2021 (11) TMI 34 - AT - Income Tax

TDS u/s 194J - Non deduction of TDS on channel placement charges - cable operators are providing technical services - CIT(A) deleted the demand of tax raised u/s 201(1) - HELD THAT - When placement charges are paid by the respondent to the cable operators/ MSOs for placing the signals on a preferred band, it is a part of work of broadcasting and telecasting covered by sub clause (b) of clause (iv) of the explanation to Section 194C. As a matter of fact, it was found by the Commissioner (Appeals) that whether the payment is towards a standard fee or placement fee, the activities involved on the part of the cable operators/ MSOs are the same. When placement fee is received, a channel is placed on a particular prime band. It was found that by an agreement to place the channel on a prime band by accepting placement fee, the cable operator/ MSO does not render any technical service. As far as Appellate Tribunal is concerned, again the definition of work in clause (iv) of the explanation to Section 194C was looked into. We must note here that a grievance was made by the learned counsel appearing for the appellant that there are no detailed findings recorded by the Appellate Tribunal. Commissioner (Appeals) has recorded detailed findings on the basis of material on record and by referring to the findings, the Appellate Tribunal has expressed general agreement with the findings recorded by the first Appellate Authority. While affirming the judgment of the first Appellate Authority, it is open for the Appellate Tribunal to express such general agreement - Decided against revenue.

Summary

Issues:
1. Whether the demand of tax raised u/s 201(1) of the Act should be deleted?
2. Whether the levy of interest u/s 201(1A) of the Act should be deleted?

Analysis:

Issue 1:
The case involved an appeal by the Revenue against the order of the learned CIT(A) pertaining to the Assessment Year 2011-12. The dispute revolved around the nature of payments made by the Appellant, an Indian company engaged in broadcasting channels, to cable operators for channel placement. The Revenue contended that the payments were fees for technical services and should be subject to TDS at 10% under section 194J of the Act. However, the Appellant argued that the payments should be subjected to TDS at 2% under section 194C of the Act. The TDS officer had held that the payments for channel placement should be subject to TDS under section 194J at 10%. The Ld.CIT(A) decided in favor of the assessee based on judicial precedents, including decisions of the Hon'ble Bombay High Court and ITAT in the assessee's own case for previous assessment years. The Ld.CIT(A) concluded that the payments for channel placement were not fees for technical services but should be treated as payments for work contracts under section 194C of the Act. The Appellant's argument was supported by various case laws and judicial precedents, leading to the deletion of the tax demand under section 201(1) of the Act.

Issue 2:
Regarding the levy of interest under section 201(1A) of the Act, the Ld.CIT(A) also ruled in favor of the assessee. The Ld.CIT(A) highlighted that since the assessee was not deemed a defaulter under section 201(1), the interest under section 201(1A) was not applicable. This decision was based on the fact that the Appellant had already deducted TDS under section 194C of the Act. The Ld.CIT(A) relied on judicial precedents set by the Hon'ble Bombay High Court in the assessee's case and other entities to support the decision to delete the interest amounting to ?4,33,01,284 under section 201(1A) of the Act. The Appellant's compliance with TDS provisions under section 194C was crucial in determining the non-applicability of interest under section 201(1A).

In conclusion, the Tribunal upheld the order of the Ld.CIT(A) and dismissed the Revenue's appeal, emphasizing the importance of correctly interpreting the nature of payments for tax deduction purposes based on relevant legal provisions and judicial precedents.