ACIT 16(1), MUMBAI V. T.V. VISION LTD, MUMBAI

ITA 3387/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0005 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 13-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Keywords: Retrospective amendment; Wholly owned subsidiary; Difference of opinion
• Section: 194C; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D , MUMBAI BEFORE S HRI SHAMIM YAHYA (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 3387 /MUM/2016 ASSESSMENT YEAR: 2012 - 13 THE ACIT - 16(1), ROOM NO. 439, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. MARG, MUMBAI - 400020 VS. M/S T.V. VISION LTD., 4 TH FLOOR, ADHIKARI CHAMBERS, OBEROI COMPLEX, NEW LINK ROAD, ANDHERI (WEST), MUMBAI 400053 PAN: AACCT7276Q (APPELLANT) (RESPONDENT) REVENUE BY : SHRI VIDISHA KALRA (CIT DR) ASSESSEE BY : SHRI MADHUR AGGARWAL ( AR ) DATE OF HEARING: 04 /01 /201 8 DATE OF PRONOUNCEMENT: 28 / 0 2 /201 8 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDER DATED 29.02.2016 PASSED BY THE C OMMISSIONER OF INCOME TAX (APPEALS) - 4 , MUMBAI , FOR THE A S S ESSMENT YEAR 2012 - 13 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT). 2. T HE BRIEF FA CTS OF THE CASE ARE THAT THE ASSESSEE COMPANY 100% SUBSIDIARY OF SHRI ADHIKARI BROTHERS TELEVISION NETWORK LTD., FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING LOSS AT RS 15,02,67,633/ - . LATER ON THE ASSESSEE AL SO FILED COPY OF T AX AUDIT REPORT UNDER SECTION 4 4AB IN FORM NO 3CA AND 3CD ALONG WITH ITS SUPPORTING STATEMENTS OF ACCOUNT. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE A CT. SINCE THE 2 ITA NO. 3387 / MUM/2016 ASSESSMENT YEAR: 2012 - 13 CASE WAS SELECTED FOR SCRUTINY , NOTICE UNDER SECTION 143 ( 2 ) A N D 142 (1) WERE ISSUED AND IN RESPONSE THEREOF THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE ATTENDED THE PROCEEDINGS AND FURNISH ED THE DETAILS CALLED FOR BY THE AO . SINCE, THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 30, 54 ,15,426/ - UNDER THE HEAD DISTRIBUTION EXPENSES, THE AO ASKED THE ASSESSEE TO FURNISH THE DETAIL OF EXPENSES. ACCORDINGLY, T HE AUTHORIZED REPRESENTATIVE SUBMITTED THE DETAIL S . THE AO NOTICED THAT THE ASSESSEE HAD DEDUCTED THE TAX AT SOURCE @ 10% ON THE AMOUNT OF RS. 12,01,982/ - AND ON REMAININ G AMOUNT THE TAX WAS DEDUCTED @ 2% U/S 194C INSTEAD OF 194J OF THE ACT. ACCORDINGLY, THE AO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY DISALLOWANCE OF EXPENSES FOR LESS TDS SHOULD BE MADE U/S 40(A)(IA) OF THE ACT . THE AUTHORIZED REPRESENTATIVE OF THE ASSES SEE SUBMITTED A DETAILED REPLY AND CONTENDED THAT TDS U/S 194C IS APPLICABLE FOR CARRIAGE/PLACEMENT FEES. HOWEVER, THE AO REJECTED THE CONTENTION OF THE ASSESSEE AND DISALLOW THE EXPENDITURE HOLDING THAT CARRIAGE FEES IS ROYALTY AS DEFINED IN EXPLANATION 2 TO SECTION 9(1)(VI) AND THE TAX AT SOURCE HAS BEEN DEDUCTED AT THE LESSER RATE. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER HEARING THE ASSESSEE IN THE LIGHT OF THE VARIOUS CASE LAW S RELIED UPON BY THE ASSESSEE DIRECTED THE AO TO DELETE THE DISALLOWANCE IN QUESTION. AGAINST THE SAID ORDER THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. T HE REVENUE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD, CIT(A) BY RAISING THE FOLLOWING EFFECTIVE GROUND S : - 1. ON THE FA CTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD. CIT (A) WAS JUSTIFIED IN DIRECTING TO DELETE THE DISALLOWANCE U/S 40(A)(IA) R.W.S 194J OF CARRIAGE FESS AND FAILING TO APPRECIATE THAT THE PAYMENTS MADE FOR USE/RIGHT TO USE OF PROCESS ARE ROYALTY AS PER EXPLANATION 6 TO SECTION 9(10(VI) HENCE SUCH PAYMENTS ARE COVERED U/S 194J OF THE INCOME - TAX ACT, 1961. 3 ITA NO. 3387 / MUM/2016 ASSESSMENT YEAR: 2012 - 13 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD. CIT (A) WAS JUSTIFIED IN DIRECTING TO DELETE THE DISALLOWANCE U/S 40(A)(IA) RWS 194J OF CARRIAGE FESS PLACING RELIANCE ON THE JUDGMENT IN THE CASE OF CIT VS S.K. TEKRIWAL [2014] 46 TAXMANN.COM 444 (CALCUTTA) WITHOUT APPRECIATING THAT IN THE LATEST JUDGMENT DATED 20 TH JULY, 2015, THE HONBLE KERALA HIGH COURT, CIT - 1 KOCHI VS PVS MEMORIAL HOSPITAL LTD. [2015] 60 TAXMANN.COM 69 (KERALA), HAD HELD AS UNDER: - IN SO FAR AS THE JUDGMENT OF THE CALCUTTA HIGH COURT IN S.K. TEKRIWAL (SUPRA) WHICH WAS RELIED ON BY THE TRIBUNAL IS CONCERNED, WITH GREAT RESPECT, FOR THE AFOR ESAID REASONS, WE ARE UNABLE TO AGREE WITH THE VIEWS THAT IF TAX IS DEDUCTED EVEN UNDER A WRONG PROVISION OF LAW, SECTION 40(A)(IA) CANNOT BE INVOKED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD. CIT (A) WAS JUSTIFIED IN DIRECTIN G TO DELETE THE DISALLOWANCE U/S 40(A)(IA) RWS194J OF CARRIAGE FESS, WHEREAS THE JURISDICTIONAL ITAT, MUMBAI L BENCH, IN ITS ORDER DATED 28.03.2014 IN THE CASE OF ADIT - (IT) - 2(2), MUMBAI VS VIACOM 18 MEDIA PVT. LTD. ANSWERED IN THE AFFIRMATIVE, THE FOLL OWING QUESTIONS OF LAW RAISED BY THE DEPARTMENT - A) WHETHER DEFINITION OF TERM PROCESS IN EXPLANATION 6 TO SECTION 9(1)(VI), BY WAY OF RETROSPECTIVE AMENDMENT IS CLARIFICATORY IN NATURE AND DID NOT AMEND DEFINITION OF ROYALTY PER SE HELD, YES; AND B) WHETH ER PAYMENTS MADE FOR USE/RIGHT TO USE OF PROCESS ARE ROYALTY IN TERMS OF THE INCOME - TAX ACT, 1961 - HELD YES. 4. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE ASSESSMENT ORDER SUBMITTED THAT THE ORDER PASSED BY THE LD. CIT(A) IS CONTRARY TO THE LAW LAID DOWN BY THE HONBLE KERALA HIGH COURT IN CIT - 1 KOCHI VS. PVS MEMORIAL HOSPITAL LTD.[2015]60TAXMANN.COM (KERALA) AND THE DECISION OF THE MUMBAI TRIBUNAL RENDERED IN THE CASE OF ADIT MUMBAI VS . 4 ITA NO. 3387 / MUM/2016 ASSESSMENT YEAR: 2012 - 13 VIACOM 18 MEDIA PVT . LTD. THE LD DR FUR THER SUBMITTED THAT THE CARRIAGE FEES /CHANNEL PLACEMENT FEES PAID BY THE ASSESSEE FALLS UNDER THE DEFINITION OF PROCESS AS PER THE EXPLANATION 2 OF SECTION 9(1)(VI) OF THE ACT AND THE DEFINITION OF TERM PROCESS AS AMENDED BY EXPLANATION 6 TO SECTION 9(1 )(VI) IS CLARIFICATORY IN NATURE AND HAS NO ALTERED THE DEFINITION AND AMBIT OF THE TERM ROYALTY PER SE . THEREFORE THE ASSESSEE WAS LIABLE TO DEDUCT THE TAX U/S 194J OF THE ACT. S INCE THE IMPUGNED ORDER IS NOT IN ACCORDANCE WITH THE CASES REFERRED ABOVE, T HE SAME IS LIABLE TO BE SET ASIDE. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ORDER UNDER CHAL LENGE DOES NOT SUFFER FROM ANY LEGAL INFIRMITY AS THE SAME HAS BEEN PASSED IN THE LIGHT OF THE LAW LAID DOWN BY THE VARIOUS B ENCHES OF THE TRIBUNAL AND THE HIGH COURTS INCLUDING THE HONBLE JURISDICTIONAL HIGH COURT. THE LD. COUNSEL FURTHER SUBMITTED THAT IN CIT VS. M/S UTV ENTERTAINMENT TELEVISION LTD. IN INCOME TAX APPEAL NO525 OF 2015,732 OF 2015,741 OF 2015 AND 1035 OF 2015 , THE HO NBLE BOMBAY HIGH COURT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. THE LD COUNSEL FURTHER SUBMITTED THAT THE HON,BLE GUJARAT HIGH COURT IN CIT VS. PRAYAS ENGINEERING LTD., TAX APPEAL NO 1237 OF 2014 AND THE KARNATAKA HIGH COURT IN CIT VS. K ISHORE RAO & OTHERS (HUF) HAVE HELD THAT IN CASE OF SHORTFALL DUE TO ANY DIFFERENCE OF OPINION AS TO THE TAXABILITY OF ANY ITEM OR THE NATURE OF PAYMENTS FALLING UNDER VARIOUS TDS PROVISIONS, NO DISALLOWANCE CAN BE MADE BY INVOKING PROVISIONS OF 40(A)(IA) OF THE ACT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL ON RECORD INCLUDING THE DECISIONS RELIED UPON BY THE PARTIES. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HAS WRONGLY DELETED THE DISALL OWANCE MADE BY THE AO U/S 40(A)(IA) OF THE ACT. THE OPERATIVE PART OF THE ORDER OF THE LD. CIT(A) READS AS UNDER: 5 ITA NO. 3387 / MUM/2016 ASSESSMENT YEAR: 2012 - 13 3.3. I HAVE CONSIDERED THE ISSUE UNDER APPEAL CAREFULLY. I FIND THAT CARRIAGE FEES IS NOT AT ALL ROYALTY AS DEFINED IN EXPLANATION 2 TO SECT ION 9(1)(VI) OF THE ACT. THE AO HAS NOT PROPERLY APPRECIATED THE FACT AND NATURE OF PAYMENT. FURTHER, SUCH CARRIAGE FEES I S SUBJECT TO TDS U/S 19 4C PAID TO CABLE OPERATORS AND SUCH FEES DO NOT QUALIFY AS FEES FOR TECHNICAL SERVICES OR ROYALTY, HENCE SECTIO N 194J OF THE ACT IS NOT APPLICABLE. FURTHER, IT IS PERTINENT TO MENTION THAT THIS CASE IS NOT OF NO TDS BUT IT IS A CASE OF LESS TDS U/S 194C, HENCE N O SUCH DISALLOWANCE CAN BE MADE /S 40(A)(IA) AS HAS BEEN HELD BY HONBLE CALCUTTA HIGH COURT IN T HE CASE OF THE CIT VS S. K. TEKRIWAL 48 SOT 515. RECENTLY IN THE CASE OF THE DCIT VS ZEE ENTERTAINMENT LTD. ITA NO. 3931 TO 3935/MUM/2013, IT HAS BEEN HELD THAT SUCH PAYMENT TO CABLE OPERATORS SHOULD BE SUBJECT TO TDS @2% U/S 194C. FURTHER APPELLANT GETS S UPPORT FROM THE JURISDICTIONAL ITAT, DECISION IN THE CASE OF A CIT VS M/S STAR DEN MEDIA SERVICES PVT .LTD( ITA NO 1413/MUM/2014) AND CHANDABHOY & JASSOBHOY VS DCIT 49 SOT 448 (MUMBAI ITAT). RESPECTFULLY FOLLOWING THE DECISION OVER THE ISSUE, THE AO IS DIR ECTED TO OF GENUINE EXPENDITURE OF RS.30,42,13,444/ - . 7. WE NOTICE THAT THE LD. CIT(A) HAS DELETED THE DISALLOWANCE IN QUESTION HOLDING THAT CARRIAGE FEES DOES NOT COME WITHIN THE AMBIT OF THE DEFINITION OF ROYALTY. THEREFORE, THE ASSESSEE WAS NOT REQUI RED TO DEDUCT THE TAX AT SOURCE U/S 194J . FU RTHER THE LD. CIT(A) HAS HELD THAT IT IS NOT THE CASE OF NO TDS BUT THE CASE OF LESS TDS THEREFORE, THE DISALLOWANCE MADE BY THE AO IS BAD IN LAW. THE LD. CIT(A) HAS RELIED ON THE DECISION OF THE HONBLE CALC UTTA HIGH COURT RENDERED IN CIT VS S. K. TEKRIWAL 48 SOT 515 AND THE DECISION S OF COORDINATE BENCH OF THE TRIBUNAL IN THE CASES OF CIT VS M/S STAR DEN MEDIA SERVICES PVT .LTD( ITA NO 1413/MUM/2014) AND CHANDABHOY & JASSOBHOY VS DCIT 49 SOT 448 (MUMBAI ITA T) . AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE THIS ISSUE IS COVERED BY THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT DELIVERED IN CIT VS. M/S UTV ENTERTAINMENT TELEVISION LTD. IN INCOME TAX APPEAL (SUPRA) IN FAVOUR OF THE 6 ITA NO. 3387 / MUM/2016 ASSESSMENT YEAR: 2012 - 13 ASSESSEE. SIMILARLY, THE HON,BLE GUJARAT HIGH COURT IN CIT VS. PRAYAS ENGINEERING LTD., (SUPRA) AND THE KARNATAKA HIGH COURT IN CIT VS. KISHORE RAO & OTHERS (HUF) (SUPRA) HAVE HELD THAT IN CASE OF SHORTFALL DUE TO ANY DIFFERENCE OF OPINION AS TO THE TAXABILITY OF ANY ITEM OR THE N ATURE OF PAYMENTS FALLING UNDER VARIOUS TDS PROVISIONS, NO DISALLOWANCE CAN BE MADE BY INVOKING PROVISIONS OF 40(A)(IA) OF THE ACT. 8. HENCE, IN OUR CONSIDERED OPINION, THE FINDINGS OF THE LD CIT(A) ARE BASED ON THE EVIDENCE ON RECORD AND IN ACCORDANCE W ITH THE PRINCIPLES OF LAW LAID DOWN BY THE HIGH COURTS INCLUDING THE JURISDICTIONAL HIGH COURT DISCUSSED ABOVE . WE THEREFORE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAME. ACCORDINGLY, WE UPHOLD THE DECISION OF THE LD. CIT(A) AND DISMISS THE SOLE GROUN D OF ISSUE OF THE REVENUE. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR A SSESSMENT YEAR 2012 - 20 13 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBR UARY, 2018 . SD/ - SD/ - ( SHAMIM YAHYA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 28 / 0 2 / 201 8 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 7 ITA NO. 3387 / MUM/2016 ASSESSMENT YEAR: 2012 - 13 3. ( ) / THE CIT (A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI