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2019 (6) TMI 430

MBAY HIGH COURT] has held Carriage Fee/Channel Placement Fees to be covered within scope of “Work‟ defined under sub-clause (b) to clause (iv) of the Explanation to Section 194C. We have also observed that in the case of CIT v. Times Global Broadcasting Co. Ltd. [2018 (8) TMI 1810 - BOMBAY HIGH COURT] has held Carriage Fees/ Channel Placement Fees paid to cable operators /MSO/DTH operators being payment for work contract covered u/s 194C by relying on the decision of Hon‟ble Bombay High Court in the case CIT v. UTV Entertainment Television Ltd. (supra). Also confirmed by SC [2019 (5) TMI 1297 - SUPREME COURT OF INDIA] As concerned with Carriage Fees/ Channel Placement Fees paid by the assessee to cable operators for putting channel on certain frequency to enhance viewership of the said channel. These payments were held by Hon‟ble Bombay High Court to be standard fees paid for broadcasting channel on certain frequency. We have also observed that Hon‟ble Jurisdictional High Court has consistently held that payments of Carriage Fees/ Channel Placement Fees are covered under the definition of “work‟ under sub-clause (b) to clause(iv) to Explana .....

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in its judgment dated 20.07.2015 in the case of CIT-1, Kochi Vs PVS Memorial Hospital Ltd. [2015] 60 taxmann.com 69 (Kerala) has clearly laid down that the disallowance u/s. 40(a)(ia) would be made even in the cases of short deduction of tax". 4. "The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer restored". 5. "The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 3. The brief facts of the case are that the assessee is engaged in the business of advertisement and subscription. The assessee owns and operate four channels namely UTV Movies, UTV World Movies, UTV Stars and UTV Action Telugu. The assessee has paid channel placement/carriage fees of ₹ 88,08,20,017/- during the previous year relevant to impugned assessment year , on which the assessee has deducted income-tax at source u/s. 194C of the Act on such payment at the rate of 2% , while the AO was of the view that the income-tax ought to have been deducted at source @ 10% under the provisions of Section 194J of the 1961 Act. The assessee was asked by the AO to explain reasons for short ded .....

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ards Channel Placement/Carriage Fees, vide assessment order dated 15.03.2016 passed by the AO u/s 143(3) read with Section 144C(3) of the 1961 Act, by holding as under: 8.4 Revenue is under appeal on issue. The undersigned has considered the above submissions carefully, but the contention of the assessee cannot be accepted for following reason: 8.4.1. Channel Placement Fee: Channel Placement/ Carriage Fees are the charges paid by the broadcasters to the MSO for placing their channel on a particular frequency/bandwidth. These charges are paid to put the channel in prime band so that viewership as well as quality of channel can be increased. The carriage fee is a fee charged by broadcaster to carry the channel. As the channel capacity of MSO/LSO is limited whereas the channels are more, channels pay the charge to carry the signals. 8.4.2. Placing the particulars channel on a particular frequency or carrying a channel is INTEGRAL part of Transmission or Broadcasting PROCEES. The Pictorial representation of the PROCESS involved is depicted below 8.4.3. From the above pictorial representation, it is evidently clear that placing or carrying a channel on a particular frequency is an INTEG .....

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r Transmission Fee is a payment for ROYALTY . The Legislature has always intended that a PROCESS such as transmission by satellite (including up linking, amplification, conversion for down linking of any signal) cable, optic fiber or by any other similar technology, whether or not such process is a secret constituted and it embedded in the very definition of term ROYALTY . This is further fortified by the insertion of clarification by virtue of Explanation 6 in Section 9(1)(vi) w.e.f. 01.06.1976. It is reproduced as under:- For removal OF doubts, it is hereby clarified that the expression process includes and shall by deemed to have always included transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by other similar technology, whether or not such process is secret. It is highlighted here that it is an explicit CLARIFICATION provided w.r.t. to the interpretation of the term Process as it was meant to be understood since inception. It is therefore, by no means any retrospective amendment. It is only clarificatory in nature by which the legislature has once again reiterated correct in respiration of the ter .....

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sses has taken the plea that Section 40(a)(ia) of the Income Tax Act, 1961 cannot be invoked at all even if it is assumed (without admitting) that there is a short deduction of tax. In regards to this, it is necessary to mention the following. 1) The very provision of Section 40(a)(ia) refers to the deduction of Tax at source in accordance with the Provisions of Chapter XVII-B. 2) Chapter XVII-B of the Act r.w. the corresponding rules, specify and lay down series of Provisions, Procedures and Compliances including specification of the rates of applicable TDS in respect of different types of expenditure such as Section 192, 194A, 194C, 194J, 195 etc. 3) If the assessee is permitted to short deduct TDS, then the very intended purpose of the Provisions of Chapter XVII-B and the consequence prescribed u/s. 40(a)(i)/ 40(a)(ia) stand defeated. Further, if this be the case, an assessee who is liable to deduct TDS, say at 20% shall go scot free by applying a token rate of 1% TDS, and get away from True and Correct Compliance. This surely cannot be the intention of the legislators. 4) In fact, the Provisions of Section 40(a)(i)/ 40(a)(ia) have been inserted only to bound the Tax payers for .....

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the total income of the assessee. Penalty proceedings u/s. 271(1)(c) of the Income Tax Act, 1961 are being initiated separately for filing inaccurate particulars of income. 4. Aggrieved by an assessment framed by the AO vide assessment order dated 15.03.2016 passed u/s 143(3) read with Section 144C(3) of the 1961 Act, the assessee filed first appeal with learned CIT(A) who was pleased to allow appeal of the assessee by following decision of ITAT-Mumbai in assessee‟s own case for earlier years wherein tribunal has held that Carriage Fees/Channel Placement Fees comes under ambit of provisions of Section 194C for deduction of income-tax at source and not under Section 194H of the 1961 Act. The learned CIT(A) also relied upon decision of his predecessor in AY 2010-11 and 2011-12 and decided the issue in favour of the assessee. The tribunal in ITA no. 2699/Mum/2012 for AY 2008-09 in assessee‟s own case, vide appellate orders dated 29.10.2014 held as under:- '6. We have considered the rival submissions and relevant material on record, There is no dispute that the payment in question was made by the assessee to the cable operators/ MSOs for placing the TV channels in the p .....

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company. The expression 'service' has also been referred to mean the TV channel which is dealt with by the licensor or the company. Therefore, what the assessee has transacted for with the licensor or company certainly includes within its ambit broadcasting and telecasting facility. The essence of the contract is to obtain broadcasting and telecasting of TV channels and thereafter its distribution amongst ultimate customers through the cable network of the assessee. 17. Another plea of the assessee/subscriber was that the licensor or the 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 Section 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 company, as is evident from the specimen agreement on record, in the business of distribution of satellite based TV channels and has exclusive rights to m .....

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ammes 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 ITAT 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 provision. Therefore, when the, work of broadcasting and' telecasting of the programmes specifically falls under the ambit of provisions of section 194C, then In view of the decision of Hon ble Delhi High Court (supra), the provisions of section 194J con not be applied on such payments. The CBDT Circular No. 720 dated 30.08.1995.also supports this view as it was clarified in the said circular as under- "1261.Payment of any sum shall be liable for deduction of tax only under one section. It has been brought to the notice of the board that in some case persons responsible for deduction tax at source are deducting tax by applying more than one provision for the same payments. In particular, it has been pointed out that the sum paid for carrying out .....

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imited reported in (2017) 88 taxmann.com 214 (Bom) , dated 11.10.2017 wherein Hon‟ble Bombay High Court held that carriage fee/Channel Placement Fees are paid for standard fee or Channel Placement Fee for broadcasting of channel on any frequency and the same cannot be held to be in the nature of Commission or Royalty. The learned counsel for the assessee also relied upon decision of Hon‟ble Bombay High Court in the case of CIT v. Zee Entertainment Enterprises Limited reported in (2018) 92 taxmann.com 30(Bom.) , wherein Hon‟ble Bombay High Court held that payments towards Channel Placement Fees and Carriages Fees paid to cable operators and MSO/DTH operators are payments for work contract and would be covered for deduction of income-tax at source u/s 194C of the 1961 Act and not under Section 194J of the 1961 Act. The AY before Hon‟ble Bombay High Court were AY‟s 2006-07 to 2010-11 in the case of Zee Entertainment(supra) . The Hon‟ble Bombay in the above case of Zee Entertainment(supra) decided the issue in favour of the tax-payer by relying on its earlier decision in assesee‟s own case in CIT v. UTV Entertainment Television Ltd. reported in .....

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tal Limited in ITA no. 2 of 2012 and 16 of 2014 judgment dated 20/07/2015 reported in (2015) 60 taxmann.com 69 (Ker. HC) and it was submitted that if income-tax is deducted at source under Chapter XVII-B by invoking wrong provisions of the 1961 Act leading to short deduction of income-tax at source, the additions are required to be made by invoking provisions of Section 40(a)(ia) of the 1961 Act . It was submitted by learned CIT DR that these payments are royalty payments keeping in view Explanation 2 and 6 to section 9(1)(vi) of the 1961 Act and hence the assessee ought to have deducted income-tax at source @10% u/s 194J of the 1961 Act. 5.4 The Ld. Counsel for the assessee on the other hand in rebuttal to learned CIT(A) submitted that in the case of Viacom 18 Media Private Limited v. ADIT (Int. Tax.) in ITA no. 1584/Mum/2010 for AY 2009- 10, the taxpayer had made payments towards transponder fees and the payments were not made for Carriage Fees/Channel Placement Fees. The assessee relied upon the decision of ITAT, Mumbai in the case of Viacom 18 Media Private Limited v. ADIT(Int. Tax.) for AY 2013-14 to 2015-16 in ITA no. 599 to 614/Mum/2016 , common order dated 09.07.2018, where .....

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sidered the rival submissions and relevant material on record, There is no dispute that the payment in question was made by the assessee 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 Durpans (P) Ltd. Vs. CIT (supra}, the Hon'ble High Court of Punjab & Haryana while dealing with on identical question with has held in para 13 to 18 us 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 the Act creates an obligation on a person responsible for paying any sum specified therein to a person for carrying out any work, to deduct the tax at source. Presently, we are concerned with the 'work' as referred to in Clause (b) of Expln. III below Section 194C(2) of the Act. 14. In terms of the said Explanation, it is provided that expression work' shall include, inter alia, broadcasting and telecasting including production of programmes for such broadcasting and telecasting. By way of such Explanation, it is evident that where the paymen .....

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ng of TV signals. Moreover, the licensor or the company, as is evident from the specimen agreement on record, in the business of distribution of satellite based TV channels and has exclusive rights to market and distribute said services in India, the service that is referred to in the agreement is the broadcasting and telecasting of TV signals. 18. For the reasons recorded above, we have no hesitation in concluding that the Tribunal was correct in holding that the assessee was required to deduct tax at source in terms of Section 194C of the Act on payments 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) of the Explanation to section 194C which reads as under:- "Explanation -For the purpose of this Section - ************** .....

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ase persons responsible for deduction tax at source are deducting tax by applying more than one provision for the same payments. In particular, it has been pointed out that the sum paid for carrying out work of advertising are subjected to deduction of tax at source under section 194C as payment for work contract as also under section 194j as payments of fees for professional services. 2. It is hereby clarified that each section, regarding TDS under Chapter XVII, deals with a particular kind of payment to the exclusion of all other sections is this Chapter. Thus, payment of any sum shall be liable for deduction of tax only under one section. Therefore, a payment is liable for tax deduction only under one section. In view of the above discussion as well as the decisions of Hon'ble Punjab & Haryana High Court and Hon ble Delhi High Court, we do not find any error or illegality in the impugned order of CIT(A) qua this issue." 9.2 The Ld. CIT(A) for the impugned assessment year followed the aforesaid decision of tribunal in assessee‟s own case for AY 2010-11 and 2011-12 and granted relief to the assessee. We are presently concerned with AY 2012-13 and in this year ad .....

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by the assessee company as per the provisions of section 194C of the I.T.Act, 1961. 10. Thus, we are concerned with three categories of charges i.e. carriage fees, editing expenses and dubbing charges. It is to be noted that the respondentassessee had deducted TDS as per the provision of Section 194C of the said Act. The showcausenotices were issued to the assessee for the Financial Years 200708, 200809, 200910 and 201011. 11. The Assessing Officer held that the placement charges will be governed by Section 194J. Similarly in case of dubbing charges, the same finding was recorded. Even the same view was taken in respect to editing expenses. As stated earlier, the Commissioner (Appeals) (the first appellate authority) interfered in the appeal preferred by the assessee. 12. The first Appellate Authority has made indepth consideration of the factual aspects. Reference to the factual aspects will be necessary to understand technicalities associated with carriage fees, editing expenses and dubbing charges. Firstly, it will be necessary to consider the nature of carriage fees or placement fees in the context of the nature of business carried on by the respondent. 13. The Commissioner (A .....

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o the distributor/ TV channel. Reference is made to the standard fee paid for basic broadcasting of a channel at any frequency. The Commissioner (Appeals) has considered clause (iv) of the explanation to Section 194C which incorporates inclusive definition of work . Clause (iv) includes broadcasting and telecasting including production of programmes for such broadcasting and telecasting. The Commissioner (Appeals) rightly found that if the contract is executed for broadcasting and telecasting the channels of the respondent, the same would be covered by Section 194C as it falls in clause (iv) of the definition of work . Therefore, when placement charges are paid by the respondent to the cable operators/ MSOs for placing the signals on a preferred band, it is a part of work of broadcasting and telecasting covered by subclause (b) of clause (iv) of the explanation to Section 194C. As a matter of fact, it was found by the Commissioner (Appeals) that whether the payment is towards a standard fee or placement fee, the activities involved on the part of the cable operators/ MSOs are the same. When placement fee is received, a channel is placed on a prime band. It was found that by an agre .....

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g the finding of fact recorded by the Commissioner (Appeals) on both the aspects on placement fee and subtitling charges, the Appellate Tribunal has noted that both Sections 194C and 194J having introduced into the Income Tax Act on the same day, it is observed that the activities covered by Section 194C are more specific and the activities covered by Section 194J are more general in terms. Therefore, for the activities covered by Section 194C, Section 194J cannot be applied being more general out of the two. 16. In the alternative, a submission was canvassed by the learned counsel for the appellant that the carriage fees or the placement charges are in the nature of commission or brokerage as defined in explanation to Section 194H of the Income Tax Act. Further, in the alternative, it was submitted that carriage fees/ placement charges were in the nature of royalty covered by Section 194J of the Income Tax Act. 17. We have already discussed in detail the findings of fact recorded by the Commissioner (Appeals) as regards placement fees/ carriage fees. We have agreed with the findings of fact based on material on record that when the payment is made towards standard fee or placement .....

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s for work contract covered u/s 194C and not fees for technical service u/s 194J, without appreciating that the service received by the assessee are technical in nature? 3. Mr. Suresh Kumar, learned Counsel appearing for the Revenue very fairly states that the impugned order of the Tribunal relied upon the order of its coordinate bench in the case of Asst. Commissioner of Income Tax (TDS) Vs. UTV Entertainment Television Ltd., dated 29th October, 2014, relating to Assessment Year 200809 to 201112, while dismissing the Revenue's appeal. Mr. Suresh Kumar further states that being aggrieved with the order dated 29th October, 2014 passed by the Tribunal in the case of UTV Entertainment Television Ltd. (supra), the Revenue filed appeals being Income Tax Appeal Nos. 525, 732, 741 and 1035 of 2015 to this Court. All the above appeals filed by the Revenue were dismissed by orders dated 10th / 11th October, 2017. 4. The Revenue does not point out any distinguishing feature in fact or in law in this case from that in the UTV Entertainment Television Ltd. (supra), which would warrant a different view. 5. Therefore, for the reasons stated in our order dated in CIT v. UTV Entertainment Tele .....

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el Placement Fees are covered under the definition of work‟ under sub-clause (b) to clause(iv) to Explanation to Section 194C of the 1961 Act and income-tax is deductible at source u/s 194C of the 1961 Act. Reference is drawn to decision of Hon‟ble Bombay High Court in the case of CIT v. Zee Entertainment Enterprises Limited reported in (2018) 92 taxman.com 30(Bombay) , wherein Hon‟ble Bombay High Court held as under: 1. These appeals under Section 260-A of the Income Tax Act, 1961 (the Act) challenge the common order dated 20th February, 2015 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order relates to Assessment Years 2006-07, 2007-08, 2008-09, 2009-10 and 2010-11. These four appeals relate to Assessment Years 2007-08, 2008-09, 2009-10 and 2010-11. 2. The Revenue has urged the following substantial questions of law four our consideration :- (i) Whether in the facts and circumstances of the case and in law, the Tribunal is justified in holding that the placement fees / carriage fees paid to Cable Operators / MSO / DTH Operators are payments for work contract covered under section 194C and not fees for technical services under section .....

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Company Limited(supra) was dismissed on 25.02.2019. The Revenue has claimed before us to be aggrieved as to non consideration of definition of Process‟ vide Explanation 6 to Section 9(1)(vi) which was inserted by Finance Act, 2012 wef 01.06.1976 in all these decisions rendered by Superior Courts. Our Hon‟ble Jurisdictional High Court in assessee‟s own case in CIT v. UTV Entertainment Television Limited(supra) has held in para 17 based on appreciation of material on record that when the services are rendered as per the contract by accepting Channel Placement Fee or carriage fee, the same are similar to the services rendered against the payment of standard fee paid for broadcasting of channels on any frequency. The Hon‟ble Bombay High Court observed that channel placement fees are paid under the contract between assessee and the cable operators /MSO‟s and the said payments by way of carriage fees or channel placement fees cannot be considered to be in the nature of commission or royalty. Now, for Revenue to contend before us that none of the Superior Courts in series of judgments passed as much as recently in February 2019 have not considered Explanatio .....

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