Decided on July 09,2014

Astt. Commissioner Of Income Tax Appellant
Ngc Networks (I) Pvt. Ltd. Respondents


Vijay Pal Rao, Member (J) - (1.) THIS appeal by the Revenue and the Cross Objection by the Assessee are directed against the order giving effect to the directions dated 31.12.2013 of DRP -II, Mumbai passed u/s. 144C(1) of the Income Tax Act for the assessment year 2009 -10. Revenue has raised the following grounds in this appeal: - 1. On the facts and circumstances of the case and in law, the ld. DRP was not justified in deleting the disallowance of Rs. 7,18,19,004/ - made on account of channel placement fees u/s. 40(a)(ia) as TDS was not deducted u/s. 194J. 2. THE Appellant prays that the order of the ld. DRP -II on the above grounds be set aside and that of the AO be restored.
(2.) The only issue raised by the Revenue is in respect of directions of the DRP in deleting the disallowance made by AO u/s. 40(a)(ia) as the Assessee has deducted short tax at source u/s. 194C. Before us, the ld. DR has submitted that during the year under consideration the Assessee paid channel placement fee of Rs. 7,18,19,004/ - to the cable operators on which the Assessee has deducted TDS @ 2% instead of 10% as per provisions of Section 194J. The ld. DR submitted that the channel placement fees are charges paid by the broadcaster to the MSO for placing their channel on a particular frequency or bandwidth. Thus, these charges are paid to put the channel in prime frequency/band so that viewership as well as quality of channel can be increased. Placing a particular channel on a particular frequency is integral part of transmission and broadcasting process and therefore, the fee/charges paid by Assessee are in the nature of royalty as defined in the Explanation 2 to section 9(1)(vi) of the Income Tax Act. The fee is paid for placing the channel in a particular prime band or bandwidth involves process of transmission and, therefore, the provisions of section 194J are applicable on such payment. The Assessee has not deducted tax at the required rate of 10% but deducted tax only @ 2%, Therefore, the provisions of section 40(a)(ia) are attracted for disallowance. He has relied upon the draft order of AO.
(3.) ON the other hand the ld. Sr. Counsel has submitted that the Assessee has deducted tax u/s. 194C which is applicable on payment in question. He has further submitted that DRP has considered the issue even in the light of retrospective amendment whereby Explanation -6 to Section 9(1)(vi) has been introduced by Finance Act 2012. He has further contended that placing the channel in a high frequency does not involve any process of transmission or up -linking or down linking of any signal from satellite. Without prejudice to the above contention the ld. Sr. Counsel has submitted that the shortfall of TDS does not attract the provisions of Section 40(a)(ia). In support of his contention he has relied upon the decision of the co -ordinate Bench of the Tribunal in the case of M/s. Channel Guide India Limited vs. ACIT in ITA No. 1221/M/2006 dated 29/08/2012 (Assessment Year 2004 -05) as well as the decision of Hon'ble Calcutta High Court in the case of CIT vs. S.K. Tekriwal : (2013) 260 CTR (Cal)73. The ld. Sr. Counsel has further submitted that even as per the provisions of section 40 the definition of royalty has to be taken as defined under Explanation -2 of Section 9(1)(vi). Since there is no corresponding amendment in the provisions of section 40, therefore, the definition of royalty for the purpose of section -40 can not be imported from the Explanation -6 of section -9(1)(vi). In support of his contention he has relied upon the decision of co -ordinate Bench of this Tribunal in the case of SKOL Breweries Ltd. vs. ACIT in ITA No. 6175/Mum/2011 dated 18/01/2013 (for AY -20007 -08);, (2013) 29 111(Mumbai -Trib.).;

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