Income Tax Appellate Tribunal - Delhi
Dish Tv India Ltd., Noida vs Assessee on 29 February, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES: B : NEW DELHI
BEFORE SHRI R.S. SYAL, AM & SHRI A.T. VARKEY, JM
ITA No.5310/Del/2013
Assessment Year : 2009-10
Dish TV India Ltd., Vs. ACIT (TDS),
FC-19, Sector-16A, Noida.
Film City,
Noida.
PAN: AAACA5478M
ITA No.6066/Del/2013
Assessment Year : 2009-10
ACIT (TDS), Vs. Dish TV India Ltd.,
Noida. FC-19, Sector-16A,
Film City,
Noida.
PAN: AAACA5478M
Assessee by : Shri Sanjiv Sapra, CA
Deptt. by : Shri Sunil Chander Sharma, CIT-DR
Date of Hearing : 25.02.2016
Date of Pronouncement : 29.02.2016
ORDER
PER R.S. SYAL, AM:
These cross appeals - one by the assessee and the other by the Revenue - emanate from the order passed by the ld.
ITA Nos.5310 & 6066/Del/2013 Commissioner of Income-tax (Appeals) [CIT(A)] on 21.8.2013 in relation to the assessment year 2009-10.
2. The sole issue agitated by the assessee in its appeal is against treating the payments made by it to various TV channels as liable for deduction of tax at source u/s 194J of the Income-tax Act, 1961 (hereinafter also called `the Act') as against under section 194C as was done by it. The Revenue is aggrieved against the direction of the ld. CIT(A) to the Assessing Officer (AO) for looking into the claim of the assessee w.r.t the payment of taxes by the deductees and then allowing appropriate relief to the assessee while determining liability u/s 201 of the Act, without appreciating that the same is tantamount to setting aside of the case, which is ultra vires his power u/s 251(1) of the Act.
3. Briefly stated, the facts of the case are that the assessee, Dish TV India Limited, is an Indian company engaged in the business of distribution of channels from its DTH (Direct to 2 ITA Nos.5310 & 6066/Del/2013 Home) network. The assessee, after deduction of tax at source u/s 194C and 195 of the Act, made payments to certain TV channels in India and abroad. The dispute in the instant appeal is only qua the payments made to channels in India on which the assessee deducted tax at source u/s 194C of the Act. During the course of verification of TDS returns filed by the assessee, it was noticed by the AO (TDS) that tax withholding done by the assessee u/s 194C was incorrect inasmuch as it was required to be done u/s 194J. It was held so after going through Agreement of the assessee with Sun TV Network Ltd. and others under which the assessee obtained non-exclusive right to distribute programs of such channels from its DTH platform to the ultimate viewers/subscribers. As per these agreements, the assessee was required to pay a license fee to the channels which, in the opinion of the AO, was a payment of `Royalty' within the meaning of clause (iv) of Explanation 2 to section 9(1)(vi). He, therefore, passed an order u/s 201(1) and (1A) of the Act, creating a demand of Rs.40,56,14,101/- 3
ITA Nos.5310 & 6066/Del/2013 inclusive of interest u/s 201(1A) amounting to Rs.9,36,03,254/-. It is a matter of record that the assessee moved application u/s 154, which led to the reduction in demand to Rs. 26.42 crore, inclusive of interest u/s 201(1A) amounting to Rs.6.09 crore. The assessee assailed the order before the ld. CIT(A), who came to hold that the assessee paid License fee to the TV channels which was in the nature of royalty covered under Explanation 2(v) of section 9(1)(vi) and as such, deduction of tax at source was required to be made u/s 194J of the Act. In reaching this conclusion, he relied, inter alia, on an order passed by the Chennai Bench of the Tribunal in ACIT vs. Shri Balaji Communications (2013) 140 ITD 687 (Chennai) in which case satellite rights of certain films and programs were purchased and payment was made without any deduction of any tax at source. The AO in that case was of opinion that since the agreements were for assignment of rights which meant that the payments were in nature of royalty and not for sale of right to assessee, the provisions of section 4 ITA Nos.5310 & 6066/Del/2013 194J were applicable. The tribunal eventually upheld the view of the AO by observing that as long as transfer is of any right relatable to a copyright of a film or video tape, which is to be used in connection with television or tapes, consideration paid would be royalty only. Without prejudice to its main argument that deduction of tax at source was rightly made u/s 194C of the Act, the assessee also argued before the ld. CIT(A) that the judgment of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd. vs. CIT (2007) 293 ITR 226 (SC) was applicable inasmuch as the payments made by it to various TV channels were included by the deductees in their respective incomes and due taxes were paid thereon. The ld. CIT(A) got convinced with the assessee's submission in this regard and directed the AO to look into this claim and allow appropriate relief. The AO passed order on 18.11.2013 u/s 201(1) and (1A) read with section 251 of the Act deleting demand u/s 201(1), except to the extent of Rs.6,05,387/-, representing the amount of tax liable to deduction at source u/s 5 ITA Nos.5310 & 6066/Del/2013 194J on the amount of Rs.75.67 lac which was not offered to tax by the concerned TV channels. Apart from that, he also upheld the chargeability of interest u/s 201(1A) to the extent of Rs.2.19 crore. This resulted into reduction in the assessee's liability from the original amount of Rs.40.56 crore to the final determination at Rs.2,25,48,341. Both the sides are in appeal on their respective stands.
4. We have heard the rival submissions and perused the relevant material. First, we take up the assessee's contention about the applicability of section 194C on the payments made by it to the TV Channels as against section 194J held by the authorities below.
5.1. Before delving into the core issue, we deem it befitting to have an in-depth insight into the factual matrix. In this regard, we find that the assessee obtained DTH License from Ministry of I&B, Government of India and commenced its DTH service under the brand name of `Dish TV'. The assessee 6 ITA Nos.5310 & 6066/Del/2013 has requisite infrastructure comprising of Up-linking facilities, Digital Headend, Conditional Access System (CAS), Subscriber Management Systems (SMS), Satellite Transponders and other requirements for providing encrypted signals. The assessee made payments to various TV channels for obtaining rights in their programs so as to make them directly available to the ultimate viewers through its distribution and transmission network. Such payments made after deduction of tax at source u/s 194C of the Act have been tabulated on page 1 of the order passed by the AO pursuant to the order u/s 251. On a pertinent query, the ld. AR candidly admitted that the assessee entered into various agreements with the TV channels, all of which are similarly worded. Highest payment was made to ESPN Software India Pvt. Ltd. amounting to Rs.76.58 crore on which tax was deducted u/s 194C to the tune of Rs.1.94 crore.
7
ITA Nos.5310 & 6066/Del/2013 5.2. On a representative basis, we take up the Agreement with ESPN Software India Pvt. Ltd. for analysis. A copy of this Agreement, effective from 14 th June, 2006, has been placed at pages 112 onwards of the paper book. As per this Agreement, the assessee got non-exclusive right to distribute ESPN and Star Sports Services channels in India. The 'Right to distribute' has been set out in Article 2 of the Agreement, whose relevant part reads as under:-
"(i) Subject to the provisions hereof and in consideration of Dishtv's payment of the Subscription Fees, the Company grants to Dishtv, non-exclusive right: to receive; to decrypt, turnaround, encrypt (without interfering in its contents) either itself or through the Affiliate(s);
and to redistribute/transmit the Service through DISH TV platform, for reception by the Customers through CPE as per their request and choice which may or may not have storage capacity....."
5.3. As per clause 3.6 of the Agreement, the assessee shall not transfer, alienate or part with possession of the IRD to and in favour of any third party without prior written permission of the ESPN. Clause 6 of the Agreement provides that ESPN shall 8 ITA Nos.5310 & 6066/Del/2013 have sole right and privilege to determine which sports events and other programs, advertisements, messages and the like shall be included in the service and the assessee agrees and undertakes to distribute the service in its entirety as and how it is delivered by ESPN without any cutting, editing. Article 7(iii) of the Agreement provides that the assessee : `shall not remove, modify, misuse or tamper with the IRS including the seal or any signals emanating therefrom...'. Article 7 (iv) sets out that the assessee : `shall not authorize others to copy, tape, use, distribute or reproduce any part of the Service without the Licensor's prior written authorization. It shall not copy or tape programs for resale or sub-licensing and shall immediately notice the Company of any unauthorized copy, taping or use of any part of the Service.'. The ld. AR has placed on record a copy of Memorandum of Understanding (MOU) executed on 12.03.2009 with ESPN covering the period from July 1, 2008 to 30.6.2012 for a total consideration of Rs.322 crore. As per this MOU, ESPNL shall continue to provide its channels to 9 ITA Nos.5310 & 6066/Del/2013 Dish TV on a 'fixed subscription fees' amounting to Rs.70 crore for the period 1.7.2008 to 30.6.2009.
5.4. It is discernible from a careful perusal of various clauses of the Agreement read with the MOU that the assessee acquired a non-exclusive `right to distribute' the contents of channels of ESPN through its DTH network for a fixed amount of Rs.70 crore for the period July 1, 2008 to July 30, 2009. Choice of producing programs rests solely with TV channels, in which the assessee has no interference. The contents can be any programs produced or got produced by the TV Channel as per its wisdom or in respect of which it holds license to commercially exploit. The assessee, by means of this Agreement, has got a simple right to distribute the contents without any modification, which always continues to remain the exclusive property of the Channel, on which the assessee exercises no right except distribution as such. What to talk of the assessee removing or modifying the signals, the assessee 10 ITA Nos.5310 & 6066/Del/2013 cannot even copy or tape programs for resale or sub-licensing. The assessee can neither transfer any part of such contents in favour of any third party nor even authorize them to copy, tape, use, distribute or reproduce any part of the content at its own. The assessee simply holds license, which is again simply non-exclusive in nature, for distribution of contents to the ultimate viewers. In the above backdrop of the facts, the moot question is whether the payments made by the assessee to TV channels are covered u/s 194C or 194J?
6. Section 194C with the marginal note: 'Payments to Contractors' provides through sub-section (1) that: "Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of 11 ITA Nos.5310 & 6066/Del/2013 payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ......'. The term `work' has been defined under clause (iv) of the Explanation to include, inter alia, ... `(b) broadcasting and telecasting including production of programs for such broadcasting or telecasting'. The case of the assessee rests on sub-clause (b). When we consider the mandate of section 194C(1) in conjunction with clause (iv)(b) of the Explanation, the provision in the present context reads as : 'Any person responsible for paying any sum to any resident for carrying out broadcasting and telecasting ... in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ......'. This, in simple terms, indicates that in order to cover an amount u/s 194C read with Explanation
(iv)(b), it is essential that the assessee must enter into contract 12 ITA Nos.5310 & 6066/Del/2013 with another resident for carrying out the work of broadcasting and telecasting.
7. The entire exercise of viewing TV programs can be broadly split into three parts, viz, first is the production of programs by or on behalf of the channels; second is uplinking of such programs by the TV Channels, which are amplified and then relayed in the footprint area through transponder on satellite; and third is the actual transmitting of such programs to the viewers, which is called telecasting or broadcasting. TV Channels produce or purchase rights of programs after spending a lot of money on them and thus exercise IPRs over them. No one else can telecast such programs without the prior permission of the channel. The second step is simply a medium of picking up signals of the program produced etc. by TV channel and dropping it the DTH/Cable operator for onward relay to the ultimate viewers, which is called broadcasting or telecasting, being the third step. In common parlance, the word 13 ITA Nos.5310 & 6066/Del/2013 `telecast' means `transmit by television'. Section 2 of the Broadcasting Act defines broadcasting to mean : `any transmission of programs, whether or not encrypted, by radio waves or other means of telecommunication for reception by the public by means of broadcasting receiving apparatus, but does not include any such transmission of programs that is made solely for performance or display in a public place;'. Thus broadcasting or telecasting means transmission of programs. Telecasting encompasses relaying of TV programs and not that of blank signals. Thus what is contemplated under the third step is to relay the programs to the ultimate viewers. The essence of telecasting lies in relaying signals containing TV programs.
8. Largely, there can be two business models in this line of business. First, when a TV channel takes upon itself the task of telecasting its programs as well; and the second when rights in such programs are transferred by it to DTH/cable 14 ITA Nos.5310 & 6066/Del/2013 operators for value. In both the business models, the end result is same, being the TV programs relayed to ultimate viewers. Adverting to the facts of the instant case, we find that out of the three steps discussed above, first two are done by TV Channels, while, the third is done by the assessee, who has made payment to the TV Channels for receiving their TV programs so that it could make them available to the ultimate viewers for consideration.
9. It goes without saying that applicability of the correct provision of tax withholding depends on ascertaining the purpose of payment at the threshold. It is the precise nature of transaction requiring payment which matters rather than the whole sequence. We have noted above that section 194C is attracted when payment is made for carrying out the `work' of broadcasting and telecasting. So, the pertinent question to ask is the purpose for which the assessee paid to the TV channels. If a person responsible pays to a contractor for the `work' of 15 ITA Nos.5310 & 6066/Del/2013 `telecasting', then, of course, the provisions of section 194C are attracted. In the instant case, we find that the assessee has made payment to the TV channels not for any broadcasting or telecasting, but, to receive programs for providing encrypted signals to the viewers through its own DTH network, which comprises of Up-linking facilities, CAS, SMS, etc. The act of telecasting is being done by the assessee on its own behalf and the source of its revenue is from end-viewers who pay to it for receiving telecast of TV programs.
10. Under the first business model, TV channel approaches DTH/cable operators for telecasting its programs on its own behalf. Under this model, revenue from ultimate viewership goes to the Channel itself and payment is made by it to the DTH/Cable operator for using their infrastructure for telecasting. It is this amount paid by the TV Channel to the DTH/cable operator, which can be categorized as payment `for carrying out broadcasting and telecasting' to fall within the 16 ITA Nos.5310 & 6066/Del/2013 sweep of section 194C. As the assessee has not made payments to the TV channels for telecasting programs on its behalf, it is held that the provisions of section 194C are not attracted in the extant case.
11. Now we turn to examining the attractability or otherwise of the provisions of section 194J, which requires deduction of tax at source from 'fees for professional or technical services.' Sub-section (1) of section 194J provides that : `Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of-- (a) fees for professional services, or (b) fees for technical services or .... (c) royalty, or... shall, ...... deduct an amount equal to ten per cent of such sum as income-tax on income comprised therein'. The term 'royalty' as used in clause (c) of section 194J(1) has been defined in the Explanation to: 'have the same meaning as in Explanation 2 to clause (vi) of sub- section (1) of section 9.'. When we consider Explanation 2 to 17 ITA Nos.5310 & 6066/Del/2013 section 9(1)(vi), we get the meaning of 'royalty', whose relevant part is 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) to (iva)
(v) the transfer of all or any rights (including the granting of a license) 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 ; or......'
12. The case of the Revenue is that the assessee paid royalty to TV channels within the meaning of clause (v) of the Explanation 2. On going through the mandate of this provision, it becomes vivid that royalty means consideration for the transfer of all or any rights (including the granting of a license) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television. A circumspection of this provision indicates that royalty is a payment for transfer of all or any 18 ITA Nos.5310 & 6066/Del/2013 rights in copyright, literary, artistic or scientific work including films or video tapes for use in connection with television. Reverting to the facts of the instant case, we find that the programs made by the TV channels are their exclusive property over which they exercise IPRs. No one can use such them without prior permission of the Channels. The assessee, by means of the Agreement, has acquired right to distribute the TV programs for value, which payment is under consideration. The assessee can simply use such TV programs, which eventually continue to remain the exclusive property of the Channel. Such `Right to distribution' is a limited right confined to using the contents of programs without any modification whatsoever. The quid pro quo for the payment by the assessee is transfer of rights by the TV channels in their programs, which are in the nature of copyright, literary, artistic work including films or video tapes, that are meant for use by the assessee exclusively in connection with television. 19
ITA Nos.5310 & 6066/Del/2013
13. We have briefly discussed supra two business models in this line of business and found that whereas under the first model, TV channel approaches DTH/cable operators for telecasting its programs on its own behalf, under the second model, right to use in programs are transferred by TV channel to DTH/cable operators for value. In such later case, revenue from ultimate viewership goes to the DTH/Cable operators and TV Channel ends up by receiving consideration from DTH/cable operator for transfer of rights in its programs. While the third step, namely, telecasting and broadcasting of TV programs under the first business model is done by DTH/Cable operators for and on behalf of TV channels, and under the second business model is done by DTH/cable operators for and on their own behalf and not the TV channels. Whereas under the first business model, payment is made by TV channel to DTH/cable operators for `broadcasting and telecasting' their TV programs, which is covered u/s 194C, under the second business model, payment is made by 20 ITA Nos.5310 & 6066/Del/2013 DTH/cable operators to TV Channel for transfer of IPRs in programs to be used by DTH/cable operators in `connection with television', which is covered under clause (v) of Explanation 2 to section 9(1)(vi) requiring deduction of tax at source u/s 194J of the Act. The case under consideration clearly falls under the second business model. In our considered opinion, the authorities below were fully justified in holding the applicability of the provisions of section 194J of the Act.
14. Now, we will espouse the case law relied by the ld. AR to canvass the view that deduction of tax at source was required u/s 194C. First is the judgment of the Hon'ble jurisdictional High Court in CIT vs. Prasar Bharati (Broadcasting) Corporation of India (2007) 292 ITR 580 (Del). The assessee in that case made certain payments to outside producers for programs under 'commissioned category' for which the assessee deducted tax at source u/s 194C by treating them as 21 ITA Nos.5310 & 6066/Del/2013 contract payments. The Revenue took a stand that the television programs producers should be treated as professionals/technical persons and the payment made to them should be subjected to TDS u/s 194J. An order was passed u/s 201(1)/(1A) of the Act holding the assessee in default for short deduction. When the matter went before the Hon'ble High Court, their Lordships observed that Explanation III which was introduced simultaneous with section 194J is very specific in its application to not only broadcasting and telecasting, but also includes 'production of programs for such broadcasting and telecasting'. That is how, the case was held to be falling u/s 194C of the Act. When we peruse the nature of payment made in the case of Prasar Bharati (Broadcasting) Corporation of India (supra), it comes up that the same was made to outside producers for making programs on behalf of Prasar Bharati. Since payment for making programs is directly covered under Explanation (iv)(b) being 'production of programs for such broadcasting or telecasting', there remains 22 ITA Nos.5310 & 6066/Del/2013 absolutely no doubt that payments to producers for making programs falls within the ambit of section 194C of the Act. We find that the facts of this case are nowhere close to those under consideration. Instantly, we are examining the applicability of TDS provisions on payments made by the assessee to the TV channels for use of their programs in connection with television, which is directly covered under Explanation 2(v) of section 9(1)(vi) and not for `producing any programs'. As such, the decision in Prasar Bharti (Broadcasting) Corporation of India (supra), does not support the case of the assessee.
15. The next decision relied by the ld. AR is judgment of the Hon'ble Punjab & Haryana High Court in Kurukshetra Darpans (P) Ltd. vs. CIT (2008) 217 CTR 326 (P&H). In that case, the assessee, a cable network operator, was in the business of distributing cable connections to customers. It entered into contract with a licensor of various TV channels 23 ITA Nos.5310 & 6066/Del/2013 for local cable distribution systems. These licensors were not the owners of the TV channels and they only had the exclusive right to market and distribute satellite based television service. The assessee in that case did not deduct any tax at source from the payments made to the licensors. In the opinion of the Revenue, the tax was required to be deducted at source u/s 194C of the Act. When the matter finally went before their Lordships, it was held that the provisions of section 194C were attracted. Here again, we find that this judgment does not advance the case of the assessee in any manner. The assessee in that case entered into contract with the `licensors' of various TV channels for local cable distribution systems who were not the owners of TV channels and they only had the exclusive right to market and distribute satellite based television service. As against that, the instant assessee is itself a licensor who has obtained licenses directly from the TV channels and the payment has been made to the owners of these TV channels for the use of licenses given in its favour. 24
ITA Nos.5310 & 6066/Del/2013 Moreover, in that case, the dispute was between non-deduction of tax at source versus deduction of tax at source u/s 194C. There was no issue of applicability of section 194J of the Act. It was in that background that the Hon'ble Punjab & Haryana High Court held that the provisions of deduction of tax at source were attracted and the assessee was liable to deduct tax at source u/s 194C of the Act as was held by the AO. We, therefore, hold that this case does not fortify the assessee's stand.
16. The last reliance of the ld. AR is on an order passed by the Mumbai Bench of the Tribunal in ACIT vs. NGC Networks (I) Pvt. Ltd. (ITA No.1382/M/2014). We have gone through this order, whose copy has been placed in the paper book. It is noticed that the dispute in that case was about the deductibility of tax at source on 'Channel placement fees' paid for 'placing the channel on a particular frequency or bandwidth.' These charges were paid to put the channel in prime frequency/band. 25
ITA Nos.5310 & 6066/Del/2013 The assessee deducted tax at source u/s 194C. The Revenue made out a case that the provisions of section 194J were attracted. When the matter came up before the Tribunal, it was held that section 194J was not attracted. Again, we find that this judgment to be of no consequence because of distinction in its factual backdrop. The dispute in that case was only about deduction of tax at source on `Channel placement charges' which is not the case before us. We, therefore, find this case also of no assistance to the assessee.
17. The ld. AR then pressed into service the `Principle of consistency' by arguing that the assessee made similar payments in past also to the TV Channels after deduction of tax at source u/s 194C, which view has not been disturbed by the Revenue. It was, ergo, argued that the same view should be followed for this instant year as well. This was vehemently opposed by the ld. DR. On a specific query, it was admitted by the ld. AR that in none of the earlier years, the TDS returns 26 ITA Nos.5310 & 6066/Del/2013 were taken up for verification and as such, the issue as to the attractability of section 194C or section 194J of the Act was never examined. In view of the fact that this issue has never been examined in the past in assessee's case, such a non- decision cannot have a precedent value. The ld. AR admitted in all fairness that the Revenue has taken similar stand in the succeeding years by holding the magnetizing of the provisions of section 194J to the similar payments, for which the matter is sub judice. Be that as it may, the rule of res judicata is not applicable in fiscal statutes like income-tax. The contention of the ld. AR about the applicability of the `rule of consistency', in our considered opinion cannot be allowed to dethrone the rule of `no estoppel against the statute'. After making an elaborate analysis, we have hereinabove held that section 194J is attracted to the facts of the instant case. Merely because in earlier years this issue was not examined and the assessee's contention got accepted without verification, cannot give license to it claim in the later years 27 ITA Nos.5310 & 6066/Del/2013 that the correctly applicable section be put under carpet. Since the statute requires such an amount to be considered u/s 194J, we cannot permit a wrong provision of section 194C to be applied in the garb of consistency. This contention is therefore, jettisoned.
18. Lastly, the ld. AR resorted to the argument of following a view favourable to the assessee where two views are available. It was submitted that albeit the decision of the Chennai bench in Shree Balaji (supra) is in favour of the Revenue, but the other decisions as cited by him in favour of the assessee, be preferred. This contention again, in our considered opinion is bereft of any force. We have examined all the three decisions relied by him and found none to be germane to the issue under consideration. This contention, therefore, fails.
19. In view of the foregoing discussion, we are of the considered opinion that the payment made by the assessee to the TV channels is covered u/s 9(1)(vi) and, as such, deduction 28 ITA Nos.5310 & 6066/Del/2013 of tax at source was required u/s 194J of the Act as has been rightly held by the authorities below.
20. Now we take up the Revenue's appeal, in which the assail is only to the direction of the ld. CIT(A) for allowing relief in respect of payment of taxes by the deductees. The assessee without prejudice to its main ground of the applicability of section 194C, argued in the alternative before the ld. first appellate authority that liability u/s 201 be proportionately reduced to the extent of inclusion of receipts by the payees in their respective income. The ld. CIT(A) accepted this contention and directed the AO to verify the claim of the assessee in this regard and allow appropriate relief. In doing so, he relied on the judgment of the Hon'ble Apex Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. (supra), in which it has been held that where the payee has already paid tax on the income on which there was a short deduction of tax at source, recovery of tax cannot be made once again from the 29 ITA Nos.5310 & 6066/Del/2013 tax-deductor. The AO vide his order passed u/s 201(1)/(1A) read with section 251 has reduced the demand to Rs.2.25 crore consisting of interest u/s 201(1A) amounting to Rs.2.19 crore and tax u/s 201(1) amounting to Rs.6.05 lac. The relief came to be allowed by considering the amounts paid by the assessee to TV channels and corresponding amounts included by the deductees in their respective income. Only a sum on which tax withholding comes to Rs.6.05 lac, was not considered by the deductees in their respective income for which the liability of the assessee has been sustained u/s 201(1). The remaining demand under sub-section (1) has been erased because of the payees including the amount received from the assessee in their respective income.
21. After considering the rival submissions and perusing the relevant material on record, we find that the view taken by the ld. CIT(A) in directing the AO to reduce the amount u/s 201(1) for which the payee had already paid tax on the income, is 30 ITA Nos.5310 & 6066/Del/2013 otherwise in conformity with the judgment in the case of Hindustan Coca Cola Beverages Pvt. Ltd. (supra). Moreover, the legislature has inserted proviso to section 201(1) by the Finance Act, 2012 giving recognition to the principle laid down by the Hon'ble summit Court in Hindustan Coca Cola Beverages Pvt. Ltd. (supra). This proviso stipulates that that any person who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid/credited to a resident shall not be deemed to be an assessee in default in respect of such tax if such resident (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect. In view of the judgment in Hindustan Coca Cola Beverages Pvt. Ltd. (supra), we hold that the ld. CIT(A) was fully justified in reducing the obligation of the assessee u/s 201(1) to this extent. 31
ITA Nos.5310 & 6066/Del/2013
22. However, we find that this judgment does not discharge the obligation of the assessee towards interest u/s 201(1A) notwithstanding the obliteration of demand u/s 201(1) of the Act. Their Lordships in para 10 of this judgment have categorically upheld the liability of the assessee towards interest by relying on Circular No. 275/201/95-IT(B), dt. 29th Jan., 1997 issued by the CBDT, declaring that this will not alter the liability to charge interest under s. 201(1A) of the Act till the date of payment of taxes by the deductee. It is further observed that proviso to sub-section (1A) of section 201 provides in unambiguous terms that in case any person fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident but is not deemed to be an assessee in default under the first proviso of sub- section (1), the interest under clause (i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident. This proviso 32 ITA Nos.5310 & 6066/Del/2013 reaffirms the liability of the assessee towards interest irrespective of the deletion of liability u/s 201(1) on the score of payees including receipts from the person responsible in their respective income. On a pertinent query, the ld. AR was fair enough to accept that the calculation of Rs.2.25 crore as made by the AO in his final order u/s 201(1)/(1A) is otherwise correct if the provisions of section 194J are held to be attracted.
23. Now we take up the contention of the Department that the ld. CIT(A) went outside his jurisdiction in remitting the matter to the AO directing to allow appropriate relief qua the amounts paid by the assessee getting included in the income of the respective payees. In principle, we hold that the ld. CIT(A) ought to have decided the issue at his end rather than remitting it to the AO since section 251(1) does not now permit him to restore the matter to the AO. Since the AO has religiously followed the direction of the ld. CIT(A) in reducing the 33 ITA Nos.5310 & 6066/Del/2013 amount, which should have been rightly excluded by the ld. CIT(A) himself in terms of the judgment of the Hon'ble Summit Court in Hindustan Coca Cola Beverage (supra), now it will be a mere ritual in firstly setting aside the order of the ld. CIT(A) to this extent and then asking him to make the calculation himself, correctness of which has not been disputed by the either side. Under these peculiar circumstances, we do not propose to interfere with the impugned order and countenance the same in entirety.
24. In the result, both the appeals stand dismissed.
Order Pronounced in the open Court on 29.02.2016.
Sd/- Sd/-
[A.T. VARKEY] [R.S. SYAL]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated, 29th February, 2016.
dk
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ITA Nos.5310 & 6066/Del/2013
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.
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