Income Tax Appellate Tribunal - Mumbai
Genx Entertainment Ltd., Mumbai vs Department Of Income Tax on 14 January, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL "G" BENCH, MUMBAI
BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND
SHRI B.R. BASKARAN, ACCOUNTANT MEMBER
ITA NO.2627/Mum/2012
Assessment year: - 2008-09
DCIT (TDS) 1(1), Room No. Vs.` M/s Genx Entertainment Ltd.
803, 01st Floor, Bldg. No. 14,
K.G. Mittal Hospital Bldg., Solitaire Corporate Park
Charni Road, Mumbai - 2. Guru Govindji Marg, Chakala,
Andheri (E), Mumbai - 400 093
Appellant Respondent
ITA NO.4197/Mum/2012
Assessment year: - 2009-10
ACIT (TDS) 1(1), Room No. Vs.` M/s Genx Entertainment Ltd.
803, 01st Floor, Bldg. No. 14,
K.G. Mittal Hospital Bldg., Solitaire Corporate Park
Charni Road, Mumbai - 2. Guru Govindji Marg, Chakala,
Andheri (E), Mumbai - 400 093
Appellant Respondent
CO No. 228/Mum/2013
Arising out of ITA NO.2627/Mum/2012
Assessment year: - 2008-09
M/s Genx Entertainment Ltd. Vs.` DCIT (TDS) 1(1), Room No.
01st Floor, Bldg. No. 14, 803,
Solitaire Corporate Park K.G. Mittal Hospital Bldg.,
Guru Govindji Marg, Charni Road, Mumbai - 2.
Chakala, Andheri (E),
Mumbai - 400 093
Appellant Respondent
CO No. 229/Mum/2013
Arising out of ITA NO 4697/Mum/2012
Assessment year: - 2009-10
M/s Genx Entertainment Ltd. Vs.` DCIT (TDS) 1(1), Room No.
01st Floor, Bldg. No. 14, 803,
Solitaire Corporate Park K.G. Mittal Hospital Bldg.,
Guru Govindji Marg, Charni Road, Mumbai - 2.
Chakala, Andheri (E),
Mumbai - 400 093
Appellant Respondent
M/s Genx Entertainment Ltd
Revenue By Shri Vijay K. Bora
Assessee By Shri Farokh Irani and Shri Ashish Agrawal
Date of hearing
06.01.2015
Date of pronouncement
14.01.2015
ORDER
Per Vijay Pal Rao, JM
These two appeals by the revenue and Cross Objection by the assessee are directed against the two separate orders of CIT(A) dated 30.01.2012 and 30.03.2012 arising from order passed u/s 201 & 201(1A) for A.Y. 2008-09 and 2009-10 respectively. Common grounds are raised by the revenue in both the appeals. The grounds raised for A.Y. 2008-09 are as under:-
"1. (i) The Ld. CIT(A) has erred on facts and in law in not correctly appreciating the nature of the services rendered by the cable operators /DTH operators for which placement charges are paid and holding that such charges come within the purview of section 194C whereas such placement charges are in nature of technical fee within the meaning of section 194J of the Income-tax Act, 1961.
(ii) The Ld. CIT(A) has erred on facts and in law in not correctly appreciating that for placing the channel of broadcaster in prime band, for which placement charges are paid, application of human mind by a technical person is essential and the same cannot be done merely by mechanical means. Therefore, the payment on account of placement charges is in nature of technical fee within the meaning of section 194J and section 194C has no application to the facts of the case
(iii) Without prejudice to the first two grounds of appeals as above, since providing the services of preferred channel placement on account of which placement charges are paid requires use of industrial, commercial or scientific equipment within the meaning of sub clause (iva) to Explanation to sub clause (vi) of section 9(1) of the Income-tax Act, 1961, the said payment is payment on account of royalty and therefore, section 194J is clearly applicable. Accordingly, CIT(A) has erred in law and on facts in not appreciating this factual and legal position and in giving relief to the assessee.
(iv) CIT(A) has further erred on facts and in law in not appreciating that in any case the nature of services rendered by the cable operator / multi service operators
2|Page M/s Genx Entertainment Ltd consists in facilitating delivery of products of broadcaster to the viewer and in view of implied agency, such payment on account of carriage fee is in nature of commission or brokerage as defined in Explanation to section 194H of the Income- tax Act, 1961.
(v) CIT(A) has erred in law and on facts in holding that section 194C applies to the payment of placement charges without appreciating the correct nature of these charges, as is clearly brought out in the statement of fact annexed to the ground of appeal and the order u/s. 201 (1) of the Income-tax Act, 1961.
2.). The Ld. CIT(A) has erred on law and in facts in not appreciating that the dubbing charges require providing of technical services as defined in the Act and therefore , are within the purview of section 194J of the I. T.Act."
2. The ground no. 1 is regarding applicability of section 194C or section 194J in respect of the payment made to cable operators/DTH operators for channel placement. The assessee is engaged in the business of distribution of television channels. The TV channels are distributed by the assessee through cable operators/MSOs. Due to bandwidth constrains, it was up to the cable operator to decide which channel will reach the end viewer at what frequency (placement). Accordingly, Broadcasters make payments to the cable operator to carry their channels at a particular frequency which is generally referred as 'carriage fees'/'placement fees'. The payment of placement fee is for placement of channels in prime band to enhance the viewership and further lead to better advertisement revenue for the TV channels. The assessee has deducted tax at source at the rate of 2% u/s 194C of the Act in respect of the said payments made towards placement fee to the cable operators/MSOs. The Assessing Officer held that the payment made towards placement of channels is for providing technical services to the assessee and, therefore, the said payment ought to be subjected to TDS u/s 194J at the rate of 10%.
3. On appeal, the CIT(A) held that the payment for placement of channel falls u/s 194C for the purpose of deduction of tax and not u/s 194J.
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4. Before us, the Ld. DR has submitted that the channel placement fees are charges paid by the broadcaster to the cable operators/MSOs for placing their channels 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 channels can be increased. Placing a particular channel on a particular frequency is integral part of broadcasting process and, therefore, the fee/charges paid by assessee are in the nature of royalty or fee for technical services as per 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 the process of transmission and, therefore, the provisions of section 194J are applicable on such payment. He has relied upon the orders of authorities below.
5. On the other hand, the Ld. Counsel has submitted that the issue is covered in favour of the assessee by the decisions of this Tribunal in the case of ACIT Vs. UTV Entertainment Television Ltd. vide order dated 29.10.2014 and further in the case of ACIT Vs. M/s. NGC Networks (I) Pvt. Ltd. dated 09.07.2014, wherein the Tribunal has held that the fee for placement of channel does not fall u/s 194J but the same falls u/s 194C. Hence the CIT(A) has rightly held that the TDS in respect of the payment has to be deducted u/s 194C.
6. We have considered the rival submissions as well as relevant material on record. At the outset, we note that an identical issue has been considered by this Tribunal in the case of ACIT Vs. UTV Entertainment Television Limited (supra) in para 6 to 10 as under:-
"6. We have considered the rival submissions and relevant material on record. There is no dispute that the payment in question was made by the assessee to the cable operators/ MSOs for placing the TV channels in the prime band in order to enhance the viewership and better advertisement revenue. In the case of Kurukshetra Darpans (P) Ltd. Vs. CIT (supra), the Hon'ble High Court of Punjab & Haryana while dealing with an identical question has held in para 13 to 18 as under:-
4|Page M/s Genx Entertainment Ltd "13. After hearing learned counsel for the parties, we are of the view that the contentions of the counsel for the appellant are liable to be rejected. Sec.
194C of the Act creates an obligation on a person responsible for paying any sum specifled therein to a person for carrying out any work, to deduct the tax at source.' Presently, we are concerned with the work' as referred to in cl(b) of Expln. III below s.194C(2)of the Act.
14. In terms of the said Explanation. it is provided that expression 'work' shall include inter alia broadcasting and telecasting including production of programmes for such broadcasting and telecasting. By way of such Explanation, it is evident that where the payment is for a work involving broadcasting and telecasting. the same shall be subject to deduction of. tax at source in tems of section 194 of the Act. the assessee is a cable network operator through which it provides telecasting of programmes to the ultimate consumers/subscribers. The assessee in turn enters into a contract with the licensor of various TV channels. On the payment so made, s. 194C of the Act" is attracted. This is for the reason that the licensor. is a person who is performing the work which is covered within the meaning of c1. (b) of Expln. III to s. 194C(2) of the Act.
15. It is also relevant to mention here that in the agreement between the assessee and the licensor, the licensor is referred to as 'company engaged in the business of distribution of satellite based television channel(s) services including the service and has exclusive rights to market and distribute the services in India to various customers and users of the service'. Further, the agreement refers to the assessee subscriber as a party, which is desirous to subscribe for and receive the telecast signals of the service from the company in order to further distribute the same to the customers).
16. From the recital of the agreement "Itself, it is clear that the service that the assessee subscriber is availing is the receipt of 'telecasting signals' from the licensor or the company. The expression 'service' has also been referred to mean the TV channel which is dealt with by the licensor or the company. Therefore, what the assessee has transacted for with the licensor or company certainly includes within its ambit broadcasting and telecasting facility. The essence of the contract is to obtain broadcasting and telecasting of TV channels and thereafter its distribution amongst ultimate customers through the cable network of the assessee.
17. Another plea of the assessee/subscriber was that the licensor or the person to whom the assessee is making payment by itself does not do the work of broadcasting' and telecasting and is therefore outside the purview of s. 194C of the Act. This argument deserves to be negated at the threshold. As we have pointed out earlier what the assessee subscriber is looking for is to obtain the telecast signals from the licensor, which is enough. to deduce that the impugned contract involves broadcasting and telecasting of TV signals . Moreover, the licensor or the companyv, as is evident from the specimen agreement on record, in the business of distribution of satellite based TV channels and has exclusive
5|Page M/s Genx Entertainment Ltd rights to market and distribute said services in India, the service that is referred to in theagreement is the broadcasting and telecasling of TV signals.
18. For the reasons recorded above. we have no hesitation in concluding that the Tribunal was correct in holding that the assessee was required to deduct tax at source in terms of s. 194C of the Act on payments made to the licensor for obtaining TV signals. cable TV network owned by the assessee."
7. Thus after examination of the Explanation III to the then section 194C, the Hon'ble High Court held that the payment for obtaining the telecast licenses from the licensor falls under the provisions of section 194C. We find that the work of broadcasting/telecasting including production of programme or such broadcasting or telecasting falls under the definition of "work" as provided under clause (iv) of the Explanation to section 194C which reads as under:-
"Explanation - For the purpose of this section -
********************************* *********************************
(iv) "work" shall include-
(a) Advertising;
(b) Broadcasting and telecasting including production of programmes for such broadcasting or telecasting
(c) Carriage of goods or passengers by any mode of transport other than by railways;
(d) Catering;
(e) Manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, But does not include manufacturing or supplying a product according to the requirement of specification of a customer by using material purchased from a person, other than such customer.]"
8. The Hon'ble Delhi High Court in the case of CIT Vs. Prasar Bharati (Broadcasting Corporation of India) (supra), has observed in para 11 as under:-
"We are unable to agree with this submission. We observe that Explanation III, which was introduced simultaneously with section 194J, is very specific in its application to not only broadcasting and telecasting but also include "production of programmes for such broadcasting and telecasting". If, on the same date, two provisions are introduced in the Act, one specific to the activity sought to be taxed and the other in more general terms, resort must be had to the specific provision which manifests the intention of the Legislature. It is not, therefore, possible to accept the contention of the Revenue that programmes
6|Page M/s Genx Entertainment Ltd produced for television, including "commissioned programmes", will fall outside the realm of section 194C, Explanation III of the Act. We find no infirmity in the view taken by the Income-tax Appellate Tribunal which we hereby affirm.
9. The Hon'ble Delhi High Court has made it clear that when two provisions are simultaneously introduced in the Act., one is specific and another is more general in terms then the resort must be to the specific provision. Therefore, when the work of broadcasting and telecasting of the programmes specifically falls under the ambit of provisions of section 194C, then in view of the decision of Hon'ble Delhi High Court (supra), the provisions of section 194J cannot be applied on such payments. The CBDT Circular No. 720 dated 30.08.1995, also supports this view as it was clarified in the said circular as under:-
"1261. Payment of any sum shall be liable for deduction of tax only under one section .
It has been brought to the notice of the Board that in some cases persons responsible for deducting tax at source are deducting such tax by applying more than one provision for the same payment. In particular, it has been pointed out that the sums paid for carrying out work of advertising are being subjected to deduction of tax at source under section 194C as payment for work contract as also under section 1941 as payments of fees for professional services.
2. It is hereby clarified that each section, regarding TDS under Chapter XVII, deals with a particular kind of payment to the exclusion of all other sections is this Chapter. Thus, payment of any sum shall be liable for deduction of tax only under one section. Therefore, a payment is liable for tax deduction only under one section.
10. In view of the above discussion as well as the decisions of Hon'ble Punjab & Haryana High Court and Hon'ble Delhi High Court, we do not find any error or illegality in the impugned order of CIT(A) qua this issue.
7. We further note that an identical issue was also decided by the Tribunal in the case of ACIT Vs. NGC Network Pvt. Ltd. in ITA no. 1382/Mum/2014 vide order dated 9-7-2014, wherein the Tribunal has taken the similar view. Accordingly, following the earlier orders of this Tribunal on this issue, we do not find any error or illegality in the order of CIT(A) qua this issue.
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8. Ground No. 2 is regarding applicability of section 194J or section 194C in respect of dubbing charges.
9. We have heard the Ld. DR as well as Ld. AR and considered the relevant material on record. At the outset we note that an identical issue was considered and decided by this Tribunal in the case of ACIT Vs. Manish Dutt (12 taxmann.com 50), wherein it was held that the payment made for dubbing work falls under section 194C and not u/s 194I. The Tribunal again in case of UTV Entertainment Television Limited (supra) had decided a similar issue in para 12 and 13 as under:-
"12. We have heard the Ld. DR as well as Ld. Authorized Representative and considered the relevant material on record. The CIT(A) while deciding this issue has relied upon the decision of this Tribunal in the case of ACIT Vs. Manish Dutt (12 taxmann.com 50), wherein, the Tribunal held in para 8 to 12 as under:-
"8. We have already seen that the assessee is engaged in the business of doing dubbing work. The assessee was having his own studio comprising of various dubbing equipments and professional artist to carryon the work of dubbing. Whenever the assessee's own studio could not be used the assessee used to give the job of carrying out dubbing work to other dubbing studios. In respect of one such work entrusted by the assessee to another studio by name Ninety Degrees the assessee had made a payment of Rs. 1,60,000. According to the assessee, the payment was made to a sub-contractor for execution of a contract and, therefore, in terms of section 194C the assessee deducted tax at source at 2 per cent. The Assessing Officer however, was of the view that the payment in question was rent paid by the assessee and, therefore, in terms of section 194-1 of the Act the assessee ought to have deducted tax at source at 20 per cent. Since the assessee did not deduct tax at source at the proper rate the Assessing Officer disallowed the claim of the assessee for deduction of a sum of Rs. 1,60,000 under the head studio hire charges by invoking the provisions of section 40(a)(ia) of the Act.
9. Before the CIT(A), the assessee submitted that the contract details were not called for during the assessment and that the work done by 90 Degree was for work as provided for under section 194C of the Act. The assessee
8|Page M/s Genx Entertainment Ltd pointed out that studio is booked and dubbing work is undertaken using studio equipment, staff etc. The word Studio Hire is a term generally used by industry to denote the various services rendered by the dubbing studio. But the real nature of work is a contract for carrying out work. The assessee relied on Explanation to section 194C(7) where at (iv) 'work' would include broadcasting and telecasting including production of programmes for such broadcasting or telecasting. The assessee furnished details of the work carried out by it from Studio 90 Degree which showed that in respect of TV serial Karma the assessee undertook dubbing work. The agreement between the assessee and Turner Entertainment a telecasting Company was also filed.
10. On consideration of the above submissions, the CIT(A) held as follows: "2.3.2 Facts and materials on record are considered. It is seen that Assessing Officer had only asked Appellant to explain the payment but had not specified any evidence to be furnished. The submissions made during the appeal indicate that the studio was hired for utilizing the dubbing facilities which included service through the studio staff. Condition of section 194C(7) Explanation (iv) are met also. As such the payment made was coverable under section 194C under which tax was deduced. On facts, therefore, the disallowance made under section 40(a)(ia) is deleted."
11. Aggrieved by the order of the CIT(A) the revenue has raised ground No.2 before the Tribunal.
12. We have heard the rival submissions. As can be seen from the order of the CIT(A), the assessee had utilized the services of dubbing studio Ninety Degrees by using their equipments as well as the artists who were working for Studio Ninety Degrees. The assessee had thus carried out the work of dubbing by engaging services and the same was of the nature of getting work done through a sub-contractor. The findings of the CIT(A) in this regard are not in challenge before us. In such circumstances we are of the view that the provisions of section 194C were applicable and the assessee has rightly deducted tax at source at 2 per cent treating the payment as a payment to sub-contractor for carrying out a work. We do not find any ground to interfere with the order of CIT(A). Consequently ground No.2 raised by the revenue is dismissed.
13. No contrary decision has been referred or produced before us. Therefore, following the decision of this Tribunal, we do not find any error or illegality in the order of CIT(A) qua this issue."
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10. Following the earlier orders of this Tribunal, this issue is decided against the revenue and in favour of the assessee.
11. Now we take up the Cross Objections filed by the assessee wherein the assessee has raised common grounds as under:-
"1. On the facts and in the circumstances of the case, the learned Commissioner of Income- tax (Appeals) - 14, Mumbai, erred in not adjudicating on the following contentions raised by the Appellant:
"(i) The learned TDS officer erred in holding that the Appellant is liable to pay principal amount of tax under section 201(1) of the Income tax Act, 1961 without verifying the payment of tax on such income by the deductee cable operators in their respective returns/ assessments.
(ii) Without prejudice to the above, the learned TDS officer erred in levying interest under section 201(1A) of the Income tax Act, 1961 from the date the tax was deductible till the date of order under Section 201 (1) !201 (1A) of the Act."
12. We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. In view of our finding in the revenue's appeal and consequential dismissal of the revenue's appeals the cross objections filed by the assessee become infructuous.
13. We find that there is a delay of 152 days in the Cross Objection for the A.Y. 2008-09 and delay of 75 days in filing the cross objection for the A.Y. 2009-10. The assessee has filed applications for condonation of delay along with affidavit of Director of the assessee company.
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14. We have heard the Ld. AR as well as Ld. DR and considered the averments made in the affidavits for explaining the delay in filing the Cross Objections. We are satisfied with the reasons explained by the assessee that the assessee had a reasonable cause for not filing the Cross Objections within the period of limitation. Accordingly, the delay in filing the Cross Objections are condoned.
15. In the result, the appeals of the revenue as well as cross objections of the assessee are dimissed.
Order pronoucned in the open court on this 14th Day of January 2015.
Sd/- Sd/-
(B.R. Baskaran) (Vijay Pal Rao)
ys[kk lnL;)
(Accountant Member/ys lnL; U;kf;d lnL;)
(Judicial Member/U;kf;d lnL;
Mumbai dated 14 -01-2015
SKS Sr. P.S,
Copy to:
1. The Appellant
2. The Respondent
3. The concerned CIT(A)
4. The concerned CIT
5. The DR, "G" Bench, ITAT, Mumbai
By Order
Assistant Registrar
Income Tax Appellate Tribunal,
Mumbai Benches, MUMBAI
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