Tribunal upholds CIT(A) decision on non-deduction of TDS for carriage fee

The Tribunal upheld the CIT(A)'s decision to delete the disallowance of carriage fee/Channel Placement fee for non-deduction of TDS under section 194J. The Tribunal rejected the Revenue's arguments, emphasizing that the payments were not subject to tax deduction under section 194C and were akin to standard broadcasting fees, not commission or royalty. Citing judicial precedents and specific payment nature, the Tribunal dismissed the Revenue's appeal and confirmed the deletion of the disallowance.

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Issues:
Appeal against CIT(A)'s order deleting disallowance of carriage fee/Channel Placement fee for non-deduction of TDS under section 194J invoking section 40a(ia) of the Income Tax Act.

Analysis:
The Revenue raised four grounds challenging the CIT(A)'s decision. Firstly, the Revenue argued that the payments made for use/right to use of 'process' are 'royalty' under Explanation 6 to section 9(1)(vi) and should be covered under section 194J, not deleted under section 40(a)(ia). Secondly, the Revenue cited a jurisdictional ITAT Mumbai 'L' Bench order confirming 'process' payments as 'royalty' under the Act, contrary to CIT(A)'s decision. Thirdly, the Revenue contested CIT(A)'s reliance on a Delhi High Court decision, arguing it applied to different payment scenarios. Lastly, the Revenue pointed to a Kerala High Court judgment favoring the Department, urging the disallowance deletion to be reconsidered.

The Tribunal considered a previous year's order in the assessee's case, where disallowance was deleted based on payment nature and tax deduction sections. The Tribunal upheld the CIT(A)'s decision, emphasizing that the Assessing Officer's invocation of section 40(a)(ia) was incorrect, as payments were not subject to tax deduction under section 194C. The Tribunal referred to a Bombay High Court judgment on technical services fees, distinguishing between sections 194C and 194J based on specificity and generality. The Tribunal rejected arguments that carriage fees/placement charges were commission, brokerage, or royalty, affirming that such fees were akin to standard broadcasting fees and not subject to disallowance.

Relying on the Bombay High Court precedent and the earlier Tribunal decision, the Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s deletion of the disallowance. The Tribunal highlighted the similarity in services rendered for standard fees, placement fees, and carriage fees, emphasizing that the nature of the transaction did not align with commission or royalty definitions under the Income Tax Act.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the disallowance, citing judicial precedents and the specific nature of the payments involved. The appeal of the Revenue was dismissed, and the order was pronounced in open court on 30-07-2018.

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