2017 (11) TMI 915 - HC - Income Tax

TDS u/s 194C OR 194J - TDS liability carriage fees, editing charges and dubbing charges - Held that - 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, sub-clause (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 production of programmes. Apart from confirming the finding of fact recorded by the Commissioner (Appeals) on both the aspects on placement fee and subtitling charges, the Appellate Tribunal has noted that both Sections 194C and 194J having introduced into the Income Tax Act on the same day, it is observed that the activities covered by Section 194C are more specific and the activities covered by Section 194J are more general in terms. Therefore, for the activities covered by Section 194C, Section 194J cannot be applied being more general out of the two. We have already discussed in detail the findings of fact recorded by the Commissioner (Appeals) as regards placement fees/ carriage fees. We have agreed with the findings of fact based on material on record that when the payment is made towards standard fee or placement fee, the activity involved is the same in both cases. As stated earlier, when services are rendered as per the contract by accepting placement fee or carriage fee, the same are similar to the services rendered against the payment of standard fee paid for broadcasting of channels on any frequency. In the present case, the placement fees are paid under the contract between the respondent and the cable operators/ MSOs. Therefore, by no stretch of imagination, considering the nature of transaction, the argument of the appellant that carriage fees or placement fees are in the nature of commission or royalty can be accepted.

Summary

Issues Involved:
1. Applicability of Section 194C vs. Section 194J of the Income Tax Act, 1961 for carriage fees, editing expenses, and dubbing charges.
2. Consideration of carriage fees/placement charges as commission or royalty under Section 194H or Section 194J of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Applicability of Section 194C vs. Section 194J for Carriage Fees, Editing Expenses, and Dubbing Charges:

The primary issue revolves around whether the payments made by the respondent for carriage fees, editing expenses, and dubbing charges should be subjected to tax deduction under Section 194C or Section 194J of the Income Tax Act, 1961.

The Assessing Officer initially held that these payments were for technical services and thus should be taxed under Section 194J, which deals with fees for professional or technical services. Consequently, a demand was raised based on this interpretation.

Upon appeal, the Commissioner of Income Tax (Appeals) partially allowed the respondent's appeal, holding that there was no short deduction of tax as the payments were correctly subjected to Section 194C, which deals with payments to contractors. This decision was further upheld by the Income Tax Appellate Tribunal (ITAT).

The High Court examined the nature of the payments in detail:

- Carriage Fees/Placement Charges: The Commissioner (Appeals) found that these fees were paid by the respondent to cable operators for placing their channels on specific frequencies to enhance viewership and advertisement revenue. The Commissioner (Appeals) concluded that this activity falls under the purview of broadcasting and telecasting work as defined in clause (iv) of the explanation to Section 194C, and not as technical services under Section 194J. The ITAT agreed with this interpretation, noting that the placement of channels does not constitute a technical service.

- Editing Expenses: The Commissioner (Appeals) and ITAT both found that subtitling, which involves creating textual versions of dialogues, is part of the production of programmes for broadcasting and telecasting. This activity is also covered under Section 194C as per clause (iv) of the explanation.

- Dubbing Charges: Although not contested by the Revenue in this appeal, the Commissioner (Appeals) had earlier found that dubbing charges are similarly covered under Section 194C.

The High Court agreed with these findings, noting that the activities in question are more specifically covered by Section 194C, which deals with broadcasting and telecasting work, rather than the more general provisions of Section 194J.

2. Consideration of Carriage Fees/Placement Charges as Commission or Royalty:

The Revenue alternatively argued that carriage fees or placement charges should be considered as commission or brokerage under Section 194H or as royalty under Section 194J.

The High Court rejected these arguments, concurring with the findings of the Commissioner (Appeals) and ITAT. The court noted that the nature of the transaction, involving payments for placing channels on specific frequencies, does not align with the definitions of commission, brokerage, or royalty. The court emphasized that the activities involved are the same whether the payment is a standard fee or a placement fee, and thus should be consistently treated under Section 194C.

Conclusion:

The High Court upheld the decisions of the Commissioner (Appeals) and ITAT, confirming that the payments for carriage fees, editing expenses, and dubbing charges are correctly subjected to tax deduction under Section 194C of the Income Tax Act, 1961. The court found no merit in the Revenue's appeals and dismissed them, concluding that no substantial question of law arises in these cases. The appeals were dismissed with no order as to costs.