ASSISTANT COMMISSIONER OF INCOME TAX-16(1), MUMBAI V. MI MARATHI MEDIA LIMITED , MUMBAI

ITA 4601/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4289 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 27-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA JANGPANGI
• Keywords: Retrospective amendment; Question of law; TDS
• Section: 143(3); 40(a)(ia); 194C; 143(1); 201; 143(2)

Judgement Text

ACIT, CIRCLE 16(1) VS. M/S MI MARATHI MEDIA LIMITED ITA NO. 4601/MUM/2017 1 IN THE INCOME TAX APPELLATE TRIBUNAL ' D ' BENCH, MUMBAI BEFORE SHRI B.R BASKARAN , ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 4 601/ MUM/2017 (ASSESSMENT YEAR: 201 1 - 1 2 ) ASSTT. COMMISSIONER OF INCOME - TAX - 16(1), ROOM NO. 439, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 / VS. M/S MI MARATHI MEDIA LTD., 10, SUMER KENDRA SOCIETY PANDURANG BUDHKAR MARG, NEAR DOORDARSHAN KENDRA, BEHIND MAHINDRA & MAHINDRA TOWERS, WORLI, MUMBAI 400 013. ./ ./ PAN NO. AA ICS3594E ( / REVENUE) : ( / ASSESSEE ) / REVENUE BY : SHRI NARENDRA JANGPANG I / ASSESSEE BY : NONE / DATE OF HEARING : 0 6 .0 3 .201 9 / DATE OF PRONOUNCEMENT : 13 .0 3 .201 9 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 4, MUMBAI, DATED 07.03.2017, WHICH IN TUR N ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT IT ACT) , DATED 30.12.2013 . THE REVENUE ASSAILING THE ACIT, CIRCLE 16(1) VS. M/S MI MARATHI MEDIA LIMITED ITA NO. 4601/MUM/2017 2 ORDER PASSED BY A.O HA S RAISED BEFORE US THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING TO DELETE THE DISALL OWANCE U/S 40(A)(IA) RWS 194J IN RESPECT OF ARRIAGE FEES/PLACEMENT FEESAND FAILING TO APPRECIATE THAT THE PAYMENTS MADE FOR USE OF PROCESSARE ROYALTYAS PER EXPLANATION 6 TO SECTION 9(1)(VI) HENCE SUCH PAYMENTS ARE COVERD U/S 194J OF THE INCOME - TAX A CT, 1961. 2. WHETHER ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING TO DELETE THE DISALLOWANCE U/S 40(A)(IA) RWS 194J OF ARRIAGE FEES/CHANNEL PLACEMENT FEES 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 P. LTD.., HAS CONFIRMED THAT THE PAYMENTS MADE FOR USE/RIGHT TO USE OF PROCESS ARE ROYALTY IN TERMS OF THE INCOME - TAX ACT, 1961. 3 . WHETHER ON THE FA CTS, IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING TO DELETE THE DISALLOWANCE U/S 40(A)(IA) WITHOUT APPRECIATING THAT THE HONBLE KERALA HIGH COURT IN ITS JUDGMENT DATED 20.07.2015 IN THE CASE OF CIT - 1, KOCHI VS. P VS MEMORIAL HOSPITAL LTD. (2015) 60 TAXMANN.COM 69 (KERALA) HAS CLEARLY LAID DOWN THAT THE DISALLOWANCE U/S 40(A)(IA) WOULD BE MADE EVEN IN THE CASES OF SHORT DEDUCTION OF TAX. 4. THE APPELLANT CRAVES, LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WHICH OWNS A REGIONAL T.V CHANNEL HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 2011 - 1 2 ON 23.09.2011, DECLARING TOTAL INCOME AT RS. NIL. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH U/S 143(1) OF THE I.T ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE IT ACT. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 11,87,93,600/ - IN ITS PROFIT & LOSS ACCOUNT UNDER THE HEAD DISTRIBUTION EXPENSES , ON WHICH TAX WAS DEDUCTED AT SOURCE UNDER SEC. 19 4C OF THE I.T ACT . IT WAS NOTICED BY THE A.O THAT THE DISTRIBUTION EXPENSES MAINLY COMPRISED OF C ARRIAGE EXPENSES I.E EXPENSES THAT WERE INCURRED BY THE ASSESSEE FOR PLACING THE CHANNEL ON PRIME BAND FOR THE SOLE PURPOSE OF GETTING BETTER VIEWERSHIP, BETTE R TRP AND MAXIMIZ ING OF ITS REVENUE. THE A.O BEING OF THE VIEW THAT THE ACIT, CIRCLE 16(1) VS. M/S MI MARATHI MEDIA LIMITED ITA NO. 4601/MUM/2017 3 CARRIAGE EXPENSES INCURRED BY THE ASSESSEE FELL WITHIN THE REALM OF THE DEFINITION OF ROYALTY AS ENVISAGED IN SEC. 9(1)(VI) OF THE IT ACT, THEREFORE, THE ASSESSEE WHICH WAS OBLIGATED TO DEDUCT TAX AT SOURCE ON THE SAID AMOUNT UNDER SEC. 194J HAD WRONGLY DEDUCTED THE SAME UNDER SEC. 194C OF THE IT ACT. ON THE BASIS OF HIS AFORESAID DELIBERATIONS THE A.O DISALLOWED THE AMOUNT OF RS. 11,87,93,600/ - UNDER SEC. 40(A)(IA) OF THE I.T ACT. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) . THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS ADVANCED BY THE ASSESSEE THAT IT HAD RIGHTLY DEDUCTED TAX AT SOURCE UNDER SEC. 194C, WAS PERSUADED TO ACCEPT THE SAME. IT WAS OBSERVED BY THE CIT(A) THAT THE PAYMENT MADE BY THE ASSESSEE TOWARDS CHANNEL PL ACEMENT FEES WOULD NOT FALL WITHIN THE DEFINITION OF ROYALTY UNDER SEC. 9(1)(VI) OF THE IT ACT. THE CIT(A) WHILE SO CONCLUDING RELIED ON THE ORDER OF THE ITAT, MUMBAI IN THE CASE OF NGC NETWORKS (I) PVT. LTD. (ITA NO. 1382/MUM/2014; DATED 09.07.2014). AP ART THEREFROM, IT WAS NOTICED BY THE CIT(A) THAT THE SAID ISSUE WAS ALSO SQUARELY COVERED BY AN ORDER OF A COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT (TDS) - 3(1) VS. UTV ENTERTAINMENT, (ITA NO. 2699/MUM/2012; DATED 29.10.2014). ON THE BASIS OF HI S AFORESAID OBSERVATIONS THE CIT(A) DIRECTED THE A.O TO DELETE THE ADDITION OF RS. 11,87,93,600/ - . 5 . T H E REVENUE BEING AGGRI EVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. WE FIND THAT THE ASSESSEE RESPONDENT DESPITE HAVI NG BEEN INTIMATED AS REGARDS THE DATE OF HEARING OF THE APPEAL HAD NEITHER PUT UP AN APPEARANCE BEFORE US, NOR ANY APPLICATION SEEKING AN ADJOURNMENT HAS BEEN FILED. IN THE BACKDROP OF THE AFORESAID FACTS , WE ARE LEFT WITH NO OTHER ALTERNATIVE BUT TO PROCE ED WITH AS PER RULE 25 OF THE APPELLATE TRIBUNAL RULES, 1963 AND DISPOSE OFF THE APPEAL AFTER HEARING THE APPELLANT REVENUE. THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDER PASSED BY THE A.O. 6 . WE HAVE HEARD THE LD. D.R, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. O UR INDULGENCE IN THE ACIT, CIRCLE 16(1) VS. M/S MI MARATHI MEDIA LIMITED ITA NO. 4601/MUM/2017 4 PRESENT APPEAL HAS BEEN SOUGHT BY THE REVENUE FOR ADJUDICATING AS TO WHETHER THE CIT(A) WAS RIGHT IN LAW AND FACTS OF THE CASE IN CONCLUDING THAT AS THE ASSESS EE WAS NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE ON THE CHANNEL PLACEMENT FEES UNDER SEC.194J OF THE ACT AND HAD RIGHTLY SUBJECTED THE SAME FOR DEDUCTION UNDER SEC.194C, THEREFORE, NO DISALLOWANCE OF THE SAME WAS CALLED FOR IN ITS HANDS UNDER SEC. 40(A)(IA) OF THE IT ACT. 7 . WE HAVE DELIBERATED AT LENGTH ON THE ISSUE UNDER CONSIDERATION AND ARE OF THE CONSIDERED VIEW THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN T HE CASE OF THE COMMISSIONER OF INCOME TAX - 11 VS. M/S NGC NETWORKS (INDIA) PVT. LTD. (ITA NO. 397/MUM/2015; DATED 29.01.2018) . THE TWO FOLD ISSUE S WHICH WERE RAISED BEFORE THE HONBLE HIGH COURT WERE VIZ. (I). THAT AS TO WHETHER THE TRIBUNAL WAS JUSTIFIED I N HOLDING THAT THE DISALLOWANCE OF C HANNEL P LACEMENT F EES CANNOT BE MADE UNDER SEC. 40(A)(I) OF THE I.T ACT WHEN THE TAX WAS DEDUCTED U /S 194C INSTEAD OF SEC. 194J OF THE I.T ACT; AND (II). THAT AS TO WHETHER THE TRIBUNAL WAS JUSTIFIED IN HOLDING T H AT THE C HANNEL P LACEMENT F EE WAS NOT IN THE NATURE OF ROYALTY U/S 9(1)(VI) AND SO THE TAX WAS NOT REQUIRED TO BE DEDUCTED U/S 194J O F THE I.T ACT , DESPITE EXPLANATION 6 THERETO INSERTED W. R. E.F 01.06.1976. THE HONBLE HIGH COURT OBSERVED THAT SEC. 40(A)(I) OF T HE IT ACT UNDER WHICH THE EXPENDITURE WAS DISALLOWED BY THE REVENUE REFERRED TO THE MEANING OF ROYALTY AS PROVIDED IN EXPLANATION 2 TO SEC. 9(1)(VI) AND NOT EXPLANATION 6 TO SEC. 9(1)(VI) OF THE IT ACT. IN THE BACKDROP OF THE AFORESAID OBSERVATIONS , IT W AS HELD BY T H E HONBLE HIGH COURT THAT AS PAYMENT MADE BY THE ASSESSEE FOR CHANNEL PLACEMENT FEES WAS NOT ROYALTY, THEREFORE, NO DISALLOWANCE OF THE SAME COULD HAVE BEEN MADE UNDER SEC. 40(A)(I) OF THE IT ACT. APART THEREFROM, IT WAS ALSO OBSERVED BY THE H ONBLE HIGH COURT THAT AS THE AMENDMENT BY INTRODUCTION OF EXPLANATION 6 TO SEC. 9(1)(VI) TOOK PLACE IN THE YEAR 2012 WITH RETROSPECTIVE EFFECT FROM 1976, THEREFORE, THE ASSESSEE COULD NOT HAVE CONTEMPLATED THE SAID RETROSPECTIVE AMENDMENT AT THE TIME HE H AD MADE THE PAYMENT AFTER SUBJECTING THE SAME TO DEDUCTION OF TAX AT SOURCE UNDER SEC. 194C. THE HONBLE HIGH COURT WHILE UPHOLDING THE VIEW TAKEN BY THE ACIT, CIRCLE 16(1) VS. M/S MI MARATHI MEDIA LIMITED ITA NO. 4601/MUM/2017 5 TRIBUNAL THAT AS THE CHANNEL PLACEMENT FEES WAS RIGHTLY SUBJECTED TO DEDUCTION OF TAX AT SOURCE BY THE ASSESSEE UNDER SEC.194C AND NOT SEC. 194J OF THE IT ACT, THEREFORE, NO DISALLOWANCE OF THE SAID EXPENDITURE WAS CALLED FOR UNDER SEC. 40(A)(I) OF THE ACT IN THE HANDS OF THE ASSESSEE , HAD OBSERV ED AS UNDER: (D) WE FIND THAT VIEW TAKEN BY THE IMPUGNED ORDER DATED 9TH JULY, 2014 OF THE TRIBUNAL THAT A PARTY CANNOT BE CALLED UPON TO PERFORM AN IMPOSSIBLE ACT I.E. TO COMPLY WITH A PROVISION NOT IN FORCE AT THE RELEVANT TIME BUT INTRODUCED LATER BY RETROSPECTIVE AMEND MENT. THIS IS IN ACCORD WITH THE VIEW TAKEN BY THIS COURT IN CIT V/S. CELLO PLAST (2012) 209 TAXMANN 617 - WHEREIN THIS COURT HAS APPLIED THE LEGAL MAXIM LEX NON COGIT AD IMPOSSIBILIA (LAW DOES NOT COMPEL A MAN TO DO WHAT HE CANNOT POSSIBLY PERFORM). (E) IN THE PRESENT FACTS, THE AMENDMENT BY INTRODUCTION OF EXPLANATION - 6 TO SECTION 9(1)(VI) OF THE ACT TOOK PLACE IN THE YEAR 2012 WITH RETROSPECTIVE EFFECT FROM 1976. THIS COULD NOT BE HAVE BEEN CONTEMPLATED BY THE RESPONDENT WHEN HE MADE THE PAYMENT WHICH W AS SUBJECT TO TAX DEDUCTION AT SOURCE UNDER SECTION 194C OF THE ACT DURING THE SUBJECT ASSESSMENT YEAR, WOULD REQUIRE DEDUCTION UNDER SECTION 194J OF THE ACT DUE TO SOME FUTURE AMENDMENT WITH RETROSPECTIVE EFFECT. (F) FURTHER, WE ALSO NOTICE THAT UNDER S ECTION 40(A)( I ) OF THE ACT, UNDER WHICH THE EXPENDITURE HAS BEEN DISALLOWED BY THE REVENUE, MEANING OF ROYALTY AS DEFINED THEREIN, IS THAT AS PROVIDED IN EXPLANATION 2 TO SECTION 9(1)(VI) OF THE ACT AND NOT EXPLANATION 6 TO SECTION 9(1)(VI) OF THE ACT. THU S, THE DISALLOWANCE OF EXPENDITURE UNDER SECTION 40(A)(I) OF THE ACT CAN ONLY BE IF THE PAYMENT IS ROYALTY IN TERMS OF EXPLANATION 2 TO SECTION 9 (1)(VI) OF THE ACT. UNDISPUTEDLY, THE PAYMENT MADE FOR CHANNEL PLACEMENT AS A FEE, IS NOT ROYALTY IN TERMS OF EXPLANATION 2 TO SECTION 9(1)(VI) OF THE ACT. THEREFORE, NO DISALLOWANCE OF EXPENDITURE UNDER SECTION 40(A)( I ) OF THE ACT, CAN BE MADE IN THE PRESENT FACT S. (G) IN THE ABOVE VIEW, AS IT IS A SELF EVIDENT POSITION FROM THE READING SECTION 40(A)(I) OF THE ACT, NO SUBSTANTIAL QUESTION OF LAW. THUS, QUESTION (A) NOT ENTERTAINED. 8 . WE MAY HEREIN OBSERVE THAT AS THE DEFINITION OF ROYALTY AS ENVISAGED IN E XPLANATION TO SEC. 40(A)(I) AND THAT IN EXPLANATION(VI) TO SEC. 40(A)(IA) ARE SIMILARLY PLACED, THEREFORE, THE AFORESAID JUDGMENT OF THE HONBLE HIGH COURT WOULD BE APPLICABLE TO THE CASE OF THE PRESENT ASSESSEE WHERE THE DISALLOWANCE HAD BEEN MADE BY THE A.O UNDER SEC. 40(A)(IA). APART THEREFROM, WE ALSO FIND THAT THE ISSUE THAT CHANNEL PLACEMENT FEES IS LIABLE ACIT, CIRCLE 16(1) VS. M/S MI MARATHI MEDIA LIMITED ITA NO. 4601/MUM/2017 6 FOR DEDUCTION OF TAX AT SOURCE UNDER SEC. 194C , HAD ALSO RECENTLY BEEN LOOKED INTO BY A COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT, MUMBAI VS. M/S STAR DEN MEDIA SERVICES PVT. LTD. (ITA NO. 1311/MUM/2016; DATED 01.06.2018 FOR A.Y 2011 - 12. WE THUS RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF COMMISSIONER OF INCOME TAX - 11, VS . M/S NGC NETWORKS (INDIA) PVT. LTD. (ITA NO. 397/MUM/2015; DATED 29.01.2018) AND THE VIEW TAKEN BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S STAR DEN MEDIA SERVICES PVT. LTD. (SUPRA) , UPHOLD THE ORDER OF THE CIT(A) . 9 . THE APPEAL FILED BY TH E REVENUE IS DISMISSED. ORDER PRON OUNCED IN THE OPEN COURT ON 13 .0 3 .201 9 SD/ - SD/ - ( B.R BASKARAN ) ( RAVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 13 .0 3 .201 9 PS. ROHIT / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI ACIT, CIRCLE 16(1) VS. M/S MI MARATHI MEDIA LIMITED ITA NO. 4601/MUM/2017 7