, ` '
INCOME TAX APPELLATE TRIBUNAL,MUMBAI "K" BENCH
. ., , ,
Before S/Sh. A.D. Jain,Judicial Member & Rajendra,Accountant Member
/.ITA No.1413/Mum/2014, /Assessment Year-2009-10
Astt. CIT-11(1) M/s. Star Den Media Services Pvt.
th
Room No.439, 4 Floor, Assessee Ltd.Star House, Off Dr. E. Moses
yakar Bhavan, M.K. Road Vs Road, Mahalaxmi,Mumbai-11
Mumbai-400 020. PAN: ASSESSEE CCD 7658 Q
( /Appellant) ( / Respondent)
Cross Objection No.71/Mum/2014Arising Out of ITA No.1413/Mum/2014 /AY-2009-10
M/s. Star Den Media Services Pvt. Astt. CIT-11(1)
Ltd.Mumbai-400 011 Vs Mumbai-400 020.
( /Appellant) ( / Respondent)
/.ITA No.1414/Mum/2014, /Assessment Year-2009-10
Astt. CIT-11(1) M/s. Star India Pvt. Ltd.
Room No.439, 4th Floor, Assessee Star House, Off Dr. E. Moses
yakar Bhavan, M.K. Road Vs Road, Mahalaxmi,Mumbai-11
Mumbai-400 020. PAN: ASSESSEE ACN 1335 Q
( /Appellant) ( / Respondent)
Cross Objection No.72/Mum/2014Arising Out of ITA No.1414/Mum/2014 /AY.2009-10
M/s. Star India Pvt. Ltd. Astt. CIT-11(1)
Mumbai-400 011 Vs Mumbai-400 020.
( /Appellant) ( / Respondent)
/Assessee by : S/Shri Porus Kaka & Divesh Chawla
/ Revenue by : Shri G.M. Doss
/ Date of Hearing : 27 -07-2015
/ Date of Pronouncement : 05 -08-2015
, 1961 254(1)
Order u/s.254(1)of the Income-tax Act,1961(Act)
PER RAJENDRA, AM-
Challenging the directions dt.31.12.2013 of the Dispute Resolution Penal(DRP)-II,Mumbai,
the Assessing Officers (AO.s) have filed appeals in both the cases .The assessee has also filed
cross objections. As the issues involved in both the appeals and the CO.s are common and the
assessee's belong to the same group, so, we are deciding the appeals by a common order.
ITA 1413/M/2014:
The AO has raised following grounds of 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. 67,37,23,506/ 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. DRPII on the above grounds be set aside
and that of the Assessing Officer be restored.
1413,1414/14 ; CO. 71,72/14 Star Group
3. The appellant craves, leave to amend or alter any ground or add a new ground which
may be necessary."
C.O. No.71/M/2014:
The grounds of CO, filed by the assessee read as under :-
"1. On the facts and in the circumstances of the case, the learned Assistant Commissioner of
Income Tax11(1) ['Assessing Officer'] erred in objecting to the directions of DRP that the
Respondent has rightly deducted TDS on channel placement fees/ carriage fees under
Section 194C of the Income Tax Act, 1961 ('Act') and that the provision of Section 194J of the
Act are not applicable on the channel placement fees/carriage fees paid by the Respondent and
hence, there cannot be any disallowances under Section 40(a)(ia) of the Act.
2.On the facts and in the circumstances of the case, without prejudice to the above, the
learnedAssessing Officer erred in not appreciating that the disallowances under Section 40
(a)(ia) of the Actcannot be made in case of alleged short deduction of tax at source.
3.On the facts and in the circumstances of the case, without prejudice to the above, the learned
Assessing Officer erred in not appreciating that the disallowances under Section 40(a) (ia) of
the Act cannot be made in light of the retrospective amendments to the provisions of Section
9(1)( vi) of the Act
The Respondent craves to consider each of the above grounds of crossobjections without
prejudice to each other and craves leave to add, alter, delete or modify all or any of the above
grounds of cross objections."
ITA No.1414/M/2014:
Following are Grounds of appeal, filed by the AO:-
"1. "On the facts and circumstances of the case and in law, the Ld. DRP was not justified in
deleting the disallowance of Rs.56,05,29,772/ 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. DRPII on the above grounds be set aside
and that of the Assessing Officer be restored.
3. The appellant craves, leave to amend or alter any ground or add a new ground which
may be necessary."
CO No.72/Mum/2014:..
The assessee has filed the following grounds in its Cross Objection:-
"1. On the facts and in the circumstances of the case, the learned Assistant Commissioner of
Income Tax11(1) ['Assessing Officer'] erred in objecting to the directions of DRP that the
Respondent has rightlydeducted TDS on channel placement fees/ carriage fees under Section
194C of the Income Tax Act, 1961 ('Act') and that the provision of Section 194J of the Act are
not applicable on the channel placement fees/carriage fees paid by the Respondent and hence,
there cannot be any disallowances under Section 40(a)(ia) of the Act.
2. On the facts and in the circumstances of the case, without prejudice to the above, the
learnedAssessing Officer erred in not appreciating that the disallowances under Section
40(a)(ia) of the Act cannot be made in case of alleged short deduction of tax at source.
3. On the facts and in the circumstances of the case, without prejudice to the above, the
learned Assessing Officer erred in not appreciating that the disallowances under Section
40(a)(ia) of the Act cannot be made in light of the retrospective amendments to the provisions
of Section 9(1)( vi) of the Act
The Respondent craves to consider each of the above grounds of crossobjections without
prejudice to each other and craves leave to add, alter, delete or modify all or any of the above
grounds of cross objections.
1413/Mum/2014"-AY.2009-10:
Assessee company,engaged in the business of distribution of Television channel,filed its
original return on 30.11.2009,declaring a total income of 42.78 crores. Later on a revised
return of income was filed on 29.3.2011 declaring the same total income. However, the claim
of tax deducted at source was increased.The assessee had done international transactions with
2
1413,1414/14 ; CO. 71,72/14 Star Group
its associate concerns therefore the matter was referred to Transfer Pricing Officer (TPO) .On
the basis of adjustments made by the TPO the AO passed a draft order on 22.3.2013. The
assessee challenged the draft order before the DRP who passed the order on 31.12.2013. The
AO completed the assessment u/s. 143(3) r.w.s. 144C(13) of the Act on 20.1.2014
determining the income of the assessee at Rs.85,75,46,290/-.
2.Effective ground of appeal is about deleting the disallowance of Rs.67.37 crores made on
account of channel placement fees u/s. 40(a)(ia). During the year the assessee had paid
channel placement fee of Rs.67,37,23,506/- . The AO found that the assessee had deducted
TDS u/s. 194C on payment of such fee @ 2%.He was of the opinion that it should have
deducted tax u/s.194J @ 10%. The DRP in its directions held that the payment made by the
assessee did not tantamount to payment of fee for transmission purposes which included
hiring of transponders, uplinking, down linking etc., that the fees paid by the assessee did
not come within the definition of royalty, that provisio of s.194J were not applicable.
At the time of hearing before us Representatives of both the sides agree d that the issue of
channel payment fees paid to cable TV operators/DTH providers has been decided by the
Tribunal in the case of NGC Networks(I)(P) Ltd.(150 ITD 772). We find that the Tribunal
has in the above case has held as under:-
"5.We have considered the rival submissions as well as relevant material on record. AO has
disallowed payment made by the Assessee to the cable T.V. operator/DTH provider for
placing its channel in a particular frequency to get better viewership on account of good
picture and sound quality. AO was of the view that the payment made by the Assessee for
placement of its channel is in the nature of royalty as per Explanation2 of section 9(1)(vi)
and, therefore, TDS should have been deducted as per provisions of Section 194J. The
Assessee challenged proposed action of Assessing Officer before DRP. The DRP has held that
channel placement fee does not come in the definition of royalty and therefore, the provision
u/s. 194J are not applicable. The DRP while coming to the conclusion also considered
retrospective amendment in section 9(1)(vi) in the shape of Explanation6. The DRP found
that the payment of channel placement fee is not tantamount to payment of fee for
transmission purpose which includes hiring of transponder, uplinking/downlinking etc. Thus
the DRP held that the disallowance u/s. 40(a)(ia) on account of short deduction of tax is not
warranted. We find that the channel placement fee paid to the cable TV operator/DTH
provider cannot be regarded as royalty as it does not fall under the definition in terms of
Explanation2 of Section 9(1)(vi) of the Income tax Act. Though there is an amendment in the
provision and as per newly inserted Explanation6 with retrospective effect the term process
has been defined and it includes transmission, uplinking and down linking of signals etc. But
the said retrospective amendment cannot be pressed into service for the purpose of
disallowance u/s. 40(a)(ia) because of the reason that at the relevant time when the Assessee
has deducted the tax at source it was not in the statute. The coordinate Bench of this
Tribunal in case of Channel Guide India Ltd. (supra), had the occasion to consider and
decide an identical issue in para25 and 26 as under :
"25. In our opinion, the issue involved in the present case however, is relating to
disallowance made u/s.40(a)(i) for nondeduction of taxatsource from the payment made by
the assessee to SSA and as held by Ahmedabad Bench of this Tribunal in the case of Sterling
Abrasives Ltd. by its order dated 23.12.2010 cited by the Ld. Counsel for the assessee, the
assessee cannot be held to be liable to deduct tax at source relying on the subsequent
amendments made in the Act with retrospective effect. In the said case, Explanation to
sec.9(2) was inserted by the Finance Act, 2007 with retrospective effect from 1.6.1976 and it
was held by the Tribunal that it was impossible for the assessee to deduct tax in the financial
year 200304 when as per the relevant legal position prevalent in the financial year 200304,
the obligation to deduct tax was not on the assessee. The Tribunal based its decision on a
legal Maxim lex non cogit ad impossiblia meaning thereby that the law cannot possibly
3
1413,1414/14 ; CO. 71,72/14 Star Group
compel a person to do something which is impossible to perform and relied on the decision of
Hon'ble Supreme Court in the case of Krishna Swamy S. PD and Another v. Union of India
and others 281 ITR 305 wherein the said legal Maxim was accepted by the Hon'ble apex
court.
26. In view of the above discussion, we are of the view that the amount in question paid by the
assessee to SSA was not taxable in India in the hands of SSA either u/s.9(1)(vi) or 9(1)(vii) as
per the legal position prevalent at the relevant time and the assessee therefore was not liable
to deduct tax at source from the said amount paid to M/s. SSA and there was no question of
disallowing the said amount by invoking the provisions of sec.40(a)(i). In that view of the
matter, we delete the disallowance made by the AO u/s.40(a)(i) and confirmed by Ld. CIT (A)
and allow ground no.1 of the assessee's appeal."
5.1 The Tribunal in the said case has concluded that the law can not compel a person to do
something which is impossible to perform. A similar view was taken by Ahmedabad Bench of
this Tribunal in the case of Sterling Abrasives Ltd. v. ITO [IT Appeal No. 2247 & 2248
(AHD.) of 2008, dated 23122010] which was followed by the coordinate Bench of this
Tribunal in case of Channel Guide India Ltd. (supra). It is not the case of the Revenue that
the issue of applicability of section 194J was already considered in the case of the Assessee.
Therefore, when the Assessee has deducted the tax as per provisions of Section 194C which is
a bonafide decision of assessee keeping in view the nature of payments and facts of the case,
then, the Assessee was not supposed to foresee the subsequent retrospective amendment in the
statute to be held liable to tax deduction at source under the provisions of section 194J. We
further note that in case of S.K. Tekriwal (supra), the Hon'ble Calcutta High Court has
considered an issue of disallowance u/s. 40(a)(ia) on account of short deduction of tax. The
relevant part of the decision is as under :
"1. ....There is nothing in the said section to treat, inter alia, the assessee as defaulter where
there is a shortfall in deduction. With regard to the shortfall, it cannot be assumed that there
is a default as the deduction is not as required by or under the Act but the fact is that this
expression, 'on which tax is deductible at source under Chapter XVIIB and such tax has not
been deducted or, after deduction has not been paid on or before the due date specified in
subsection (1) of section 139'. This section 40(a)(ia) of the Act refers only to the duty to
deduct tax and pay to the Government account. If there is any shortfall due to any difference
of opinion as to the taxability of any item or the nature of payments falling under various TDS
provisions, the assessee can be declared to be an assessee in default under section 201 of the
Act and no disallowance can be made by invoking the provisions of section 40(a)(ia) of the
Act."
5.2 Further, we find force in the contention of the ld. Sr. Counsel that payment in question
does not fall under the term royalty as defined in Explanation2 of section 9(1)(vi) and
Explanation6 can not be pressed into service as the definition of royalty for the purpose of
section 40 is taken only under Explanation2 to section 9(1)(c). An identical issue was
considered and decided by this Tribunal in case of SKOL Breweries Ltd. (supra),
XXXXX
5.3 In view of the above discussion as well as the decision of Hon'ble Calcutta High Court
and the coordinate Bench of this Tribunal we do not find any reason to interfere with the
direction of the DRP."
Respectfully,following the above we decide the effective ground of appeal against the AO
CO No.71/Mum/2014:
3.From the grounds raised by the assessee in its cross objection,it is clear that it has supported
the direction of the DRP and has not raised any new issue. In view of our finding given in the
appeal filed by the AO the cross objections filed by the assessee become infructuous.
ITA No.1414/Mum/2014 and CO No. 72/Mum/2014 (2009-10):
4
1413,1414/14 ; CO. 71,72/14 Star Group
4.As stated earlier,the facts of both the cases are identical except the amount of disallowance
involved.Following our order in the case of Star Den media Services Pvt. Ltd. (ITA No.1413/
Mum/2014 assessment year 2009-10) we decide the effective ground of appeal against the
AO. Following our order for CO No.71/Mum/2014 we hold that the grounds raised by the
assessee are infructuous.
As a result,appeals of the AO and CO.s filed by both the assesses stand dismissed.
/ / .
Order pronounced in the open court on 5th August,2015.
5th ,2015
Sd/- Sd/-
(. . /A.D. Jain) ( / RAJENDRA)
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
/Mumbai, /Date: 05 .8. 2015
. ..Jv.Sr.PS.
/Copy of the Order forwarded to :
1.Appellant / 2. Respondent /
3.The concerned CIT(A)/ , 4.The concerned CIT /
5.DR A Bench, ITAT, Mumbai / , ,.. .
6.Guard File/
//True Copy//
/ BY ORDER,
/ Dy./Asst. Registrar
, /ITAT, Mumbai.
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