2018 (6) TMI 688 - AT - Income Tax

Disallowance u/s. 40(a)(ia) - tax has to be deducted u/s 194J or 194C for Channel Placement Fees - Held that - Following the order of the Hon ble High Court of Bombay in the case of the Commissioner of Income Tax-11, Vs. M/s NGC Networks (India) Pvt. Ltd 2016 (1) TMI 1368 - ITAT MUMBAI and finding no reason to take a view different from that arrived at by coordinate benches of the Tribunal in the assessee s own case for A.Ys 2009-10 and 2010-11 - the amendment by introduction of Explanation-6 to Section 9(1)(vi) of the Act took place in the year 2012 with retrospective effect from 1976. This could not be have been contemplated by the Respondent when he made the payment which was subject to tax deduction at source u/s 194C - Hence TDS is to be deducted u/s 194C and not u/s 194J - Decided in favor of assessee.

Summary

Issues:
1. Disallowance under Sec. 40(a)(ia) of 'Channel Placement Fees'
2. Interpretation of statutory provisions for tax deduction
3. Application of legal principles in income tax proceedings

Analysis:

1. The appeal by the revenue challenged the order passed by the Assessing Officer (A.O) under Sec.143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 regarding the disallowance under Sec. 40(a)(ia) of 'Channel Placement Fees'. The revenue raised grounds questioning the justification of the Dispute Resolution Panel (DRP) in directing to delete the disallowance based on previous tribunal decisions and High Court rulings.

2. The A.O observed that the assessee had paid 'Channel Placement Fees' and deducted tax at source under Sec. 194C instead of Sec. 194J. The A.O proposed disallowance under Sec. 40(a)(ia) due to short deduction of tax. The DRP, considering past decisions and tribunal rulings, directed the A.O to delete the disallowance, which was subsequently upheld by the High Court and Tribunal based on retrospective statutory amendments and legal principles.

3. The issue revolved around whether the assessee was liable for deduction of tax at source under Sec.194J for 'Channel Placement Fees' and if the disallowance under Sec. 40(a)(ia) was justified. The High Court's judgment emphasized that the law does not compel a person to perform an impossible act due to retrospective amendments. The Tribunal and coordinate benches supported the position that tax deduction under Sec. 194C was appropriate, leading to the dismissal of the revenue's appeal.

In conclusion, the judgment upheld the decisions of the DRP, High Court, and Tribunal, emphasizing the correct application of statutory provisions and legal principles in income tax proceedings. The appeal by the revenue was dismissed based on the established interpretations and precedents in the case of 'Channel Placement Fees'.