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ACIT (TDS) -1 (1) , Mumbai Versus M/s. B4U Broadbank India Pvt. Ltd.

2017 (1) TMI 572 - ITAT MUMBAI

TDS u/s 194C or 194J - payment on account of placement charges - short deduction of tds - rendering of services by the cable operators/MSO’s - invocation of section 201(1)/201(1A) - Held that:- On verification of various clauses of such agreements which were found to be similarly worded it is seen that the Broadcasters are paying carriage fees not just for the purpose of utilizing the services of cable operators for transmitting its Channels but for placing its channels on price bands. The place .....

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the nature of services provided it is clear that the Cable Operators / Multi System Operators facilitates delivery of products of the broadcaster to the viewer and thus viewed this is the payment is in the nature of commission or brokerage as defined in Explanation to section 194H of the Income-tax Act,1961. - There is uncontroverted finding in the impugned order that the assessee has already deducted TDS under section 194C of the Act on placement fee, therefore, we are in agreement with th .....

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The Assessee : Shri Bhupendra Karkhanis- CA ORDER Per Joginder Singh (Judicial Member) Both these appeals are by the Revenue, aggrieved by the impugned orders dated 29/06/2012 of the Ld. First Appellate Authority, Mumbai. 2. The common ground raised in the present appeals pertains to rendering of services by the cable operators/MSO s, and payment and placement charges within the purview section 194C and also Commission or brokerage as defined in Explanation to Section 194H of the Act and consequ .....

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thority for ready reference and analysis:- 3.15 I have considered the submissions and the arguments of the Id. ARs. The above grounds pertain to the short deduction of TDS on payment by the Appellant, of channel placement fees to cable operators/MSOs. The Appellant has made payment of placement charges to cable operators. From the placement agreement, it is seen that the cable operators agree with the Appellant to place the channels on certain preferred frequencies. It is only in consideration f .....

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hat expression work' shall include, inter alia, broadcasting and telecasting including production of programmes for such broadcasting and telecasting. Therefore, 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 terms of section 1 94C of the Act 3.16 It is not in dispute that cable operators disseminate signals received from the broadcaster through cables to various subscribers. Thus, carriage .....

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ans (P) Ltd. Vs. CIT (169 Taxman 344). In the case of Prasar Bharti (Broadcasting Corpn. of India) (158 Taxman 470) cited by the appellant, even the production of television programs has been held to be in the nature of a 'work contract'. In this case, the Hon'ble Court held that there is no applicability of section 194J and the assessee had rightly deducted tax u/s. 1940. Therefore, I am of the view that payment of placement fee by the Appellant to the cable operators should be subj .....

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vice provider. Under the current arrangement, what the cable operator does is to only give preference to a particular channel over the other to place it on a particular band for which they charge a consideration. Merely because as part of providing this privilege/ facility, it requires the cable operators to put the channel on a particular band using technical equipment, does not mean that any technology or technical service is provided by the cable operators to the Appellant. Having regard to t .....

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Act, is concerned, the same is even farther from the reality. Commission or brokerage in common parlance is understood to be a payment received by a person from the other person for services rendered by him to such other person. However, this definition pre-supposes that the person receiving brokerage or commission, himself does not carry out any independent business in this regard: rather he is only a tool for the said business of the other person. The recipient of brokerage or commission prov .....

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is inclusive, largely the 'commission on brokerage' is understood as elaborated above. The cable operators/MSOs carry out independent business with the help of their own resources, assets and independent establishment. Their activity, as explained above, amounts to the activity of broadcasting and telecasting. They are also not engaged in providing services in the course of buying and selling of goods etc. Hence the channel placement fee received by them cannot in any manner, be categor .....

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of tax u/s 201(1) of ₹ 96.46560/- and interest u/s 201(1A) of ₹ 32,79,830/- is hereby deleted. 4.1 1 have held above that there is no short deduction of tax by the Appellant on account of payment of channel placement charges made to cable operators! MSOs. Hence, there is no question of recovery of such taxes from the Appellant. Thus, above grounds of appeal Nos. 2, 4 and 5 do not survive and are in-fructuous. 2.2 If the observation made in the assessment order, leading to addition m .....

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erusal of the submission made by the IBF before the Board it is seen that basic thrust and the sole purpose of the same is to somehow to simplify and over simplify a process which is otherwise complex and technical in nature. It needs to be appreciated that just by linguistic simplification, an elaborate and technical process cannot be brought at part with an exercise/process which is non technical in nature. Therefore, it is necessary to understand in clear terms what precisely is the nature of .....

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and cable distributors company, as there are about 400 television channels registered by the government looking around to be viewed, while the analog cable distributor platform can carry only 70-80 channels. The visibility of a channel is further affected by black & while TV sets or old colour sets which do not have facilities to tune into some of the TV frequency bands like Super Bank (S Band) or UHF Band. These two bands are the Prime Bands comprising of CH-5 to CH-12 and they carry the hi .....

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ein there is no limit to advertisement charges. In 'the light of factual position as discussed in immediately preceding paragraph it is clear that carriage fee is paid by broadcasters in view of lieu of technical service provided to it by the MSO / Cable Operators for placing their channel on the Prime Bands for better viewership resulting into better TRP and maximized revenue. The fee paid by the Broadcasters is clearly covered under explanation 2 to clause VII of sub-section (1) of section .....

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contemplated under section 194J. The details of services rendered and steps followed in respect of channel placement services which is reproduced for the sake of convenience as under: - • Broadcaster gives an integrated Receiver Decoder ( 1RD ) (in case of many broadcasters, a Viewing Card (VC) too is provided along with IRD) to the cable operator/MSO as a part of the subscription agreement. • The broadcaster separately does a channel placement deal with the Cable operator! MS0 for a p .....

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comes into play and the modulator of the desired channel on a particular frequency on the Prime band is connected by way of application of human mind by a technical person, for which the Federation itself has admitted that a separate Channel Placement Deal is made with the Cable operators. This process is not automated is for placing the Channel on a particular frequency of Prime Band human intervention is essential. The process that follows subsequent to connection of modulator is automated. I .....

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process which precedes the receipt of signal by modulator is the crucial process, which requires human application of technical mind so that the channel is placed on a desired frequency of the Broadcaster in the Prime band. Therefore, the contention of the Federation that no technical services are provided or no know/edge is imparted by the broadcaster is not found to be factually correct Further, it is also a fact that without application of human mind by technical person the Channel cannot be .....

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is not the case and it is seen that the Carriage fees is being paid top 40-50 Broadcasters only, who have means and resources to pay higher amounts for getting their channels placed in Prime Bands by such cable operators. The rest of the broadcasters pay standard fees to cable operators for getting their channels transmitted through them. Here it would be pertinent to mention that some of the Broadcasters don't even pay the Standard fees to cable operators for getting their channels transmit .....

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s. • Carriage fees, which is paid by a few elite Broadcasters to the cable operators for getting their channels placed in the Prime Band for getting better viewership, higher TRP and maximized revenue. 2.6 The Standard fees paid by Broadcasters comes within the purview of contract payments u/s. 194C as the same can he said be paid pursuant to carrying out the "work" of transmitting the channels of the Broadcasters. This service clearly falls within the ambit of Explanation given b .....

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o the received by the general public either directly or indirectly and all its grammatical variations and cognate shall be construed accordingly (Emphasis supplied). However, the same cannot be said to be the case in respect of carriage / placement fees as it involves application of human mind by the technical person who place the Broadcasters channels on Prime Band with the sole objective of increased viewership, higher TRP attracting better advertisements and maximized revenue for the Broadcas .....

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at service as application of human mind by a technical person is essential for doing so and this service is squarely coming within the ambit of section 194J for the purpose of TD.S. In this connection the reliance can also placed on the decision given by the ITAT Delhi in the case of Parasrampuria Synthetics Ltd which is quoted by the OF itself. The analogy of this case is reversely applicable in the present case. In this case the tribunal has held that "rendering of services by using techn .....

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s channels but through application of human mind a specified technical service has been provided for placing Broadcasters channels on desired Prime Brands which resulted into the increased viewership, higher TRP, better advertisements and maximized revenue for such Broadcasters. 2.8 During the course of proceedings u/s 201(1) in respect of some of the broadcasters the copies of agreements made by them with various Cable Operators/MSOs were examined. On verification of various clauses of such agr .....

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