2016 (3) TMI 214 - AT - Income Tax

TDS u/s 194J or 194C - payments made to various TV channels - assessee, Dish TV India Limited, is an Indian company engaged in the business of distribution of channels from its DTH (Direct to Home) network - Held that - Revenue has taken similar stand in the succeeding years by holding the magnetizing of the provisions of section 194J to the similar payments, for which the matter is sub judice. Be that as it may, the rule of res judicata is not applicable in fiscal statutes like income-tax. The contention of the ld. AR about the applicability of the rule of consistency , in our considered opinion cannot be allowed to dethrone the rule of no estoppel against the statute . After making an elaborate analysis, we have hereinabove held that section 194J is attracted to the facts of the instant case. Merely because in earlier years this issue was not examined and the assessee s contention got accepted without verification, cannot give license to it claim in the later years that the correctly applicable section be put under carpet. Since the statute requires such an amount to be considered u/s 194J, we cannot permit a wrong provision of section 194C to be applied in the garb of consistency. This contention is therefore, jettisoned. The payment made by the assessee to the TV channels is covered u/s 9(1)(vi) and, as such, deduction of tax at source was required u/s 194J of the Act as has been rightly held by the authorities below. Obligation of the assessee u/s 201(1) - Held that - Any person who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid/credited to a resident shall not be deemed to be an assessee in default in respect of such tax if such resident (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect. In view of the judgment in Hindustan Coca Cola Beverages Pvt. Ltd. (2007 (8) TMI 12 - SUPREME COURT OF INDIA ), we hold that the ld. CIT(A) was fully justified in reducing the obligation of the assessee u/s 201(1) to this extent. Proviso to sub-section (1A) of section 201 provides in unambiguous terms that in case any person fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident but is not deemed to be an assessee in default under the first proviso of subsection (1), the interest under clause (i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident. This proviso reaffirms the liability of the assessee towards interest irrespective of the deletion of liability u/s 201(1) on the score of payees including receipts from the person responsible in their respective income. On a pertinent query, the ld. AR was fair enough to accept that the calculation of ₹ 2.25 crore as made by the AO in his final order u/s 201(1)/(1A) is otherwise correct if the provisions of section 194J are held to be attracted. - Decided against assessee

Summary

Issues Involved:
1. Applicability of Section 194C vs. Section 194J for tax deduction at source on payments made to TV channels.
2. Legitimacy of the CIT(A)'s direction to the AO to verify the payment of taxes by the deductees and allow appropriate relief to the assessee.

Detailed Analysis:

1. Applicability of Section 194C vs. Section 194J:

Background:
The assessee, an Indian company engaged in DTH services, made payments to various TV channels after deducting tax at source under Section 194C of the Income-tax Act, 1961. The AO, however, held that tax should have been deducted under Section 194J, treating the payments as royalty within the meaning of Explanation 2 to Section 9(1)(vi).

Assessee's Argument:
The assessee argued that the payments were for broadcasting and telecasting, thus falling under Section 194C, which covers payments for carrying out any work, including broadcasting and telecasting.

Tribunal's Analysis:
- The Tribunal examined the agreements between the assessee and TV channels, particularly focusing on the agreement with ESPN Software India Pvt. Ltd.
- The agreements granted the assessee a non-exclusive right to distribute TV channels' content without any modification.
- The Tribunal noted that the essence of telecasting lies in relaying signals containing TV programs, and the assessee was responsible for telecasting on its own behalf, not for the TV channels.
- Section 194C applies to payments for carrying out the work of broadcasting and telecasting, which was not the case here. The assessee made payments to receive programs for its DTH network, not for broadcasting or telecasting on behalf of the TV channels.

Conclusion:
The Tribunal held that the payments made by the assessee to TV channels were for the transfer of rights in programs, which is considered royalty under Explanation 2(v) of Section 9(1)(vi). Thus, tax deduction at source should be under Section 194J, not Section 194C.

2. Legitimacy of CIT(A)'s Direction to AO:

Background:
The CIT(A) directed the AO to verify the assessee's claim regarding the payment of taxes by the deductees and allow appropriate relief, following the Supreme Court's judgment in Hindustan Coca Cola Beverages Pvt. Ltd. vs. CIT.

Revenue's Argument:
The Revenue contended that the CIT(A)'s direction was ultra vires his power under Section 251(1) of the Act.

Tribunal's Analysis:
- The Tribunal upheld the CIT(A)'s direction, noting that it was in line with the Supreme Court's judgment, which states that recovery of tax cannot be made from the tax-deductor if the deductee has already paid the tax.
- The AO's subsequent order reduced the demand based on the inclusion of the payments in the deductees' income, except for a small portion not offered to tax by the TV channels.
- The Tribunal also addressed the interest liability under Section 201(1A), affirming that it remains payable until the date of payment of taxes by the deductee.

Conclusion:
The Tribunal found no fault with the CIT(A)'s direction and upheld the reduction in the assessee's liability. The Tribunal dismissed the Revenue's appeal, confirming that the CIT(A) acted within his jurisdiction and in accordance with the Supreme Court's judgment.

Final Decision:
Both the appeals by the assessee and the Revenue were dismissed. The Tribunal confirmed that tax deduction at source should be under Section 194J, and upheld the CIT(A)'s direction to verify the payment of taxes by the deductees and allow appropriate relief.