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TMI Blog2018 (6) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... n - allowed for statistical purpose. Disallowance u/s 40(a)(i) and (ia) in respect of various payments - short deduction of tds - deduction of tax at source at a lower rate - Held that:- As decided CIT vs. S.K. Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT] where tax was deducted by the assessee, though under a bonafide wrong impression under wrong provisions, the provisions of Section 40(a)(ia) could not be invoked and if there was any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various tax deduction at source provisions, the assessee could be declared to be an assessee in default under section 201 but no disallowance could be made invoking the provisions of Section 40(a)(ia) - hence we uphold the deletion of disallowance made by the AO. Disallowance u/s 40(a)(ia) in respect of linking fees - Tax deducted at lower rate - Held that:- Following our reasoning in above para we uphold the deletion of disallowance made under section 40(a)(ia) Withholding tax under section 195 - Payment of up–linking fees to a non–residence entity - Held that:- As could be seen from the material placed before us, Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see challenged the disallowance before the learned Commissioner (Appeals). However, the learned Commissioner (Appeals) also sustained the disallowance made by the Assessing Officer. 4. The learned Authorised Representative submitted before us that during the relevant previous year the assessee has not earned any exempt income. Therefore, no disallowance under section 14A of the Act can be made. In support of such contention, the learned Authorised Representative relied upon the decision of the Tribunal, Mumbai Bench, in assessee s own case for the assessment year 2008 09 and 2009 10 in ITA no.2066 and 2067/Mum./2015, dated 20th December 2016. To impress upon the fact that during the relevant previous year the assessee had not earned any exempt income, the learned Authorised Representative drew our attention to the notice dated 22nd November 2012, issue under section 142(1) of the Act by the Assessing Officer and assessee s reply dated 8th December 2012. 5. The learned Departmental Representative relying upon the observations of the learned Commissioner (Appeals) submitted that provisions of section 14A of the Act are applicable even to strategic investment. In support of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To Home (DTH) operator, satellite television services, teleport services, etc. As observed by the Assessing Officer, the assessee distributes various channels through DTH platform. In course of assessment proceedings, the Assessing Officer noticing that the assessee has paid commission charges of ₹ 7,18,15,595 called upon the assessee to furnish the details of such expenses and also to justify the reason for not deducting tax at source while making such payment, as, according to the Assessing Office such payment is covered under section 194H of the Act. In reply, it was submitted by the assessee that as per the system adopted by the assessee the distributor pays lump sum amount in advance which is credited to his card / EPRS and assessee gets this amount as subscription. It was submitted that to incentivize the payment in advance, the assessee gives cash discount to the distributors. The distributors pay in advance to the assessee and collect the said amount from various subscribers over a period of time which may sometime run into few months. The assessee gets this amount in advance and allocates this to subscription revenue account on receipt of subscription from the subsc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue involved we are of the view that examination of these documents as a whole along with the terms and conditions of the agreement entered into between the assessee and the distributor in respect of talk time card is essential to determine the true nature of the transaction whether the transaction entered into between the assessee and the distributor relates to discount or commission. The TDS provisions are applicable under section 194H in case it is held that the nature of the transaction entered into between the assessee and the distributor is that of commission but in case if it is decided that the nature of transaction is not commission but discount given on sales it cannot be regarded to be commission which is hit by the provisions of Section 194H of the Income Tax Act. We, therefore, in the interest of justice and fair play to both the parties set aside this issue and restore it to the file of the AO with the direction that the AO shall redecide this issue afresh in accordance with law after going though the agreement which the assessee has entered into with the distributor as well as the sample subscription application form, whether the amount represents the expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble Calcutta High Court in CIT v/s S.K. Tekriwal, 206 CTR 73 (Cal.), he held that no disallowance under section 40(a)(ia) of the Act can be made. Of course, the learned Commissioner (Appeals) also referred to the order passed by the first appellate authority in assessee s own case for assessment year 2008 09 and 2010 11 against the order passed under section 201(1) and 201(1A) of the Act, wherein, the assessee s claim that the payment made is not in the nature of royalty was accepted. 18. The learned Departmental Representative submitted that the learned Commissioner (Appeals) was not justified in deleting the disallowance made under section 40(a)(ia) of the Act by applying the ratio laid down by the Hon'ble Calcutta High Court in S.K. Tekriwal (supra). He submitted, the Hon'ble Kerala High Court in CIT v/s PVS Memorial Hospital Ltd., [2015] 60 taxmann.com 69 (Ker.) after taking note of the decision in S.K. Tekriwal (supra) has held that the provisions of section 40(a)(ia) of the Act are also applicable to short deduction of tax at source. The learned Departmental Representative submitted, even the observations of the learned Commissioner (Appeals) that the payment ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, the aforesaid provision operates under two conditions; firstly, if tax is not deducted at source; and secondly, if after deduction it is not paid to the Government account before the prescribed date. In the present case, admittedly, the assessee has deducted tax at source on the payment made, though, at a lower rate. Therefore, the first condition of section 40(a)(ia) of the Act does not apply. Even, there is no allegation that after deduction of tax the assessee has not remitted it to the Government account before the prescribed date. Therefore, the second condition of section 40(a)(ia) of the Act also does not apply. The Hon'ble Calcutta High Court in case of S.K. Tekriwal (supra) has held that the provisions of section 40(a)(ia) of the Act will not apply to a case of short deduction of tax at source. Following the aforesaid decision, the Hon'ble Karnataka High Court in case of CIT V/S Kishor Rao and others HUF[2016]387 ITR 196, has also expressed similar view. Of course, the Hon'ble Kerala High Court in PVS Memorial Hospital Ltd. (supra) has expressed a contrary view. However, it is settled legal principle, if there is no decision of the Hon'ble Jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is the case of the Revenue that the assessee should have deducted tax @ 10% as per section 194J of the Act. Thus, there is no dispute that the assessee has deducted tax at source, but, may be at a lower rate. It is not a case of failure to deduct tax at source. That being the case, following our reasoning in Para 20 of this order, we uphold the deletion of disallowance made under section 40(a)(ia) of the Act. 25. The next dispute is with regard to payment of up linking fees of ₹ 6,62,06,997, to a non residence entity viz. B.T. Worldwide. 26. During the assessment proceedings, the Assessing Officer noticing that the assessee has paid up linking fees of ₹ 6,62,06,997, to a Singapore based company viz. B.T. Worldwide without withholding tax under section 195 of the Act called upon the assessee to explain why the payment should not be disallowed under section 40(a)(i) of the Act as it is in the nature of royalty as per section 9(1)(vi) r/w Explanation 2 and 6 of the Act. In response, it was submitted by the assessee that since the payment made was for services rendered outside India, the income did not accrue or arise in India. Therefore, there was no need to withh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2015, judgment dated 29th January 2018. Further, the learned Authorised Representative submitted, in assessee s own case for the impugned assessment year the Income Tax Officer (TDS) has passed an order under section 201(1) / 201(1A) of the Act on 7th February 2014, holding that the up linking fees paid to B.T. Worldwide is not liable to deduction of tax at source as such payment is towards services rendered outside India. Thus, the learned Authorised Representative submitted, learned Commissioner (Appeals) was justified in deleting the disallowance. 30. We have considered rival submissions and perused materials on record. At the outset, we must observe that the learned Commissioner (Appeals) deleted the disallowance on a factual misconception that the assessee has deducted tax on the payment at a lower rate. However, the facts on record reveal that the assessee has not deducted any tax at source on the payment of ₹ 6,62,06,997, to B.T. Worldwide towards up linking fees. To that extent, the observations of the learned Commissioner (Appeals) are not correct. However, the issue to be decided is, whether the assessee was liable to deduct tax at source on such payment. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 40(a)(ia) of the Act deserves to be deleted. Therefore, we uphold the decision of the Commissioner (Appeals) on the issue, though, on our own reasoning. 31. The next dispute is with regard to payment of transponder fees amounting to ₹ 50,25,99,456. 32. The Assessing Officer noticing that the assessee while making the aforesaid payment has deducted tax at source @ 2% under section 194C of the Act as against @ 10% under section 194J of the Act called upon the assessee to explain why the payment made should not be disallowed under section 40(a)(ia) of the Act. Though, the assessee objected to the proposed disallowance, however, the Assessing Officer proceeded to disallow the payment made, since, the assessee has not deducted tax at the appropriate rate as provided under section 194J of the Act. 33. Assessee challenged the disallowance before the learned Commissioner (Appeals) who deleted the disallowance. 34. The learned Departmental Representative submitted that the learned Commissioner (Appeals) without any discussion on the issue has deleted the disallowance made by the Assessing Officer. 35. The learned Authorised Representative submitted that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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