to him, in the instant ca .....

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perfectly justified. It cannot be considered compensation at all. It would just be sharing of advertisement revenue because Kingfisher Airlines is purchasing magazines from appellant in bulk for a specific use of aviation customers. There is no service contract here as envisaged by Assessing Officer. It is a kind of joint effort where an existing magazine which was in its declining phase is being revived for the benefit of both the concerned parties. The goodwill of Kingfisher, the name itself, .....

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tax is not required to be deducted at source, the provisions of TDS do not get attracted. To my mind then, appellant was not required to deduct tax at source and therefore disallowance as made by Assessing Officer is not justified. The ground of appeal is consequently allowed. 4.8 In our considered opinion also the agreement between the assessee and KAL cannot be said to be an agreement in the nature of work contract or even service contract. The agreement between the two was on account of shar .....

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ct of the assessee was purchased by KAL, thereafter whatever has been done by KAL with the said product was for own benefits, advantages and purposes of KAL only. Under these circumstances it could not be said at all that KAL had displayed the magazine for and on behalf of the assessee, nor it could be said that by placing the magazines on the back of the seats of the aircraft, KAL had done a 'work' for the assessee. KAL provided magazines to its guest passengers as part of its effort fo .....

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l within the provisions of section 194C. The judgments relied upon by the Ld. Counsel and by the Ld. CIT(A) are directly applicable on the facts of the case. The case of Hon'ble Delhi Bench of the Tribunal in the case of ITO v. Bhasin Motors India P. Ltd., relied upon by Ld DR, shall not be applicable on the facts of this case, because in the said case admittedly the payee had done endorse 'work' for and on behalf of the payee, and thus, the facts of the said case are clearly disting .....

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tax was required to be deducted on the said amount paid by the assessee. Under these circumstances, we find that taking a contrary view by the AO in the year under consideration was unjustified. 4.10 Thus, keeping in view all the fact and circumstances of the case, we find that findings of Ld. CIT(A) are in accordance with law and facts, and therefore these are upheld. 5. As a result, the appeal filed by the Revenue is dismissed. Now we shall take up Cross Objections of the assessee: 6. The ass .....

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and in the circumstances of their case, provisions of section 40a(i) of the IT Act are not applicable in respect of expenditure of ₹ 7,59,645/- and consequently no disallowance for non-deduction of tax in respect thereof is called for. 7. The brief facts required to address this issue are that as stated above, the assessee was engaged during the year in the business of publishing magazines. The AO made disallowance of an aggregating amount of ₹ 7,59,645/- being payments made to two e .....

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d. CIT(A) wherein the detailed submissions were filed. It was contended that provisions of TDS were not applicable since the impugned payments did not fall in the category of royalty as envisaged under the law but Ld. CIT(A), although accepted the reasoning given by Ld. Counsel but while concluding his decision, he agreed with the AO had held that TDS was required to be deducted, and since not deducted by the assessee, therefore disallowance was rightly made by AO and accordingly he upheld the a .....

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itted that payees were the owners of the photographs and images, and they uploaded these pictures on their website. The assessee was given user name and password to have access on these photographs and download them to be published in the magazines. It was submitted that for each downloading of the photographs the assessee was required to make separate payment. Thus, the download of the photographs and images was for a limited use and restricted purposes. He drew our attention on Double Taxation .....

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1)(vi) explanation-2(v) to contend that the impugned payments would fall within the definition of royalty as provided in the above said provisions of the Act. Finally, she relied upon the judgment of Hon'ble Delhi Bench of the Tribunal in the case of Agence France Press v. ADIT, 153 ITD 568 (Delhi) wherein payments made for download of news photos were held to be payment for royalty after considering the aforesaid provisions of the Act as well as Indo-France Treaty. 7.4 In rejoinder, Ld. Cou .....

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en included. Thus, showing that intention of the legislature is clear that 'photo' would not be covered. He further submitted that even in the definition given under the treaty, a 'photo' would not be covered. Lastly, he submitted that factual reasoning of the assessee has been accepted by the Ld. CIT(A) which has not been disputed by the Revenue, therefore, the conclusion drawn as Ld. CIT(A) was contrary to the reasoning given in the order and therefore, order of the Ld. CIT(A) .....

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show that terms of transactions with both of them are identical. The photographs of celebrities and other models, like those which the assessee has obtained through the website of these foreign parties, are generally taken by the photographers who are generally on contract with some corporate entity. These corporate entities become the owners of the photographs of these celebrities and others models by way of making payments to the celebrities, and thereby acquiring a right to use of these photo .....

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s been concluded by the Ld. CIT(A) that foreign party did not sell the 'photo', and therefore it cannot be classified a business transactions, since the ownership of the photographs has not been transferred to the assessee. 7.6. Ld. CIT(A) further holds that such limited rights given for the limited purpose shall fall within the definition of royalty in terms of Article 12 of DTAA with Singapore. It is further held by him that Article 13 of DTAA with UK is identical wherein the term roya .....

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more restrictive in nature as compared to the definition given in the Act, though, the impugned payment would not fall even in Section 9(1)(vi) read with its explanation 2(v). For the sake of simplicity, let us first analyse the provisions of Article 12, of DTAA with Singapore, which read as under: any copyright of a literary, artistic or scientific work, including cinematograph film or films or taps used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret .....

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ll in any one or more of the items mentioned in the above said definition, even, then it is mandatory on the part of the revenue before applying these provision to show that the payment was for use of 'copyright' and not 'copyrighted article'. In our opinion, use of copyright and 'copyrighted article' are altogether two different things as has been held in many judgments also. The admitted fact is that the photograph has been given to the assessee for the limited purpose .....

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