SPORTS BROADCAST P.LTD, MUMBAI V. PR CIT 10, MUMBAI

ITA 2766/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4337 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 11-05-2015
• Court: TRIBUNAL
• Department Lawyers: N P SINGH
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Difference of opinion
• Section: 143(3); 194C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI BEFORE SHRI R.C. SHARMA, AM AND SHRI MAHAVIR SINGH, JM ITA NO. 2766/MUM/2015 (ASSESSMENT YEAR: 2010-11) M/S. NEO SPORTS BROADCAST PVT. LTD. APPELLANT 3 RD FLOOR, NIMBUS CENTRE OBEROI COMPLEX, ANDHERI (W) MUMBAI 400053 VS. PRINCIPAL COMMISSIONER OF INCOME-10 ROOM NO. 416, 4 TH FLOOR RESPONDENT AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN - AACCN2854Q APPELLANT BY: DR. K. SHIVARAM RESPONDENT BY: SHRI N.P. SINGH DATE OF HEARING : 23.03.2016 DATE OF PRONOUNCEMENT : 01.04.2016 O R D E R PER MAHAVIR SINGH, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE REVISION ORDER OF PRINCIPAL CIT-10, MUMBAI PASSED U/S. 263 OF THE INC OME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE ORDER D ATED 23.03.2015. THE ASSESSMENT WAS FRAMED BY DCIT (OSD) RANGE-8(1), MUM BAI U/S. 143(3) OF THE ACT FOR AY 2010-11 VIDE ORDER DATED 06.03.20 13. 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AG AINST THE REVISION ORDER OF CIT UNDER SECTION 263 OF THE ACT. FOR THIS THE ASSESSEE HAS RAISED THE FOLLOWING TWO EFFECTIVE GROUNDS: - 2 ITA NO. 2766/MUM/2013 M/S. NEO SPORTS BROADCAST PVT. LTD. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND LAW, THE APPLICABLE THERETO, LEARNED CIT ERRED IN HOLDING TH AT ASSESSMENT ORDER U/S 143(3) DATED 06-03-2013 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WITHOUT APPRECIATING TH E FACT THAT THE LD. AO HAS CONSIDERED THE ISSUE, THEREFORE, ORDER PASSE D U/S 263 OF THE ACT IS LIABLE TO BE QUASHED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT ERRED IN SETTING ASIDE THE ORDER PASSED U/S 143(3) DATED 06- 03-2013 WITH THE DIRECTION TO THE AO TO MAKE ASSESSMENT AFRESH A FTER PROPER VERIFICATION OF THE FACTS AND LAW APPLICABLE THERET O. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE CIT-10, MU MBAI ISSUED SHOW CAUSE NOTICE (SCN) DATED 22.09.2014 STATING TH AT THE ASSESSMENT FRAMED UNDER SECTION 143(3) DATED 06.03.2013 IS ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE FOR THE REAS ON THAT THE ASSESSEE HAS REIMBURSED BANK GUARANTEE EXPENDITURE OF RS. 21 ,31,28,528/- TO NIMBUS COMMUNICATION LTD. (NCL) WITHOUT DEDUCTION O F TDS U/S194C OF THE ACT. THE CIT OBSERVED THAT NCL HAS ACQUIRED TELECAST RIGHT FROM BCCI IN RESPECT OF MATCHES TO BE PLAYED IN INDIA AN D IN TERMS OF THAT AGREEMENT ENTERED INTO BETWEEN BCCI AND NCL, NCL WA S NOT OBLIGED TO PROVIDE BANK GUARANTEE OF RS. TWO THOUSAND CRORES. SUBSEQUENTLY, NCL ENTERED INTO AN AGREEMENT WITH THE ASSESSEE ON 27.1 1.2007 AND ASSESSEE AGREED TO REIMBURSE 80% OF THE BANK GUARAN TEE TO NCL. BCCI WAS NOT A PARTY TO THE AGREEMENT BETWEEN THE ASSESS EE AND NCL. ACCORDINGLY, AS PER THE CIT, THE ASSESSEE WAS UNDER OBLIGATION TO DEDUCT TDS @2% ON SUCH REIMBURSEMENT OF EXPENSES BU T WAS NOT DONE BY THE ASSESSEE. SIMILARLY, ANOTHER ISSUE IN THIS R EVISION PROCEEDING IS THAT THE ASSESSEE HAS PAID A SUM OF RS.45 LAKHS TO NOIDA SOFTWARE TECHNOLOGY PARK LTD. FOR TECHNICAL AND PROFESSIONAL SERVICES WITHOUT DEDUCTION OF TDS @ 10% UNDER SECTION 194J OF THE AC T. ACCORDING TO HIM TAX WAS DEDUCTED @ 2% U/S 194C OF THE ACT. 4. IN RESPONSE TO THE SCN, THE ASSESSEE REPLIED THAT A S PER TDS ASSESSMENT ORDER UNDER SECTION 201(1)/(1A) OF THE A CT DATED 18.03.2012 THE ASSESSEE HAS DEDUCTED TDS AND PAID BEFORE THE D UE DATES AND ALSO FILED DETAILS BEFORE THE AO. ACCORDINGLY TO THE ASS ESSEE, THE AO FRAMED 3 ITA NO. 2766/MUM/2013 M/S. NEO SPORTS BROADCAST PVT. LTD. ASSESSMENT AFTER CONSIDERING ALL THE FACTS AND IF A T THIS STAGE THIS ISSUE WOULD BE RAISED IT WILL TANTAMOUNT TO CHANGE IN OPI NION, BUT THE CIT WAS OF THE VIEW THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON REIMBURSEMENT AND THERE IS SHORTFALL OF TDS IN RESP ECT OF PAYMENTS TO NOIDA SOFTWARE TECHNOLOGIES PARK LTD. AMOUNTING TO RS.45 LAKHS AND HENCE THE ASSESSMENT FRAMES BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HENCE, HE WRONGLY DIRECTED THE AO TO MAKE FRESH ASSESSMENT AFTER PROPER VERIFICATION OF FACTS AND LAW APPLICABLE FOR TAX DEDUCTION AT SOURCE ON THESE TWO PAYMENTS. AGGR IEVED, ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 5. BEFORE US THE LEARNED COUNSEL OF THE ASSESSEE, IN R ESPECT OF APPLICABILITY OF TDS ON REIMBURSEMENT OF BANK GUARA NTEE CHARGES PAID TO NCL EXPLAINED THAT ASSESSEE HAS ACQUIRED TELECAS TING RIGHT FROM NCL OF CRICKET MATCHES TO BE PLAYED IN INDIA UNDER THE BANNER OF BCCI VIDE AGREEMENT DATED 16.09.2010 FOR INDIA AND OTHER SPEC IFIC TERRITORIES WHICH CONSTITUTES APPROXIMATELY 80% OF THE TOTAL RI GHTS OF NCL. THE AGREEMENT BETWEEN ASSESSEE AND NCL IS TOWARDS GRANT ING OF BROADCAST RIGHTS OF CRICKET MATCHES TO BE PLAYED IN INDIA IN ITS TV CHANNEL NEO CRICKET. TO ASSURE REGARDING TIMELY AND FULL PAYMEN T OF CHARGES, BCCI HAD LAID DOWN A CONDITION ON NCL TO PROVIDE BANK GU ARANTEE FROM CERTAIN BANKS FOR WHICH NCL HAS TO MAKE PAYMENT OF BANK GUARANTEE CHARGES TO BANKS. ASSESSEE HAS NOT PROVIDED ANY GUA RANTEE TO THE NCL FOR PAYMENT OF LICENSE FEES AND ASSESSEE HAS DEDUCT ED TDS UNDER SECTION 194J ON PAYMENT OF LICENSE FEES FOR OBTAINI NG BROADCAST RIGHTS FROM NCL. WITH RESPECT OF APPLICABILITY OF TDS ON R EIMBURSEMENT OF BANK GUARANTEE CHARGES BY ASSESSEE TO NCL, ACCORDIN G TO ASSESSEE, THE SAME IS NOT COVERED WITHIN THE PROVISIONS OF SECTIO N 194C, SINCE THE PAYMENT IS NEITHER MADE BY ASSESSEE FOR CARRYING OU T ANY WORK NOR IT IS TOWARDS BROADCASTING AND TELECASTING SERVICES OR RI GHTS. ACCORDING TO ASSESSEES COUNSEL THIS PAYMENT IS REIMBURSEMENT BY ASSESSEE AND NCL HAS NOT CARRIED OUT ANY WORK FOR ASSESSEE AND SINCE THE PAYMENT IS 4 ITA NO. 2766/MUM/2013 M/S. NEO SPORTS BROADCAST PVT. LTD. TOWARDS REIMBURSEMENT OF ACTUAL EXPENDITURE WITHOUT ANY PROFIT ELEMENT, IT IS NOT COVERED UNDER SECTION 194C OF TH E ACT. WITH RESPECT TO ANOTHER ISSUE OF SHORTFALL IN DEDUCTION OF TDS AS P OINTED OUT BY THE CIT IN RESPECT OF PAYMENT OF RS.45 LAKHS TO NOIDA SOFTW ARE TECHNOLOGY PARK LTD. FOR TECHNICAL AND PROFESSIONAL SERVICES, THE ASSESSEE HAS DEDUCTED TAX @ 2% AS PER PROVISIONS OF SECTION 194C OF THE A CT AND THIS PAYMENT DOES NOT FALL UNDER SECTION 194J OF THE ACT AND THI S IS MERELY A SHORTFALL OF PAYMENT AND THE ISSUE IS COVERED BY THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. S.K. TEK RIWAL (2014) 361 ITR 432 (CAL). IN VIEW OF THE ABOVE ARGUMENT LEARNED CO UNSEL OF THE ASSESSEE STATED THAT THE ASSESSMENT ORDER FRAMED BY THE AO I S NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. 6. ON THE OTHER HAND, THE LEARNED CIT-DR RELIED ON THE REVISION ORDER OF THE CIT PASSED UNDER SECTION 263 OF THE AC T. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ABOVE STATED FAC TS ARE UNDISPUTED IN RESPECT TO THE FIRST ISSUE OF REIMBURSEMENT OF BANK GUARANTEE CHARGES. NOW THE QUESTION ARISES WHETHER THE REIMBURSEMENT O F BANK GUARANTEE CHARGES PAID BY ASSESSEE TO NCL FALLS UNDER SECTION 194C OF THE ACT OR NOT. WE FIND THAT BANK GUARANTEE CHARGES PAID BY AS SESSEE TO NCL WAS NEITHER PAYMENT FOR CARRYING OUT ANY WORK NOR IT IS MADE TOWARDS BROADCASTING AND TELECASTING SERVICES. FROM THE AGR EEMENT ENTERED INTO BY THE ASSESSEE WITH NCL, IT IS CLEAR THAT BANK GUA RANTEE IS TO BE PROVIDED TO BCCI AS JOINT AND SEVERAL LIABILITY OF BOTH THE PARTIES AND THEREFORE REIMBURSEMENT OF BANK GUARANTEE COMMISSIO N TO NCL IS WITH RESPECT TO THE GUARANTEE PROVIDED BY THE BANK TO BC CI FOR WHICH PAYMENT IS MADE BY NCL AND SUBSEQUENTLY 80% IS REIM BURSED BY THE ASSESSEE. WE FIND THAT NCL HAS NOT CARRIED OUT ANY WORK FOR ASSESSEE AND SINCE THE PAYMENT IS TOWARDS REIMBURSEMENT OF A CTUAL EXPENDITURE AND HENCE THE SAME CANNOT BE PRESUMED TO BE COVERED UNDER SECTION 5 ITA NO. 2766/MUM/2013 M/S. NEO SPORTS BROADCAST PVT. LTD. 194C OF THE ACT. EVEN OTHERWISE ASSESSEE HAS REIMBU RSED 80% OF BANK GUARANTEE COMMISSION REFLECTED UNDER THE HEAD FINAN CIAL EXPENDITURE OF ITS AUDITED PROFIT & LOSS ACCOUNT. THE ASSESSEE RELIED UPON THE CBDC CIRCULAR NO. 715 DATED 08.08.1995 WHEREIN CBDT, VID E QUESTION NO. 30 ANSWERED THE PROPOSITION AS UNDER: - Q.30: WHETHER THE DEDUCTION OF TAX AT SOURCE U/S 1 94C AND 194J HAS TO BE MADE OUT OF THE GROSS AMOUNT OF THE BILL INCLUDI NG REIMBURSEMENT OR EXCLUDING REIMBURSEMENT FOR ACTUAL EXPENSES? ANS: SECTION 194C AND 194J REFER TO ANY SUM PAID. O BVIOUSLY, REIMBURSEMENT CANNOT BE DEDUCTED OUT OF THE TOTAL A MOUNT FOR THE PURPOSE OF TAX DEDUCTION AT SOURCE. 8. IN VIEW OF THESE FACTS AND THE BOARD CIRCULAR NO. 7 15 AND PAYMENT MADE BY THE ASSESSEE OF RS. 21,31,25,582/- TO NCL BY WAY OF REIMBURSEMENT OF ACTUAL EXPENDITURE INCURRED BY NCL ON PAYMENT OF BANK GUARANTEE COMMISSION IS MERELY A REIMBURSEMENT . IN THE LIGHT OF THE ABOVE, WE ARE OF THE VIEW THAT TAX IS NOT REQUI RED TO BE DEDUCTED FROM BANK GUARANTEE COMMISSION IN THE ABSENCE OF AG ENT/PRINCIPAL RELATION. CONSEQUENTLY TAX IS NOT REQUIRED TO BE DE DUCTED FROM REIMBURSEMENT OF ACTUAL EXPENSES BY ASSESSEE AS INC URRED BY NCL UNDER ANY OF THE PROVISIONS OF THE ACT. THIS ISSUE IS SQUARELY COVERED BY THE COORDINATE BENCH DECISION IN ASSESSEES OWN CAS E, WHEREIN THE ISSUE UNDER ADJUDICATION WAS REVISION PROCEEDINGS U NDER SECTION 263 OF THE ACT IN RESPECT TO REIMBURSEMENT OF BANK GUARANT EE COMMISSION UNDER SECTION 194A OF THE ACT IN PLACE OF DEDUCTION UNDER SECTION 194C OF THE ACT. THE TRIBUNAL, VIDE ITS ORDER IN ITA NOS . 4010 & 4011/MUM/2014 FOR A.Y. 2010-11 AND A.Y. 2011-12 DAT ED 19.02.2016 HAS CONSIDERED THIS ISSUE AND HELD AS THE ISSUE TO BE DEBATABLE VIDE PARA 12 AS UNDER: - 12. IN THE INSTANT CASE, THERE IS NO MONEY BORROWE D OR DEBT INCURRED. THEREFORE, PROVISIONS OF SEC. 2(28A) AND SEC. 194A DO NOT APPLY. PAYMENT MADE TO NCL IS NOT INCOME BY WAY OF INTEREST. THE IMPUGNED RECEIPT WOULD BE IN THE NATURE OF REIMBURSEMENT OF EXPENSES INCURRED BY IT. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY ME RIT IN THE ORDER PASSED U/S. 263 IN RESPECT OF ONE OF THE POSSIBLE V IEW TAKEN BY THE AO. 6 ITA NO. 2766/MUM/2013 M/S. NEO SPORTS BROADCAST PVT. LTD. EVEN ON MERIT, WE FOUND THAT BANK GUARANTEE COMMISS ION DOES NOT COME UNDER THE PURVIEW OF INTEREST SO AS TO MAKE ASSESSE E LIABLE FOR TDS U/S. 194A. IN VIEW OF THE ABOVE ORDER OF COORDINATE BENCH IN A SSESSEES OWN CASE, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E. 9. IN REGARD TO THE SECOND ISSUE OF SHORT DEDUCTION OF TDS ON THE PAYMENT MADE BY THE ASSESSEE TO NOIDA SOFTWARE TECH NOLOGY PARK LTD. OF AN AMOUNT OF RS. 45 LAKHS FOR TECHNICAL AND PROF ESSIONAL SERVICES, FOR WHICH ASSESSEE HAS DEDUCTED TAX @2% INSTEAD OF @ 10 % TO BE DEDUCTED UNDER SECTION 194J OF THE ACT AS HELD BY CIT IN HIS REVISION ORDER. WE FIND THAT THE PAYMENT MADE TO NOIDA SOFTWARE TECHNO LOGY PARK LTD. IS AS PER THE AGREEMENT ENTERED INTO BETWEEN THE ASSES SEE AND THE SAID PARTY, THE ASSESSEE HAS OBTAINED SERVICES ONLY FOR UPLINKING OF TWO CHANNELS OWNED BY ASSESSEE ON SATELLITE INVOLVING N O TECHNICAL SERVICES AND HENCE THE SAME IS COVERED UNDER SECTION 194C OF THE ACT AND THERE IS NO SHORTFALL IN TAX TO BE DEDUCTED. IN THIS REG ARD THE ISSUE OF THE ASSESSEE IS VERY CLEAR ON MERITS ALSO THAT ASSESSEE HAS RIGHTLY DEDUCTED TAX @ 2% U/S. 194C OF THE ACT ON PAYMENTS MADE TO NOIDA SOFTWARE TECHNOLOGY PARK LTD. EVEN OTHERWISE IN VIEW OF THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF S.K. TEK RIWAL, SUPRA WHEREIN IT HAS BEEN HELD THAT IF THERE IS ANY SHORTFALL DUE TO ANY DIFFERENCE OF OPINION AS TO TAXABILITY OF AN ITEM OR NATURE OF PA YMENT FALLING UNDER VARIOUS PROVISIONS OF TDS, THE ONLY SOLUTION LEFT W ITH THIS IS THAT THE ASSESSEE CAN BE DECLARED AS ASSESSEE IN DEFAULT UND ER THE PROVISIONS OF SECTION 201 OF THE ACT BUT NO DISALLOWANCE CAN BE M ADE BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THIS CL EARLY SHOWS THAT IT IS A HIGHLY DEBATABLE ISSUE. ONCE IT IS A DEBATABLE ISSU E, PROVISIONS OF SECTION 263 OF THE ACT, I.E. REVISION PROCEEDINGS C ANNOT BE INITIATED. 10. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT ON BO TH OF THE ISSUES THE REVISION PROCEEDINGS WILL NOT STAND AS BOTH THE SE ISSUES ARE HIGHLY DEBATABLE AND THERE CAN BE TWO OPINIONS FOR BOTH TH E ISSUES. THE AO 7 ITA NO. 2766/MUM/2013 M/S. NEO SPORTS BROADCAST PVT. LTD. HAS GONE INTO THE DETAILS OF THESE EXPENSES WHILE F RAMING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT VIDE ORD ER DATED 06.03.2013 AND HE HAS TAKEN A POSSIBLE VIEW AND NO DISALLOWANC E ACCORDINGLY WAS MADE, HENCE THE ASSESSMENT IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. HENCE, REVISION PROCEEDING IS QUASHED. 11. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01ST APRIL, 2016. SD/- SD/- (R.C. SHARMA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 1ST APRIL, 2016 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE PRINCIPAL CIT-10, MUMBAI 4. DR, B BENCH ITAT, MUMBAI 5. GUARD FILE. BY ORDER //TRUE COPY// (ASSTT. REGISTRAR) ITAT, MUMBAI N.P.