2014 (12) TMI 716 - AT - Income Tax

Tribunal: Placement Charges under Section 194C, Not 194J

ACIT (TDS) 3(1), Mumbai Versus UTV Entertainment Television Limited

The Tribunal upheld the CIT(A)'s decisions that placement charges fall under Section 194C, not Section 194J, as they involve channel placement preference, ... Payment made to the cable operators - TDS deduction u/s 194C or u/s 194J – Held that:- The payment 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 – also in the case of Kurukshetra Darpans (P) Ltd. Vs. CIT 2008 (3) TMI 48 - High Court Punjab and Haryana] similar issue has been decided wherein it has been held that the payment for obtaining the telecast licenses from the licensor falls under the provisions of section 194C - 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 - 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 - when the work of broadcasting and telecasting of the programmes specifically falls under the ambit of provisions of section 194C, then the provisions of section 194J cannot be applied on such payments – the order of the CIT(A) is upheld – Decided against revenue. Payment for subtitling and editing charges to be treated as fee for technical service or not – Applicability of provisions of section 194J – Held that:- Following the decision in ACIT Vs. Manish Dutt [2012 (7) TMI 186 - ITAT MUMBAI] - the assessee had utilized the services of dubbing studio Ninety Degrees by using their equipments as well as the artists who were working for Studio Ninety Degrees - The assessee had thus carried out the work of dubbing by engaging services and the same was of the nature of getting work done through a subcontractor - the provisions of section 194C were applicable and the assessee has rightly deducted tax at source at 2 per cent treating the payment as a payment to sub-contractor for carrying out a work – thus, the order of the CIT(A) is upheld – Decided against revenue. Issues Involved:1. Whether the payment for placement charges falls under Section 194C or Section 194J of the Income Tax Act, 1961.2. Whether the payment for subtitling and editing charges should be treated as fees for technical services under Section 194J.3. Verification of tax payment by deductee cable operators and the liability of the appellant under Section 201(1) and 201(1A).Issue-wise Detailed Analysis:1. Placement Charges - Section 194C vs. Section 194J:The primary issue is whether the payment made by the assessee to cable operators/MSOs for placement charges should be subjected to TDS under Section 194C or Section 194J of the Income Tax Act, 1961. The assessee, engaged in the distribution of television channels, paid placement fees to cable operators to place their channels in prime bands, enhancing viewership and advertisement revenue. The assessee deducted tax at source at 2% under Section 194C, while the Assessing Officer argued that the payment was for technical services, necessitating a 10% deduction under Section 194J.The CIT(A) ruled that placement fees do not involve technical services but rather a preference for channel placement, thus falling under Section 194C. This decision was supported by the Hon'ble Madras High Court in Skycell Communication Ltd. and the Punjab & Haryana High Court in Kurukshetra Darpans (P) Ltd. vs. CIT. The Tribunal upheld this view, emphasizing that broadcasting and telecasting work, including placement fees, falls under the specific provision of Section 194C, not the general provisions of Section 194J. The CBDT Circular No. 720 also clarified that each TDS section deals with a specific kind of payment, excluding others.2. Subtitling and Editing Charges - Section 194J:The second issue concerns whether subtitling and editing charges paid by the assessee should be treated as fees for technical services under Section 194J. The Assessing Officer treated these payments as technical fees, applying Section 194J. However, the CIT(A) relied on the Tribunal's decision in ACIT vs. Manish Dutt, which held that payments for dubbing work, involving studio services and staff, fall under Section 194C as subcontractor payments for work, not technical services.The Tribunal found no contrary decisions and upheld the CIT(A)'s ruling that subtitling and editing charges are covered under Section 194C, not Section 194J.3. Verification of Tax Payment by Deductee Cable Operators:The assessee contended that the TDS officer erred in holding them liable for the principal amount of tax under Section 201(1) without verifying whether the deductee cable operators paid tax on the placement charges in their returns. The assessee requested the TDS officer to verify the tax payment by cable operators and absolve them from the principal tax liability.However, since the Tribunal dismissed the revenue's appeal, the cross-objections filed by the assessee became academic and were dismissed as infructuous.Conclusion:The Tribunal dismissed the revenue's appeals and the assessee's cross-objections, upholding the CIT(A)'s decisions that placement charges fall under Section 194C and subtitling and editing charges are not fees for technical services under Section 194J. The order was pronounced in the open court on 29.10.2014.