M/S SCOD 18 NETWORKING PVT LTD., MUMBAI V. DY CIT 11 (2)(1), MUMBAI

ITA 7570/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9957 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2016-2017
• Appeal Filed On: 10-12-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR MENON
• Keywords: TDS
• Section: 115JB; 40(a)(ia); 194C; 201; 194J; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAJESH KUMAR , ACCOUNTANT MEMBER ITA NO. 7570/MUM/2019 ASSESSMENT Y EAR: 2016 - 17 M/S SCOD 18 NETWORKING PRIVATE LIMITED, 3 & 4, PRATHMESH HO RIZON, LINK ROAD, NR. SAILEE SHP CENTER, BORIVALI (W) - 400091 PAN: AALCS6147C VS. THE DY. COMMISSIONER OF INCOME TAX 11 (2)(1), ROOM NO. 417, 4 TH FLOOR, AAYAKAR BHAVAN, M K MARG, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RASHMI KANT MODI (A R) REVENUE BY : SHRI VIJAY KUMAR MENON ( DR) DATE OF HEARING: 22/06 /20 21 DATE OF PRONOUNCEMENT: 09 / 07 /202 1 O R D E R PER SAKTIJIT DEY , JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST O RDER DATED 14.10.2019 OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 30, MUMB AI FOR THE ASSESSMENT YEAR 2016 - 17 . 2. THE DISPUTE IN THE PRESENT APPEAL IS C ONFINED TO DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 TOWARDS ALLEGE D NON DEDUCTION OF TAX AT SOURCE. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A RESIDENT COMPANY ENGAGED IN THE BUSINESS OF DISTRIBUTION OF TELEVISION CHANNELS TO LOCAL CABLE OPERATORS THROUGH ANALOGUE AND DIGITAL CABLE DISTRIBUTION NETWORK. FOR THE ASSESSM ENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 13.10.2016 DECLARING TOTAL INCOME OF RS. 3,86,78,230/ - UNDER THE NORMAL PROVISIONS OF THE ACT. WHEREAS, THE ASSESSEE DECLARED BOOK PROFIT OF RS. 4,40,22,958/ - UNDER SECTION 115JB OF 2 ITA NO. 7570 / MUM/2019 ASSESSMENT YEAR: 20 16 - 1 7 THE ACT . IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) WHILE VERIFYING THE TDS STATEMENT FURNISH ED BY THE ASSESSEE FOUND SHORT DEDUCTION OF TAX ON PAYMENT MADE TO CHANNEL COMPANIES. HE OBSERVED , INSTEAD OF DEDUCTING TAX AT THE RATE APPLICABLE AS PER SECTION 194J OF THE ACT, T H E ASSESSEE HAD DEDUCTED TAX AT A LOWER RATE BY APPLYING THE PROVISION OF SECTION 194C OF THE ACT . A FTER ISSUING SHO W CAUSE NOTICE AND REJECTING ASSESSEES EXPLANATION, T HE AO DISALLOWED AN AMOUNT OF RS. 5,86,28,748/ - , BEING 30% OF THE PAYMENT NOT SUBJECTED TO TDS AT THE APPROPRIATE RATE , BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THOUGH, THE ASSESSEE CONTESTED THE AFORE SAID DISALLOWANCE BEFORE LEARNED COMMISSIONER (APPEALS), H OWEVER, IT WAS UNSUCCESSFUL. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED , THE ASSESSEE , BEING A DISTRIBUTOR OF VARIOUS CHANNELS THROUGH ITS DISTRIBUTION NETWORK , WAS ALL ALONG DEDUCTING TAX AT THE RATE APPLICABLE UNDER SECTION 194C OF THE ACT. HE SUBMITTED , SUBSEQUENTLY , DUE TO CHA NGE IN LEGAL POSITION AS A RESULT OF S OME JUDICIAL PRECEDENTS , ASSESSEE STARTED DEDUCTING TAX BY APPLYING RATE AS PER SECTION 194J OF THE ACT. THUS, HE SUBMITTED , IT IS NOT A CASE WERE THE ASSESSEE HAS NOT AT ALL DEDUCTED TAX AT SOURCE. HE SUBMITTED , IN RE SPECT OF EACH AND EVERY PAYMENT MADE TO THE CHANNEL COMPANIES, T HE ASSESSEE HA D DEDUCTED AT SOURCE, EITHER UNDER SECTION 194C OR SECTION 194J OF THE ACT. THEREFORE, HE SUBMITTED , NO DISALLOWANCE UNDER SECTION 40(A)(IA) CAN BE MADE FOR SHORT DEDUCTION OF TA X AT SOURCE. FURTHER, HE SUBMITTED , SOME OF THE PAYEES I.E. STAR INDIA PVT. LTD. AND TAJ TELEVISION INDIA PVT. LTD. HAVE OBTAINED CERTIFICATE S FOR NO DEDUCTION AND DEDUCTION AT LOWER RATE , RESPECTIVELY FROM THE DEPARTMENT. HE SUBMITTED , BY HONORING SUCH CE RTIFICATE S ISSUED TO THE CONCERNED PAYEES BY THE DEPARTMENT, ASSESSEE HAS EITHER NOT DEDUCTED AT SOURCE OR HAS DEDUCTED AT THE APPROPR IATE RATE. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE CERTIFICATE S ISSUED UNDER SECTION 197 OF THE ACT IN FAVOUR OF STA R INDIA PVT. LTD. AND TAJ TELEVISION INDIA PVT. LTD. W ITHOUT PREJUDICE , HE SUBMITTED , IN ANY CASE OF THE MATTER ALL PAYMENT S MADE WERE SUBJECT ED TO TDS EITHER UNDER SECTION 194C OR 194J . HE SUBMITTED, WHETHER SECTION 194C OR 194J WOULD BE APPLICABLE TO THE PAYMENTS MADE IS A HIGHLY DEBATABLE ISSUE , AS , THERE ARE CONFLICTING VIEWS BY 3 ITA NO. 7570 / MUM/2019 ASSESSMENT YEAR: 20 16 - 1 7 JUDICIAL AUTHORITIES ON THE ISSUE. THUS, HE SUBMITTED , IN SUCH CIRCUMSTANCES NO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT CAN BE MADE. FINALLY, HE SUBMITTED THE AO HAS NOT PASSED ANY ORDER UNDER SECTION 201 OF THE ACT HOLDING THE ASSESSEE AS ASSESSEE IN DEFAULT. THEREFORE, NO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT CAN BE MADE . I N SUP PORT OF SUCH CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: 1. ACIT 16 (1) , MUMBA I VS. DISH TV INDIA LTD, ITA NOS. 3061 & 3062/MUM/20 17, ITA NOS. 3691&3692/MUM/2017 DATED10 OCTOBER 2017, 2. SCRABBLE ENTERTAINMENT L TD. VS ASST CIT 11(1), I.T.A. NOS. 1742 AND 2808/MUM/2016. 31 JANUARY 2018, 3. ACIT 16(1), MUMBAI VS. M/S UBJ BROADCASTING PRIVAT E LIMITED, ITA NO. 1205/MUM/2018, PRONOUNCED ON 19.03.2019. 4. C IT VS. S K TEKRIWAL, (2014) 46 TAXMANN.COM 444 ( CALCUTTA) 5. ACIT 16(1) VS. M/S T V VISION LTD., ITA 3387/MUM/2016, PRONOUNCED ON 28.02.2018. 6. CIT TDS 2, MUBMAI VS. UTV ENTERTAINMENT TELEVISION LTD. 8 8 TAXMANN.COM 214 (2017) BOMBAY HC. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELYING UPON THE OBSERVATIONS OF THE AO AND LEARNED COMMISSIONER (APPEALS) SUBMITTED, DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT CAN ALSO BE MADE FOR SHORT DEDUC TION OF TAX . IN SUPPORT OF SUCH CONTENTION, H E RELIED UPON THE FOLLOWING DECISION : COMMISSIONER OF INCOME TAX VS. PVS MEMORIAL HOSPITAL LTD. (2015) 60 TAXMAN.COM 69 (KERALA). 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATE RIALS ON RECORD. THOU GH, LEARNED COMMISSIONER (APPEALS) HAS ALLEGED THAT THE ASSESSEE HAS NOT DEDUCTED TAX IN RESPECT OF SOME PAYMENT S, H OWEVER, ON A CAREFUL PERUSAL OF MATERIALS ON RECORD INCLUDING THE AUDIT REPORT, WE FIND THE AFORESAID ALLEGATION BASELESS. IT IS EVIDENT FRO M THE MATERIAL ON RECORD , IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD MADE PAYMENT TO 19 PARTIES AN AMOUNT OF RS. 4 ITA NO. 7570 / MUM/2019 ASSESSMENT YEAR: 20 16 - 1 7 43,51,94,965/ - . IT IS A FACT THAT THE ASSE SSEE HAD DEDUCTED TAX AT SOURCE ON SUCH PAYMENT S EITHER BY APPLYING SECTION 194C OR SECTION 194 J OF THE ACT. IT IS FURTHER EVIDENT , DURIN G THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS PAID AN AMOUNT OF RS. 10,35,16,700/ - TO STAR INDI A PVT. LTD., WHICH HAS OBTAINED A NO DEDUCTION OF TAX AT SOURCE CERTIFICATE FROM THE DEPARTMENT. FURTHER, TAJ TELEVIS ION INDIA PVT. LTD. H AS ALSO OBTAINED A CERTIFICATE FOR DEDUCTION OF TAX AT A LOWER RATE OF 1.76%. THUS, THE ASSESSEE IN TERMS OF THE AFORESAID CERTIFICATES ISSUED , EITHER DID NOT DEDUCT AT SOURCE OR DEDUCT ED AT A LOWER RATE WHILE MAKING PAYMENT TO THE CON CERNED PARTIES . THUS, AS COULD BE SEEN FROM THE MATERIAL ON RECORD , THE DIFFERENCE IN THE AMOUNT TO BE DEDUCTED AS PER THE ASSESSEE AND AS PER THE REVENUE IS ON ACCOUNT OF THE DIFF ERENCE IN RATE AS APPLICABLE UNDER SECTION 194C AND 194J OF THE ACT. THUS, I T IS CLEARLY CASE OF SHORT DEDUCTION OF TAX AND NOT A CASE OF NO DEDUCTION OF TAX . 7. A S HELD BY THE HO NBLE CALCUTTA HIGH COURT IN C ASE OF CIT VS. S.K. TEKRIWAL (SUPRA), NO DISALLOWANCE UNDER SECTION 40(A)(IA) CAN BE MADE FOR SHORT DEDUCTION OF TAX AT SO URCE. THOUGH, THERE IS A CONTRARY DECISION OF THE HONBLE KERALA HIGH COURT IN CASE OF CIT VS . PVS MEMORIAL HOSPITAL (SUPRA), H OWEVER, AS PER TH E SETTLED LEGAL PRINCIPLE, WHEN THERE IS NO DECISION OF THE HONBLE SUPREME COURT OR HONBLE JURISDICTIONAL HIGH COURT AND THERE ARE CONFLICTING DECISION S OF NON JURISDICTIONAL HIGH COURT S , THE DECISION HOLD ING THE VIEW FAVORABLE TO THE ASSESSEE HAS TO BE ADOPTED. THE CO - ORDINATE BENCH IN CASE OF ACIT VS. DISH TV INDIA LTD. AND OTHER DECISIONS CITED BEFORE US BY THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO EXPRESSED THIS VIEW . IT IS ALSO A FACT THAT NO ORDER UNDER SECTION 201 OF THE ACT HAS BEEN PASSED BY TH E AO HOLDING THE ASSESSEE AS ASSESSEE IN DEFAULT. THUS, KEEPING IN VIEW THE AFORESAID FACTUAL AND LEGAL POSITI ON, NO DISAL LOWANCE UNDER SECTION 40(A)(IA) OF THE ACT CAN BE MADE. IN ANY CASE OF THE MATTER , WHETHER NATURE AND CHARACTER OF PAYMENT MADE BY THE ASSESSEE FALLS UNDER SECTION 194C OR 194J OF THE ACT , IS A HIGHLY DEBATABLE ISSUE , AS , THERE ARE DECISIONS BO TH IN FAVOUR AND AGAINST THE ASSES SEE . THAT BEING THE CASE, THE ASSE SSEE DESERVES THE BENEFIT OF DOUBT . THUS, CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE AND KEEPING IN VIEW THE RATIO 5 ITA NO. 7570 / MUM/2019 ASSESSMENT YEAR: 20 16 - 1 7 LAID DOWN IN THE DECISIONS RELIED UPON, WE ARE OF THE CO NSIDER ED VIEW THAT NO DISALLOWANCE UNDER SECTION 40(A) (IA) OF THE ACT CAN BE MADE. ACCORDINGLY, WE DELETE THE DISALLOWANCE. 8 . IN THE RESULT, APPEAL IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH JULY , 2021 . SD/ - SD/ - ( RAJESH KUMAR ) ACCOUNTANT MEMBER ( SAKTIJIT DEY ) JUDICIAL MEMBER MUMBAI ; DATED: 09 / 07 /2021 ALINDRA, PS / 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 . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI