TaxTMI 
TaxTMI 
2016 (3) TMI 214
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....ility u/s 201 of the Act, without appreciating that the same is tantamount to setting aside of the case, which is ultra vires his power u/s 251(1) of the Act. 3. Briefly stated, the facts of the case are that the assessee, Dish TV India Limited, is an Indian company engaged in the business of distribution of channels from its DTH (Direct to Home) network. The assessee, after deduction of tax at source u/s 194C and 195 of the Act, made payments to certain TV channels in India and abroad. The dispute in the instant appeal is only qua the payments made to channels in India on which the assessee deducted tax at source u/s 194C of the Act. During the course of verification of TDS returns filed by the assessee, it was noticed by the AO (TDS) that tax withholding done by the assessee u/s 194C was incorrect inasmuch as it was required to be done u/s 194J. It was held so after going through Agreement of the assessee with Sun TV Network Ltd. and others under which the assessee obtained non-exclusive right to distribute programs of such channels from its DTH platform to the ultimate viewers/subscribers. As per these agreements, the assessee was required to pay a license fee to the channels....
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....tion at source u/s 194J on the amount of Rs. 75.67 lac which was not offered to tax by the concerned TV channels. Apart from that, he also upheld the chargeability of interest u/s 201(1A) to the extent of Rs. 2.19 crore. This resulted into reduction in the assessee's liability from the original amount of Rs. 40.56 crore to the final determination at Rs. 2,25,48,341. Both the sides are in appeal on their respective stands. 4. We have heard the rival submissions and perused the relevant material. First, we take up the assessee's contention about the applicability of section 194C on the payments made by it to the TV Channels as against section 194J held by the authorities below. 5.1. Before delving into the core issue, we deem it befitting to have an in-depth insight into the factual matrix. In this regard, we find that the assessee obtained DTH License from Ministry of I&B, Government of India and commenced its DTH service under the brand name of `Dish TV'. The assessee has requisite infrastructure comprising of Up-linking facilities, Digital Headend, Conditional Access System (CAS), Subscriber Management Systems (SMS), Satellite Transponders and other requirements for providin....
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....ssessee : `shall not authorize others to copy, tape, use, distribute or reproduce any part of the Service without the Licensor's prior written authorization. It shall not copy or tape programs for resale or sub-licensing and shall immediately notice the Company of any unauthorized copy, taping or use of any part of the Service.'. The ld. AR has placed on record a copy of Memorandum of Understanding (MOU) executed on 12.03.2009 with ESPN covering the period from July 1, 2008 to 30.6.2012 for a total consideration of Rs. 322 crore. As per this MOU, ESPNL shall continue to provide its channels to Dish TV on a 'fixed subscription fees' amounting to Rs. 70 crore for the period 1.7.2008 to 30.6.2009. 5.4. It is discernible from a careful perusal of various clauses of the Agreement read with the MOU that the assessee acquired a non-exclusive `right to distribute' the contents of channels of ESPN through its DTH network for a fixed amount of Rs. 70 crore for the period July 1, 2008 to July 30, 2009. Choice of producing programs rests solely with TV channels, in which the assessee has no interference. The contents can be any programs produced or got produced by the TV Channel as per its ....
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....that in order to cover an amount u/s 194C read with Explanation (iv)(b), it is essential that the assessee must enter into contract with another resident for carrying out the work of broadcasting and telecasting. 7. The entire exercise of viewing TV programs can be broadly split into three parts, viz, first is the production of programs by or on behalf of the channels; second is uplinking of such programs by the TV Channels, which are amplified and then relayed in the footprint area through transponder on satellite; and third is the actual transmitting of such programs to the viewers, which is called telecasting or broadcasting. TV Channels produce or purchase rights of programs after spending a lot of money on them and thus exercise IPRs over them. No one else can telecast such programs without the prior permission of the channel. The second step is simply a medium of picking up signals of the program produced etc. by TV channel and dropping it the DTH/Cable operator for onward relay to the ultimate viewers, which is called broadcasting or telecasting, being the third step. In common parlance, the word `telecast' means `transmit by television'. Section 2 of the Broadcasting Act....
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....receiving telecast of TV programs. 10. Under the first business model, TV channel approaches DTH/cable operators for telecasting its programs on its own behalf. Under this model, revenue from ultimate viewership goes to the Channel itself and payment is made by it to the DTH/Cable operator for using their infrastructure for telecasting. It is this amount paid by the TV Channel to the DTH/cable operator, which can be categorized as payment `for carrying out broadcasting and telecasting' to fall within the sweep of section 194C. As the assessee has not made payments to the TV channels for telecasting programs on its behalf, it is held that the provisions of section 194C are not attracted in the extant case. 11. Now we turn to examining the attractability or otherwise of the provisions of section 194J, which requires deduction of tax at source from 'fees for professional or technical services.' Sub-section (1) of section 194J provides that : `Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of- (a) fees for professional services, or (b) fees for technical services or .... (c) royalty, or... shall, ...... ....
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....ransfer of rights by the TV channels in their programs, which are in the nature of copyright, literary, artistic work including films or video tapes, that are meant for use by the assessee exclusively in connection with television. 13. We have briefly discussed supra two business models in this line of business and found that whereas under the first model, TV channel approaches DTH/cable operators for telecasting its programs on its own behalf, under the second model, right to use in programs are transferred by TV channel to DTH/cable operators for value. In such later case, revenue from ultimate viewership goes to the DTH/Cable operators and TV Channel ends up by receiving consideration from DTH/cable operator for transfer of rights in its programs. While the third step, namely, telecasting and broadcasting of TV programs under the first business model is done by DTH/Cable operators for and on behalf of TV channels, and under the second business model is done by DTH/cable operators for and on their own behalf and not the TV channels. Whereas under the first business model, payment is made by TV channel to DTH/cable operators for `broadcasting and telecasting' their TV programs,....
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.... to the TV channels for use of their programs in connection with television, which is directly covered under Explanation 2(v) of section 9(1)(vi) and not for `producing any programs'. As such, the decision in Prasar Bharti (Broadcasting) Corporation of India (supra), does not support the case of the assessee. 15. The next decision relied by the ld. AR is judgment of the Hon'ble Punjab & Haryana High Court in Kurukshetra Darpans (P) Ltd. vs. CIT (2008) 217 CTR 326 (P&H). In that case, the assessee, a cable network operator, was in the business of distributing cable connections to customers. It entered into contract with a licensor of various TV channels for local cable distribution systems. These licensors were not the owners of the TV channels and they only had the exclusive right to market and distribute satellite based television service. The assessee in that case did not deduct any tax at source from the payments made to the licensors. In the opinion of the Revenue, the tax was required to be deducted at source u/s 194C of the Act. When the matter finally went before their Lordships, it was held that the provisions of section 194C were attracted. Here again, we find that this....
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....t year as well. This was vehemently opposed by the ld. DR. On a specific query, it was admitted by the ld. AR that in none of the earlier years, the TDS returns were taken up for verification and as such, the issue as to the attractability of section 194C or section 194J of the Act was never examined. In view of the fact that this issue has never been examined in the past in assessee's case, such a nondecision cannot have a precedent value. The ld. AR admitted in all fairness that the Revenue has taken similar stand in the succeeding years by holding the magnetizing of the provisions of section 194J to the similar payments, for which the matter is sub judice. Be that as it may, the rule of res judicata is not applicable in fiscal statutes like income-tax. The contention of the ld. AR about the applicability of the `rule of consistency', in our considered opinion cannot be allowed to dethrone the rule of `no estoppel against the statute'. After making an elaborate analysis, we have hereinabove held that section 194J is attracted to the facts of the instant case. Merely because in earlier years this issue was not examined and the assessee's contention got accepted without verificatio....
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....corresponding amounts included by the deductees in their respective income. Only a sum on which tax withholding comes to Rs. 6.05 lac, was not considered by the deductees in their respective income for which the liability of the assessee has been sustained u/s 201(1). The remaining demand under sub-section (1) has been erased because of the payees including the amount received from the assessee in their respective income. 21. After considering the rival submissions and perusing the relevant material on record, we find that the view taken by the ld. CIT(A) in directing the AO to reduce the amount u/s 201(1) for which the payee had already paid tax on the income, is otherwise in conformity with the judgment in the case of Hindustan Coca Cola Beverages Pvt. Ltd. (supra). Moreover, the legislature has inserted proviso to section 201(1) by the Finance Act, 2012 giving recognition to the principle laid down by the Hon'ble summit Court in Hindustan Coca Cola Beverages Pvt. Ltd. (supra). This proviso stipulates that that any person who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid/credited to a resident shall not be de....