Tribunal rules in favor of taxpayer on expense disallowance issue

The Tribunal upheld the CIT(A)'s decision to delete the disallowance of expenses under section 40(a)(ia), ruling that payments for carriage fees/channel placement fees fall under section 194C, not section 194J. The Revenue's appeals were dismissed, confirming that the disallowance by the AO was unwarranted, and payments were correctly subjected to TDS under section 194C.

---

---

Issues Involved:
1. Disallowance of expenses due to short deduction of TDS under section 194C instead of section 194J.
2. Classification of payments as 'royalty' under section 9(1)(vi) and its implications under section 194J.

Detailed Analysis:

1. Disallowance of Expenses Due to Short Deduction of TDS:

The primary issue in these appeals is whether the CIT(A) was justified in deleting the disallowance made by the AO on account of short deduction of TDS under section 194C instead of section 194J in respect of Carriage Fees/Channel Placement Fees. The AO had disallowed these fees by invoking section 40(a)(ia) of the Income Tax Act, 1961, arguing that the payments were in the nature of royalty as per explanation 6 to section 9(1)(vi) and should have been subjected to TDS at 10% under section 194J, rather than 2% under section 194C.

The CIT(A) deleted the disallowance by relying on the Tribunal’s decision in the assessee’s own case, which held that the provisions of section 194J do not apply to payments of carriage fees to cable operators. This decision was based on the Tribunal’s previous order where it was concluded that such payments fall under the purview of section 194C, which specifically deals with broadcasting and telecasting activities.

2. Classification of Payments as 'Royalty':

The Revenue contended that the payments made for the use/right to use of 'process' are classified as 'royalty' under explanation 6 to section 9(1)(vi) and therefore should be covered under section 194J. The Tribunal, however, upheld the CIT(A)’s decision by referencing several judicial precedents, including the Hon'ble Punjab & Haryana High Court in the case of Kurukshetra Darpans (P) Ltd. Vs. CIT and the Hon'ble Delhi High Court in the case of CIT Vs. Prasar Bharati (Broadcasting Corporation of India).

These precedents clarified that payments for broadcasting and telecasting, including the production of programs for such activities, fall under the specific provisions of section 194C. The Tribunal emphasized that when two provisions are simultaneously introduced, one specific and the other general, the specific provision should be applied, which in this case is section 194C.

Conclusion:

The Tribunal concluded that the CIT(A) was correct in deleting the disallowance under section 40(a)(ia) as the payments made by the assessee for carriage fees/channel placement fees fall under section 194C and not section 194J. This decision was consistent with previous judicial rulings and the specific provisions of the Income Tax Act, which categorize broadcasting and telecasting payments under section 194C.

Final Order:

The appeals by the Revenue were dismissed, and the order of the CIT(A) was upheld. The Tribunal confirmed that the disallowance made by the AO was not justified, and the payments were correctly subjected to TDS under section 194C.

Pronouncement:

The order was pronounced in the open court on 15-10-2018.

---