TaxTMI 
TaxTMI 
2013 (10) TMI 593
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....the assessee to comply with the provisions of section 194C." ITA No.61/Agra/2012 for A.Y. 2008-09 "1. The ld. CIT(A) has erred in law and on facts in holding that the nature of transaction between the assessee and different channels is more Akin to manufacture and distributor rather than Contractor and Sub-Contractor, therefore provisions of section 194C is not applicable. 2. The ld. CIT(A) has erred in law and on facts in deleting the disallowance made by the AO u/s 40(a)(ia) of the IT Act amounting to Rs.67,90,170/-, stating that there was no obligation on part of the assessee to comply with the provisions of section 194C of the IT Act and ignored the ratic lead down by Hon'ble Punjab and Haryana High Court in the case of Kurukshetra Darpans (P) Ltd. vs. Commissioner of Income Tax in 217 CTR PH 326, wherein it is held that the assessee was required to deduct tax at source in terms of Section 194C of the IT Act on payments made to the licensor for obtaining TV Signals, Cable TV Network owned by the assessee." 3. The grounds of appeals for both the years are based on identical set of facts. The ld. Representatives of the parties submitted that the facts lead in A.Y. 200....
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....in reply dated 20.11.2009 the assessee admitted that the assessee has not deducted any amount of tax at source on the payments made to these channels. The A.O. noted that the provisions section 40(a)(ia)(iv) is applicable in this case. Thus, the amount of Rs.72,72,807/- on which no TDS has been made is not liable to be deducted in computing the income chargeable under the head "Profit & Gains of business or profession" shown by the assessee. A notice was, therefore, sent to the assessee on 30.11.2009, requiring the assessee to explain as to why the addition of the said amount may not be made to his total income during the year under consideration. The assessee sent reply on 10.12.2009 which has been reproduced by the A.O. in his order at page no.8. The A.O. from the perusal of the reply of the assessee found that the reply is totally false, misleading, absurd and irrelevant as it appears that the assessee has not understood the issue under consideration. The A.O. has inserted some copy of receipts of M/s Star India Pvt. Ltd. M/s ESPN Software India Pvt. Ltd. and M/s Set Discovery Pvt. Ltd. in his order at page nos.9 & 10. The A.O. noted that on each of the three receipts mentioned ....
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....ainment and knowledge, is like manufacturing and marketing any commodity, to the public, the price of which commodity is collected from various house hold depending on which package or how many channel one subscribes to. The collection of payments made by various house hold i.e. public is made not directly to the channel operators but indirectly through COs and SCOs. The package of goods/commodities is determined by the channel operators, who signal such programs into the satellite. The public gets programs of his choice through transmission network being operated by MSOs/COs/SCOs. Once the house hold subscribes to a particular package; it has to pay prescribed monthly fee, whether it watches all programs or only few of them or, even if not a single program. In brief, this entertainment and knowledge programs are like commodities put-up by the channel operators in the market (in the air) which are then brought by public according to the choice (subscription of various packages having different permutation and combination of channels). In this market for channels or programs; the assessee is merely the mediator, more correctly identifiable as distributor; because it distributes t....
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....ments, if any, made directly or indirectly to the COs/MSOs like assessee. It would not be other way round, as AO is trying to make a case for. After all, no work service is being provided by the channel network to/on the order of; COs/MSOs!; it is only the other way around. (3.3) According to the AO (Para 4.1 of assessment order), sub-cable operator is 'principal'; assessee is a 'contractor'; and channel networks are sub-contractor. The fallacy in this view point of the AO can be understood as under: (i) If AO is correct, that would mean that SCOs and COs are contracting to channel-operators, as to which programs and channels to be prepared and broadcasted?! But, this is not true! (ii) If sub-COs is 'principal' and assessee is sub-contracting to various channel networks; the amount of payments made by sub Cos/Public to assessee would be a much larger amount almost may multiple of what assessee is paying to channel-networks (which would be only sub-contractor)!! The reality is just opposite. (iii) As a corollary; the status Level of operation of assessee should then be much larger than the channel operators!! Certainly this is also not true. What all above amplify, is....
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....dundant and irrelevant." 7. We have heard the ld. Representatives of the parties and records perused. The crux of the matter under consideration whether under the facts and circumstances Explanation-(iv)(b) of section 194C of the Act is applicable or not. The said Explanation-(iv)(b) reads as under :- (as applicable from 01.06.2008. Before 01.06.2008, the meaning of "works" is covered by Explanation-(iii)(b) of the Act.) "(iv) "work" shall include-- (a) ....................... (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting;" 8. The meaning "works" for the purpose section 194C of the Act is applicable under following circumstances :- 1) Broadcasting and 2) Telecasting 3) Including production of i) Broadcasting ii) Telecasting 9. Now, to examine the issue under consideration, we would like to see what is the dictionary meaning of 'Broadcasting' and 'Telecasting'. The dictionary meaning as per different dictionaries are as under :- As per Hinkhoj.com :- BROADCAST BROADCAST BROADCAST BROADCAST BROADCAST BROADCAST BROADCAST BROADCAST BROADCAST BROADCAST BROADCAST ....
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....ndia gives a Republic Day address over Doordarshan, it may be received by millions of viewers over their TV sets in their homes. But this TV does not make it a private communication. It is very much a communication to the public. The President is not making a private broadcast to each viewer or listener. The audience may be sitting in the privacy of their homes. But this makes no difference to the character of the audience. Broadcasting: Aural or visual communication by wireless telegraphy. 10. In the light of the above meaning of words Broadcasting and Telecasting, we would examine the nature of payment made in the year under consideration. On perusal of copy of agreement dated 06.02.2007 between Star India Pvt. Ltd. and the assessee of which copy has been placed at page no.23 to 24 of the assessee's Paper Book, it is seen that the agreement is under the title of 'Subscription Agreement'. The assessee is called affiliate in the said agreement. The other party is Star India Pvt. Ltd. In the agreement it is stated that the affiliate, the assessee is engaged in the business of distribution of television channels through the distribution system. For the purpose of distributing s....
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....uthorized copying, taping or use of any part of the Subscribed Channels and shall fully cooperate with all requests by STAR to take such steps as are reasonable and appropriate to cause such activities to cease." "5(h) I shall not remove or shift or allow to be removed or shifted, the Equipment from the installation address detailed in Article II hereof or allow anybody else to do the same, without the prior written permission of STAR and shall indemnify STAR against any damage, destruction, theft or loss of the Equipment." 12. The other relevant important clauses are 8(a) and 9(c) which reads as under :- "8(a) The Affiliate agrees and undertakes to distribute the Subscribed Channels in its entirety as and how it is delivered by STAR, without (i) any cutting, editing, dubbing, scrolling or ticker ape, voice-over, sub titles, substituting or any other modification, alternation, addition, deletion or variation; and, (ii) replacing, modifying, deleting, imposing or superimposing of advertisements or otherwise tampering with the content of the Subscribed Channels. Further, the Affiliate undertakes not to place the Subscribed Channels next to any pornographic or gambling channe....
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....w that the assessee is not liable for deducting TDS in respect of payment of Rs.17,91,286/- on the ground that in this payment there are two parties, one is the assessee as principal person and the other is channels. However, in respect of payment of Rs.72,72,807/-, the A.O. was of the view that there are three parties i.e. the assessee, Cable Operators and channels. Therefore, in accordance with A.O.'s view this payments are covered under the meaning 'works' i.e. broadcasting & telecasting. Therefore, the assessee was liable to deduct tax at source under section 194C of the Act and accordingly Explanation-(iv)(b) of section 194C is applicable. To appreciate the position of the assessee in the transaction, we would like to refer the following diagram :- 15. The A.O. did not dispute about the nature of payment in respect of own customers. The issue before us is only in respect of sequence of transaction i.e. channels - assessee - cable operator - customers. In the light of above sequence of stages of transactions and after considering dictionary meaning of broadcasting and telecasting, we notice that the assessee is engaged in the business of distribution of signals thr....