ADIT (IT)2(1), MUMBAI V. STAR ASIA REGION FZ LLC, MUMBAI

ITA 1439/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8447 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 22-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Assessee Lawyers: DINESH CHAWLA
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER & SHRI VIJAY PAL RAO, JUDICIAL MEMBER I.T.A.NO.1439/MUM/2010 A.Y 2007-08 DDIT (IT) -2 (1), MUMBAI. VS. STAR ASIA REGION FZ LLC, C/O. SR BATLIBOI & CO., C.A. 18 TH FLOOR, EXPRESS TOWER, NARIMAN POINT, MUMBAI 400 021. PAN: AAJCS 3494 A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUMEET KUMAR. RESPONDENT BY : SHRI DINESH CHAWLA. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWING G ROUND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT[A] WAS CORRECT IN HOLDING THAT WHEN DUTY IS CAS T ON THE PAYER TO PAY TAX AT SOURCE, NO INTEREST U/S.234B AND 234C CA N BE IMPOSED ON THE PAYEE ASSESSEE IGNORING THE FACT THAT IT IS LIABILI TY OF THE PAYEE TO PAY ADVANCE TAX EVEN ON THE AMOUNT WHICH HAD NOT BEEN D EDUCTED AT SOURCE UNDER SECTION 195 OF THE INCOME-TAX ACT, 1961. 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE ASSESSEE IS A COMPANY INCORPORATED IN UAE AND WAS THE OWNER OF TH E SATELLITE TELEVISION CHANNELS BEING STAR UTSAV, STAR ONE AND VIJAY T.V. OVER THE PAN ASIAN REGION. DURING THE YEAR ASSESSEE SOLD ADV ERTISING AIRTIME INVENTORY ON THE CHANNELS TO SATELLITE TELEVISION A SIAN REGION LIMITED [FOR SHORT STAR LTD. ], A NON RESIDENT COMPANY WH ICH IS A TAX RESIDENT OF HONG KONG. STAR LTD HAD FILED AN APPLICATION U/S .195(2) FOR LOWER DEDUCTION IN RESPECT OF ADVERTISING AIRTIME PAYABLE BY STAR LTD. TO THE 2 ASSESSEE. THE AO OF STAR LTD. HAD ISSUED A CERTIFIC ATE BY WHICH STAR LTD. WAS DIRECTED TO WITH-HOLD THE TAX @ 0.4182% FR OM THE AMOUNT PAYABLE TO THE ASSESSEE. IT WAS ARGUED THAT SINCE A SSESSEE WAS A NON RESIDENT, THEREFORE, NO INTEREST WAS PAYABLE UNDER SECTIONS 234B AND 234C. HOWEVER, SUCH INTEREST WAS LEVIED IN THE INTI MATION U/S.143(1)(A). 3. BEFORE THE CIT[A] IT WAS MAINLY SUBMITTED THAT I NTEREST WAS NOT PAYABLE U/S.234B AND 234C BECAUSE ASSESSEE WAS NOT REQUIRED TO PAY ADVANCE TAX AND RELIANCE WAS ALSO PLACED ON THE DEC ISION OF THE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF I.T. ( INT.TAXATION) VS. NGC NETWORK ASIA LLC (313 ITR 187). THE LD. CIT[A] ADJUDICATED THE ISSUE VIDE PARAS 3.4 AND 3.5 AND DELETED THE INTERE ST. THE RELEVANT PARAS ARE REPRODUCED AS UNDER: 3.4 WITH REGARDS TO THE MERITS OF THE CASE, I HAVE GONE THROUGH THE PROVISION OF SECTION 208 AND 209 OF THE IT ACT AND THE DECISIONS CITED BY THE LEARNED ANNUAL REPORT IN THE CASE OF STAR LT D. AND THE BOMBAY HIGH COURT DECISION IN THE CASE OF NGC NETWO RK ASIA LLC [SUPRA]. THE PROPOSITION THAT EMERGES, AFTER THE OR DER OF BOMBAY HIGH COURT IN THE CASE OF NGC NETWORK ASIA LLC [SUPRA] I S, THAT IN A CASE WHERE THE ENTIRE INCOME OF THE ASSESSEE PAYEE IS LI ABLE FOR DEDUCTION OF TAX AT SOURCE, THEN INTEREST UNDER SECTION 234B AND 234C OF THE IT ACT IS NOT LEVIABLE, EVEN THOUGH THE PAYER HAS NOT DEDU CTED THE ADVANCE TAX THEREON. IN THE SAID DECISION, THE HON'BLE HIGH COU RT HAD DISMISSED THE PLEA OF REVENUE THAT ON FAILURE OF THE PAYER TO DED UCT TAX IT IS THE LIABILITY OF THE ASSESSEE TO PAY THE ADVANCE TAX EV EN ON THE AMOUNT WHICH HAD NOT BEEN DEDUCTED UNDER S.195 OF THE IT A CT. 3.5 THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF NGC NETWOR K ASIA LLC [SUPRA] AND THE DECISION OF THE ITAT STAR LTDS CAS E AS STATED ABOVE, I HOLD THAT THE APPELLANT WAS NOT LIABLE TO PAY ADV ANCE TAX AS ITS ENTIRE WAS LIABLE FOR DEDUCTION OF TAX AT SOURCE. ACCORDIN GLY, IN VIEW OF THE ABOVE, INTEREST UNDER SECTIONS 234B AND 234C OF THE IT ACT IS NOT LEVIABLE ON THE APPELLANT. 3 4. BEFORE US, LD. DR RELIED ON THE ORDER OF THE AO. 5. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE R ELIED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE DIT (INT.T) VS. NGC NETWORK ASIA LLC [SUPRA] AS WELL AS THE ORDER O F THE TRIBUNAL IN THE CASE STAR LTD. WHEREIN THE DECISION OF THE HON' BLE BOMBAY HIGH COURT IN THE CASE OF DIT (INT.T) VS. NETWORK ASIA L LC [SUPRA] HAS BEEN FOLLOWED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DIT (I NT.T) VS. NGC NETWORK ASIA LLC [SUPRA] HAS OBSERVED AS UNDER: THE TRIBUNAL, ON FINDING THAT THE PAYER, NTIL, HAD FAILED TO DEDUCT TAX AT SOURCE, HELD THAT THE ASSESSEE WAS NOT LIABL E TO PAY ADVANCE TAX AND THEREFORE THE QUESTION OF CHARGING INTEREST UND ER SECTION 234B OF THE INCOME-TAX ACT, 1961 DID NOT ARISE. THE REVENUE PREFERRED AN APPEAL CONTENDING THAT THE ASSESSEE WAS LIABLE TO P AY ADVANCE TAX EVEN ON THE AMOUNT WHICH HAD NOT BEEN DEDUCTED UNDER SEC TION 195 OF THE ACT. ON THE ABOVE FACTS, IT WAS HELD AS UNDER: HELD, DISMISSING THE APPEAL, THAT WHEN A DUTY WAS CAST ON THE PAYER TO DEDUCT THE TAX AT SOURCE, ON FAILURE OF THE PAYER T O DO SO, NO INTEREST COULD BE IMPOSED ON THE ASSESSEE. WE FURTHER FIND THAT THE TRIBUNAL IN I.T.A.NO.1125/ MUM/2010 IN THE CASE OF ADIT (IT) VS. SATELLITE TELEVISION ASIAN RE GION LTD., VIDE PARA 12 HAS HELD AS UNDER: 12. WE HEARD BOTH THE PARTIES. WE FIND THAT THIS ISSUE IS COVERED BY THE DECISION IN THE CASE OF DDIT VS NGC NETWORK ASI A LLC WHEREIN IT HAS BEEN HELD AS FOLLOWS: THUS IN THE GIVEN CASE THOUGH ASSESSEE IS ASSESSAB LE IN RESPECT OF THE INCOME (THOUGH OF COURSE, AND, IT WOULD NOT BE IF I TS QUANTUM APPEAL IS SUCCESSFUL, IT IS NOT LIABLE TO PAY ADVANCE TAX, SI NCE TAX IS DEDUCTIBLE BY THE PAYER M/S. NTIL, THOUGH NOT ACTUALLY DEDUCTED BY IT . WHEN THE ASSESSEE IS 4 NOT LIABLE TO PAY ADVANCE TAX, THERE IS NO QUESTION OF CHARGING INTEREST U/S. 234B. IN THE CASE OF MOTOROLA INC VS. DY. CIT, CIT ED SUPRA, IT WAS HELD IN SIMILAR CIRCUMSTANCES THAT WHERE ALL INCOME RECEIV ED BY ASSESSEE WERE SUCH FROM WHICH TAX WAS DEDUCTIBLE AT SOURCE, ASSESSEE C OULD NOT BE HELD TO HAVE COMMITTED DEFAULT IN PAYMENT OF ADVANCE TAX AND CON SEQUENTLY NOT LIABLE TO PAY INTEREST U/S. 234B. HENCE WE HAVE NOT HESITATI ON TO HOLD THAT ASSESSEE IN THIS CASE IS NOT LIABLE TO PAY INTEREST U/S. 234B. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE DISMI SS REVENUES APPEAL . THEREFORE, FOLLOWING THE ABOVE DECISION, WE ARE OF THE VIEW THAT LD. CIT[A] HAS CORRECTLY ADJUDICATED THE ISSUE THAT ASS ESSEE IS NOT LIABLE TO PAY ADVANCE TAX AND ACCORDINGLY NO INTEREST UNDER S ECTIONS 234B AND 234C WAS PAYABLE. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT[A]. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11TH DAY OF FEBRUARY, 2011. SD/- SD/- (VIJAY PAL RAO) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 11 TH FEBRUARY, 2011. P/-*