TaxTMI 
TaxTMI 
2007 (9) TMI 448
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....ising time are referred as Free Commercial Time (FCT). TVAM produced the programme incurring various expenditure on production. For earning the revenue, TVAM sold its right in the programme to the assessee-company MPCL. MPCL acquired rights of such contents and had rights of such footage as well as re-cast rights. Pursuant to the agreement between the assessee and TVAM dated 25-3-1999, the assessee got the right to release the advertisement during the FCT. For acquiring such rights, assessee MPCL reimburse the cost incurred by TVAM along with 7.5 per cent of such cost towards their profit. Thus, MPCL acquired the rights to release the advertisement during FCT and paid TVAM for acquiring such right. The relevant clauses in the agreement dated 25-3-1999 are extracted herein: "This agreement made this 25th day of March, 1999 Between M/s. Moving Picture Company (India) Limited through its Director, Ms. Umagajapathi Raju being Party of the First Part And M/s. TVAM (India) Private Limited through its Director, Mr. Ramesh Sharma being Party of the Second Part hereinafter referred to as Parties of the first and second part respectively which expression shall unless repugnant....
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....t Part would ensure that adequate funds are available at all times to the Party of the Second Part so that smooth production of the programme is not hampered. Any delay in payments and where expenses have to be incurred by Party of Second Part owing to such delay in payment would entitle the Party of the Second Part to charge interest at the bank rate for the period of delay. (6)That in the event that Party of the Second Part does not exhibit its programme on TV as per specifications and timings etc., agreed to between both the Parties of the First and Second Part, the Party of the First Part shall have a right to terminate such contract and recover costs and damages from the Party of the Second Part for any loss that it may have suffered for delay/non-execution of the terms of this contract." 2.1 A survey under section 133A was conducted at the premises of assessee on 30-1-2003. During the course of survey, statement of Shri M.M. Pokhrial confirmed that following payments were made to TVAM, which were towards cost of production of TV serial and marketing : F.Y. Cost of Production 'Subah Savere' 2000-01 Rs. 3,70,88,213 2001-02 Rs. 3,58,45,469 The Assessin....
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....any to produce TV Programmes for Doordarshan. M/s. TVAM produced a morning programme 'Subah Savere' for Doordarshan and in consideration of supplying the programme, Doordarshan allowed M/s. TVAM Free Commercial Time (FCT). In turn M/s TVAM appointed the appellant-company as a sole marketing representative and exclusive holder of the world rights for subsequent resale/re-telecast of the programme as well as the FCT. The programme was only produced by TVAM who had been commissioned by M/s. Doordarshan. In such facts and circumstances, in my opinion, the Assessing Officer fell into an error, under a wrong appreciation of facts, by inferring that the producer of the programme was the appellant-company, and, consequently since the programme had been produced by M/s. TVAM the latter had rendered 'technical services' to the appellant-company on which the provisions of section 194J are not applicable, the impugned demand raised by the Assessing Officer is hereby quashed. Consequently, the demand under section 201(1A) will also not remain." 2.4 Revenue is in further appeal before us. The learned DR Shri M.P. Singh submitted that the assessee was treated as assessee-in-default based on th....
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....ices to MPCL and MPCL erred in not charging TDS under section 194J. The Assessing Officer also proceeded to hold that the 'Agency Sales Commission', had been paid by the assessee to advertising agencies and TDS under section 194H not charged on it. The CIT(A) had gone into the matter in depth. He has examined the entire transactions and also considered the decision of the ITAT in Asstt. CIT v. Samaj [2001] 77 ITD 358 (Cuttack), where this matter had been discussed in the last para, and finally held on page 14 of his order that: (i)the advertising agency was entitled to retain 15 per cent from the sale proceeds of FCT which partakes the character of trade discount, and (ii)to attract provisions of section 194H there should be three parties involved in the transaction whereas in the instant case only two parties were involved, and held that provisions of section 194H were not attracted in this case. Again, on page 15 of his order, the CIT(A) recorded a finding of fact that M/s. TVAM produced a morning programme 'Subah Savere' for Doordarshan and in consideration of supplying the programme, Doordarshan allowed M/s. TVAM Free Commercial Times (FCT). In turn M/s. TVAM appointed....
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....o it. Rather the TV serial was produced by TVAM itself availing the services of various artists etc. The entire cost of production of the TV serial is reimbursed by the assessee. The payments by the assessee is for acquiring right in the FCT which is merely measured on the basis of cost plus 7.5 per cent. Thus, it cannot be said that the amount was paid by the assessee to TVAM in the nature of 'fees for technical services' as defined in Explanation to section 9(1)(vii). Thus, there is no error in the order of learned CIT(A) in this regard. 3.1 As regards payments of commission, it is seen that the assessee has not paid any commission to the advertising agents. Rather the assessee has sold the air time to the advertising agents who in their turn have sold such air time to various other advertisers. The assessee was to receive certain consideration for selling the air time to the advertising agent and the advertising agents had retained part of that commission which is in the nature of agency commission. Thus, the assessee received payment from the advertising agent net of such agency commission. These are in the form of trade discount offered and not in the form of commission pai....