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2018 (10) TMI 1858 - AT - Income TaxTDS u/s 195 - Addition u/s 40(a)(i) - disallowing the payment made by the Appellant to various non-resident television content aggregators ('channel companies') - plea of the assessee that disallowance of payment made to channel companies u/s.40(a)(ia) of the Act is based upon retrospective amendment in section 195 of the Act and cannot be made as no one can be expected to do the impossible - HELD THAT - Since it is not disputed that the retrospective amendment in section 195 was made subsequently, the assessee cannot be expected to have deducted TDS u/s.40(a)(i) anticipating the amendment. Honourable apex court in the case of Vodafone International Holdings B.V. 2012 (1) TMI 52 - SUPREME COURT had held that withholding tax provisions under section 195 of the act would be applicable when payments are made by a resident to another non-resident and not between two non residents outside of India. Since the payments as one in the present case are between two non-residents, as per the ratio emanating from above said honourable apex court decision the provisions of withholding tax are not applicable. On the basis of the above said discussion and precedent's we are of the considered opinion that disallowance under section 40(a)(i) cannot be made in this case. - Decided in favor of assessee Accrual of income - Holding SASBV (now known as IGNBV) as an alleged conduit of Star Ltd. and taxing the revenue in the hands of Star India Private Limited ('SIPL') on accrual basis - This issue has been decided in favour of the assessee by the Hon'ble jurisdictional High Court in the case of Director of Income Tax (IT) vs. Satellite Television Asian Region Ltd. 2015 (6) TMI 1211 - BOMBAY HIGH COURT Deduction of head office expenses u/s. 44C - AO has held that the deduction claimed in respect of allocated head office expenses have been disallowed pursuant to an adjustment made to the arms length price u/s. 92 - HELD THAT - As assessee in this regard submitted that the Transfer Pricing Officer in his short order has mentioned that the assessee has not submitted anything and the assessee had provided all the necessary details which have not been referred by the TPO, thus issue needs to be remitted to the file of the A.O. to compute reasonable attribution on the basis of documents being submitted by the assessee. Accordingly, this issue is so remitted. Disallowance of payments made to AsiaSat for transponder hire charges under Section 40(a) - HELD THAT - As decided in own case 2011 (1) TMI 47 - DELHI HIGH COURT this issue is now covered, in principle, in favour of the assessee held Tribunal was not justified in holding that the amount paid to the assessee by its customers represented income by way of royalty, as the said expression is defined in the Explanation 2 to section 9(1)(vi). Levy of interest u/s. 234B and 234C - HELD THAT - issue is covered in favour of the assessee while the Mumbai ITAT decision in assessee s own case vide department s appeal 2012 (7) TMI 221 - ITAT MUMBAI and 2010 (5) TMI 682 - ITAT MUMBAI . Further he submitted that this issue is also covered in favour of the assessee vide the Hon'ble Bombay High Court decision in the case of NGC Network Asia LLC 2009 (1) TMI 174 - BOMBAY HIGH COURT
Issues Involved:
1. Disallowance of payments made to non-resident television content aggregators under Section 40(a)(i) of the Income-tax Act, 1961. 2. Application of Section 195 of the Income-tax Act for tax deduction at source. 3. Taxability of channel companies in India under Section 9(1)(i) and 9(1)(vi) of the Income-tax Act. 4. Determination of the agent status of the appellant and SIPL. 5. Attribution of income to operations carried out in India. 6. Classification of advertisement revenues and subscription revenues. 7. Deduction of head office expenses under Section 44C of the Income-tax Act. 8. Levy of interest under Sections 234B and 234C of the Income-tax Act. Issue-wise Detailed Analysis: 1. Disallowance of Payments to Non-resident Television Content Aggregators: The appellant challenged the disallowance of payments made to non-resident television content aggregators under Section 40(a)(i) of the Income-tax Act, 1961, arguing that the retrospective amendment in Section 195 could not be applied as it was impossible to comply with a provision not in force at the relevant time. The Tribunal referred to the ITAT's decision in the appellant's case for subsequent years (A.Y. 2007-08 and 2008-09) and the Bombay High Court's ruling in NGC Networks (India) Limited, which held that provisions of withholding tax could not be applied retrospectively. The Tribunal concluded that disallowance under Section 40(a)(i) could not be made as the appellant could not have anticipated the amendment. 2. Application of Section 195: The appellant contended that the provisions of Section 195 did not apply to the payments made to channel companies as the payments were between two non-residents outside India. The Tribunal referred to the Supreme Court's decision in Vodafone International Holdings B.V. vs. Union of India, which held that withholding tax provisions under Section 195 would be applicable only when payments are made by a resident to another non-resident. Since the payments in this case were between two non-residents, the Tribunal concluded that the provisions of withholding tax were not applicable. 3. Taxability of Channel Companies in India: The appellant argued that the channel companies did not have a business connection in India and did not carry out operations in India as per Section 9(1)(i) of the Income-tax Act. The Tribunal referred to its earlier decision and the jurisdictional High Court's ruling, which held that the channel companies were not taxable in India as they did not have a business connection in India. The Tribunal upheld the appellant's contention that the channel companies were not taxable in India. 4. Determination of Agent Status: The appellant challenged the CIT(A)'s finding that the appellant and SIPL were agents of the channel companies. The Tribunal referred to its earlier decision and the High Court's ruling, which held that SIPL was not an agent of the appellant and the channel companies. The Tribunal concluded that the appellant and SIPL were not agents of the channel companies. 5. Attribution of Income to Operations in India: The appellant argued that income deemed to accrue or arise to the channel companies could not exceed the part of the income reasonably attributable to operations carried out in India. The Tribunal referred to the CBDT Circular 742 and earlier decisions, concluding that the income attributable to operations in India was not taxable as the operations were not carried out in India. 6. Classification of Advertisement and Subscription Revenues: The Tribunal addressed the classification of advertisement revenues and subscription revenues. It referred to the earlier decision and the High Court's ruling, which held that the advertisement revenues collected by SAS BV were not taxable in the hands of the appellant. The subscription revenues earned by SIPL were also not taxable in the hands of the appellant as they were not in the nature of royalty. 7. Deduction of Head Office Expenses: The appellant challenged the disallowance of head office expenses under Section 44C of the Income-tax Act. The Tribunal remitted the issue to the Assessing Officer to compute reasonable attribution based on the documents submitted by the appellant. 8. Levy of Interest under Sections 234B and 234C: The Tribunal addressed the levy of interest under Sections 234B and 234C of the Income-tax Act. It referred to the jurisdictional High Court's ruling and earlier decisions, which held that interest under Sections 234B and 234C could not be levied as the appellant was not liable to deduct tax at source. Conclusion: The Tribunal allowed the appeals partly, setting aside the disallowance of payments made to channel companies and the levy of interest under Sections 234B and 234C. It remitted the issue of head office expenses to the Assessing Officer for recomputation. The Tribunal upheld the appellant's contention that the channel companies were not taxable in India and that the appellant and SIPL were not agents of the channel companies.
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