TaxTMI 
TaxTMI 
2019 (6) TMI 430
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....s under:- 1. "Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT(A) has erred in directing to delete the disallowance u/s. 40(a)(ia) rws 194J in respect of 'Carriage fees/Channel Placement fees' and failing to appreciate that the payments made for use/right to use of 'process' are 'royalty' as per Explanation 6 to section 9(1)(vi) hence such payments are covered u/s. 194J of the Income Tax Act, 1961". 2. "Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT(A) has erred in directing to delete the disallowance u/s. 40(a)(ia) rws 194J in respect of 'Carriage fees/Channel Placement fees', whereas the jurisdictional ITAT, Mumbai 'L' Bench, in its order dated 28.03.2014 in the case of ADIT-(IT)-2(2), Mumbai Vs Viacom 18 Media Pvt. Ltd. has confirmed that the payments made for use/right to use of 'process' are 'royalty' in terms of the Income Tax Act, 1961". 3. "Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT(A) has erred in directing to delete the disallowance u/s. 40(a)(ia) without appreciating that the Hon'ble Keral....
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....the AO that the payment of carriage fees does not comes within definition of royalty and hence Section 194J of the 1961 Act has no applicability. The assessee relied upon decision of ITAT, Mumbai in assessee‟s own case for AY 2008-09, 2009-10 and 2010-11 , wherein the Mumbai tribunal had held in favour of the assessee that the deduction of income-tax at source was rightly made by assessee @ 2% u/s 194C of the 1961 Act. 3.3. The AO observed that Revenue has filed an appeal with Hon‟ble Bombay High Court against decision of Mumbai-tribunal holding in favour of the assessee on this issue as the decision of Mumbai-tribunal was not accepted by Revenue. The AO rejected the contentions of the assessee and held that provisions of Section 194J of the 1961 Act are applicable and the assessee ought to have deducted income-tax at source @10% u/s 194J of the 1961 Act instead of deducting income-tax at source @2% u/s 194C of the 1961 Act , wherein the AO made additions to the tune of Rs. 88,08,20,017/- under provisions of Section 40(a)(ia) of the 1961 Act on the ground that the assessee has infringed provisions of Section 194J read with Section 40(a)(ia) of the 1961 Act on payment....
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....ng of any information concerning the working of or the use of a patent, invention, model, design, secret formula or process or trade mark or similar property: (iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property: (iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill: (iva) the use of right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB: (v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting but not including consideration for the sale, distribution or exhibition of cinematographic films; or (vi) the rendering of any services in connection with the activities referred to in sub-clause (i) to (iv), (iva) and (v)." From the above definition it is amply clear that a "PROCESS" is covered within the ambit of the definition of....
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....s area. (b) ACT v. Sanskar Info. T.V.P. Ltd. [24 SOT 87 (ITAT Mum) (2008)] In this case, the Mumbai Tribunal placed heavy reliance on the decision in the case of Asia Satellite Telecommunication Co. Ltd.v. DCIT and held that the payments are taxable as 'royalty' under the Act. (c) New Skies Satellite N.V v. ADIT [121 ITD (Del) SB (2009)] The Delhi Special Bench held that revenues earned by the satellite operators are taxable as 'royalty' both under the Act and various tax treaties. It held that the payments are for the 'use' or 'right to use' the process involved in the transponder and that for the purpose of determining the payments as 'royalty' it is not necessary for the process to be 'secret' under the act as well as the tax treaty. In the process of transmission, human intervention is possible only at few levels as depicted in the diagram only at the level of MSO/LSO to decide which channel will be placed on what frequency. Therefore, the Right to place or carry a Channel is vested with the MSO/LSO. The Channel Company or Broadcaster is paying to the MSO/LSO for using this right only. In effect therefore, the payment is made under t....
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....of this section. The assessee does not give his content to a third party for broadcasting. Instead the assessee himself is the broadcaster of its own content. This broadcasting work is not covered under the provisions of section 194C. The assessee, moreover, uses a part of the integral process of broadcasting, which is covered under 'Royalty'. 8.8. The argument of assessee that section 40(a)(ia) of the income tax act has defined royalty by referring Explanation 2 to clause (vi) of Section 9(1) of the Income Tax Act. The assessee has also argued that "Royalty" is covered under the provisions of section 194J of the Income Tax Act, 1961. Section 194J provides for deduction of TDS on payment for professional and technical fees and royalty. It also mentions that royalty shall have the same meaning as contained in Explanation 2 to clause (vi) of Section 9(1) of the Income Tax Act. Reference hasn't been made to Explanation 6 to the said section 9(1)(vi). The assessee contends that Explanation 6 cannot be applicable in its case. 8.9. This contention of the assessee is also not acceptable. Explanation 2 while defining 'Royalty' uses the term 'process'. The meaning of 'proc....
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....vided that expression work' shall include, inter alia, broadcasting and telecasting including production of programmes for such broadcasting and telecasting. By way of such Explanation, it is evident that where the payment is for a work involving broadcasting and telecasting, the same shall be subject to deduction of tax at source in terms of Section 194 of the Act. The assessee is a cable network operator through which it provides telecasting of programmes to the ultimate consumers/subscribers. The assessee in turn enters into a contract with the licensor of various TV channels. On the payment so made, Section 194C of the Act is attracted. This is for the reason that the licensor, is a person who is performing the work which is covered within the meaning of Clause (b) of Expln. III to Section 194C(2) of the Act. 15. It is also relevant to mention here that in the agreement between the assessee and the licensor, the licensor is referred to as 'company engaged in the business of distribution of satellite based television channel(s) services including the service and has exclusive rights to market and distribute the services in India to various customers and users of....
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....ng production of programme or such broadcasting or telecasting falls under the definition of "work" as provided under clause (iv) of the Explanation to section 194C which reads as under:- "Explanation -For the purpose of this Section - **************** **************** (iv) "work" shall include {a} Advertising; {b} Broadcasting and telecasting including production of programmes for such broadcasting or telecasting {c} Carriage of goods or passengers by any mode of transport other than by Railways: {d} Catering; {e/ Manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, "But does not included manufacturing or Supplying a product according to the requirement of specification of a customer by using material purchase from a person other them such customer" 8. The Hon'ble Delhi High Court in the case of CIT Vs. Prasar Bharati (Broadcasting Corporation of India)(supra), has observed In para 11 as under: "We are unable to agree with this submission. We observe that Explanation III, which wa....
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....and Hon'ble Delhi High Court, we do not find any error or illegality in the impugned order of CIT(A) qua this issue." 5. Now Revenue is aggrieved by the decision of Ld. CIT(A) allowing relief to the assessee and has filed an appeal with tribunal. The Ld. CIT-DR at the outset submitted that the assessee has paid Carriage Fees/Channel Placement Fees on which income-tax was deducted at source by assessee u/s. 194C by applying rate of 2% , although it ought to have been deducted at source by assessee u/s. 194J of the 1961 Act by applying rate of 10%. It was submitted that these payments made by assessee are Royalty payments within provisions of Section 194J of the 1961 Act. Our attention was drawn to para 8.4.1. of the assessment order passed by the AO. Our attention was drawn by learned CIT-DR to Explanation 2 and Explanation 6 to Section 9(1)(vi) of the 1961 Act. It was submitted that in view of the aforesaid Explanations , these payments are Royalty payments in nature and hence income-tax was deductible at source u/s. 194J of the Act. It was submitted that learned CIT(A) gave relief to the assessee based on earlier year order of ITAT,Mumbai Benches. Our attention was drawn to cir....
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....CIT,TDS v. UTV News Ltd., in ITA no. 1384 , 1437-1448 and 1446 of 2016 , judgment dated 18.01.2019. The learned counsel for the assessee submitted that Hon‟ble Bombay High Court has decided this issue consistently in favour of the assessee/taxpayers vide above judgments. It was prayed that judgments of Hon‟ble Jurisdictional High Court be followed to maintain judicial discipline. It was submitted that aforesaid circular of CBDT dated 29.02.2016 relied upon by learned CIT-DR is not applicable to factual matrix of the case. 5.3. The Ld. CIT-DR in rejoinder submitted that Carriage Fees/Channel Placement fees will fall under "Process‟ as defined under Section 9(1)(vi) read with Explanation 2 and 6 and the aforesaid payments as made by assessee are in-fact Royalty and the assessee ought to have deducted income-tax at source u/s 194J by applying rate of deduction at source of 10% instead of 2% u/s 194C of the 1961 Act. The learned CIT-DR would rely on the amendments made to Section 9(1)(vi) of the 1961 Act wherein Explanation 6 was inserted by Finance Act, 2012 w.e.f. 01.06.1976. Thus it was contended by learned CIT-DR that in all the aforesaid decisions of Hon‟....
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....ought to followed the same to maintain judicial discipline and hence prayers were made to upheld the appellate order passed by learned CIT(A) and dismiss the appeal filed by Revenue. 9. We have considered rival contentions and perused the material on record including cited case laws. We have observed that the assessee is engaged in the business of advertisement and subscription. The assessee owns and operate four channels namely UTV Movies, UTV World Movies, UTV Stars and UTV Action Telugu. The assessee has paid Channel Placement Fees/Carriage Fees of Rs. 88,08,20,017/- during the previous year relevant to impugned assessment year , on which the assessee has deducted income-tax at source u/s. 194C of the Act on such payment at the rate of 2% , while the AO was of the view that the income-tax ought to have been deducted at source @ 10% under the provisions of Section 194J of the 1961 Act. The AO made additions to the income of the assessee to the tune of Rs. 88,08,20,017/- on aforesaid short deduction of income-tax deducted at source by invoking provisions of Section 40(a)(ia) of the 1961 Act read with Section 194J of the 1961 Act. The tribunal has decided this issue in favour....
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.... of the Act. 15. It is also relevant to mention here that in the agreement between the assessee and the licensor, the licensor is referred to as 'company engaged in the business of distribution of satellite based television channel(s) services including the service and has exclusive rights to market and distribute the services in India to various customers and users of the service'. Further, the agreement refers to the assessee subscriber as a party, which is desirous to subscribe for and receive the telecast signals of the service from the company in order to further distribute the same to the customer(s). 16. From the recital of the agreement itself, it is clear that the service that the assessee subscriber is availing is the receipt of 'telecasting signals' from the licensor or the company. The expression 'service' has also been referred to mean the TV channel which is dealt with by the licensor or the company. Therefore, what the assessee has transacted for with the licensor or company certainly includes within its ambit broadcasting and telecasting facility. The essence of the contract is to obtain broadcasting and telecasting of TV ch....
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....according to the requirement of specification of a customer by using material purchase from a person other them such customer" 8. The Hon'ble Delhi High Court in the case of CIT Vs. Prasar Bharati (Broadcasting Corporation of India)(supra), has observed In para 11 as under: "We are unable to agree with this submission. We observe that Explanation III, which was introduced simultaneously with Section 194j, is very specific in its application to not only broadcasting and telecasting but also include 'production of programmes for such broadcasting and telecasting. If, on the same date, two provisions are introduced in the Act, one specific to the activity sought to be taxed and the other in more general terms, resort must be had to the specific provision which manifests the intention of the Legislature. It is not, therefore, possible to accept the contention of the Revenue that programmes produced for television, including 'commissioned programmes will fall outside the realm of Section 194C Explanation III of the Act We find no infirmity in the view taken by the ITAT which we hereby affirm." 9. The Hon'ble Delhi High Court has made i....
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....rt in assesse‟s own case in ITA no. 525,732,741 and 1035 of 2015 for AY 2008-09 to 2011-12 vide common order dated 11.10.2017 in CIT v. UTV Entertainment Television Ltd., reported in (2017) 399 ITR 443 (Bom) ; (2017) 88 taxmann.com 214 (Bom) wherein Hon‟ble Bombay High Court held that payments made towards carriage Fees/Channel Placement Fees by the assessee are subject to deduction of income-tax at source u/s 194C of the 1961 Act, by holding as under:- "9. We have given careful consideration to the submissions. Firstly, it will be necessary to advert to the facts of the case. For that purpose, it will be necessary to make a reference to the order passed by the Income Tax Officer. Paragraph 3 of the order reads thus : "3. During the Survey, on perusal of the books of accounts of the assessee company, it was found that for Financial Years 201011, the year under consideration the assessee company has debited an amount of Rs. 33,24,56,189/on account of "carriage fees" , Rs. 8,20,650/on account of Editing expenses and Rs. 12,95,400/on account of Dubbing Charges. The assessee was asked to give the details of the Carriage Fees, Editing Expenses and Dubbing C....
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....ors are in a state to decide which channel will reach the end viewer at what frequency (placement). Accordingly, broadcasters make payments to the cable operators to carry their channels at a particular frequency. Fee paid in that behalf is known as "carriage fee" or "placement fee". The payment of placement fee leads to placement of channels in prime bands, which in turn, enhances the viewership of the channel and it also leads to better advertisement revenues to the TV channel. 14. The Commissioner (Appeals) has given a finding of fact on the perusal of sample copies of the agreements. The agreements are entered into with the respondent by the cable operators for placement of channels on agreed frequencies on which the respondent wishes to place a particular channel. The placement fee is the consideration for providing choice of the desired placement of the channels. That is how, channel placement charges are paid to the cable operators under the agreement. Under the agreement, the cable operators agree for placing a particular channel on agreed frequency band. As stated earlier, the respondent has deducted tax at the rate of 2% at source by invoking Section 194C of the ....
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....t that there are no detailed findings recorded by the Appellate Tribunal. However, the Commissioner (Appeals) has recorded detailed findings on the basis of material on record and by referring to the findings, the Appellate Tribunal has expressed general agreement with the findings recorded by the first Appellate Authority. While affirming the judgment of the first Appellate Authority, it is open for the Appellate Tribunal to express such general agreement. 15. Now, turning to the second grievance regarding subtitling charges, again the Commissioner (Appeals) has gone into the details of the factual aspects. Subtitles are textual versions of the dialogs in the films and television programmes which are normally displayed at the bottom of the screen. Sometimes, it is a textual version of the dialogs in the same language. It can also be a textual version of the dialogs in a particular language other than the language of the film or the TV programme. Again the stand of the Revenue was that this will be covered by Section 194J and not by Section 194C. We must note here that in this appeal, the Revenue has not made any grievance regarding applicability of Section 194C t....
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....ement fees are paid under the contract between the respondent and the cable operators/ MSOs. Therefore, by no stretch of imagination, considering the nature of transaction, the argument of the appellant that carriage fees or placement fees are in the nature of commission or royalty can be accepted. 18. Thus, as far as both the grounds of challenge are concerned, there are findings of fact recorded by both the authorities. We concur with the view taken by the Appellate Tribunal. In our view, no question of law arises in these appeals. There is no merit in the appeals and the same are dismissed with no order as to costs." 9.3 Thus, in assessee‟s own case Hon‟ble Bombay High Court for AY 2008-09 to 2011-12 has held Carriage Fee/Channel Placement Fees to be covered within scope of "Work‟ defined under sub-clause (b) to clause (iv) of the Explanation to Section 194C of the 1961 Act. We have also observed that Hon‟ble Bombay High Court in the case of CIT v. Times Global Broadcasting Co. Ltd., (2019) 105 Taxmann.com 313 (Bom) has held Carriage Fees/ Channel Placement Fees paid to cable operators /MSO/DTH operators being payment for work contract covered....
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....No order as to costs." 9.4 The Revenue filed an SLP before Hon‟ble Supreme Court challenging aforesaid decision of Hon‟ble Bombay High Court in the case of Times Global(supra) which was dismissed by Hon‟ble Supreme Court by holding that on the facts of the case, no question of law arises in the said SLP( reported in (2019) 105 taxmann.com 314(SC). The learned CIT-DR has placed reliance on the Explanation 2 and 6 to Section 9(1)(vi) of the 1961 Act before us to contend that the Carriage Fees/Channel Placement fees are towards a "Process‟ as defined in Explanation 6 and hence is Royalty on which income-tax ought to have been deducted at source u/s 194J of the 1961 Act @10%. The learned CIT-DR has placed heavy reliance on the decision of Mumbai-tribunal in the case of Viacom 18 Media Private Limited v. ADIT(Int. Tax) in ITA no. 1584/Mum/2010 for AY 2009-10 vide orders dated 28.03.2014(common order for AY 2009-10 to 2011-12 passed by tribunal) wherein tribunal held that transponder fee payable by the tax-payer to be Royalty within definition of Section 9(1)(vi) of the 1961 Act read with Explanation 2 and 6 of the 1961 Act. We have observed that tribunal in....
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.... for the appellant - Revenue very fairly states that the impugned order of the Tribunal while dismissing the Revenue's appeal placed reliance upon the decision of its co-ordinate bench in ACIT v. UTV Entertainment Television Ltd. [IT Appeal No.2699 (Mum.) of 2012, dated 29-10-2014] to hold in favour of the respondent assessee. The Revenue being aggrieved by the order of the Tribunal in UTV Entertainment Television Ltd. (supra) had preferred an appeal to this Court being CIT v. UTV Entertainment Television Ltd. [2017] 88 taxmann.com 214/399 ITR 443 (Bom.) and by its order the appeal of the Revenue was dismissed. (b) In the above view, the question (i) as proposed does not give rise to any substantial question of law. Thus, not entertained." 9.5 Similarly, in the case of CIT v. UTV News Limited in ITA no. 1384, 1437, 1446 and 1448 of 2016, vide judgment dated 18.01.2019 dismissed the tax-appeals filed by Revenue by holding that no substantial question of law arises in those appeal by following the decision of Hon‟ble Bombay High Court in the case of CIT v. UTV Entertainment Television Limited(supra) wherein it was held that payments towards Carriage Fees/Channel....