Tribunal rules channel placement fees not royalty, disallows disallowance under Sec. 40(a)(ia)

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision that the payments for 'Carriage fees/Placement fees' and 'Carriage fees/Channel Placement fees' did not constitute royalty under Sec. 9(1)(vi). Citing precedents and the Bombay High Court judgment, the Tribunal found no justification for disallowance under Sec. 40(a)(ia) rws 194J, leading to the deletion of the disallowance. The Kerala High Court judgment was deemed inapplicable, and the Tribunal affirmed that the channel placement fees were not subject to disallowance under Sec. 40(a)(ia).

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Issues:
1. Disallowance under Sec. 40(a)(ia) rws 194J for 'Carriage fees/Placement fees'
2. Disallowance under Sec. 40(a)(ia) rws 194J for 'Carriage fees/Channel Placement fees'
3. Disallowance under Sec. 40(a)(ia) based on Kerala High Court judgment
4. Applicability of Sec. 40(a)(ia) regarding channel placement fees

Analysis:

1. The appeal concerned the disallowance under Sec. 40(a)(ia) rws 194J for 'Carriage fees/Placement fees'. The AO disallowed an amount under this section as the assessee had wrongly deducted tax under Sec. 194C instead of Sec. 194J. The CIT(A) accepted the assessee's contention that the payment did not fall under the definition of 'royalty' under Sec. 9(1)(vi) and directed the deletion of the disallowance. The Tribunal noted that the issue was covered by the Bombay High Court judgment in a similar case, where it was held that the payment was not royalty, hence no disallowance was warranted.

2. Another issue was the disallowance under Sec. 40(a)(ia) rws 194J for 'Carriage fees/Channel Placement fees'. The AO disallowed the amount based on the view that the payment for 'process' use was royalty under Sec. 9(1)(vi). However, the CIT(A) relied on precedents to conclude that the payment did not constitute royalty. The Tribunal referred to the Bombay High Court judgment, stating that no disallowance was justified as the payment was not royalty.

3. The third issue involved the disallowance under Sec. 40(a)(ia) without appreciating a Kerala High Court judgment. The Tribunal found that the Bombay High Court's interpretation of 'royalty' under Sec. 40(a)(ia) was applicable, rendering the disallowance unnecessary based on the facts of the case.

4. The final issue was the applicability of Sec. 40(a)(ia) regarding channel placement fees. The Tribunal upheld the CIT(A)'s decision, citing the Bombay High Court judgment and a Tribunal decision on a similar matter. It emphasized that the payment for channel placement fees did not qualify as royalty, hence no disallowance was warranted. The appeal by the revenue was subsequently dismissed based on these considerations.

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