ASST CIT 11(1), MUMBAI V. NGC NETWORKS (I) P LTD, MUMBAI

ITA 1382/MUM/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79384 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Next Hearing Date: 02-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 27-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment; Difference of opinion
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER I.T.A. NO.1382/MUM/2014 (ASSESSMENT YEAR : 2009-10) ASTT. COMMISSIONER OF INCOME TAX-11(1) ROOM NO.439, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-20. VS. M/S. NGC NETWORKS (I) PVT. LTD. STAR HOUSE, OFF. DR. E. MOSES ROAD MAHALAXMI MUMBAI-400 011. PAN/GIR NO. AABCN 1401 A ( APPELLANT ) .. ( RESPONDENT ) C.O. NO.68/MUM/2014 ARISING OUT OF I.T.A. NO.1382/MUM/2014 (ASSESSMENT YEAR : 2009-10) M/S. NGC NETWORKS (I) PVT. LTD. STAR HOUSE, OFF. DR. E. MOSES ROAD MAHALAXMI MUMBAI-400 011. VS. ASTT. COMMISSIONER OF INCOME TAX-11(1) ROOM NO.439, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-20. PAN/GIR NO.AABCN 1401 A ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI PORUS KAKA DEPARTMENT BY : SHRI SANTOSH KUMAR DATE OF HEARING : 02 . 07 .2014 DATE OF PRONOUNCEMENT : 09 . 07 .2014 O R D E R PER VIJAY PAL RAO, JM : THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER GIVING EFFECT TO THE DIR ECTIONS DATED 31.12.2013 OF DRP-II, MUMBAI PASSED U/S.144C(1) OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2009-10. REVENUE HAS RAISED THE FOLLOWING GROU NDS IN THIS APPEAL:- ITA NO.1382/M/14 & CO NO.68/2014. AY: 2009-10 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DRP WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.7, 18,19,004/- MADE ON ACCOUNT OF CHANNEL PLACEMENT FEES U/S. 40(A)(IA) AS TDS WAS NOT DEDUCTED U/S. 194J. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. DRP-I I ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED . 2. THE ONLY ISSUE RAISED BY THE REVENUE IS IN RESPE CT OF DIRECTIONS OF THE DRP IN DELETING THE DISALLOWANCE MADE BY AO U/S. 40 (A)(IA) AS THE ASSESSEE HAS DEDUCTED SHORT TAX AT SOURCE U/S. 194C. 3. BEFORE US, THE LD. DR HAS SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE PAID CHANNEL PLACEMENT F EE OF RS.7,18,19,004/- TO THE CABLE OPERATORS ON WHICH THE ASSESSEE HAS DEDUC TED TDS @ 2% INSTEAD OF 10% AS PER PROVISIONS OF SECTION 194J. THE LD. DR S UBMITTED THAT THE CHANNEL PLACEMENT FEES ARE CHARGES PAID BY THE BROADCASTER TO THE MSO FOR PLACING THEIR CHANNEL ON A PARTICULAR FREQUENCY OR BANDWIDT H. 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 PART ICULAR CHANNEL ON A PARTICULAR FREQUENCY IS INTEGRAL PART OF TRANSMISSI ON 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 PROVISI ONS OF SECTION 194J ARE APPLICABLE ON SUCH PAYMENT. THE ASSESSEE HAS NOT DE DUCTED TAX AT THE REQUIRED RATE OF 10% BUT DEDUCTED TAX ONLY @ 2%, TH EREFORE, THE PROVISIONS OF SECTION 40(A)(IA) ARE ATTRACTED FOR DISALLOWANCE. H E HAS RELIED UPON THE DRAFT ORDER OF AO. 4. ON THE OTHER HAND THE LD. SR. COUNSEL HAS SUBMIT TED THAT THE ASSESSEE HAS DEDUCTED TAX U/S. 194C WHICH IS APPLICABLE ON P AYMENT IN QUESTION. HE HAS FURTHER SUBMITTED THAT DRP HAS CONSIDERED THE I SSUE EVEN IN THE LIGHT OF ITA NO.1382/M/14 & CO NO.68/2014. AY: 2009-10 3 RETROSPECTIVE AMENDMENT WHEREBY EXPLANATION-6 TO SE CTION 9(1)(VI) HAS BEEN INTRODUCED BY FINANCE ACT 2012. HE HAS FURTHER CONT ENDED THAT PLACING THE CHANNEL IN A HIGH FREQUENCY DOES NOT INVOLVE ANY PR OCESS OF TRANSMISSION OR UP-LINKING OR DOWN LINKING OF ANY SIGNAL FROM SATEL LITE. WITHOUT PREJUDICE TO THE ABOVE CONTENTION THE LD. SR. COUNSEL HAS SUBMITTED THAT THE SHORTFALL OF TDS DOES NOT ATTRACT THE PROVISIONS OF SECTION 40(A)(IA ). IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M /S. CHANNEL GUIDE INDIA LIMITED VS. ACIT IN ITA NO .1221/M/2006 DATED 29/08/2012 (ASSESSMENT YEAR 2004-05) AS WELL AS THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. S.K. TEKRIWAL (2013) 260 CTR (CAL)73. THE LD. SR. COUNSEL HAS FURTHER SUBMITTED THAT EVE N AS PER THE PROVISIONS OF SECTION 40 THE DEFINITION OF ROYALTY HAS TO BE TAKEN AS DEFINED UNDER EXPLANATION-2 OF SECTION 9(1)(VI). SINCE THER E IS NO CORRESPONDING AMENDMENT IN THE PROVISIONS OF SECTION 40, THEREFOR E, THE DEFINITION OF ROYALTY FOR THE PURPOSE OF SECTION-40 CAN NOT BE IMPORTED F ROM THE EXPLANATION-6 OF SECTION-9(1)(VI). IN SUPPORT OF HIS CONTENTION HE H AS RELIED UPON THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SKOL BREWERIES LTD. VS. ACIT IN ITA NO.6175/MUM/2011 DATED 18/01/2013 (FOR AY -2 0007-08); (2013) 29 TAXMANN.COM 111(MUMBAI-TRIB.). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. AO HAS DISALLOWED PAYMENT MADE BY THE ASSES SEE TO THE CABLE T.V. OPERATOR/DTH PROVIDER FOR PLACING ITS CHANNEL IN A PARTICULAR FREQUENCY TO GET BETTER VIEWERSHIP ON ACCOUNT OF GOOD PICTURE AND SO UND QUALITY. AO WAS OF THE VIEW THAT THE PAYMENT MADE BY THE ASSESSEE FOR PLAC EMENT OF ITS CHANNEL IS IN THE NATURE OF ROYALTY AS PER EXPLANATION-2 OF SECTI ON -9(1)(VI) AND, THEREFORE, TDS SHOULD HAVE BEEN DEDUCTED AS PER PROVISIONS OF SECTION 194J. THE ASSESSEE CHALLENGED PROPOSED ACTION OF ASSESSING OF FICER BEFORE DRP. THE DRP HAS HELD THAT CHANNEL PLACEMENT FEE DOES NOT COME I N THE DEFINITION OF ROYALTY AND THEREFORE, THE PROVISION U/S. 194J ARE NOT APPL ICABLE. THE DRP WHILE COMING TO THE CONCLUSION ALSO CONSIDERED RETROSPECT IVE AMENDMENT IN SECTION ITA NO.1382/M/14 & CO NO.68/2014. AY: 2009-10 4 9(1)(VI) IN THE SHAPE OF EXPLANATION-6. THE DRP FOU ND THAT THE PAYMENT OF CHANNEL PLACEMENT FEE IS NOT TANTAMOUNT TO PAYMENT OF FEE FOR TRANSMISSION PURPOSE WHICH INCLUDES HIRING OF TRANSPONDER, UPLIN KING/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 RE GARDED AS ROYALTY AS IT DOES NOT FALL UNDER THE DEFINITION IN TERMS OF EXPL ANATION-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, UPLINKIN G AND DOWN LINKING OF SIGNALS ETC. BUT THE SAID RETROSPECTIVE AMENDMENT C AN 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 DED UCTED THE TAX AT SOURCE IT WAS NOT IN THE STATUTE. THE CO-ORDINATE BENCH OF TH IS TRIBUNAL IN CASE OF M/S. CHANNEL GUIDE INDIA LIMITED VS. ACIT (SUPRA), HAD T HE OCCASION TO CONSIDER AND DECIDE AN IDENTICAL ISSUE IN PARA-25 AND 26 AS UNDER :- 25. IN OUR OPINION, THE ISSUE INVOLVED IN THE PRE SENT CASE HOWEVER, IS RELATING TO DISALLOWANCE MADE U/S.40(A)(I) FOR NON- DEDUCTION OF TAX-AT- SOURCE FROM THE PAYMENT MADE BY THE ASSESSEE TO SSA AND AS HELD BY AHMEDABAD BENCH OF THIS TRIBUNAL IN THE CASE OF STE RLING ABRASIVES LTD. BY ITS ORDER DATED 23.12.2010 CITED BY THE LD. COUN SEL FOR THE ASSESSEE, THE ASSESSEE CANNOT BE HELD TO BE LIABLE TO DEDUCT TAX AT SOURCE RELYING ON THE SUBSEQUENT AMENDMENTS MADE IN THE ACT WITH R ETROSPECTIVE EFFECT. IN THE SAID CASE, EXPLANATION TO SEC.9(2) WAS INSERTED BY THE FINANCE ACT, 2007 WITH RETROSPECTIVE EFFECT FROM 1.6.1976 AND IT WAS HELD BY THE TRIBUNAL THAT IT WAS IMPOSSIBLE FOR THE ASSESSEE TO DEDUCT TAX IN THE FINANCIAL YEAR 2003-04 WHEN AS PER THE R ELEVANT LEGAL POSITION PREVALENT IN THE FINANCIAL YEAR 2003-04, THE OBLIGA TION TO DEDUCT TAX WAS NOT ON THE ASSESSEE. THE TRIBUNAL BASED ITS DECISI ON ON A LEGAL MAXIM LEX NON COGIT AD IMPOSSIBLIA MEANING THEREBY THAT THE LAW CANNOT POSSIBLY COMPEL A PERSON TO DO SOMETHING WHICH IS I MPOSSIBLE TO PERFORM AND RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KRISHNA SWAMY S. PD AND ANOTHER VS. UNION OF INDIA AND OTHERS 281 ITR 305 WHEREIN THE SAID LEGAL MAXIM WAS ACCEPTED B Y THE HONBLE APEX COURT. 26. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE AMOUNT IN QUESTION PAID BY THE ASSESSEE TO SSA WAS NOT TAXABLE IN INDIA IN THE HANDS OF SSA EITHER U/S.9(1)(VI) OR 9(1)(VII ) AS PER THE LEGAL POSITION ITA NO.1382/M/14 & CO NO.68/2014. AY: 2009-10 5 PREVALENT AT THE RELEVANT TIME AND THE ASSESSEE THE REFORE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE SAID AMOUNT PAID T O M/S. SSA AND THERE WAS NO QUESTION OF DISALLOWING THE SAID AMOUN T BY INVOKING THE PROVISIONS OF SEC.40(A)(I). IN THAT VIEW OF THE MA TTER, WE DELETE THE DISALLOWANCE MADE BY THE AO U/S.40(A)(I) AND CONFIR MED BY LD. CIT (A) AND ALLOW GROUND NO.1 OF THE ASSESSEES APPEAL. 5.1 THE TRIBUNAL IN THE SAID CASE HAS CONCLUDED THA T THE LAW CAN NOT COMPEL A PERSON TO DO SOMETHING WHICH IS IMPOSSIBLE TO PER FORM. A SIMILAR VIEW WAS TAKEN BY AHMEDABAD BENCH OF THIS TRIBUNAL IN THE CA SE OF STERLING ABRASIVES LTD. ORDER DATED 23.12.2010 WHICH WAS FOLLOWED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN CASE OF M/S. CHANNEL GUIDE INDIA L IMITED VS. ACIT. IT IS NOT THE CASE OF THE REVENUE THAT THE ISSUE OF APPLICABI LITY OF SECTION 194J WAS ALREADY CONSIDERED IN THE CASE OF THE ASSESSEE. THE REFORE, WHEN THE ASSESSEE HAS DEDUCTED THE TAX AS PER PROVISIONS OF SECTION 1 94C 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 FORESE E THE SUBSEQUENT RETROSPECTIVE AMENDMENT IN THE STATUTE TO BE HELD L IABLE TO TAX DEDUCTION AT SOURCE UNDER THE PROVISIONS OF SECTION 194J. WE FUR THER NOTE THAT IN CASE OF CIT VS. S.K. TEKRIWAL (SUPRA), THE HON'BLE CALCUTTA HIGH COURT HAS CONSI DERED 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 SE CTION 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 A CT BUT THE FACT IS THAT THIS EXPRESSION, 'ON WHICH TAX IS DEDUCTIBLE AT SO URCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTE R DEDUCTION HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN S UB-SECTION (1) OF SECTION 139'. THIS SECTION 40(A)(IA) OF THE ACT RE FERS ONLY TO THE DUTY TO DEDUCT TAX AND PAY TO THE GOVERNMENT ACCOUNT. IF T HERE IS ANY SHORTFALL DUE TO ANY DIFFERENCE OF OPINION AS TO THE TAXABIL ITY OF ANY ITEM OR THE NATURE OF PAYMENTS FALLING UNDER VARIOUS TDS PROVIS IONS, THE ASSESSEE CAN BE DECLARED TO BE AN ASSESSEE IN DEFAULT UNDER SECTION 201 OF THE ACT AND NO DISALLOWANCE CAN BE MADE BY INVOKING TH E PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ITA NO.1382/M/14 & CO NO.68/2014. AY: 2009-10 6 5.2 FURTHER, WE FIND FORCE IN THE CONTENTION OF THE LD. SR. COUNSEL THAT PAYMENT IN QUESTION DOES NOT FALL UNDER THE TERM RO YALTY AS DEFINED IN EXPLANATION-2 OF SECTION 9(1)(VI) AND EXPLANATION-6 CAN NOT BE PRESSED INTO SERVICE AS THE DEFINITION OF ROYALTY FOR THE PURPOS E OF SECTION 40 IS TAKEN ONLY UNDER EXPLANATION-2 TO SECTION 9(1)(C). AN IDENTIC AL ISSUE WAS CONSIDERED AND DECIDED BY THIS TRIBUNAL IN CASE OF SKOL BREWERIES LTD. VS. ACIT (SUPRA), IN PARA 19.1 TO 19.4 AS UNDER :- 19.1 WE CONFINED OURSELVES TO THE DEFINITION AND MEANING OF THE TERM ROYALTY BECAUSE THE ASSESSING OFFICER HAS TREATED THE PAYME NT AS IN THE NATURE OF ROYALTY AS PER PROVISIONS OF SEC. 9(1)(VI) AND NOT FOR FEE FOR TECHNICAL SERVICES. AS IT IS CLEAR FROM THE CLAUSE A OF EXPLANATION TO SEC. 40(A)(I), THE M EANING OF THE ROYALTY FOR THE PURPOSE OF SEC. 40 HAS TO BE TAKEN AS GIVEN IN THE EXPLANAT ION 2 TO SEC 9(1)(VI). WE QUOTE EXPLANATION 2 TO SEC. 9(1)(VI) AS UNDER: [EXPLANATION 2.- FOR THE REMOVAL OF DOUBTS, IT IS H EREBY DECLARED THAT 'BUSINESS CONNECTION' SHALL INCLUDE ANY BUSINESS ACTIVITY CAR RIED OUT THROUGH A PERSON WHO, ACTING ON BEHALF OF THE NON-RESIDENT, - ( A ) HAS AND HABITUALLY EXERCISES IN INDIA, AN AUTHORITY TO CONCLUDE CONTRACTS ON BEHALF OF THE NON- RESIDENT, UNLESS HIS ACTIVITIES ARE LIMITED TO THE PURCHASE OF GOODS OR MERCHANDISE FOR THE NON- RESIDENT; OR ( B ) HAS NO SUCH AUTHORITY, BUT HABITUALLY MAINTAINS IN INDIA A STOCK OF GOODS OR MERCHANDISE FROM WHICH HE REGULARLY DELIVE RS GOODS OR MERCHANDISE ON BEHALF OF THE NON-RESIDENT; OR ( C ) HABITUALLY SECURES ORDERS IN INDIA, MAINLY OR WHOLL Y FOR THE NON- RESIDENT OR FOR THAT NON-RESIDENT AND OTHER NON- RESIDENTS CONTROLLING, CONTROLLED BY, OR SUBJECT TO THE SAME COMMON CONTRO L, AS THAT NON- RESIDENT: PROVIDED THAT SUCH BUSINESS CONNECTION SHALL NOT IN CLUDE ANY BUSINESS ACTIVITY CARRIED OUT THROUGH A BROKER, GENERAL COMMISSION AG ENT OR ANY OTHER AGENT HAVING AN INDEPENDENT STATUS, IF SUCH BROKER, GENERAL COMM ISSION 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 CO MMISSION AGENT OR ANY OTHER AGENT WORKS MAINLY OR WHOLLY ON BEHALF OF A NON-RES IDENT (HEREAFTER IN THIS PROVISO REFERRED TO AS THE PRINCIPAL NON-RESIDENT) OR ON BE HALF OF SUCH NON-RESIDENT AND OTHER NON-RESIDENTS WHICH ARE CONTROLLED BY THE PRI NCIPAL 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 SH ALL NOT BE DEEMED TO BE A BROKER, GENERAL COMMISSION AGENT OR AN AGENT OF AN INDEPENDENT STATUS ITA NO.1382/M/14 & CO NO.68/2014. AY: 2009-10 7 19.2 IT IS CLEAR FROM THE ABOVE EXPLANATION THAT THE PA YMENT FOR TRANSFER OF ANY RIGHT TO USE OR RIGHT TO USE OF COMPUTER SOFTWARE DOES NO T 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 COMPUT ER 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 INCLUDE AND SHA LL BE DEEMED TO HAVE ALWAYS MEANT AND INCLUDED 'BY MEANS OF', 'IN CONSEQUENCE O F' OR 'BY REASON OF'. 19.3 AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE COOR DINATE BENCH OF THE TRIBUNAL IN THE CASE OF SONATA INFORMATION TECHNOLOGY LTD (SUPRA). '30. HOWEVER, THERE ARE TWO MORE ISSUES WHICH REQUI RE FURTHER EXAMINATION. ONE IS THAT THE HON'BLE SPECIAL BENCH OF THE ITAT CONSI DERED THE ISSUE OF SECTION 40(A)(IA) IN THE CASE OF MERILYN SHIPPING & TRANSPORTS V. ADCIT ( 16 ITR TRIB. (1) VIZ ) IN ITA NO.477/VIZ/2008 FOR ASSESSMENT YEAR 2005-0 6 DATED 29.3.2012 AND HELD THAT THE WORD 'PAYABLE' USED IN THE SECTION RE FERS TO ONLY THE AMOUNT OUTSTANDING AS ON 31ST MARCH AND NOT THE AMOUNT PAI D BY THE DATE. THE LEARNED COUNSEL PLACED ON RECORD THE DETAILS OF THE OUTSTAN DING AMOUNT AS UNDER: DETAILS OF AMOUNT PAID AND PAYABLE AS ON 31/03/2008 FOR PURCHASE OF SOFTWARE IN RESPECT OF THE AMOUNTS DISALLOWED UNDER SECTION 40( A)(IA) OF THE I.T. ACT 1961: S. NO NAME OF THE PARTY TOTAL AMOUNT DISALLOWED (EXCL. OF LOCAL TAXES PAID BEFORE 31.03.2008 (EXCL. LOCAL TAXES) PAYABLE AS ON 31.03.2008 (EXCL. LOCAL TAXES) 1 ORACLE INDIA PVT. LTD 1,114,471,630 768,167,218 346,304,412 2 BEA SYSTEMS INDIA PRIVATE 108,922,200 93,631,520 15,290,680 3 IBM INDIA PRIVATE LIMITED 436,492,087 428,949,124 7,542,963 4 INGRAM MICRO INDIA PVT. LTD 176,188,548 149,500,880 26,687,668 5 REDINGTON INDIA LTD 60,107,319 60,103,840 3,479 ITA NO.1382/M/14 & CO NO.68/2014. AY: 2009-10 8 6 HEWELETT PACKARD INDIA 38,406,545 22,986,317 15,420,228 7 OTHERS 63,323,265 47,018,483 16,304,782 TOTAL 1,997,911,595 1,570,357,383 427,554,212 AS CAN BE SEEN FROM THE ABOVE THE TOTAL AMOUNT PAID TO VARIOUS SOFTWARE DEVELOPERS IS RS. 1,99,79,11,595/- OUT OF WHICH RS. 1,57,03,57,38 3/- WAS PAID BEFORE 31-03-2008. THE OUTSTANDING AMOUNT WAS ONLY RS. 42,75,54,212/-. SUBJECT TO VERIFICATION OF THE AMOUNTS, IN CASE THE PAYMENTS ARE CONSIDERED AS ROY ALTY COVERED BY SECTION 9(1)(VI), THEN THE DISALLOWANCE UNDER SECTION 40(A)(IA) CAN O NLY BE RESTRICTED TO THE AMOUNT OUTSTANDING AS PAYABLE AS ON 31/03/2008 AS PER THE PRINCIPLES LAID DOWN BY SPECIAL BENCH IN THE CASE SUPRA.' 19.4 IN THE ABSENCE OF ANY CONTRARY DECISION BROUGHT BE FORE US, WE FOLLOW THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL AND ACCORD INGLY HELD THAT WHEN THE ROYALTY FOR TRANSFER OF RIGHT TO USE OF COMPUTER SOFTWARE D OES NOT FALL UNDER 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 CANNO T 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 T HIS TRIBUNAL WE DO NOT FIND ANY REASON TO INTERFERE WITH THE DIRECTION OF THE D RP. 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 CA SE, THE LD. ACIT- 1(1)(ASSESSING OFFICER) ERRED IN OBJECTING TO THE D IRECTIONS OF DRP THAT THE RESPONDENT HAS RIGHTLY DEDUCTED TDS ON CHANNEL PLAC EMENT 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 T HE 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 C ASE, WITHOUT PREJUDICE TO THE ABOVE, THE LD. ASSESSING OFFICER ERRED IN NO T APPRECIATING THAT THE DISALLOWANCES U/S. 40(A)(IA) OF THE ACT CANNOT BE M ADE IN CASE OF ALLEGED SHORT DEDUCTION OF TAX AT SOURCE. ITA NO.1382/M/14 & CO NO.68/2014. AY: 2009-10 9 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, WITHOUT PREJUDICE TO THE ABOVE, THE LD. ASSESSING OFFICER ERRED IN NO T APPRECIATING THAT THE DISALLOWANCES U/S. 40(A)(IA) OF THE ACT CANNOT BE M ADE IN LIGHT OF THE RETROSPECTIVE AMENDMENTS TO THE PROVISIONS OF SECTI ON 9(1)(VI) OF THE ACT. 6.1 AS IT IS CLEAR FROM THE GROUNDS RAISED IN TH E CROSS OBJECTION THE ASSESSEE HAS SUPPORTED THE DIRECTIONS OF THE DRP AND NO NEW ISSUE HAS BEEN RAISED. IN VIEW OF OUR FINDING ON THE ISSUE INVOLVED IN THE AP PEAL OF THE REVENUE THE CROSS OBJECTION FILED BY THE ASSESSEE BECOMES INFRU CTUOUS. 6.2 IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON 9 TH DAY OF JULY, 2014 . SD/- (R.C. SHARMA) ACCOUNTANT MEMBER SD/- (VIJAY PAL RAO) JUDICIAL MEMBER MUMBAI; DATED : 09 /07/2014 JV. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// ( (( ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI