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TMI Blog2012 (7) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be regarded as fees for technical services - tax is not deductible on payment Data circuit rentals – In favor of assessee Payment of band width charges – Held that:- Payment made for using bandwidth and network operation are not technical services and tax needed not be deducted from such payments u/s 194J - payments of bandwidth are not liable for TDS under section 194J – In favor of assessee Payments of internet charges - Held that:- payments of Internet Charges are not liable for TDS – In the case of Skycell Communications Ltd. (2001 (2) TMI 57 (HC)) - provisions of section 194J are not applicable to the impugned payments – In favor of assessee Payment of Data Circuit Rental Charges – assessee not deducted TDS - Held that:- connectivity charges cannot come under the purview of technical/professional services. It is similar to telephone connection and therefore, provisions of section 194C are inapplicable – In favor of assessee TDS - Payment of transponder Rent – Assessing Officer held that the services provided are of very technical nature requiring highly skilled professionals - AO held that the assessee was liable to make deduction of tax at source u/s 194J on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent: Smt Nivedita Biswas ORDER Per: Asha Vijayaraghavan: These appeals preferred by the assessee as well as the Revenue are directed against the common orders passed by the CIT(A)-II, Hyderabad dated 29.9.2008 and they are pertaining to the assessment years 2004-05, 2005-06 2006-07. Since issues involved in these appeals are common in nature, they are clubbed together, heard together and disposed off vide this common order for the sake of convenience. REVENUE APPEALS ITA 1706 to 1708/Hyd/2008 2. The assessee company is engaged in publishing of Newspaper, manufacture of food items, diary products, and electronic media i.e. TV channels etc. The Assessing Officer examined the various transactions in the case of the assessee and payments made by the assessee. The AO was of the view that the assessee defaulted in deducting tax at source from various payments made by it. The AO called for information and after considering the same and also the clarifications and explanations furnished by the assessee, the Assessing Officer held that the assessee is a defaulter in respect of deduction of tax at source from various categories of payments. 3. Discount on adver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia India Ltd. in ITA No.3807/Del/2005 dated 31.5.2007. The CIT(A) followed the said decision in the case of living Media India Ltd. He also noticed that the Department s appeal against the said of the Tribunal was dismissed vide order in ITA No.1264 of 2007, a copy of which was placed before him by the assessee. We also find that the department conceded before the Tribunal and when the matter reached up to the Supreme Court and the decision of the Tribunal was upheld. Therefore, we are of the opinion that the issue is covered by the decision of the Co-ordinate Bench in the case of Living Media India Limited in ITA No.3807/Del./2005 . Hence we confirm the order of the CIT (A) on this issue and hence the departmental appeal is dismissed on this issue. 10. The next issue in the Departmental appeals is Payment of data circuit rentals: The Assessing Officer noticed that in the publication division and ETV other channels division, the assessee made payments towards use of data circuit lines to BSNL and that the assessee has not made TDS on these payments. 11. The CIT(A) took note of the fact that data circuit lines were taken on lease by the assessee from BSNL for transmit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the person receiving the services even after the particular contract comes to an end. It is enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone into it. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Hence, we confirm the order of the CIT(A) that tax is not deductible on payment Data circuit rentals and dismiss the departmental appeal on this issue. 15. The next issue raised by the Department is Payment of band width charges: The Assessing Officer held that payments made to various companies towards bandwidth charges are liable for TDS u/s 194J. He brushed aside the assessee s plea that the payments were made for providing facilities and not any services. In appeal, the CIT(A) accepted the contention of the assessee and held that the payments are in the nature of rent paid for space allotted in the transponder and the same will not come under the purview of section 194J. The CIT(A) followed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges. Hence, the case law relied on in the case of payments for bandwidth charges are applicable to payment of internet charges also. 21. We heard both the parties. We uphold the order of the CIT(A) that payments of Internet Charges are not liable for TDS relying on the following decisions: 1. Skycell Communications Ltd. Vs. DCIT 251 ITR 53 MAD . 2. Software Technology Parks of India Vs. ITO 3 SOT 529 (Bangalore) 3. Pacific Internet (India) Pvt Ltd. Vs. ITO (318 ITR (AT) 0179 (Mum) . 4. Hence we uphold the order of the CIT(A) holding the provisions of section 194J are not applicable to the impugned payments. 22. Hence we dismiss the revenue appeal on this ground. 23. The next ground is Payment of Data Circuit Rental Charges: The payments relate to Data Circuit Rentals charges. In the assessment order, the AO has observed that the assessee has made payments to BSNL towards use of data circuit lines on which tax was not deducted at source. The AO (TDS) referred to the assessment order dated 26.12.2007 passed u/s 143(3) by the jurisdictional AO wherein it was held that the payments are towards contractual obligation and are liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransponder Rent: Relevant to assessment year 2004-05: The Assessing Officer noticed that the assessee had entered into an agreement with VSNL to reserve space segment on the INTELSAT satellite vide agreement dated 27.7.99. The Assessing Officer held that the services provided are of very technical nature requiring highly skilled professionals. It was not only the facility provided but services are also inherently included therein. The assessee cannot utilise or operate the facility as per its choice. The assessee makes a payment for the entire contract. Having opined so, the Assessing Officer brushed aside the contentions of the assessee and reliance by the assessee on decision of the Tribunal in the case of DCIT Vs. Pan Amsat International Systems Inc. 103 TTJ 861 Delhi . The AO held that the assessee was liable to make deduction of tax at source u/s 194J on the transponder rent and raised demand accordingly. 30. On appeal, the CIT(A) analysed the nature of facility that the assessee has obtained by making the impugned payment. By following the Hon ble Madras High Court decision in the case of Skycell Communications Ltd. Vs. DCIT 251 ITR 53 MAD the CIT(A) deleted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The CIT(A) stated that quite often the reporters possess professional qualification and that services provided by the news service agencies are based on high quality data base. The CIT(A) held that the services rendered to the assessee attract TDS u/s 194J. The CIT(A) however, accepted the alternative plea of the assessee that if the assessee proves that the payees have included the amounts paid to them in their returns, the demand may be reduced to that extent. 36. Aggrieved, the assessee is in appeal before us. 37. It is submitted that the CIT(A) erred in considering the payments as made for professional/technical services. The CIT(A) erred in holding that the professional qualifications and skills required to be possessed by news reporters result in professional services by the news service agencies. The CIT(A) ought to have appreciated that professional service is to be understood as the application of personal skill by persons who is trained/qualified and the word professional service attaches to services rendered by individuals. The news service agencies may be utilising professional services but in the hands of the assessee the data is raw data which has to undergo proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue generated on advertisements for time slots during telecasting of the programmes supplied by the said parties shall be shared between them. Therefore the assessee submitted that it had not entered into any agreement for production of any programmes with M/s Usha Kiron Television, M/s Usha Kiron Movies and other parties. The assessee also submitted that the said parties are absolute owners over their programmes, feature films, serials etc. and the assessee is not owning the rights over their programmes except telecasting their programmes in its TV channels. The assessee also further submitted that the revenue paid to M/s Usha Kiron Television, M/s Usha Kiron Movies and other parties out of advertisement revenue from the time slots in telecasting the programmes is not towards cost of programmes, serials etc. In this connection, the assessee further submitted that it had credited the gross revenue generated during said programmes and debited the amount paid to the said parties to P L account under the head cost of TV programmes for accounting purposes. In fact it would have been enough if the assessee had credited its shares of revenue to its profit and loss account instead of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y them thereon, the Assessing Officer may modify the demand raised u/s 201(1). 46. Aggrieved the assessee is in appeal before us. 47. The learned counsel for the assessee Shri Siva Kumar submitted that its case is totally outside the provisions of section 194C for the reason that it has been undisputedly admitted on record that the payments made as per revenue sharing agreed by the contracting parties, both in form as well as in substance, there is no scope to hold otherwise. The fact that the assessee advances money to the producers of the programmes does not convert the payment as payment for work done/agreed to be done by the payee. The assessee reiterated its reliance on the decisions in the cases of ACIT Vs. NIIT 112 TTJ 800 DEL and HFCL Infotel Limited Vs. ITO 99 TTJ 440 CHD . 48. We heard both the parties and perused the materials available on record. From the Profit and Loss account it was seen that in the ETV Telugu Division and ETV Other Channel Division, the assessee has made payments towards software expenses. These payments are further subdivided into revenue share . Other programmes and Direct purchases . Expenses towards revenue shares are towards the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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