Rakesh Garg, J. - (1.) THIS judgment will dispose of IT Appeal Nos. 260, 261 and 262 of 2007 as the proposed substantial questions of law involved in all the appeals are similar. For the sake of arguments, the facts are being taken from IT Appeal No. 260 of 2007.
(2.) THE present appeal has been filed by the Revenue under Section 260A of the IT Act, 1961 (for short 'the Act') against the order dt. 28th Dec, 2006 passed in Appeal No. 801/Chd/2006 by the Tribunal, Chandigarh, for the asst. yr. 2006 -07, raising the following substantial questions of law: (i) Whether Section 194C of the IT Act, 1961 is applicable in the facts and circumstances of this case ? (ii) Whether the Revenue is justified in treating the appellant/assessee an assessee in default without making any inquiry from the payee as to the fact whether the payee has discharged his liability to pay tax on the income received from the payer ? (iii) Whether the appellant can be treated as assessee in default for non -deduction of tax at source on account of his bona fide belief that he is not liable to deduct tax at source and the payee has discharged his liability on the income so received from the payer ? (iv) Whether interest can be charged under Section 201(1A) on account of an assessee's failure to deduct tax under a bona fide belief that it is not liable to deduct tax at source ? The assessee is a cable network operator who is in the business of distributing cable connections to the customers and charges subscription fee from them. The appellant assessee enters into a contract with the licensor of various TV channels for local cable distribution system. It is relevant to mention here that these licensors are not the owners of the TV channels and they only have the exclusive right to market and distribute satellite based television service to various customers and users of the service. In the above mentioned contract, the assessee is referred to as subscriber or affiliate as he is to pay the subscription to another party referred to as the licensor. These channels are telecasted from abroad and the assessee becomes an affiliate or subscriber of the licensor by entering into an agreement for payment of subscription. This payment is based on the number of customers of the appellant or the amount of subscription collected.
(3.) DURING the course of inspection regarding proper implementation of TDS provisions on 2nd March, 2006, it was noticed by the ITO(TDS), Kurukshetra that the assessee has not deducted tax at source under Section 194C of the Act from the payments made to the different channels for airing charges for broadcasting of programme and for use of electric pole to make the programme to reach the viewer's door. The assessee was served with a show -cause notice vide letter dt. 16th March, 2006 as to why he should not be treated as an assessee in default in terms of Section 201 and 201(1A) r/w Section 194C of the Act for making payment of "airing charges to different TV channels for broadcasting" of programmes and the Electricity Department for using their electric poles to enable connectivity to the viewers/customers, without deduction of tax at source in violation of the provisions of Section 194C of the Act. The assessee was further directed to bring copy of contracts, if any, reached with different channels or with Electricity Department.;