2018 (2) TMI 1923 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on TDS deduction, dismisses revenue's appeal under Income Tax Act

The Tribunal dismissed the revenue's appeal, upholding the Commissioner of Income Tax (Appeals)'s decision to delete the disallowance of expenses for less ... TDS u/s 194J - TDS liability on carriage fees - No deduction v/s short deduction - disallowance u/s 40(a)(ia) - HELD THAT:- CIT(A) has deleted the disallowance in question holding that carriage fees does not come within the ambit of the definition of Royalty. Therefore, the assessee was not required to deduct the tax at source u/s 194J. Further the Ld. CIT(A) has held that it is not the case of ‘no TDS’ but the case of ‘less TDS’ therefore, the disallowance made by the AO is bad in law. CIT(A) has relied on the decision of the Hon’ble Calcutta High Court rendered in CIT vs S. K. Tekriwal [2011 (10) TMI 10 - ITAT, KOLKATA] This issue is covered by the judgment of CIT vs. M/s UTV Entertainment Television Ltd. [2017 (11) TMI 915 - BOMBAY HIGH COURT] in favour of the assessee. Similarly, the Hon,ble Gujarat High Court in CIT vs. Prayas Engineering Ltd.[2014 (11) TMI 1086 - GUJARAT HIGH COURT] and CIT vs. Kishore Rao & others (HUF) [2016 (4) TMI 430 - KARNATAKA HIGH COURT] have held that in case of shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provisions, no disallowance can be made by invoking provisions of 40(a)(ia) of the Act. Findings of the CIT(A) are based on the evidence on record and in accordance with the principles of law laid down by the High courts including the jurisdictional High Court discussed above. We therefore do not find any reason to interfere with the same. Accordingly, we uphold the decision of the Ld. CIT(A) and dismiss the sole ground of issue of the revenue. Issues:- Disallowance of expenses for less TDS under section 40(a)(ia) of the Income Tax Act, 1961.- Interpretation of the definition of royalty and applicability of TDS provisions.Analysis:1. The appeal was filed by the revenue against the order passed by the Commissioner of Income Tax (Appeals)-4, Mumbai, for the assessment year 2012-13. The assessee, a subsidiary company, declared a loss in its return of income. The case was selected for scrutiny, and discrepancies in TDS deduction on distribution expenses were noted by the Assessing Officer (AO). The AO disallowed expenses for less TDS deduction under section 40(a)(ia) of the Act. The authorized representative of the assessee contended that TDS under section 194C was applicable for carriage/placement fees, not section 194J. The CIT(A) directed the AO to delete the disallowance, leading to the revenue's appeal before the Tribunal.2. The revenue challenged the CIT(A)'s order on grounds questioning the justification of deleting the disallowance under section 40(a)(ia) of the Act. The revenue argued that the payments made for the use/right to use of a process are royalty as per Explanation 6 to section 9(1)(vi), hence falling under section 194J for TDS deduction. The revenue cited judgments to support its position, including a decision by the Hon'ble Kerala High Court.3. The Tribunal considered the arguments of both parties and reviewed the relevant legal precedents. The revenue contended that the CIT(A)'s order contradicted established legal principles. However, the assessee's counsel argued that the order was legally sound, citing judgments favoring the assessee from various High Courts. The Tribunal noted that the Ld. CIT(A) had correctly deleted the disallowance, emphasizing that carriage fees did not qualify as royalty under the Act. The Tribunal upheld the CIT(A)'s decision, stating that it was in line with the law laid down by higher courts.4. The Tribunal concluded that the findings of the CIT(A) were based on the evidence and legal principles established by higher courts, including the jurisdictional High Court. Therefore, the Tribunal dismissed the revenue's appeal, upholding the decision of the CIT(A) to delete the disallowance of expenses for less TDS deduction. The appeal filed by the revenue for the assessment year 2012-2013 was ultimately dismissed by the Tribunal.