2018 (8) TMI 512 - AT - Income Tax

TDS u/s 194J OR 194C - disallowance made by AO on account of carriage fee/ Channel Placement fee paid for non-deduction of TDS - Held that - 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 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. 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 - See THE COMMISSIONER OF INCOME TAX, TDS 2 MUMBAI VERSUS M/S. UTV ENTERTAINMENT TELEVISION LTD. 2017 (11) TMI 915 - BOMBAY HIGH COURT - Decided against revenue

Summary

Issues:
Appeal against CIT(A)'s order deleting disallowance of carriage fee/Channel Placement fee for non-deduction of TDS under section 194J invoking section 40a(ia) of the Income Tax Act.

Analysis:
The Revenue raised four grounds challenging the CIT(A)'s decision. Firstly, the Revenue argued that the payments made for use/right to use of 'process' are 'royalty' under Explanation 6 to section 9(1)(vi) and should be covered under section 194J, not deleted under section 40(a)(ia). Secondly, the Revenue cited a jurisdictional ITAT Mumbai 'L' Bench order confirming 'process' payments as 'royalty' under the Act, contrary to CIT(A)'s decision. Thirdly, the Revenue contested CIT(A)'s reliance on a Delhi High Court decision, arguing it applied to different payment scenarios. Lastly, the Revenue pointed to a Kerala High Court judgment favoring the Department, urging the disallowance deletion to be reconsidered.

The Tribunal considered a previous year's order in the assessee's case, where disallowance was deleted based on payment nature and tax deduction sections. The Tribunal upheld the CIT(A)'s decision, emphasizing that the Assessing Officer's invocation of section 40(a)(ia) was incorrect, as payments were not subject to tax deduction under section 194C. The Tribunal referred to a Bombay High Court judgment on technical services fees, distinguishing between sections 194C and 194J based on specificity and generality. The Tribunal rejected arguments that carriage fees/placement charges were commission, brokerage, or royalty, affirming that such fees were akin to standard broadcasting fees and not subject to disallowance.

Relying on the Bombay High Court precedent and the earlier Tribunal decision, the Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s deletion of the disallowance. The Tribunal highlighted the similarity in services rendered for standard fees, placement fees, and carriage fees, emphasizing that the nature of the transaction did not align with commission or royalty definitions under the Income Tax Act.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the disallowance, citing judicial precedents and the specific nature of the payments involved. The appeal of the Revenue was dismissed, and the order was pronounced in open court on 30-07-2018.