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TMI Blog2014 (11) TMI 484X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Before us, the ld. DR has submitted that during the year under consideration the Assessee paid channel placement fee of Rs. 7,18,19,004/- to the cable operators on which the Assessee has deducted TDS @ 2% instead of 10% as per provisions of Section 194J. The ld. DR submitted that the channel placement fees are charges paid by the broadcaster to the MSO for placing their channel on a particular frequency or bandwidth. Thus, these charges are paid to put the channel in prime frequency/band so that viewership as well as quality of channel can be increased. Placing a particular channel on a particular frequency is integral part of transmission and broadcasting process and therefore, the fee/charges paid by Assessee are in the nature of royalty as defined in the Explanation 2 to section 9(1)(vi) of the Income tax Act. The fee is paid for placing the channel in a particular prime band or bandwidth involves process of transmission and, therefore, the provisions of section 194J are applicable on such payment. The Assessee has not deducted tax at the required rate of 10% but deducted tax only @ 2%, Therefore, the provisions of section 40(a)(ia) are attracted for disallowance. He has reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not applicable. The DRP while coming to the conclusion also considered retrospective amendment in section 9(1)(vi) in the shape of Explanation-6. The DRP found that the payment of channel placement fee is not tantamount to payment of fee for transmission purpose which includes hiring of transponder, uplinking/downlinking etc. Thus the DRP held that the disallowance u/s. 40(a)(ia) on account of short deduction of tax is not warranted. We find that the channel placement fee paid to the cable TV operator/DTH provider can not be regarded as royalty as it does not fall under the definition in terms of Explanation-2 of Section- 9(1)(vi) of the Income tax Act. Though there is an amendment in the provision and as per newly inserted Explanation-6 with retrospective effect the term process has been defined and it includes transmission, uplinking and down linking of signals etc. But the said retrospective amendment can not be pressed into service for the purpose of disallowance u/s. 40(a)(ia) because of the reason that at the relevant time when the Assessee has deducted the tax at source it was not in the statute. The co-ordinate Bench of this Tribunal in case of M/s. Channel Guide India Limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the issue of applicability of section 194J was already considered in the case of the Assessee. Therefore, when the Assessee has deducted the tax as per provisions of Section 194C which is a bonafide decision of assessee keeping in view the nature of payments and facts of the case, then, the Assessee was not supposed to foresee the subsequent retrospective amendment in the statute to be held liable to tax deduction at source under the provisions of section 194J. We further note that in case of CIT vs. S.K. Tekriwal (supra), the Hon'ble Calcutta High Court has considered an issue of disallowance u/s. 40(a)(ia) on account of short deduction of tax. The relevant part of the decision is as under :- "1. There is nothing in the said section to treat, inter alia, the assessee as defaulter where there is a shortfall in deduction. With regard to the shortfall, it cannot be assumed that there is a default as the deduction is not as required by or under the Act but the fact is that this expression, 'on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction has not been paid on or before the due date specified in sub-section (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent status, if such broker, general commission agent or any other agent having an independent status is acting in the ordinary course of his business : Provided further that where such broker, general commission agent or any other agent works mainly or wholly on behalf of a non-resident (hereafter in this proviso referred to as the principal non-resident) or on behalf of such non-resident and other non-residents which are controlled by the principal non-resident or have a controlling interest in the principal non-resident or are subject to the same common control as the principal non-resident, he shall not be deemed to be a broker, general commission agent or an agent of an independent status 19.2 It is clear from the above Explanation that the payment for transfer of any right to use or right to use of computer software does not fall within the meaning of royalty as provided under Explanation 2 to sec. 9(1)(vi) of the Act. Rather, the payment for transfer of right for use or right to use of computer software has been defined as royalty under Explanation 4 as under: [Explanation 4. - For the removal of doubts, it is hereby clarified that the expression "through" shall mean and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Explanation 2 to sec. 9(1)(vi); but the same falls under Explanation 4 to sec. 9(1)(vi), then in view of the Explanation to sec. 40(a)(i), the said amount cannot be disallowed under the provisions of sec. 40(a)(i) of the Act." 5.3 In view of the above discussion as well as the decision of Hon'ble Calcutta High Court and the co-ordinate Bench of this Tribunal we do not find any reason to interfere with the direction of the DRP. CO-No.68/Mum/2014 (Appeal of the Assessee ):- 6. The Assessee has raised the following grounds. "1. On the facts and in the circumstances of the case, the ld. ACIT- 1(1)(Assessing Officer) erred in objecting to the directions of DRP that the Respondent has rightly deducted TDS on channel placement fees/carriage fees under Section 194C of the Income tax Act, 1961 (the Act) and that the provision of Section 194J of the Act are not applicable on the channel placement fee/carriage fee paid by the Respondent and hence, there can not be any disallowances u/s. 40(a)(ia) of the Act. 2. On the facts and in the circumstances of the case, without prejudice to the above, the ld. Assessing Officer erred in not appreciating that the disallowances u/s. 40(a)(ia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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