2019 (12) TMI 327 - AT - Income Tax

TDS u/s 194J - Carriage Fees/ Channel Placement fees - Whether payments made for use/right to use of 'process' are 'royalty' as per Explanation 6 to section 9(1)(vi) ? - whether any obligation was cast upon the assessee to subject the carriage fees paid to the cable operators for deduction of tax at source under Sec.194J, or not? - HELD THAT - Hon ble High Court of Bombay in the case of CIT, TDS-2, Mumbai Vs. UTV Entertainment Television Ltd. 2017 (11) TMI 915 - BOMBAY HIGH COURT had observed, that in case of an assessee carrying on the business of broadcasting television channels, the payments made towards placement charges would fall within the meaning of work covered in Clause (iv) of Explanation to Sec.194C. On the basis of our aforesaid observations, we are of the considered view, that the CIT(A) had rightly vacated the disallowance that was made by the A.O under Sec. 40(a)(ia) - Appeal filed by the revenue is dismissed.

Summary

Issues Involved:
1. Disallowance under Section 40(a)(ia) read with Section 194J for 'Carriage Fees/Channel Placement fees'.
2. Interpretation of 'Carriage Fees' as 'Royalty' under Explanation 6 to Section 9(1)(vi).
3. Applicability of Section 194C versus Section 194J for TDS deduction on 'Carriage Fees'.
4. Reliance on judicial precedents from various High Courts on TDS provisions and disallowance under Section 40(a)(ia).

Issue-wise Detailed Analysis:

1. Disallowance under Section 40(a)(ia) read with Section 194J for 'Carriage Fees/Channel Placement fees':
The revenue challenged the CIT(A)'s decision to delete the disallowance of ?25,32,42,535/- under Section 40(a)(ia) for non-deduction of TDS under Section 194J on 'Carriage Fees/Channel Placement fees'. The Assessing Officer (A.O) had initially disallowed the amount, contending that the payments constituted 'Royalty' and thus required TDS under Section 194J. However, the CIT(A) concluded that 'Carriage Fees' did not fall under the definition of 'Royalty' as per Explanation 2 to Section 9(1)(vi) and that the assessee correctly deducted TDS under Section 194C. The CIT(A) also noted that even if there was a shortfall in TDS deduction, disallowance under Section 40(a)(ia) was not warranted.

2. Interpretation of 'Carriage Fees' as 'Royalty' under Explanation 6 to Section 9(1)(vi):
The A.O argued that 'Carriage Fees' paid for placing the channel on a particular frequency band constituted 'Royalty' under Explanation 6 to Section 9(1)(vi). The CIT(A) disagreed, holding that 'Carriage Fees' did not meet the definition of 'Royalty' and that the assessee's deduction of TDS under Section 194C was appropriate. The CIT(A) cited the Calcutta High Court decision in CIT vs S.K. Tekriwal, which supported the view that incorrect categorization of TDS provisions does not justify disallowance under Section 40(a)(ia).

3. Applicability of Section 194C versus Section 194J for TDS deduction on 'Carriage Fees':
The core issue was whether 'Carriage Fees' should be subject to TDS under Section 194C (contractual payments) or Section 194J (fees for technical services/royalty). The Tribunal referenced its prior decisions in the assessee's own case for previous years (A.Y. 2011-12 and A.Y. 2012-13) and the Bombay High Court ruling in CIT, TDS-2, Mumbai vs. UTV Entertainment Television Ltd., which classified 'Carriage Fees' under Section 194C. The Tribunal upheld that 'Carriage Fees' did not constitute 'Royalty' and that the assessee's TDS deduction under Section 194C was correct.

4. Reliance on judicial precedents from various High Courts on TDS provisions and disallowance under Section 40(a)(ia):
The Tribunal considered multiple judicial precedents, including the Calcutta High Court's judgment in CIT vs S.K. Tekriwal, which held that disallowance under Section 40(a)(ia) is not applicable for short deduction of TDS. The Tribunal also noted similar rulings from the Gujarat High Court in CIT vs. Prayas Engineering Ltd. and the Karnataka High Court in CIT vs. Kishore Rao & others (HUF). These precedents supported the view that differences in TDS provisions do not justify disallowance under Section 40(a)(ia).

Conclusion:
The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to delete the disallowance under Section 40(a)(ia). The Tribunal upheld that 'Carriage Fees' did not constitute 'Royalty' and that TDS deduction under Section 194C was appropriate. The Tribunal's decision was consistent with prior rulings in the assessee's favor and supported by relevant judicial precedents.