2013 (12) TMI 951 - AT - Income Tax

Tax not deducted at source on transponder fees paid to non-resident - Held that - Ld. CIT(A) simply relying upon the decision of Hon'ble Delhi High Court in Asia Satellite Telecommunication Co. Ltd. 2011 (1) TMI 47 - DELHI HIGH COURT has granted relief to the assessee without discussing the provisions of applicable treaty - In the decision of Mumbai ITAT in Channel Guide India Ltd. v. Asstt. ACIT 2012 (9) TMI 95 - ITAT MUMBAI which has been relied upon by the assessee - There is a discussion in detail regarding applicable treaty which in the present case is stated to be DTAA of India with Malaysia - The issue was restored for fresh adjudication.

Issues:
1. Whether TDS u/s. 195 of the Act was liable to be deducted on transponder fees for satellite usage.
2. Whether the amount paid as transponder fee to a non-resident entity should be added to the income of the assessee under section 40(a)(ia) of the Act.
3. Whether the decision of Hon'ble Delhi High Court in Asia Satellite Telecommunication Co. Ltd. case is applicable in this matter.
4. Whether the amendments in section 9(1)(vi) brought by the Finance Act, 2012, are relevant in this case.
5. Whether the provisions of the applicable treaty, in this case, DTAA of India with Malaysia, were adequately considered.
6. Whether the issue should be restored to the file of AO for re-adjudication in the light of applicable law and treaty.

Analysis:
1. The appeal involved a dispute regarding the deduction of Tax Deducted at Source (TDS) u/s. 195 of the Act on transponder fees for satellite usage. The AO contended that the assessee was obligated to withhold tax under section 195, leading to the addition of the amount under section 40(a)(ia) of the Act. However, the Ld. CIT(A) relied on the decision of the Hon'ble Delhi High Court in Asia Satellite Telecommunication Co. Ltd. case and deleted the addition, stating that payments made by telecast operators to non-residents could not be taxed solely based on the location of end consumers in India.

2. The core issue revolved around the payment of transponder fees to a non-resident entity, which the AO argued should have attracted TDS under section 195. The Ld. CIT(A) based the decision on the Delhi High Court case, which did not consider the amendments introduced by the Finance Act, 2012, to section 9(1)(vi). The Ld. DR emphasized that the amendment should be considered, while the Ld. AR cited a Mumbai Tribunal decision where similar amendments were taken into account, supporting the view that the order of the Ld. CIT(A) should be upheld.

3. During the proceedings, the Ld. DR highlighted the retrospective effect of the amendments to section 9(1)(vi) introduced by the Finance Act, 2012. The Ld. AR, on the other hand, presented a Mumbai Tribunal decision that considered both the amendments and the Indo-Thailand treaty. The Ld. DR argued that the applicable treaty in this case, the DTAA of India with Malaysia, was not adequately considered, indicating that the relief granted to the assessee should not solely rely on the Mumbai Tribunal decision.

4. The Tribunal, after hearing both parties, observed that the Ld. CIT(A) had not discussed the provisions of the applicable treaty, unlike the Mumbai ITAT decision, which extensively analyzed the treaty between India and Malaysia. Therefore, the Tribunal decided to restore the issue to the AO for re-adjudication in light of the applicable law and treaty. The AO was directed to consider all defenses available to the assessee and provide a reasonable opportunity for a hearing before making a decision.

5. Ultimately, the appeal of the revenue was considered allowed for statistical purposes, with the issue being restored to the AO for a fresh assessment considering all relevant legal provisions and the applicable treaty.

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