2020 (1) TMI 867 - HC - Income Tax

TDS us 194C OR 194J - amounts paid to cable operators for channel placement fee - HELD THAT - Amounts paid to cable operators for channel placement fee was subject to tax deduction at source under Section 194C of the Act and not under Section 194J of the Act as contended by the Revenue. See CIT v. Star Den Media Services (P.) Ltd. 2019 (1) TMI 1703 - BOMBAY HIGH COURT and CIT v. NGC Network (India) (P.) Ltd 2014 (10) TMI 365 - BOMBAY HIGH COURT Disallowance on account of advertising, marketing and publicity expenses incurred by the assessee for promotion of its channels - Allowable business expenses - foreign sister concern of the assessee is benefited by these expenses - HELD THAT - Tribunal held that once it is not disputed that the expenses were primarily incurred for the purpose of business, incidental benefit to some other party from such expenses, would not reduce the allowability of such expenditure as a deduction. This more particularly when the same has been incurred in the course of and for the purpose of business. The impugned order of the Tribunal held that the 100% expenditure by way of marketing and publicity expenses are allowable as expenses deductible u/s 37(1) of the Act. See M/S. STAR INDIA P. LTD. 2009 (3) TMI 990 - BOMBAY HIGH COURT and NGC. NETWORK (INDIA) P. LTD. 2014 (10) TMI 365 - BOMBAY HIGH COURT

Summary

Issues Involved:
1. Disallowance of Channel Placement Fee under Section 40(a)(ia) of the Income Tax Act.
2. Disallowance of advertising, marketing, and publicity expenses under Section 37(1) of the Act.
3. Deduction of tax at a lesser rate under Section 40(a)(ia) of the Act.

Analysis:

Issue 1: Disallowance of Channel Placement Fee under Section 40(a)(ia) of the Income Tax Act:
The Tribunal dismissed the Revenue's appeal, holding that the channel placement fee paid to cable operators was subject to tax deduction at source under Section 194C, not Section 194J as contended by the Revenue. This decision was based on previous rulings of the Tribunal and the High Court. The Court, in line with its earlier judgments, reiterated that payments for channel placement fee fall under Section 194C. The appeal was dismissed as the issue was settled by previous decisions, and no new grounds were presented.

Issue 2: Disallowance of advertising, marketing, and publicity expenses under Section 37(1) of the Act:
The respondent had incurred marketing and publicity expenses for promoting its channels, which the Assessing Officer partially disallowed, considering the benefit to a related party. However, the DRP, upon application by the respondent, deleted the disallowance. The Tribunal upheld the DRP's decision, emphasizing that if expenses were primarily for business purposes, any incidental benefit to another party does not affect their deductibility. The Tribunal relied on previous judgments to support its decision. The Revenue failed to demonstrate any distinguishing features in the present case to challenge the Tribunal's ruling. Consequently, the Court did not entertain the appeal as the issue was settled by previous decisions.

Issue 3: Deduction of tax at a lesser rate under Section 40(a)(ia) of the Act:
Since the first question was answered in favor of the respondent, rendering this question academic, the Court did not entertain it. The Court's decision on the first issue made this question irrelevant, leading to its dismissal without further analysis.

In conclusion, the appeal was dismissed based on the Court's analysis and application of relevant legal principles and precedents. The judgment provided detailed reasoning for each issue raised, ultimately upholding the decisions of the Tribunal and the DRP based on established legal interpretations and precedents.