DCIT 1(3), MUMBAI V. Blitz Multimedia Pvt. Ltd., MUMBAI

ITA 1216/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4024 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Department
• Bench Allotted: L
• Next Hearing Date: 02-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 10-02-2011
• Court: TRIBUNAL
• Department Lawyers: RAMAPRIYA RAGHVAN
• Keywords: Double taxation relief; Non-deduction of tax
• Section: 143(3); 194C; 6

Judgement Text

, , L, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.1216/MUM/2011 ASSESSMENT YEAR: 2007-08 DCIT - 1(3), R.NO.540/564, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, NEW MARINE LINES MUMBAI- 400020 / VS. M/S. VJM MEDIA (P) LTD. A-3, SANGAM BHAVAN, BRAHMA KUMARIS ROAD, NEAR STRAND CENEMA, MUMBAI-400005 (REVENUE) (RESPONDENT ) P.A. NO . AAACR3250L C.O. NO.137/MUM/2013 (ARISING OUT OF ITA NO.1216/M/2011 ASSESSMENT YEAR: 2007-08 M/S. VJM MEDIA (P) LTD. A-3, SANGAM BHAVAN, BRAHMA KUMARIS ROAD, NEAR STRAND CENEMA, MUMBAI-400005 / VS. DCIT - 1(3), R.NO.540/564, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, NEW MARINE LINES MUMBAI- 400020 (ASSESSEE ) (REVENUE) P.A. NO. AAACR3250L / ASSESSEE BY SHRI NITESH JOSHI (AR) / REVENUE BY MS. RAMAPRIYA RAGHVAN (DR) / DATE OF HEARING : 24/02/2016 V.J.M 2 / DATE OF ORDER: 13/04/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE REVENUE AND CROSS OBJECTION (C.O.) FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI-2 {(IN SHORT CIT(A)}, DATED 04.11.2010 PASSED AGAINST ASSESSME NT ORDER U/S 143(3) DATED 14.12.2009 FOR THE ASSESSMENT YEA R 2007- 08. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI NITESH JOSHI, AUTHORISED REPRESENTATIVE (AR) O N BEHALF OF THE ASSESSEE AND MS. RAMAPRIYA RAGHAVAN, DEPARTMENT AL REPRESENTATIVE (DR) ON BEHALF OF THE REVENUE. FIRST WE TAKE UP REVENUES APPEAL: 3. THE REVENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING TO DELETE THE DISALLOWANCE OF RS.2,53,47,173/- MADE U/S 40(A) (IA) IN RESPECT OF PAYMENT MADE TO KINGFISHER AIRLINES L TD. 1.1 THE LD. CIT(A) FURTHER ERRED IN OVERLOOKING THE FACT THAT THERE IS SERVICE CONTRACT AND ADVERTISEMENT SHARING IS PART OF THE CONTRACT. 4. THE SOLITARY ISSUE RAISED BY THE REVENUE IS CHALLE NGING THE ACTION OF LD. CIT(A) IN DELETING THE DISALLOWANCE M ADE BY THE AO U/S 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TA X AT BY THE V.J.M 3 ASSESSEE IN RESPECT OF THE PAYMENT MADE BY IT TO M/ S. KINGFISHER AIRLINES LTD. 4.1. THE BRIEF FACTS ARE THAT DURING THE YEAR THE ASSES SEE WAS ENGAGED IN THE BUSINESS OF PUBLISHING OF MAGAZINES. IT PAID AN AGGREGATE AMOUNT OF RS.2,53,47,173/- TO KINGFISHER AIRLINES LTD. (HEREINAFTER CALLED AS KAL) ON ACCOUNT OF SHAR E OF KAL IN THE ADVERTISEMENT INCOME EARNED BY THE ASSESSEE FOR ADVERTISEMENTS PUBLISHED IN THE MAGAZINES OF THE AS SESSEE. 4.2. ACCORDING TO ASSESSING OFFICER, THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE WHICH HAS NOT BEEN DONE AND THEREFORE THE EXPENDITURE WAS DISALLOWED U/S 40(A) (IA) OF THE INCOME-TAX ACT. THE BACKGROUND FACTS OF THE CAS E NOTED IN THE ASSESSMENT ORDER ARE THAT AS STATED ABOVE TH E ASSESSEE WAS IN THE LINE OF PUBLISHING MAGAZINES AN D ONE OF THE MAGAZINES PUBLISHED BY ASSESSEE WAS KNOWN AS HI - BLITZ. IN THE PAST, ASSESSEE HAD STARTED INCURRING LOSSES PRIMARILY BECAUSE OF THE COMPETITION WITH THE TELEV ISION MEDIA AFFECTING THE BUSINESS OF ASSESSEE IN A SUBST ANTIAL WAY. THEREFORE, THE ASSESSEE ENTERED INTO AN AGREEM ENT WITH KINGFISHER AIRLINES LTD UNDER WHICH A VARIANT OF THE MAGAZINE HI-BLITZ WAS TO BE BROUGHT OUT AS IN- FLIGHT MAGAZINE OF KINGFISHER AIRLINES. AS A RESULT, THERE WOULD BE ONE SEPARATE ISSUE OF THE MAGAZINE OVER WHICH THERE WOULD BE EXCLUSIVE RIGHT OF ASSESSEE AND THERE WILL BE AN I N-FLIGHT MAGAZINE FOR KINGFISHER AIRLINES. A MINIMUM OF 25,0 00 COPIES OF IN-FLIGHT MAGAZINE WAS ASSURED. ASSESSE E WAS V.J.M 4 ALSO AGREED TO RECEIVE PRINTING COST OF THE MAGAZI NES @ RS.50/- PER COPY FROM KINGFISHER AIRLINES, AND AT T HE SAME TIME ASSESSEE WAS SUPPOSED TO GIVE TO KINGFISHER AI RLINES A SPECIFIED NUMBER OF FREE ADVERTISEMENTS IN THEIR MA GAZINES, THE HI-BLITZ STAND ISSUE AS WELL AS THE OTHER MAGAZ INES OF THE ASSESSEE I.E. CINE BLITZ. AS AN INTEGRAL PART O F THIS AGREEMENT, IT WAS AGREED UPON THAT 50% OF INCREMENT AL ADVERTISEMENT REVENUE THAT ASSESSEE SHALL OBTAIN OV ER AND ABOVE RS.3 MILLION PER QUARTER SHALL BE SHARED WITH KINGFISHER AIRLINES IN THE RATIO OF 50:50. IT IS TH IS AMOUNT WHICH HAS BEEN PAID BY ASSESSEE TO KINGFISHER AIRLI NES WHICH HAS BEEN DISALLOWED BY ASSESSING OFFICER ON T HE GROUND THAT ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON THESE PAYMENTS. 4.3. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) WHEREIN DETAILED SUBMISSIONS WERE MADE A GITATING THE ACTION OF THE AO. AFTER CONSIDERING THESE SUBMI SSIONS, LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND HELD THAT THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE ON THE SAID AMOUNT, AND THEREFORE, DISALLOWANCE MADE B Y THE AO WAS DELETED. 4.4. BEING AGGRIEVED, THE REVENUE HAS FILED THE APPEAL BEFORE THE TRIBUNAL. 4.5. DURING THE COURSE OF HEARING BEFORE US, LD. DR HAS REITERATED THE STAND OF THE AO. IT HAS BEEN VEHEMEN TLY ARGUED V.J.M 5 BY THE LD. DR THAT THE PAYMENT HAS BEEN MADE IN PUR SUANCE TO A SERVICE CONTRACT AND THEREFORE, THE ASSESSEE W AS LIABLE TO DEDUCT TAX AT SOURCE U/S 194C AND SINCE NO TDS WAS DEDUCTED, THEREFORE DISALLOWANCE WAS RIGHTLY MADE B Y THE AO. ALL THE CONTENTIONS MADE BY THE AO IN HIS ORDER WER E READ AND REITERATED BEFORE US. LD. DR ALSO RELIED UPON THE J UDGMENT OF HONBLE DELHI BENCH OF ITAT IN THE CASE OF ITO V. B HASIN MOTORS INDIA P. LTD. 16 SOT 319. 4.6. PER CONTRA, LD. COUNSEL OF THE ASSESSEE VEHEMENTLY RELIED UPON THE ORDER OF THE LD. CIT(A) AND REITERATED MOS T OF THE ARGUMENTS AS WERE MADE BY THE ASSESSEE BEFORE THE F IRST APPELLATE AUTHORITY. IT WAS ARGUED BY HIM THAT IN T HE SCHEME OF THE AGREEMENT, THE PAYMENT MADE TO KAL OUT OF IN CREMENTAL ADVERTISEMENT REVENUE WAS NOTHING BUT SHARING OF R EVENUE ON WHICH TDS WAS NOT LIABLE TO BE DEDUCTED. HE FURT HER ARGUED THAT PAYMENT MADE TO KAL WAS NOT FOR CARRYING OUT A NY WORK AS IS CONTEMPLATED IN SECTION 194C OF THE ACT, AND THAT THE MAGAZINES PUBLISHED BY THE ASSESSEE WERE PURCHASED BY KAL AND USED BY THE LATTER AS AN IN-HOUSE MAGAZINE ON I TS FLIGHTS. AS PER LD. COUNSEL, THE IMPUGNED AMOUNT WAS REIMBUR SED AS SHARE OF KAL AND WAS NOT ON ACCOUNT OF ANY WORK D ONE BY KAL OR ANY ADVERTISEMENT DONE BY IT. HE EMPHASIZED ON THE FACT THAT NO WORK WAS DONE BY KAL FOR THE ASSESSE E, RATHER KAL HAD PURCHASED MAGAZINES FROM THE ASSESSEE AND J UST PLACED THEM ON THE BACK OF THE SEAT IN THE AIRCRAFT . THE ADVERTISEMENT REVENUE INCREASED AT ITS OWN AND NO E LEMENT OF WORK DONE BY KAL WAS INVOLVED. IT WAS FURTHER SUB MITTED BY V.J.M 6 HIM THAT SECTION 194C WOULD BE ATTRACTED ONLY WHEN SOME WORK IS DONE BY THE PAYEE HAVING OUTPUT IN A TANG IBLE FORM. HE RELIED UPON THE JUDGMENT OF THE HONBLE BOMBAY H IGH COURT IN THE CASE OF EAST INDIA HOTELS 320 ITR 526. HE RELIED UPON ALL THE JUDGMENTS WHICH HAVE BEEN RELIED BY LD . CIT(A) IN HIS ORDER. HE ALSO RELIED UPON THE JUDGMENT OF ITAT AHMADABAD IN THE CASE OF SUNSEL DRIVE-IN- CINEMA (P .) LTD. 5 SOT 64 (AHD), AND ITO VS. SHRINGAR CINEMAS (P.) LTD . 20 SOT 480 (MUM), FOR THE PROPOSITION THAT WHERE NO WORK IS CARRIED OUT BY THE PAYEE AND PAYMENT IS DONE ON ACCOUNT OF SHARE OF REVENUE, THEN PROVISIONS OF SECTION 194C SHALL NOT BE APPLICABLE AND NO TDS WILL BE REQUIRED TO BE DEDUCT ED. 4.7. WE HAVE GONE THROUGH ENTIRE MATERIAL AND ARGUMENTS PLACED BEFORE US BY BOTH THE SIDES. IT IS NOTED BY US THAT LD. CIT(A) HAS CORRECTLY ANALYSED THE FACT AND PROVISIO NS OF LAW APPLICABLE. THEREFORE, BEFORE MAKING OUR OWN ANALYS IS AND DISCUSSION, WE FIND IT APPROPRIATE TO REPRODUCE THE RELEVANT FINDINGS OF LD. CIT(A) AS UNDER: 7. I HAVE PERUSED THE FACTS OF THE CASE, THE AGREE MENT BETWEEN APPELLANT AND KINGFISHER AIRLINES AND THE DECISIONS RELIED UPON BY LEARNED COUNSEL OF APPELLANT. A PERUSAL OF THE ORDER OF ASSESSMENT REVEALS THAT ACCORDING TO ASSESSING OFFICER, THE CONTRACT BETWEEN APPELLANT AND KINGFISHER AIRLINES IS A SERVICE CONTRACT FOR PUBLICATION OF IN-FLIGHT MAGAZ INE AS PER SPECIFICATIONS OF KINGFISHER AIRLINES FOR DISTRIBUTION AS IN-FLIGHT MAGAZINE OF THE AIRLINE. HE HAS ARGUED THAT KINGFISHER AIRLINES IS AWARE OF ITS CAPTIVE DISTRIBUTION NETWORK IN TERMS OF ITS FLEET OF AIRCRAFT'S AND THE HIGH CLASS AUDIENCE REPRESENTED BY THE AVIATION CUSTOMERS. THE AIRLINE IS ALSO AWAR E OF ITS V.J.M 7 POTENTIAL AS REVENUE FINANCING FOR APPELLANT. THEREFORE, KINGFISHER AIRLINES HAS SOUGHT COMPENSATION FROM APPELLANT. THERE CAN BE SEVERAL MODES THROUGH WHICH COMPENSATION TO THE SAID ARRANGEMENT CAN BE FIXED LIKE PIECEMEAL PAYMENTS, L UMP- SUM PAYMENTS ETC. ACCORDING TO HIM, IN THE INSTANT CASE COMPENSATION HAS BEEN FIXED ON THE ADVERTISING REVE NUE WHICH IS READILY ASCERTAINABLE. TO MY MIND, THE PERCEPTION OF ASSESSING OFFICER IS NOT CORRECT. IT IS A FACT NOT DISPUTED BY ASSESSING OFFICER THAT BUSINESS OF APPELLANT HAD BEEN DECLINI NG. ASSESSING OFFICER HAS HIMSELF ADMITTED THAT CONSEQUENT TO TIE UP WITH KINGFISHER AIRLINES THE ADVERTISEMENT RECEIPTS OF APPELLANT ARE BOUND TO GO UP. IN SUCH A SITUATION KINGFISHER DEMANDING A SHARE IN INCREMENTAL ADVERTISEMENT RECEIPTS OF APPELLANT IS PERFECTLY JUSTIFIED. IT CANNOT BE CONSIDERED COMPEN SATION AT ALL. IT WOULD JUST BE SHARING OF ADVERTISEMENT R EVENUE BECAUSE KINGFISHER AIRLINES IS PURCHASING MAGAZINES FROM APPELLANT IN BULK FOR A SPECIFIC USE OF AVIATI ON CUSTOMERS. THERE IS NO SERVICE CONTRACT HERE AS ENV ISAGED BY ASSESSING OFFICER. IT IS A KIND OF JOINT EFFORT WHERE AN EXISTING MAGAZINE WHICH WAS IN ITS DECLINING PHA SE IS BEING REVIVED FOR THE BENEFIT OF BOTH THE CONCERNED PARTIES. THE GOODWILL OF KINGFISHER, THE NAME ITSEL F, THE BRAND OF THE AIRLINE, IS BOUND TO ATTRACT THE ADVERTISING WORLD AND YIELD INCREASING REVENUES TO THE PUBLISHER, THE APPELLANT. IN TERMS OF THE AGREEMENT APPELLANT IS ONLY GETTING 50% OF THE ADDITIONAL ADVERTISEMENT REVENUE, OVER AND ABOVE A SPECIFIED AMOUNT. THIS AMOUNTS TO SHARING OF REVENU E AND NOTHING ELSE. THE VARIOUS CASE LAWS RELIED UPON BY LEARNED COUNSEL OF APPELLANT ALSO SUGGESTS THAT IN V.J.M 8 AN AGREEMENT OF THE NATURE UNDER CONSIDERATION, THI S WILL AMOUNT TO SHARING OF REVENUE ON WHICH TAX IS N OT REQUIRED TO BE DEDUCTED AT SOURCE, THE PROVISIONS O F TDS DO NOT GET ATTRACTED. TO MY MIND THEN, APPELLANT WAS N OT REQUIRED TO DEDUCT TAX AT SOURCE AND THEREFORE DISALLOWANCE AS MADE BY ASSESSING OFFICER IS NOT JUSTIFIED. THE GROUND OF APPEAL IS CONSEQUENTLY ALL OWED . 4.8. IN OUR CONSIDERED OPINION ALSO THE AGREEMENT BETWE EN THE ASSESSEE AND KAL CANNOT BE SAID TO BE AN AGREEMENT IN THE NATURE OF WORK CONTRACT OR EVEN SERVICE CONTRACT. T HE AGREEMENT BETWEEN THE TWO WAS ON ACCOUNT OF SHARING OF INCREMENTAL ADVERTISEMENT ONLY AND NOTHING ELSE. AC CORDING TO LD. DR, DISPLAYING OF MAGAZINE TO THE CAPTIVE AUDIE NCE BY KAL IN ITS FLIGHT WOULD ITSELF FALL WITHIN THE DEFINITI ON OF WORK. IN THIS REGARD WE BEG TO DIFFER WITH THE VIEWS OF LD. DR. THE ADMITTED FACTS ARE THAT KAL HAS PURCHASED THE MAGAZ INES, WHICH WAS A SEPARATE TRANSACTION AND FOR WHICH KAL HAD MADE PAYMENT TO THE ASSESSEE. THUS DISPLAYING OF MA GAZINES BY KAL WAS FOR ITS OWN CONSUMPTION AND PURPOSES. ON CE THE PRODUCT OF THE ASSESSEE WAS PURCHASED BY KAL, THERE AFTER WHATEVER HAS BEEN DONE BY KAL WITH THE SAID PRODUCT WAS FOR OWN BENEFITS, ADVANTAGES AND PURPOSES OF KAL ONLY. UNDER THESE CIRCUMSTANCES IT COULD NOT BE SAID AT ALL THA T KAL HAD DISPLAYED THE MAGAZINE FOR AND ON BEHALF OF THE ASS ESSEE, NOR IT COULD BE SAID THAT BY PLACING THE MAGAZINES ON T HE BACK OF THE SEATS OF THE AIRCRAFT, KAL HAD DONE A WORK FO R THE ASSESSEE. KAL PROVIDED MAGAZINES TO ITS GUEST PASSE NGERS AS PART OF ITS EFFORT FOR CREATING A FIVE STAR IN-FLIG HT EXPERIENCE FOR ITS CUSTOMERS. THUS, INCREASE IN THE ADVERTISEMENT REVENUE V.J.M 9 CANNOT BE SAID TO HAVE OCCURRED DIRECTLY AS A RESUL T OF ANY WORK DONE BY KAL FOR ON BEHALF OF THE ASSESSEE. F URTHER, NO SUCH WORK COULD HAVE BEEN RECOGNIZED OR MERGED IN ANY TANGIBLE OR QUANTIFIABLE TERMS. THUS, WITHOUT ANY H ESITATION, WE CAN SAY THAT THE IMPUGNED PAYMENT MADE BY THE AS SESSEE TO KAL ON ACCOUNT OF SHARING OF INCREMENTAL ADVERTI SEMENT REVENUE SHALL NOT FALL WITHIN THE PROVISIONS OF SEC TION 194C. THE JUDGMENTS RELIED UPON BY THE LD. COUNSEL AND BY THE LD. CIT(A) ARE DIRECTLY APPLICABLE ON THE FACTS OF THE CASE. THE CASE OF HONBLE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ITO V. BHASIN MOTORS INDIA P. LTD., RELIED UPON BY LD DR, SHALL NOT BE APPLICABLE ON THE FACTS OF THIS CASE, BECAUSE IN THE SAID CASE ADMITTEDLY THE PAYEE HAD DONE ENDORSE WORK FOR AN D ON BEHALF OF THE PAYEE, AND THUS, THE FACTS OF THE SAI D CASE ARE CLEARLY DISTINGUISHABLE. 4.9. IT IS ALSO NOTED BY US THAT DURING THE COURSE OF TH E COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2009 10, THE ASSESSING OFFICER RAISED QUERY ON THE SIMILAR ISSUE , IN RESPONSE, THE ASSESSEE FILED DETAILED REPLY ALONG W ITH COPY OF THE AGREEMENT WITH KAL. THE ASSESSING OFFICER CONSI DERED THE REPLY OF THE ASSESSEE, BUT DID NOT MAKE ANY DISALLO WANCE IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143 (3) D T 24.11.2011. THUS, THE ASSESSING OFFICER HIMSELF HAS TAKEN A VIEW THAT NO TAX WAS REQUIRED TO BE DEDUCTED ON THE SAID AMOUNT PAID BY THE ASSESSEE. UNDER THESE CIRCUMSTAN CES, WE FIND THAT TAKING A CONTRARY VIEW BY THE AO IN THE Y EAR UNDER CONSIDERATION WAS UNJUSTIFIED. V.J.M 10 4.10. THUS, KEEPING IN VIEW ALL THE FACT AND CIRCUMSTANC ES OF THE CASE, WE FIND THAT FINDINGS OF LD. CIT(A) ARE I N ACCORDANCE WITH LAW AND FACTS, AND THEREFORE THESE ARE UPHELD. 5 . AS A RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. NOW WE SHALL TAKE UP CROSS OBJECTIONS OF THE ASSESSEE: 6. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN ITS CROSS OBJECTIONS: THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, MUMBAI HEREINAFTER REFERRED TO AS THE CIT(A), ERRED IN REJECTING THE GROUND OF APPEAL BEFORE HIM THAT NOT TAX IS REQUIRED TO BE DEDUCTED AT SOURCE IN RESPECT OF PAYMENTS MADE TO GETTY IMAGES AND FAMOUS PICTURES AGGREGATING TO RS.7,59,645/-AND CONSEQUENTLY CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 40A(I) OF THE IT ACT. YOUR RESPONDENTS SUBMIT THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THEIR CASE, PROVISIONS OF SECTION 40A(I) OF THE IT ACT ARE NOT APPLICABLE IN RESPECT OF EXPENDITURE OF RS.7,59,645/- AND CONSEQUENTLY NO DISALLOWANCE FOR NON-DEDUCTION OF TAX IN RESPECT THEREOF IS CALLED FOR. 7. THE BRIEF FACTS REQUIRED TO ADDRESS THIS ISSUE ARE THAT AS STATED ABOVE, THE ASSESSEE WAS ENGAGED DURING THE Y EAR IN THE BUSINESS OF PUBLISHING MAGAZINES. THE AO MADE DISAL LOWANCE OF AN AGGREGATING AMOUNT OF RS. 7,59,645/- BEING PA YMENTS MADE TO TWO ENTITIES, NAMELY M/S GETTY IMAGES AND M /S FAMOUS- PICTURES & FEATURES AGENCY, ONE LOCATED IN SINGAPORE AND ANOTHER IN UNITED KINGDOM, FOR PROCURING IMAGES AND FIGURES TO BE PUBLISHED IN ASSESSEES MAGAZINES IN INDIA. THE V.J.M 11 AO MADE THE DISALLOWANCE ON THE GROUND THAT THESE P AYMENTS WERE IN THE NATURE OF ROYALTY AND THEREFORE, REQUIR ED DEDUCTION OF TAX AT SOURCE WHICH WAS NOT DONE, AND THEREFORE DISALLOWANCE WAS MADE U/S 40(A)(I). 7.1. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) WHEREIN THE DETAILED SUBMISSIONS WERE FI LED. IT WAS CONTENDED THAT PROVISIONS OF TDS WERE NOT APPLICABL E SINCE THE IMPUGNED PAYMENTS DID NOT FALL IN THE CATEGORY OF R OYALTY AS ENVISAGED UNDER THE LAW BUT LD. CIT(A), ALTHOUGH AC CEPTED THE REASONING GIVEN BY LD. COUNSEL BUT WHILE CONCLUDING HIS DECISION, HE AGREED WITH THE AO HAD HELD THAT TDS W AS REQUIRED TO BE DEDUCTED, AND SINCE NOT DEDUCTED BY THE ASSESSEE, THEREFORE DISALLOWANCE WAS RIGHTLY MADE B Y AO AND ACCORDINGLY HE UPHELD THE ACTION OF THE AO. 7.2. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE TRIBUNAL. DURING THE COURSE OF HEARING, LD. COUNSEL OF THE ASSESSEE ARGUED THIS ISSUE AT LENGTH. IT HAS BEEN S UBMITTED BY HIM THAT IN THIS CASE THE ASSESSEE HAD MADE A WRITT EN AGREEMENT WITH THE SINGAPORE PARTY AND IT WAS FILED WITH AO, BUT IN RESPECT OF PARTY FROM UK, NO WRITTEN AGREEME NT WAS ENTERED AND THEREFORE COPIES OF BILLS AND OTHER COR RESPONDENCE WERE FILED TO EXPLAIN NATURE OF TRANSACTION. IT WAS FURTHER SUBMITTED THAT PAYEES WERE THE OWNERS OF THE PHOTOG RAPHS AND IMAGES, AND THEY UPLOADED THESE PICTURES ON THE IR WEBSITE. THE ASSESSEE WAS GIVEN USER NAME AND PASSW ORD TO HAVE ACCESS ON THESE PHOTOGRAPHS AND DOWNLOAD THEM TO BE V.J.M 12 PUBLISHED IN THE MAGAZINES. IT WAS SUBMITTED THAT F OR EACH DOWNLOADING OF THE PHOTOGRAPHS THE ASSESSEE WAS REQ UIRED TO MAKE SEPARATE PAYMENT. THUS, THE DOWNLOAD OF THE PHOTOGRAPHS AND IMAGES WAS FOR A LIMITED USE AND RE STRICTED PURPOSES. HE DREW OUR ATTENTION ON DOUBLE TAXATION AVOIDANCE AGREEMENT WITH SINGAPORE AND UK AND ALSO DREW OUR ATTENTION ON THE PROVISIONS OF THE ACT TO SHOW THAT THESE PAYMENTS DID NOT FALL WITHIN THE DEFINITION OF TERM ROYALTY AND THEREFORE NO TDS WAS REQUIRED TO DEDUCT AND THEREFO RE, THE DISALLOWANCE MADE BY THE AO WAS INCORRECT ON LAW AN D FACTS. 7.3. PER CONTRA, THE LD. DR HAS ALSO ARGUED THE CASE IN DETAIL. IT WAS SUBMITTED BY HER THAT PHOTOGRAPHS WOULD COME WITHIN THE DEFINITION OF ARTISTIC WORK. SHE READ BEFORE US PROVISIONS OF SECTION 9(1)(VI) EXPLANATION-2(V) TO CONTEND THAT T HE IMPUGNED PAYMENTS WOULD FALL WITHIN THE DEFINITION OF ROYALT Y AS PROVIDED IN THE ABOVE SAID PROVISIONS OF THE ACT. FINALLY, S HE RELIED UPON THE JUDGMENT OF HONBLE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF AGENCE FRANCE PRESS V. ADIT, 153 ITD 568 (D ELHI) WHEREIN PAYMENTS MADE FOR DOWNLOAD OF NEWS PHOTOS W ERE HELD TO BE PAYMENT FOR ROYALTY AFTER CONSIDERING TH E AFORESAID PROVISIONS OF THE ACT AS WELL AS INDO-FRANCE TREATY . 7.4. IN REJOINDER, LD. COUNSEL OF THE ASSESSEE DISTINGU ISHED THE AFORESAID JUDGMENT RELIED UPON BY THE LD. DR AN D SUBMITTED THAT THE FACTS OF THE CASE WAS DIFFERENT. THE TERMS AND CONDITIONS CONTAINED THEREIN WERE TOTALLY DIFFE RENT AND NOT APPLICABLE ON THE FACTS OF THE CASE BEFORE US. IT W AS FURTHER V.J.M 13 SUBMITTED BY HIM THAT THE PHOTO WOULD NOT BE INCLUD ED EVEN WITHIN THE EXTENDED MEANING AS GIVEN IN THE PROVISI ONS OF THE ACT WHEREIN FILMS AND VIDEO TAPES HAVE BEEN IN CLUDED BUT PHOTO HAS NOT BEEN INCLUDED. THUS, SHOWING THAT I NTENTION OF THE LEGISLATURE IS CLEAR THAT PHOTO WOULD NOT BE COVERED. HE FURTHER SUBMITTED THAT EVEN IN THE DEFINITION GIVEN UNDER THE TREATY, A PHOTO WOULD NOT BE COVERED. LASTLY, HE SUBMITTED THAT FACTUAL REASONING OF THE ASSESSEE HAS BEEN ACC EPTED BY THE LD. CIT(A) WHICH HAS NOT BEEN DISPUTED BY THE R EVENUE, THEREFORE, THE CONCLUSION DRAWN AS LD. CIT(A) WAS C ONTRARY TO THE REASONING GIVEN IN THE ORDER AND THEREFORE, ORD ER OF THE LD. CIT(A) NEEDS TO BE CORRECTED. 7.5. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY BOTH THE SIDES AS WELL AS ORDER OF THE LOWER AUTHORITIES. IT IS NOTED BY US THAT THE FACTS HAVE BEEN ANALYSED BY THE LD. CIT(A) ON WHICH BOTH THE PARTIES UNANIMOUSLY AGREE, AND THEREFORE, WE SHALL ANALYSE THE POSITION OF LAW ON THE ADMITTED FACTS A S DISCUSSED BY THE LD. CIT(A). THE FACTS AS NARRATED BY LD. CIT (A) ARE THAT WRITTEN TERMS OF AGREEMENT WITH SINGAPORE PARTY AND COPIES OF BILLS AND PAYMENTS IN RESPECT OF UK PARTY SHOW THAT TERMS OF TRANSACTIONS WITH BOTH OF THEM ARE IDENTICAL. THE P HOTOGRAPHS OF CELEBRITIES AND OTHER MODELS, LIKE THOSE WHICH T HE ASSESSEE HAS OBTAINED THROUGH THE WEBSITE OF THESE FOREIGN P ARTIES, ARE GENERALLY TAKEN BY THE PHOTOGRAPHERS WHO ARE GENERA LLY ON CONTRACT WITH SOME CORPORATE ENTITY. THESE CORPORAT E ENTITIES BECOME THE OWNERS OF THE PHOTOGRAPHS OF THESE CELEB RITIES AND OTHERS MODELS BY WAY OF MAKING PAYMENTS TO THE CELE BRITIES, V.J.M 14 AND THEREBY ACQUIRING A RIGHT TO USE OF THESE PHOTO GRAPHS IN THE MANNER THEY LIKE. IN THIS MANNER, THESE CORPORA TE ENTITIES BECOME OWNERS OF SUCH PHOTOGRAPHS. IT HAS BEEN ANAL YSED AND HELD BY LD. CIT(A) ON THE BASIS OF AGREEMENT AND OT HER TERMS OF CONDITIONS THAT WHAT HAS BEEN GIVEN TO THE ASSES SEE ITS ONLY THE RIGHT TO USE A PARTICULAR PHOTOGRAPH, AND RIGHT IS LIMITED TO PUBLICATION OF THE PHOTOGRAPHS IN ASSESSEES OWN MA GAZINE. THE LD. CIT(A) HAS FURTHER STATED THAT A LIMITED RI GHT HAS BEEN GIVEN TO THE ASSESSEE IN LIEU OF A PAYMENT. IT HAS BEEN CONCLUDED BY THE LD. CIT(A) THAT FOREIGN PARTY DID NOT SELL THE PHOTO, AND THEREFORE IT CANNOT BE CLASSIFIED A BU SINESS TRANSACTIONS, SINCE THE OWNERSHIP OF THE PHOTOGRAPH S HAS NOT BEEN TRANSFERRED TO THE ASSESSEE. 7.6. LD. CIT(A) FURTHER HOLDS THAT SUCH LIMITED RIGHTS GIVEN FOR THE LIMITED PURPOSE SHALL FALL WITHIN THE DEFINITIO N OF ROYALTY IN TERMS OF ARTICLE 12 OF DTAA WITH SINGAPORE. IT IS F URTHER HELD BY HIM THAT ARTICLE 13 OF DTAA WITH UK IS IDENTICAL WHEREIN THE TERM ROYALTY HAS SIMILAR DEFINITION AS GIVEN IN DTAA WITH SINGAPORE. WE DO NOT FIND OURSELVES IN COMPLETE AGR EEMENT WITH THE VIEWS OF LD. CIT(A). IT IS SETTLED LAW AND WE NEED NOT DEBATE MUCH UPON A SETTLED PRINCIPLE THAT AS PER SE CTION 90(2) OF THE ACT, OUT OF THE PROVISIONS OF DTAA AND INCOM E TAX ACT, THE PROVISIONS WHICH ARE MORE BENEFICIAL TO THE ASS ESSEE CAN BE AVAILED BY IT FOR THE PURPOSE OF DETERMINING ITS TAX LIABILITY. IT HAS BEEN ARGUED THAT THE DEFINITION OF THE TERM ROYALTY GIVEN IN DTAA IS MORE RESTRICTIVE IN NATURE AS COMPARED T O THE DEFINITION GIVEN IN THE ACT, THOUGH, THE IMPUGNED P AYMENT V.J.M 15 WOULD NOT FALL EVEN IN SECTION 9(1)(VI) READ WITH I TS EXPLANATION 2(V). FOR THE SAKE OF SIMPLICITY, LET US FIRST ANAL YSE THE PROVISIONS OF ARTICLE 12, OF DTAA WITH SINGAPORE, W HICH READ AS UNDER: ANY COPYRIGHT OF A LITERARY, ARTISTIC OR SCIENTIFI C WORK, INCLUDING CINEMATOGRAPH FILM OR FILMS OR TAPS USED FOR RADIO OR TELEVISION BROADCASTING, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, O R FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE, INCLUDING GAINS DERIVED FROM THE ALIENA TION OF ANY SUCH RIGHT, PROPERTY OR INFORMATION. 7.7. THUS, OUR UNDERSTANDING OF THE DEFINITION GIVEN AB OVE IS THAT TO BE INCLUDED IN THE DEFINITION OF ROYALTY, THE PAYMENT SHOULD BE MADE FOR USE OF A COPYRIGHT OF THE ITEMS WHICH HAVE BEEN MENTIONED IN THE AFORESAID ARTICLE. EVEN IF WE PRESUME, ALTHOUGH DENIED BY THE ASSESSEE, THAT PHOTOGRAPH WI LL FALL IN ANY ONE OR MORE OF THE ITEMS MENTIONED IN THE ABOVE SAID DEFINITION, EVEN, THEN IT IS MANDATORY ON THE PART OF THE REVENUE BEFORE APPLYING THESE PROVISION TO SHOW THA T THE PAYMENT WAS FOR USE OF COPYRIGHT AND NOT COPYRIG HTED ARTICLE. IN OUR OPINION, USE OF COPYRIGHT AND COP YRIGHTED ARTICLE ARE ALTOGETHER TWO DIFFERENT THINGS AS HAS BEEN HELD IN MANY JUDGMENTS ALSO. THE ADMITTED FACT IS THAT THE PHOTOGRAPH HAS BEEN GIVEN TO THE ASSESSEE FOR THE L IMITED PURPOSE OF ITS ONE TIME USE IN THE MAGAZINE. THE AS SESSEE CAN NEITHER EDIT THE PHOTOGRAPH NOR CAN IT MAKE COPIES OF THE PHOTOGRAPH TO BE SOLD FURTHER OR TO BE USED ELSEWHE RE. THE ASSESSEE IS NOT PERMITTED TO MAKE RESALE OF THESE P HOTOGRAPHS V.J.M 16 TO ANY OTHER PERSON FOR ANY OTHER USE. THUS, WHAT H AS BEEN PERMITTED TO THE ASSESSEE IS TO MAKE USE OF THE ART ICLE AND NOT USE OF THE COPYRIGHT. 7.8. THUS, WE FIND THAT THE TRANSACTIONS OF DOWNLOADING OF PHOTOGRAPHS FOR EXCLUSIVE ONE TIME USE FOR PUBLICAT ION IN THE MAGAZINE DID NOT FALL WITHIN THE PROVISIONS OF RELE VANT ARTICLE 12 OF DTAA AND THEREFORE, ASSESSEE WAS NOT LIABLE T O DEDUCT TAX ON THE PAYMENTS MADE FOR THE SAME. 7.9. IT IS FURTHER BROUGHT TO OUR NOTICE THAT IN THE ASS ESSMENT YEAR 2009-10 ALSO PAYMENTS WERE MADE TO THESE VERY PARTIES NAMELY M/S GETTY IMAGES AND M/S FAMOUS-PICTURES & FEATURES AGENCY, FOR DOWNLOADING OF PHOTOS. BUT NO DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143 (3) DATED 24.11.2011. 7.10. THE CASE LAW RELIED UPON BY THE LD. DR WOULD NOT B E APPLICABLE ON THE FACTS OF THIS CASE. IT IS NOTED T HAT TERMS OF THE AGREEMENT IN THE CASE OF AGENCE FRANCE PRESS (S UPRA) WERE DIFFERENT. IN THAT CASE, FULL RIGHTS WERE TRANSFERR ED. THE ASSESSEE WAS FREE TO USE THE DOWNLOADED NEWS AND OT HER NEWS ITEMS IN ANY MANNER AND WAS ALLOWED TO MAKE FURTHER CIRCULATION OF THE SAME. IN THE GIVEN FACTS OF THE SAID CASE IT WAS HELD THAT THERE WAS TRANSFER OF COPYRIGHT, AND THEREFORE, RELEVANT PROVISIONS OF THE ACT AND INDO-FRANCE TREA TY WERE ATTRACTED. THE FACTS ARE DISTINGUISHABLE IN THE CAS E BEFORE US. V.J.M 17 7.11. IN VIEW OF THE DISCUSSION MADE BY US, WE FIND THAT THE IMPUGNED PAYMENTS WERE NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE AND THEREFORE, THE DISALLOWANCE MADE BY THE AO IS DELETED. 8. IN THE RESULT, THE CROSS OBJECTION FILED BY THE AS SESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH APRIL, 2016. SD/- (C.N. PRASAD ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER MUMBAI; DATED : 13 /04 /2016 CTX? P.S/. .. # $%&'&($ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !'# / THE RESPONDENT. 3. $# $# % ( ) / THE CIT, MUMBAI. 4. $# $# % / CIT(A)- , MUMBAI 5. ()* # !+ , $# # +- , / DR, ITAT, MUMBAI 6. *. / / GUARD FILE. / BY ORDER, '#( ! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI