TaxTMI 
TaxTMI 
2019 (6) TMI 430
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....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 Kerala High Court in its judgment dated 20.07.2015 in the case of CIT-1....
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....nd 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 payments made towards Channel Placement/Carriage Fees, vide assessment order dated 15.03.2016 p....
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.... (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 the term "ROYALTY". In the facts of the case, the Carriage Fee, as already discussed above involves a "PROCESS" as depicted above. Therefore, any payment towards Placement Fee or Transmission Fee is ....
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....able 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 the nomenclature of Transmission Fee or Carriage Fee or Placement Fee toward "Right to use the Process" which is embedded in the definition of the term "Royalty" as defined in Explanation 2 to Section 9(1)(vi) read together with the clarification inserted in Explanation 6 to Section 9....
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....r '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 'process' has been clarified in Explanation 6 to clause (vi) of section 9(1). Thus Explanation 2 has to be necessarily read with Explanation 6. 8.10. In view of the above discussions, the channel placement charges of Rs. 88,08,20,017/- on which TDS was not deducted under proper applicable provisions i.e., Section 194J is disallowed u/s. 40(a)(ia) o....
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....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 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 ....
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....ng 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 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....
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....ng 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 circular issued by CBDT no. 4/2016 File no. 275/07/2016-IT(B) dated 29.02.2016. Our attention was also drawn to decision of tribunal in ITA no. 1584/Mum/2010 for AY 2009-10 in the case of Viacom 18 Media Private Limited v. ADIT(E), wherein tribunal decided the issue of transponder fees in favour of Revenue by holding the same to be Royalty u/s 9(1)(vi) of the 1961 Act. 5.2. The learned counsel for the assessee on the other hand relied upon the decision in assessee‟s own case for AY 2011-12 of Hon‟ble Bombay High Court in CIT....
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.....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‟ble Bombay High Court relied upon by learned counsel for the assessee , the aforesaid amendment to Section 9(1)(vi) of the 1961 Act by insertion of Explanation 6 was not discussed . The Ld. CIT-DR relied upon the decision of Mumbai tribunal in ITA no. 1584/Mum/2010 for AY 2009-10 in the case of Viacom 18 Media Private Limited v. ADIT(Int. Tax) , wherein transponder fees were held to be Royalty keeping in view Explanation 6 to section 9(1)(vi). The learned CIT DR also placed reliance on the decision of Hon‟ble Kerala High Court in t....
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....age 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 of the assessee for AY 2008-09 to 2011-12 by holding that Carriage Fees/Channel Placement Fees are covered under the definition of "work‟ as specified u/s. 194C and the assessee rightly deducted income-tax at source u/s. 194C of the Act. We also note that those decisions were rendered in context of provisions of Section 201(1) and 201(1A) of the 1961 Act . The tribunal in ITA no. 2699/Mum/2012 for AY 2008-09 in assessee‟s own case ( common order passed by tribunal for AY 2008-09 to 2011-12) , vide appellate orders dated 29.10.2014 he....
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.... 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 channels and thereafter its distribution amongst ultimate customers through the cable network of the assessee. 17. Another plea of the assessee/subscriber was that the licensor or the person to whom the assessee is making payment by itself does not do the work of broadcasting and telecasting and is therefore outside the purview of Section 194C of the Act. This argument deserves to be negated at the threshold. As we have pointed out earlier what the assessee subscriber is looking for is to obtain the telecast signals from the licensor, which is enough to deduce that the impugned co....
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....ght 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 it clear that when two provisions are simultaneously introduced in the Act, one is specific and another is more general in terms then the resort must be to the specific provision. Therefore, when the, work of broadcasting and' telecasting of the programmes specifically falls under the ambit of provisions of section 194C, then In view of the decision of Hon'ble Delhi High Court (supra), the provisions of section 194J con not be applied on such payments. The CBDT Circular No. 720 dated 30.08.1995.also supports this view as it was clarified in the said circular as under- "1261.Payment of any sum shall be liable for deduction of tax only under one section. It has been brought to the notice of t....
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....hus : "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 Charges paid by the company and the services rendered to them along with copies of Agreements made in this regard. The assessee has deducted TDS as per the provisions of section 194C of the I.T.Act on such payment. On further perusal of the Agreements submitted by the assessee it is seen that these payments are given to MSO/Cable Operators to retransmit and/or carry the service of the channels on 'S' Band in their respective territories. The services provided by these MSOs / Cable Operators does not come within the purview of section 194C of the I. T. Act, as placing the service of the channel on 'S' Band is a Technical Service for which the TDS is required to be deducted as per the provisions of Section 194J of the I.T.Act i....
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....el. 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 Income Tax Act while making payment towards placement fees to the cable operators/ MSOs. If Section 194J is to be applied, the deduction would be of 10%. The Commissioner (Appeals) has also gone through the method followed by the cable operators/ MSOs. The Commissioner (Appeals) has also gone into the submission of the Revenue that, in fact, Section 194J would apply. In substance, the argument is that placement charges are basically for rendering technical service. The Commissioner (Appeals) has recorded a finding of fact on the basis of material on record that the placement charges are consideration for placing the channels on agreed frequency bands. It was found that, as a matter of fact, by agreeing to place the channel on any preferred band, the cable operator does not r....
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....f 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 to dubbing charges. The finding of fact recorded by the Commissioner (Appeals), which is confirmed by the Appellate Tribunal, is that work of subtitling will be covered by the definition of "work" in clause (iv) of explanation to Section 194C. Reliance is placed by the Commissioner (Appeals) on the CBDT notification dated 12th January 1977. The said notification includes editing in the profession of film artists for the purpose of Section 44AA of the Income Tax Act. However, the service of subtitling is not included in the category of film artists. As noted earlier, subclause (b) of clause (iv) of the explanation to Section 194C covers the work of broadcasting and telecasting including production of programmes for such broadcasting or telecasting. The work of subtitling will be naturally a part of produ....
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....er 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 u/s 194C of the 1961 Act by relying on the decision of Hon‟ble Bombay High Court in the case CIT v. UTV Entertainment Television Ltd. (supra) wherein Hon‟ble Bombay High Court held that no substantial question of law arose in the said appeal of Times Global(supra), by holding as under:- " 1. This Appeal under Section 260A of the Income Tax Act, 1961 (the Act) challenges the common order dated 27th March, 2015 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order is a common order for Assessment Years 200809 and 200910. This appeal relates to AY 200910. 2. The appellant has urged only the following question of law for our consideration :( i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the placement fees / carriage fees....
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....009-10 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 the case of Viacom 18 Media Private Limited for AY 2013-14 to 2015-16 vide orders dated 09.07.2018 held that no income-tax was required to be deducted at source on transponder fees paid by Viacom to Intelsat Corporation as the said sum was found not to be exigible to income-tax in India in the hands of Intelsat by Hon‟ble Delhi High Court in the case of DIT(international Taxation) v. Intelsat Corporation in ITA no. 977/2011 dated 19.08.2011. We are presently not concerned with transponder fees but are presently concerned with Carriage Fees/ Channel Placement Fees paid by the assessee to cable operators for putting channel on certain frequency to enhance viewership of the said channel. These payments were held by Hon‟ble Bombay High Court to be standard fees paid for broadcasting channel on certain frequency. We have also observed that Hon‟ble Jurisdictional ....
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....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 Placement Fees are subject to income-tax deduction at source u/s 194C of the 1961 Act. Similar view was taken by Hon‟ble Bombay High Court in the case of CIT v. Genx Entertainment Limited in ITA no. 155 and 156 of 2016 vide judgment dated 26.03.2018 ( judgment later modified vide order dated 13.04.2018). The Hon‟ble Bombay High Court has also upheld deletion of additions to the income of the tax-payer made by Revenue u/s 40(a)(ia) of the 1961 Act on account of Carriage Fees/Channel Placement Fees by holding that correct provision for deductibility of income-tax at source is u/s 194C and not provisions of Section 194J in PCIT v. Genex Entertainment Limited in ITA no. 1110 of 2015 vide judgment dated 26.03.2018. We are bound by the decisions of Hon‟ble Bombay High Court being jurisdictional High Court. These decisions as are rendered by Hon‟ble Bombay High Court are recent decision as late as 18.01.2019 ....