Ortel Communications Ltd, Bhubaneswar V. JCIT (TDS), Bhubaneswar

ITA 491/CTK/2013

• Counselvise Citation: 49122114 RSA 2013
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 11-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B K MOHAPATRA
• Keywords: Bonafide belief; Non-deduction of tax; Reasonable cause
• Section: 194C; 201(1)

Judgement Text

1 I.T.A.NOS.491 & 492 /CTK/2013 ASSESSMENT YEARS:2006-07 & 2007-08 , CUTTACK IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH , CUTTACK ( )BEFORE . . , , HONBLE SHRI P.K.BANSAL, ACCOUNTANT MEMBER. /AND . . , HONBLE SHRI D.T.GARASIA, JUDICIAL MEMBER / I.T.A.NOS.491 & 492 /CTK/2013 ! ' / ASSESSMENT YEARS:2006-07 & 2007-08 ORTEL COMMUNICATIONS LTD., BHUBANESWAR - - - VERSUS- JCIT (TDS), BHUBANESWAR. ( $% /APPELLANT ) ( &'$% /RESPONDENT) $% ) / FOR THE APPELLANT: /SHRI B.K.MOHAPATRA &'$% ) /FOR THE RESPONDENT: /SHRI N.K.NEB * + , / DATE OF HEARING: 30.4.2014 -.' , / DATE OF PRONOUNCEMENT: 2 .5.2014 / / ORDER PER BENCH BOTH THESE APPEALS ARE DIRECTED AGAINST THE SEPARA TE ORDERS BOTH DATED 28.8.2013 OF LD CIT(A)-1, BHUBANESWAR FOR THE ASSESSMENT YEARS 2 006-07 AND 2007-08, RESPECTIVELY, IN THE MATTER OF PENALTY UNDER SECTION 271C OF THE INC OME TAX ACT, 1961. 2. THE ASSESSEE IS AGGRIEVED BY THE CONFIRMATION OF PENALTY UNDER SECTION 271C OF THE ACT OF RS.15,99,330 AND RS.19,12,635/- FOR THE ASSE SSMENT YEARS 2006-07 AND 2007-08. 2 I.T.A.NOS.491 & 492 /CTK/2013 ASSESSMENT YEARS:2006-07 & 2007-08 3. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CABLE NETWORK OPERATOR AND DISTRIBUTES THE PROGRAMMES OF DIFFERENT TV CHANNELS TO THE SUBSCRIBERS. THE JCIT (TDS) FOUND THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX U/ S.194C FROM PAYMENTS MADE TO BROADCASTERS OF DIFFERENT TV CHANNELS ON ACCOUNT OF AIR TIME CHARGES. IN VIEW OF THE SAME, PENALTY PROCEEDINGS U/S 271C WAS INITIATED. IT IS GATHERED FROM THE PENALTY PROCEEDINGS THAT THE ASSESSEE DID NOT APPEAR AND, ACCORDINGLY, IN ABSENCE OF REPLY, JCIT (TDS) PRESUMED THAT THERE WAS NO REASONABLE CAUSE FOR FAI LURE BY THE ASSESSEE. ACCORDINGLY, HE LEVIED PENALTY UNDER SECTION 271C OF THE ACT FOR BO TH THE ASSESSMENT YEARS UNDER CONSIDERATION. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BUT WI THOUT ANY SUCCESS. THEREFORE, THE ASSESSEE IS IN APPEAL BEFORE US. 5. LD A.R. SUBMITTED THAT THE ASSESSEE COMPANY IS R EGISTERED UNDER THE COMPANIES ACT AND IS A CABLE NETWORK OPERATORS AND IS IN THE BUSI NESS OF DISTRIBUTING CABLE CONNECTIONS TO THE CUSTOMERS AND CHARGES SUBSCRIPTION FEE FROM THE M. THE ASSESSEE HAS MADE PAYMENTS FOR AIR TIME CHARGES TO TV CHANNEL OWNERS AND THE S AID PAYMENTS WERE IN THE NATURE OF CONTENT PURCHASE AND THE ASSESSEE IS ONLY A SUBSC RIBER TO THE PROGRAMME WHICH IS ALREADY BEING BROADCASTED AND TELECASTED BY DIFFERENT TV CH ANNELS. THE TOTAL AMOUNT WAS PAID OF RS.5,90,65,030/- FOR THE ASSESSMENT YEAR 2006-07 AN D RS.8,53,85,487/- FOR THE ASSESSMENT YEAR 2007-08. IT WAS CONTENDED THAT SINCE IT WAS NO T IN THE NATURE OF WORK AS ENVISAGED UNDER SECTION 194C R.W. EXPLANATION III THERETO, TH E ASSESSEE IS NOT REQUIRED TO PAY TDS. THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT TDS IS NOT REQUIRED TO BE PAID ON THE SAME AMOUNT. THE HONBLE P&H HIGH COURT IN THE CASE OF KURUKHESHTRA DARPANS (P) LTD VS. CIT, 169 TAXMAN 344 HAS HELD THAT THE ASSESSEE IS LIABLE TO TDS ON THE SAID AIR TIME CHARGES 3 I.T.A.NOS.491 & 492 /CTK/2013 ASSESSMENT YEARS:2006-07 & 2007-08 FROM 1.4.2208 ONWARDS AND ASSESSEE HAS PAID DUE TAX IN RESPECT OF THE DEMAND BEFORE THE DUE DATE OF FILING INCOME TAX RETURNS. THEREFORE, ASSESSEE WAS UNDER THE HONEST BELIEF OF REASONABLE GROUND OF THE EXISTENCE OF CERTAIN CIRCU MSTANCES AND ASSUMING THEM TO BE TRUE HAD COME TO THE CONCLUSION OF NON-APPLICABILITY OF TDS U/S.194C OF THE ACT AND IT WAS A REASONABLE CAUSE FOR NON-DEDUCTION. THE ASSESSEE H AS ALSO GIVEN PAN NO. AND HIS ACCOUNT NO. TO WHOM AIR TIME CHARGES WAS PAID AND THE SAID PAYEES HAVE FILED THEIR INCOME TAX RETURNS FOR THE RESPECTIVE ASSESSMENT YEARS. ACCOR DINGLY, THE ASSESSEE OUGHT NOT BE TREATED AS AN ASSESSEE IN DEFAULT U/S.201(1) OF THE ACT FOL LOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BE VERAGE (P) LTD VS. CIT, 293 ITR 267 (SC). ASSESSEE CONTENDED THAT ITAT CUTTACK BENCH I N THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 HAS DELETED THE PENALTY ON SIMILAR FACTS. THEREFORE, PENALTY FOR THE ASSESSMENT YEARS UNDER CONSIDERATION HAS TO BE DELETED. 6. ON THE OTHER HAND, LD D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 7. WE HAVE HEARD RIVAL CONTENTIONS AND ALSO GONE TH ROUGH THE ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 (SUPRA), WHEREIN, THE AO DURING THAT ASSESSMENT YEAR HAS LEVIED PENALTY ON THE GROUND TH AT ASSESSEE HAS MADE PAYMENT TO BROADCASTER OF DIFFERENT TV CHANNELS AS AIR TIME CH ARGES BUT FAILED TO DEDUCT THE TAX AT SOURCE. THEREFORE, AS PER THE AO, THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE UNDER SECTION 194C OF THE ACT. THEREFORE, THE AO HAS RAI SED DEMAND UNDER SECTION 201(1) & 201(1A) AND ASSESSEE HAS PAID THE TAX. THE AO HAS LEVIED THE PENALTY UNDER SECTION 271C OF RS.15,99,330 AND RS.19,12,635/- FOR THE ASSESSM ENT YEARS 2006-07 AND 2007-08, RESPECTIVELY. WE FIND THAT THE TRIBUNAL RELYING UP ON VARIOUS DECISIONS OF HONBLE HIGH COURT HAS ALLOWED THE APPEAL ON SIMILAR SET OF FACTS, OBS ERVING AS UNDER: 4 I.T.A.NOS.491 & 492 /CTK/2013 ASSESSMENT YEARS:2006-07 & 2007-08 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE DECISIONS RELIED ON BY THE LEARNED AR OF THE ASSESSEE. WE FIND THAT AS PER THE RELEVANT PROVISIONS OF EXPL ANATION III BELOW THE PROVISO TO SECTION 194C(2), THE PAYMENTS IN QUESTION IS SUBJEC T TO DEDUCTION OF TAX AT SOURCE AND THE ASSESSEE HAS PAID THE DEMAND RAISED U/S.201 (1) AND 201(1A) IN THIS REGARD. FOR NON-DEDUCTION OF TAX AT SOURCE ON SUCH PAYMENTS , THE AUTHORITIES BELOW HAVE LEVIED THE IMPUGNED PENALTY. IN THE CASE OF WOODWAR D GOVERNOR INDIA (P) LTD. V. CIT [2002] 253 ITR 745 (DELHI), IT IS HELD THAT LEV Y OF PENALTY UNDER SECTION 271C IS NOT AUTOMATIC. BEFORE LEVYING PENALTY, THE CONCERNE D OFFICER IS REQUIRED TO FIND OUT THAT EVEN IF THERE WAS ANY FAILURE REFERRED TO IN T HE CONCERNED PROVISION THE SAME WAS WITHOUT A REASONABLE CAUSE. THE INITIAL BURDEN IS ON THE ASSESSEE TO SHOW THAT THERE EXISTED REASONABLE CAUSE WHICH WAS THE REASON TOR THE FAILURE REFERRED TO IN THE CONCERNED PROVISION. THEREAFTER THE OFFICER DEA LING WITH THE MATTER HAS TO CONSIDER THE EXPLANATION OFFERED BY THE ASSESSEE OR THE PERSON, AS THE CASE MAY BE. 'REASONABLE CAUSE' AS APPLIED TO HUMAN ACTION IS TH AT WHICH WOULD CONSTRAIN A PERSON OF AVERAGE INTELLIGENCE AND ORDINARY PRUDENC E. IT CAN BE DESCRIBED AS PROBABLE CAUSE. IT MEANS AN HONEST BELIEF FOUNDED U PON REASONABLE GROUNDS, OF THE EXISTENCE OF A STATE OF CIRCUMSTANCES, WHICH ASSUMI NG THEM TO BE TRUE, WOULD REASONABLY LEAD ANY ORDINARY PRUDENT AND CAUTIOUS M AN, PLACED IN THE POSITION OF THE PERSON CONCERNED, TO COME TO THE CONCLUSION THAT TH E SAME WAS THE RIGHT THING TO DO. THE CAUSE SHOWN HAS TO BE CONSIDERED AND ONLY I F IT FOUND TO BE FRIVOLOUS, WITHOUT SUBSTANCE OR FOUNDATION, THE PRESCRIBED CON SEQUENCES FOLLOW. NOW COMING TO THE CASE ON HAND, WE FIND THAT IT IS THE CONTENT ION OF THE ASSESSEE RIGHT FROM THE BEGINNING THAT THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON SUCH PAYMENTS UNDER THE BONAFIDE BELIEF THAT THE PAYMENTS IN QUESTION B EING 'AIR TIME CHARGES' PAID TO TV CHANNEL OWNERS WERE IN THE NATURE OF 'CONTENT PU RCHASE' AND THEREFORE, NOT LIABLE TO TDS U/S.L94C, WHICH HAS ALSO BEEN ACCEPTE D BY THE AUDITOR AND ALSO SUBSEQUENTLY OPINED BY THE CHARTERED ACCOUNTANT GIV ING HIS OPINION (SUPRA) FOR NOT TO BE DISALLOWED U/S.40(A)(IA). THE ISSUE WAS THEN NEW ONE IN THE COUNTRY AND DEBATABLE AND IT WAS ON THE BASIS OF PUNJAB & HARYA NA HIGH COURT DECISION IN THE CASE OF KURUKSHETRA DARPANS (P) LTD., V. CIT (169 T AXMAN 344),( REPORTED. IN MAY, 2008), THE ASSESSEE STARTED DEDUCTING TAX AT SOURCE ON SUCH PAYMENTS FROM 1.4.2008. THIS EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AUTHORITIES BELOW AS 'REASONABLE CAUSE'. BUT WE ARE OF THE OPIN ION THAT AN HONEST BELIEF FOUNDED UPON REASONABLE GROUNDS, OF THE EXISTENCE O F A STATE OF CIRCUMSTANCES, WHICH ASSUMING THEM TO BE TRUE, WOULD REASONABLY LE AD ANY ORDINARY PRUDENT AND CAUTIOUS MAN, PLACED IN THE POSITION OF THE PERSON CONCERNED, TO COME TO THE CONCLUSION THAT THE SAME WAS THE RIGHT THING TO DO. OUR ABOVE VIEW FINDS SUPPORT FROM THE VARIOUS DECISIONS CITED BY THE LEARNED AR OF THE ASSESSEE. THE ASSESSEE IN THE PRESENT CASE HAS GIVEN EXPLANATION BEFORE THE A UTHORITIES BELOW THAT THE DUE TO CIRCUMSTANCES PREVAILING AND UNDER BONAFIDE BELIEF THAT TAX WAS NOT REQUIRED TO BE DEDUCTED AT SOURCE U / S .194C ON THE PAYMENTS IN QUESTION. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE NON-DEDUCTION OF TAX AT SOURCE ON SUCH PAYMENTS CANNOT BE SAID TO BE WITHOUT A REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273C. THEREFORE, THE PENALTY LEVIED U/S.271C IN THE INSTANT CASE IS NOT JUSTIFIED AND AS SUCH, WE CANCE L THE SAME BY ALLOWING THE APPEAL OF THE ASSESSEE. 5 I.T.A.NOS.491 & 492 /CTK/2013 ASSESSMENT YEARS:2006-07 & 2007-08 8. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE ITAT, CUTTACK BENCH IN ASSESSEES OWN CASE (SUP RA), AND WE ARE IN CONSIDERED AGREEMENT WITH THE SAME. IN VIEW OF THIS, WE DELET E THE PENALTY LEVIED BY THE AO U/S.271C FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE ARE ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 2 .5.2014 ) / &, 1',2 - COPY OF THE ORDER FORWARDED TO: 1 . $% / THE APPELLANT : ORTEL COMMUNICATIONS LTD., C-1, CHANDRASEKHARPUR, BEHIND RMRC NEAR BDA COLONY, BBSR 2 &'$% / THE RESPONDENT: JCIT (TDS), BHUBNANESWAR 3 . / /THE CIT, BHUBANESWAR 4 . / ( )/THE CIT(A), BHUBANESWAR 5 . 3 &, /DR, CUTTACK BENCH 6 . GUARD FILE . ' , &, /TRUE COPY, / * / BY ORDER, ASST.REGISTRAR, ITAT, CUTTA CK SD/ - SD/ - ( . . ) , (P.K.BANSAL), ACCOUNTANT MEMBER ( . . ), (D.T.GARASIA(JUDICIAL MEMBER ( , )DATE. 2 .5 .2014 (B.K.PARIDA) SENIOR.PRIVATE SECRETARY. 6 I.T.A.NOS.491 & 492 /CTK/2013 ASSESSMENT YEARS:2006-07 & 2007-08