2013 (1) TMI 1008 - AT - Income Tax

Summary

Issues Involved:

1. Taxability of advertisement revenues earned by Satellite Television Asian Region Advertising Sales BV (SAS BV) in the hands of the assessee.
2. Basis of taxation (accrual vs. receipt) of advertisement income.
3. Taxability of revenues from NBC Asia CV Limited as fees for technical services.
4. Levy of interest u/s 234A, 234B, and 234C.
5. Deletion of penalty u/s 271(1)(c).

Summary:

1. Taxability of Advertisement Revenues (AY 1998-1999 & 1999-2000):
The Tribunal held that SAS BV cannot be considered a conduit for the assessee. The advertisement revenues earned by SAS BV should not be taxed in the hands of the assessee. The Tribunal relied on its previous decisions and found no income accrued or arisen to the assessee-company under the head advertisement revenue during the assessment years under consideration. Hence, the order of the CIT(A) was reversed.

2. Basis of Taxation (AY 1998-1999, 1999-2000 & 2000-2001):
The Tribunal decided that the advertisement revenues should be taxed on a receipt basis rather than on an accrual basis. This decision was based on previous Tribunal orders and the CBDT Circular No.742, which recognized the peculiarity and specialty of such transactions. The Tribunal upheld the assessee's method of accounting on a receipt basis.

3. Taxability of Revenues from NBC Asia CV Limited (AY 1999-2000):
The Tribunal ruled in favor of the assessee, holding that the revenues earned from NBC Asia CV Limited for services rendered outside India are not taxable in India as fees for technical services u/s 9(1)(vii) of the Act. This decision was based on the Hon'ble Delhi High Court's judgment in the case of Asia Satellite Telecommunications Company Ltd.

4. Levy of Interest u/s 234A, 234B, and 234C (AY 1998-1999, 1999-2000 & 2000-2001):
The Tribunal confirmed the CIT(A)'s order deleting the interest charged u/s 234A, 234B, and 234C. It was held that the assessee could not be penalized for the fault of another party (i.e., non-deduction of tax at source by the payer). The Tribunal also referred to the case of NGC Network Asia LLC, where it was held that interest u/s 234A, 234B, and 234C is not applicable to non-residents.

5. Deletion of Penalty u/s 271(1)(c) (AY 1998-1999 & 1999-2000):
The Tribunal upheld the CIT(A)'s decision to delete the penalty imposed by the AO u/s 271(1)(c). It was found that the assessee had a bona fide belief that the income was to be taxed in the hands of SAS BV, and there was no intention to avoid tax. The issue was debatable, and hence, penalty u/s 271(1)(c) was not warranted.

Conclusion:
The appeals filed by the assessee for AY 1998-1999 and 1999-2000 were allowed, and the appeals filed by the AO for AY 1998-1999, 1999-2000, and 2000-2001, including the penalty appeals, were dismissed.