The ACIT, Trichur V. M/s.Kerala Vision Ltd, Trichur

ITA 52/COCH/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7159 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-09-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 28-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: C V RAJAN
• Keywords: Retrospective amendment; Non compliance
• Section: 194C; 6

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M ITA NO. 52 /COCH/201 7 ASSESSMENT YEAR : 2011 - 12 THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-1(1), THRISSUR. VS. M/S. KERALA VISION LTD., ALPHA COMPLEX, 2 ND FLOOR, THOPPINMOOLA, POOTHOLE, THRISSUR-680 004. [PAN:AACCK 6383M] (REVENUE - APPELLANT) ( ASSESSE E - RESPONDENT) REVENUE BY SMT. A.S. BINDHU, DR ASSESSEE BY SHRI C.V. RAJAN, CA D ATE OF HEARING 26 / 09 /2018 DATE OF PRONOUNCEMENT 28 / 0 9 /2018 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), THRISSUR DATED 21/12/2016 AND PERTAINS TO THE ASSESSMENT YEAR 2011-12. 2. THE REVENUE HAS RAISED THE GROUND WITH REGARD TO DELETION OF ADDITION MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF RS.2,59,31,184/-, THE EXPENDITURE CLAIMED BY THE ASSESSEE ON ACCOUNT OF PAY CHANNEL CHARGES PAID/CREDITED TO VARIOUS COMPANIES DUE TO NON COMPLIANCE OF PROVISIONS OF SECTION 194C OF THE I.T. ACT. THE REVENUE HAS ALSO RAISED THE GROUND THAT THE CIT(A) FAILED TO I.T.A. NO. 52/COCH/2017 2 NOTICE THAT AS PER AMENDMENT AS EXPLANATION 6 TO SECTION 9(1) OF THE ACT BROUGHT OUT BY THE FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT FROM 01/06/1976, THE SCOPE OF THE TERM PROCESS USED IN EXPLANATION 2 THAT DEFINED TERM ROYALTY WAS EXPANDED. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DISTRIBUTING CABLE SIGNALS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE PAID PAY CHANNEL CHARGES TO VARIOUS COMPANIES LIKE STAR DEN MEDIA LTD., ZEE TURNER LTD., MSM DISCOVERY PVT. LTD., UTV GLOBAL BROADCASTING LTD. ETC. TOTALING RS.2,59,31,184/-. OUT OF THIS, THE ASSESSEE DEDUCTED AND PAID TAX ON PAYMENTS AMOUNTING TO RS.50,15,895/-. IT WAS HELD BY THE ASSESSING OFFICER THAT THE ASSESSEE WAS BOUND TO DEDUCT TAX AT SOURCE AND PAY IT TO THE GOVERNMENT IN TIME AS PER THE PROVISIONS OF SECTION 194C OF THE I.T. ACT. AS THIS WAS NOT DONE, THE ASSESSING OFFICER DISALLOWED THE ENTIRE AMOUNT OF RS.2,59,31,184/- AND ADDED TO THE RETURNED INCOME. 4. ON APPEAL, THE CIT(A) BY PLACING RELIANCE ON THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO. 794/COCH/2013 DATED 06/06/2014 ALLOWED THE APPEAL OF THE ASSESSEE. 5. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. I.T.A. NO. 52/COCH/2017 3 6. AFTER HEARING BOTH THE PARTIES WE FIND THAT A SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.794/COCH/2013 FOR THE ASSESSMENT YEAR 2009-10 WHEREIN THE TRIBUNAL VIDE ORDER DATED 06/06/2014 HELD AS UNDER: 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD. FOR THE PURPOSE OF SEC. 194J, THE TERM ROYALTY SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SEC. 9. THE SAID EXPLANATION READS AS UNDER:- EXPLANATION 2 FOR THE PURPOSES OF THIS CLAUSE, ROYALTY MEANS CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION BUT EXCLUDING ANY CONSIDERATION WHICH WOULD BE THE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD CAPITAL GAINS) FOR I) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; II) THE IMPARTING OF ANY INFORMATION CONCERNING THE WORKING OF, OR THE USE OF, A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; III)THE USE OF ANY PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; IV)THE IMPARTING OF ANY INFORMATION CONCERNING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL; (IVA)THE USE OR RIGHT TO USE ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT BUT NOT INCLUDING THE AMOUNTS REFERRED TO IN SECTION 44BB; (V) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING FILMS OR VIDEO TAPES FOR USE IN CONNECTION WITH TELEVISION OR TAPES FOR USE IN CONNECTION WITH RADIO BROADCASTING BUT NOT INCLUDING CONSIDERATION FOR THE SALE, DISTRIBUTION OR EXHIBITION OF CINEMATOGRAPHIC FILMS; (VI) THE RENDERING OF ANY SERVICES IN CONNECTION WITH THE ACTIVITIES REFERED TO IN SU-CLAUSES (I) TO (IV), (IVA) AND (V). I.T.A. NO. 52/COCH/2017 4 WE NOTICE THAT CLAUSE (I) OF EXPLANATION 2 INCLUDES THE EXPRESSION PROCESS. WE FURTHER NOTICE THAT THE FINANCE ACT, 2012 HAS INSERTED EXPLANATION 6 BELOW CLAUSE (VI) OF SUB-SECTION (1) OF SEC. 9 DEFINING THE WORD PROCESS. THE SAID EXPLANATION 6 READS AS UNDER:- EXPLANATION 6 FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT THE EXPRESSION PROCESS INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED TRANSMISSION BY SATELLITE (INCLUDING UP-LINING, AMPLIFICATION, CONVERSION FOR DOWN-LINKING OF ANY SIGNAL), CABLE, OPTIC FIBRE OR BY ANY OTHER SIMILAR TECHNOLOGY WHETHER OR NOT SUCH PROCESS IS SECRET; WE NOTICE THAT THE EXPRESSION PROCESS INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED TRANSMISSION BY SATELLITE, CABLE, OPTIC FIBRE OF ANY OTHER TECHNOLOGY. IN THE INSTANT CASE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRANSMITTING THE TELEVISION CHANNELS OR SIGNALS BY CABLE BY RECEIVING SIGNALS THROUGH SATELLITE. SUCH KIND OF TRANSMISSION (BOTH RECEIPT OF SIGNAL AND TRANSMISSION OF THE SAME) IS INCLUDED IN THE DEFINITION OF PROCESS UNDER EXPLANATION 6, WHICH HAS BEEN INSERTED BY THE FINANCE ACT, 2012 TO REMOVE THE DOUBTS. SINCE THIS EXPLANATION STARTS WITH THE WORDS FOR REMOVAL OF DOUBTS, IN OUR VIEW, IT IS CLARIFICATORY IN NATURE AND IT WOULD APPLY FOR THE YEAR UNDER CONSIDERATION ALSO. AS STATED EARLIER, THE TRANSFER OF ALL OR ANY RIGHTS IN RESPECT OF A PROCESS SHALL FALL IN THE CATEGORY OF ROYALTY AS PER CLAUSE (I) OF EXPLANATION 2. HENCE, IN OUR VIEW, THE PAYMENT MADE BY THE ASSESSEE AS PAY CHANNEL CHARGES SHALL FALL IN THE CATEGORY OF ROYALTY AS DEFINED IN CLAUSE (I) OF EXPLANATION 2 TO SEC. 9(1) OF THE ACT. 6. THE LD COUNSEL PRESENTED AN ALTERNATIVE ARGUMENT, VIZ., THE AMENDMENT BROUGHT IN BY THE FINANCE ACT WITH RETROSPECTIVE EFFECT, WHICH WAS PASSED IN THE YEAR SUBSEQUENT TO THE YEAR UNDER CONSIDERATION, SHOULD NOT BE CONSIDERED FOR PENALIZING THE ASSESSEE BY WAY OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT. THE LD COUNSEL SUBMITTED THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD VS. DIT (332 ITR 340) HAD TAKEN THE VIEW THAT THE TRANSMISSION OF TELEVISION SIGNALS THROUGH SATELLITE / TRANSPONDERS WOULD NOT FALL IN THE CATEGORY OF ROYALTY AS DEFINED UNDER EXPLANATION 2 TO SEC. 9(1) OF THE ACT. HE SUBMITTED THAT THE EXPLANATION 6, WHICH EXPANDED THE SCOPE OF THE EXPRESSION PROCESS HAS BEEN INSERTED BY THE FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT, WAS BROUGHT INTO THE ACT ONLY TO NULLIFY THE DECISION RENDERED BY THE HONBLE DELHI HIGH COURT. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE VIEW ENTERTAINED BY THE ASSESSEE THAT THE PAYMENT OF PAY CHANNEL CHARGES WILL NOT FALL IN THE CATEGORY OF ROYALTY WAS SUPPORTED BY THE DECISION OF HONBLE DELHI HIGH COURT REFERRED ABOVE. ACCORDINGLY HE SUBMITTED THAT THE DISALLOWANCE U/S 40(A)(IA) SHOULD NOT BE MADE ON THE BASIS OF SUBSEQUENT I.T.A. NO. 52/COCH/2017 5 AMENDMENT MADE WITH RETROSPECTIVE EFFECT. IN THIS REGARD, HE PLACED RELIANCE ON THE FOLLOWING CASE LAW:- (A) SONATA INFORMATION TECHNOLOGY LTD VS. DCIT (2012)(TAXCORP (INTL) 4659 (MUMBAI-TRIB) (B) INFOTECH ENTERPRISES LIMITED VS. ADDL. CIT (2014) TAXCORP (INTL) 6945 (ITAT HYDERABAD) (C) CHANNEL GUIDE INDIA LIMITED VS. ACIT (2013) TAXCORP (INTL) 6702 (ITAT-MUM) WE HAVE GONE THROUGH THE ABOVE SAID DECISIONS RENDERED BY DIFFERENT BENCHES OF THE TRIBUNAL. WE NOTICE THAT THEY HAVE HELD THAT THE ASSESSEE CANNOT BE HELD TO BE LIABLE TO DEDUCT TAX AT SOURCE RELYING ON THE SUBSEQUENT AMENDMENTS MADE IN THE ACT WITH RETROSPECTIVE EFFECT. 7. IN THE INSTANT CASE, THE VIEW ENTERTAINED BY THE ASSESSEE THAT THE PAY CHANNEL CHARGES CANNOT BE CONSIDERED AS ROYALTY IS IN FACT GETS SUPPORT FROM THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATION CO. LTD (SUPRA). THOUGH THE EXPLANATION 6 TO SEC. 9(1)(VI) INSERTED BY FINANCE ACT, 2012 IS CLARIFICATORY IN NATURE, YET IN VIEW OF THE FACT THAT THE VIEW ENTERTAINED BY THE ASSESSEE GETS SUPPORT FROM THE DECISION OF DELHI HIGH COURT, REFERRED ABOVE, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE HELD TO BE LIABLE TO DEDUCT TAX AT SOURCE FROM THE PAY CHANNEL CHARGES. HENCE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF PAY CHANNEL CHARGES BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE. 6.1 FURTHER, THE HIGH COURT OF JUDICATURE AT BOMBAY, ORDINARY ORIGINAL CIVIL JURISDICTION IN THE CASE OF CIT VS. M/S. NGC NETWORKS (INDIA) PVT. LTD. IN ITA NO. 397 OF 2015 VIDE ITS ORDER DATED 29/01/2018 HELD AS UNDER: (D) WE FIND THAT VIEW TAKEN BY THE IMPUGNED ORDER DATED 9 TH 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 AMENDMENT. THIS IS IN ACCORD WITH VIEW TAKEN BY THIS COURT IN CIT VS. CELLO PLAST (2012) 209 TAXMANN I.T.A. NO. 52/COCH/2017 6 617 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 HAVE BEEN CONTEMPLATED BY THE RESPONDENT WHEN HE MADE THE PAYMENT WHICH WAS 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. 6.2 IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL CITED SUPRA AND THE JUDGMENT OF THE HIGH COURT OF BOMBAY CITED SUPRA , WE ARE INCLINED TO DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH SEPTEMBER, 2018. SD/- SD/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 28 TH SEPTEMBER, 2018 GJ COPY TO: 1. M/S. KERALA VISION LTD., ALPHA COMPLEX, 2 ND FLOOR, THOPPINMOOLA, POOTHOLE, THRISSUR-680 004. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), THRISSUR. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), THRISSUR. I.T.A. NO. 52/COCH/2017 7 4. THE PR. COMMISSIONER OF INCOME-TAX, THRISSUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN