Appeal details
Counselvise Citation
[2018] 119 COUNSELVISE.COM (IT) 5042 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 3 month(s) 28 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-10-2018
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
F
Assessment Year
2011-2012
Appeal Filed On
12-06-2017
Judgement Text
IN THE INCOME-TAX APPELLATE TRIBUNAL F BENCH MUMB AI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 4316/MUM/2017 (ASSESSMENT YEAR 2011-12 ) M/S VIDEOCON D2H LIMITED (FORMERLY KNOWN AS M/S BHARAT BUSINESS CHANNEL LTD.) 171/C, MITTAL COURT, NARIMAN POINT, MUMBAI-400021. PAN: AACCB1409R VS. ACIT- 16(1) ROOM NO. 439, 4 TH FLOOR, AAYAKAR BHAVAN, M.M. ROAD, MUMBAI-400020. APPELLANT RESPONDE NT APPELLANT BY : SHRI BHUPENDRA KARKHANIS (AR) RESPONDENT BY : SHRI S. PADMAJA (DR) DATE OF HEARING : 10.10.2018 DATE OF PRONOUNCEMEN T : 10.10.2018 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER ; 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME -TAX ACT IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-4, MUMBAI DATED 17. 03.2017 FOR ASSESSMENT YEAR 2011-12. THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [THE LD. CIT(A )] ERRED IN HOLDING THAT THE APPELLANT IS NOT INTERESTED IN PURSUING TH E APPEAL AND CONSEQUENTLY ERRED IN NOT GRANTING SUFFICIENT OPPORTUNITY OF BEI NG HEARD WHICH IS UNJUSTIFIED, WRONG AND CONTRARY TO THE FACTS AND CIRCUMSTANCES O F THE CASE, THE PROVISIONS OF THE INCOME TAX ACT, 1961 AND THE RULES MADE THEREUN DER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS ES, THE LD. CIT (A) ERRED IN SUMMARILY DISMISSING THE APPEAL FILED BY THE ASSESS EE FOR WANT OF PROSECUTION, WITHOUT DECIDING THE ISSUES ON MERITS WHICH IS UNJU STIFIED, WRONG AND CONTRARY ITA NO. 4316 MUM 2017-M/S VIDEOCON D2H LIMITED 2 TO THE FACTS OF THE CASE, THE PROVISIONS OF THE INC OME TAX ACT, 1961, AND THE RULES MADE THEREUNDER. 3. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN DISALLOWING AN AMOUNT OF RS.140,16,56,008/- BEING CONTENT & OTHER SUPPORT COSTS BY INVOKING THE PROVI SIONS OF SECTION 40(A)(IA) BY TREATING SAID PAYMENTS MADE AS COVERED U/S 194-J OF THE INCOME TAX ACT 1961 AND THE REASONS ASSIGNED FOR DOING SO ARE WRON G AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIONS ACT OF INCOME TAX ACT, 1961, AND THE RULES MADE THEREUNDER. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN HOLDING THAT THE CONTENT PROCUREMENT CHARGES PAID BY THE APPELLANT COMPANY OF RS. 140,16,56,008/- COM ES UNDER THE DEFINITION OF THE TERM 'ROYALTY' AS CONTAINED IN EXPLANATION 2 TO SECTION 9(1)(VI) OF THE INCOME TAX ACT, 1961 AND THUS IS LIABLE FOR DEDUCTI ON OF TAX AT SOURCE UNDER SECTION 194J AND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIONS OF INCOME TAX ACT, 1961, AND THE RULES MADE THEREUNDER. (C) WITHOUT PREJUDICE TO ABOVE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER FAILED TO APPRECIATE THAT: (I) SECTION 40(A)(IA) OF THE ACT CAN BE INVOKED ONL Y IN THE EVENT OF NON- DEDUCTION OF TAX BUT NOT FOR LESSER DEDUCTION OF TA X AT SOURCE. (II) THE APPELLANT HAS DEDUCTED TAX AT SOURCE U/S 1 94C OF THE ACT FROM THE SAID PAYMENTS AS AGAINST SECTION 194J AS CONTENDED BY TH E LEARNED ASSESSING OFFICER, AND THUS DISALLOWANCE U/S 40(A)(IA) OF THE ACT CANNOT BE MADE. 2. AT THE OUTSET OF HEARING, THE LD. AUTHORIZED REPRES ENTATIVE (AR) OF THE ASSESSEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF TRIBUNAL I N ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11 IN ITA NO. 6795/MUM/201 6 DATED 30.05.2018. ITA NO. 4316 MUM 2017-M/S VIDEOCON D2H LIMITED 3 3. ON GOING THROUGH THE GROUNDS OF APPEAL AND DECISION OF TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 6795/MUM/2016, THE L D. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE FAIRLY CONCEDED THAT THE GROUNDS OF APPEAL RAISED BY ASSESSEE IS COVERED IN FAVOUR OF A SSESSEE AND AGAINST THE REVENUE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE DEC ISION OF TRIBUNAL. WE HAVE NOTED THAT THE GROUNDS OF APPEAL ARE COVERED I N FAVOUR OF ASSESSEE AND AGAINST THE REVENUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11 HAS PASSED THE FOLLOWING ORDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING TH E ASSESSMENT, THE ASSESSING OFFICER THE ASSESSEE WAS ASKED TO SUBMIT THE DETAIL S OF THE EXPENSES OF RS. 30,36,11,392/- AS A PROGRAMMING AND OTHER COSTS AND SHOW CAUSED AS TO WHY IT SHOULD NOT BE DISALLOWED UNDER SECTION 40(A)(IA). T HE ASSESSEE FILED ITS REPLY AND CONTENDED THAT THE PAYMENT PAID FOR THE PAY CHA NNEL CHARGES ARE NOT FOR A RIGHT TRANSFERRED, INFORMATION IMPARTED, ALLOWED US E OF PATENT, INVENTION, MODEL, DESIGN, TRADEMARK, ETC. THE ASSESSEE DID NOT RECEIVE ANY INFORMATION, TECHNICAL KNOWLEDGE, EXPERIENCE OR SKILL. THE ASSES SEE IS ALSO NOT GRANTED RIGHT TO USE ANY RIGHT, INFORMATION OR INTELLECTUAL PROPE RTY OR ANY EQUIPMENT. THE PAYMENT OF CARRIAGE FEES IS NOT FITTING ANYWHERE IN THE DEFINITION OF ROYALTY AND HENCE SECTION 194J IS NOT APPLICABLE. THE ASSES SEE ALSO CONTENDED THAT EXPLANATION 6 TO SECTION 9(1)(VI) OF THE ACT WAS NO T AT ALL ON STATUTE BOOK DURING THE RELEVANT PERIOD SO IT WAS IMPOSSIBLE FOR THE ASSESSEE COMPANY TO FORESEE SUCH PROVISION AND DEDUCT TAX AT SOURCE U/S 194J OF THE ACT. THE ASSESSEE ALSO CONTENDED THAT THE TERM ROYALTY HAS BEEN DEFINED IN EXPLANATION (V) TO SECTION 40(A)(IA) TO MEAN TO HAV E THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9. EXPLANATION 6 HAS NOT BEEN INCLUDED IN DEFINITION OF ROYALTY IN SECTI ON 40(A)(IA) AND THE DISALLOWANCE OF CHANNEL PLACEMENT FEES U/S 40(A)(IA ) BY INVOKING EXPLANATION 6 OF THE ACT DOES NOT ARISE. THE ASSESSEE ALSO CONT ENDED THAT THEY HAD DEDUCTED TDS U/S 194C OF THE ACT OUT OF ABUNDANT CAUTION, AT BEST, ONLY PROPORTIONATE DISALLOWANCE OF CHANNEL PLACEMENT FEES SHOULD BE MA DE AND NOT THE ENTIRE EXPENDITURE. THE CONTENTION OF ASSESSEE WAS NOT ACC EPTED BY ASSESSING ITA NO. 4316 MUM 2017-M/S VIDEOCON D2H LIMITED 4 OFFICER. THE ASSESSING OFFICER CONCLUDED THAT THE LEGISLATURE HAS ALWAYS INTENDED THAT A PROCESS SUCH AS TRANSMISSION BY S ATELLITE (INCLUDING UP LINKING, AMPLIFICATION, CONVERSION, OR DOWN LINKING OF ANY SIGNAL) CABLE, OPTIC FIBER OR ANY OTHER SIMILAR TECHNOLOGY, WHETHER OR N OT SUCH PROCESS IS A SECRET CONSTITUTE AND EMBEDDED IN THE DEFINITION OF ROYAL TY. THE ASSESSING OFFICER ALSO PERUSED THE VARIOUS CLAUSES ON AGREEMENT AND TOOK THE VIEW THAT ASSESSEE WAS REQUIRED TO DEDUCT TDS ON DISCOUNT TO DEALERS A ND DISTRIBUTORS UNDER SECTION 194H, THEREFORE, THE DISCOUNT TO DEALER AND DISTRIBUTOR AMOUNTING TO RS. 30,36,36,11,392/- WAS DISALLOWED UNDER SECTION 40(A )(IA). 6. THE ASSESSEE URGED THE SIMILAR CONTENTION BEFORE LD. CIT (A). THE ASSESSEE ALSO CONTENDED THAT THE SAID PAYMENT FALLS UNDER TH E DEFINITION OF WORK AS PROVIDED UNDER SECTION 194C. IN SUPPORT OF ITS CONT ENTION THE ASSESSEE RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN CIT VS PRASAR BHARAT [2007]158 TAXMAN 470 IN CONTEXT THAT WHERE TWO PROVISIONS ARE SIMULTANEOUSLY INTRODUCED IN THE ACT, ONE IS SPECIFIC AND OTHER IS GENERAL IN TERM THEN THE RESORT MUST BE TO THE SPECIFIC PROVISION. THEREFORE , THE ASSESSEE CONTENDED THAT THE WORK OF BROADCASTING AND TELECASTING OF THE PRO GRAMME SPECIFICALLY FALLS UNDER THE AMBIT OF SECTION 194C AND SECTION 194J CA NNOT APPLY. THE ASSESSEE ALSO RELIED ON THE CBDT CIRCULAR NO.720 DATED 30.08 .1995. THE LD CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND ON RELYING THE DECISION OF TRIBUNAL IN ACIT VS U TV ENTERTAINMENT, ITA NO. 269 9/M/2012 DATED 29.10.2014 AND ACIT VS NGS NETWORK(I) PVT LTD, ITA NO.1382/M/2014 DATED 09.07.2014, WHEREIN IT WAS HELD THAT WHEN THE AMOUNT IN QUESTION WAS PAID BY THE ASSESSEE WAS NOT TAXABLE IN INDIA IN UN DER SECTION 9(1)(VI) OR (VII) AS PER THE LEGAL POSITION AT THE RELEVANT TIME AND THEREFORE, THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE FROM THE AMOUNT BY INVOKING SECTION 40(A)(AI) AND GRANTED RELIEF TO THE ASSESSEE. 7. THE HONBLE PUNJAB AND HARYANA HIGH COURT IN KUR UKSHETRA DARPANS (P) LTD VS CIT (SUPRA) HELD THAT WHEN THE ASSESSEE, A C ABLE OPERATOR , ENTERED IN TO A CONTRACT WITH LICENSOR FOR VARIOUS TV CHANNELS FO R OBTAINING TELECAST SIGNALS FOR LOCAL DISTRIBUTION THROUGH ITS CABLE NETWORK A ND PAID SUBSCRIPTION CHARGES TO THE LICENSORS, PAYMENTS MADE TO LICENSOR WOULD A TTRACT PROVISIONS OF SECTION 194C, AS LICENSOR IS A PERSON WHO PERFORM WORK WHIC H IS COVERED WITHIN THE MEANING OF CLAUSE(B) OF EXPLANATION III TO SECTION 194C(2). 8. WE HAVE NOTED THAT THE COORDINATE BENCH OF MUMB AI TRIBUNAL IN CHANNEL GUIDE INDIA LTD (SUPRA) WHILE CONSIDERING THE SCOPE OF PROCESS INTRODUCED IN EXPLORATION 6 TO SECTION 9(1)(VI), INSERTED BY FINA NCE ACT 2012 WITH RETROSPECTIVE EFFECT FROM 1 JUNE 1976. THE TRIBUNAL HELD THAT BASED ON A DECISION OF LEGAL MAXIM LEX NON COGIT AD IMPOSSIBLIA MEANING THEREBY THAT THE LAW CANNOT POSSIBLY COMPEL A PERSON TO DO SOME THING WHICH IS IMPOSSIBLE TO PERFORM THE TRIBUNAL RELIED ON A DECISION OF S UPREME COURT IN CASE OF ITA NO. 4316 MUM 2017-M/S VIDEOCON D2H LIMITED 5 KRISHNA SWAMY S PD AND OTHERS VERSUS UNION OF INDI A AND OTHERS (281 ITR 305SC) AND HELD THAT THE AMOUNT IN QUESTION PAID BY ASSESSEE, WHICH WAS NOT TAXABLE IN INDIA IN THE HAND OF ASSESSEE AS PER SEC TION 9(1)(VI), AS PER LEGAL POSITION, AT THE RELEVANT TIME AND THE ASSESSEE, TH EREFORE, WAS NOT LIABLE TO TAX AT SOURCE FROM THE SAID AMOUNT PAID BY THEM AND THEREF ORE, THERE WAS NO QUESTION OF DISALLOWANCE OF THE SAID AMOUNT BY INVOKING THE PROVISION OF SECTION 40(A)(AI). FURTHER IN CASE OF RICH GRAVISS PRODUCTS (P) LIMITED VERSUS ACIT (SUPRA) HELD THAT THE PROVISION OF SECTION 194J BRI NG ROYALTY UNDER ITS PURVIEW, HOWEVER, THE TRANSACTION MADE BY THE ASSES SEE BEFORE THE INSERTION OF CLAUSE (C) IN SECTION 194J, WHICH HAS BEEN INSERTED WITH EFFECT FROM 13 JULY 2006, WILL NOT BE HIT BY THE PROVISIONS OF SECTION 194J ACCORDINGLY SECTION 194J WILL NOT BE ATTRACTED TO THE PAYMENT MADE BY ASSESS EE FOR THE PURCHASE OF SOFTWARE BEFORE 13 JULY 2006. IT WAS HELD THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA) CANNOT BE MADE FOR THE PAYMENT OF PURCHAS E OF SOFTWARE IN ASSESSMENT YEAR 2007-08, ON THE BASIS OF AMENDMENT MADE IN SECTION 9(1)(VI) BY FINANCE ACT 2012 WITH RETROSPECTIVE EFFECT. WE H AVE NOTED THAT THE ASSESSEE HAS MADE THE PAYMENTS IN THE FINANCIAL YEAR 2010-1 1 RELEVANT TO THE ASSESSMENT YEAR 2010-11, THEREFORE THE ASSESSEE HAS NO OCCASION TO FORESEE SUCH AMENDMENT AND THE ASSESSEE CANNOT BE HELD LIAB LE FOR DEDUCTION OF TAX AT SOURCE. MOREOVER, THE HONBLE PUNJAB AND HARYANA HI GH COURT HAS HELD THAT THE PAYMENT MADE IN CONTRACT WITH LICENSOR FOR VARI OUS TV CHANNELS FOR OBTAINING TELECAST SIGNALS FOR LOCAL DISTRIBUTION T HROUGH ITS CABLE NETWORK AND PAID SUBSCRIPTION CHARGES TO THE LICENSORS, PAYMENT S MADE TO LICENSOR WOULD ATTRACT PROVISIONS OF SECTION 194C. THEREFORE, KEEP ING IN VIEW OF THE ABOVE DISCUSSED FACTUAL AND LEGAL POSITION THE ASSESSEE S UCCEEDED ON BOTH THE COUNTS THAT THE PAYMENTS MADE ON ACCOUNT OF CABLE NETWORK AND PAID SUBSCRIPTION CHARGES ARE NOT ROYALTY AND PAYMENTS MADE TO LICENS OR WOULD ATTRACT PROVISIONS OF SECTION 194C. EVEN OTHERWISE THE ASSESSEE CANNOT BE HELD LIABLE DUE TO DUE TO SUBSEQUENT AMENDMENT IN LAW FOR DEDUCTION OF TAX AT SOURCE FOR PREVIOUS FINANCIAL YEAR. 9. WE HAVE FURTHER NOTED THAT THE CASE LAW RELIED B Y LD. DR FOR THE REVENUE IS NOT HELPFUL TO HER, AS THE SAME ARE MORE FAVORABLE TO THE ASSESSEE. IN VATIKA TOWNSHIP PRIVATE LIMITED (SUPRA) HELD THAT PROVISO IN THE FINANCE ACT, 2003 FURTHER MAKES IT CLEAR THAT SUCH A PROVISION WAS NE CESSARY TO PROVIDE FOR SURCHARGE IN THE CASES OF BLOCK ASSESSMENTS AND THE REBY MAKING IT PROSPECTIVE IN NATURE. THE CHARGE IN RESPECT OF THE SURCHARGE, HAVING BEEN CREATED FOR THE FIRST TIME BY THE INSERTION OF THE PROVISO TO SECTI ON 113, IS CLEARLY A SUBSTANTIVE PROVISION AND HENCE IS TO BE CONSTRUED PROSPECTIVE IN OPERATION. THE AMENDMENT NEITHER PURPORTS TO BE MERELY CLARIFICATO RY NOR IS THERE ANY MATERIAL TO SUGGEST THAT IT WAS INTENDED BY PARLIAMENT. FURT HERMORE, AN AMENDMENT MADE TO A TAXING STATUTE CAN BE SAID TO BE INTENDED TO REMOVE 'HARDSHIPS' ONLY OF THE ASSESSEE, NOT OF THE DEPARTMENT. ON THE CONT RARY, IMPOSING A RETROSPECTIVE LEVY ON THE ASSESSEE WOULD HAVE CAUSE D UNDUE HARDSHIP AND FOR ITA NO. 4316 MUM 2017-M/S VIDEOCON D2H LIMITED 6 THAT REASON PARLIAMENT SPECIFICALLY CHOSE TO MAKE T HE PROVISO EFFECTIVE FROM 01.06.2002 AND DISMISSED THE APPEAL OF THE REVENUE. WE HAVE ALSO NOTED THAT THE OTHER CASE LAW RELIED BY LD DR IN CIT V/S PRASAR BHARTI (SUPRA), IN CIT V/S UTV ENTERTAINMENT TELEVISION LTD. (SUPRA), AND DECI SION OF MUMBAI TRIBUNAL IN CASE OF ACIT V/S NGC NETWORK (I) (P.) LTD.(SUPR A) ARE MORE FAVORABLE TO THE ASSESSEE. HENCE, THE GROUNDS OF APPEAL RAISED B Y THE REVENUE ARE DISMISSED. 5. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2010-11 IN ITA NO. 6795/MUM/2016 DA TED 30.05.2018, THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE COVERE D, HENCE, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 /10/2018. SD/- SD/- G.S. PANNU PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 10 .10.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR F BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI
