Deepak R. Shah, A.M. Both these appeals by Revenue are directed against order of learned CIT(A)-XXX, New Delhi dt. 25th Sept., 20 6 in appeal against order under s. 20 1(1) of Act for financial years 20 0-01 and 20 1-02. 2 . assessee is in business of producing and marketing films and documentary etc. subsidiary company of assessee, namely, M/s TVAM (India) (P) Ltd. (in short TVAM ) is engaged in production of TV serial Subah Savere . TV serial was produced to be released on Doordarshan. TVAM paid telecast fees to Doordarshan. right to exhibit programme is only with TVAM. As per terms of telecast rights, Doordarshan allowed TVAM to advertise during screening of said programme. Such advertising time are referred as Free Commercial Time (FCT). TVAM produced programme incurring various expenditure on production. For earning Revenue, TVAM sold its right in programme to assessee company MPCL. MPCL acquired rights of such contents and had rights of such footage as well as recast rights. Pursuant to agreement between assessee and TVAM dt. 25th March, 1999, assessee got right to release advertisement during FCT. For acquiring such rights, assessee MPCL reimburse cost incurred by TVAM along with 7.5 per cent of such cost towards their profit. Thus, MPCL acquired rights to release advertisement during FCT and paid TVAM for acquiring such right. relevant clauses in agreement dt. 25th March, 1999 are extracted herein : "This agreement made this 25th day of March, 1999 Between M/s Moving Picture Company (India) Ltd. through its director, Ms. Umagajapathi Raju being Party of first part and M/s TVAM (India) (P) Ltd. through its director, Mr. Ramesh Sharma being party of second part hereinafter referred to as parties of first and second part respectively which expression shall unless repugnant to context mean and include their successors, nominees, assignees and successors-in-interest. Whereas M/s TVAM (India) (P) Ltd. is company set up to produce T.V. Programmes for Doordarshan and is producing morning programme Subah Savere . And whereas M/s Moving Picture Company (India) Ltd. is already established company involved in business of media, promotion, television, advertising for last 10 years. And whereas M/s TVAM (India) (P) Ltd. being desirous of promoting its sale etc., are desirous of appointing M/s Moving Picture Company (India) (P) Ltd. as their sole marketing representative and exclusive holder of world rights for subsequent resale/re-telecast of programme or any portion thereof. Now this deed witnesseth as under : (1) That to party of second part is producing TV Programme under t h e name and title Subah Savere which is shown on DD National in morning hours. (2) That party of second part has agreed to appoint party of first part as sole marketing agent for selling rights, of free commercial time for programme Subah Savere w.e.f. 15th Feb., 1999. party of second part also agrees that party of first part shall hold all rights to programme and footage for every re-telecast of programme or any portion thereof and TVAM shall have no rights in programme. copyright of residual footage shall also belong party of first part. (3) That party of second part confirms that during pendency of this agreement it shall not appoint any other party for marketing of its programme. All parties directly approaching party of second part shall be directed by it to party of first part. (4) That party of first part shall be solely responsible for marketing of FCT s for Subah Savere . party of first part shall meet all necessary expenses on its own as may be required for purpose. (5) That party of second part shall be entitled to recover from party of first part cost of production plus 7.5 per cent of same. All payments related to programme Subah Savere including telecast fee shall be paid by party of first part either directly or reimbursed to party of second part as may be mutually agreed. However, party of first part would ensure that adequate funds are available at all times to party of second part so that smooth production of programme is not hampered. Any delay in payments and where expenses have to be incurred by party of second part owing to such delay in payment would entitle party of second part to charge interest at bank rate for period of delay. (6) That in event that party of second part does not exhibit its programme on TV as per specifications and timings etc., agreed to between both parties of first and second part, party of first part shall have right to terminate such contract and recover costs and damages from party of second part for any loss that it may have suffered for delay/non-execution of terms of this contract." 2.1 survey under s. 133A was conducted at premises of assessee on 30th Jan., 20 3. During course of survey, statement of Shri M.M. Pokhrial confirmed that following payments were made to TVAM, which were towards cost of production of TV serial and marketing : F.Y. Cost of Production Subah Savere 20 0-01 Rs. 3,70,88,213 20 1-02 Rs. 3,58,45,469 AO held that amount paid to TVAM is to be considered as fees for technical services. assessee should have deducted tax at source as per provision of s. 194J of Act. Since no tax was deducted, assessee was treated as assessee-in-default under s. 20 1(1) of Act. 2.2 AO also noted that FCT which was available to assessee was sold to various advertising agents. advertising agents were given commission on such FCT sold through them. assessee should have deducted tax at source on such agency sales commission as per provision of s. 194H of Act. Since no tax was deducted, assessee is to be treated as assessee-in-default. contention raised by assessee in this behalf were not accepted and demand was raised for failure to deduct tax at source. Interest under s. 20 1(1A) was also charged. 2.3 Learned CIT(A) after considering rival submissions held as under : "Ground No. 2 [194H and 20 1(1)] : facts of case are that M/s TVAM, producer of programme Subah Savere had got Free Commercial Time (FCT) which they had sold to appellant company. appellant company in turn sold FCT to corporates, either directly or through advertising agencies. In case sale of FCT was made through advertising agency, advertising agency was entitled to retail 15 per cent of sale proceeds received from customer. In my opinion such retention partakes character of trade discount . fact that it has been reduced from gross amount, and it is only net amount that has been claimed by appellant also supports above view. Apart from above transaction between appellant and advertising agency was of principal to principal. Further to earn commission under s. 194H there should be three parties involved in transaction, whereas in facts of instant case only two parties are involved. Hence provisions of s. 194H are not attracted, and, impugned demand raised is quashed. Consequently, demand under s. 20 1(1A) will also not remain. AO is directed to delete demand raised under s. 194H r/w s. 20 1(1) and 20 1(1A). Ground Nos. 3, 4, 5 and 6 [194J and 20 1(1A)] : As regards this issue it is seen that M/s TVAM was set up as subsidiary of appellant company to produce TV Programmes for Doordarshan. M/s TVAM produced morning programme Subah Savere for Doordarshan and in consideration of supplying programme, Doordarshan allowed M/s TVAM Free Commercial Time (FCT). In turn M/s TVAM appointed appellant company as sole marketing representative and exclusive holder of world rights for subsequent resale/re- telecast of programme as well as FCT. programme was only produced by TVAM who had been commissioned by M/s Doordarshan. In such facts and circumstances, in my opinion, AO fell into error, under wrong appreciation of facts, by inferring that producer of programme was appellant company, and, consequently since programme had been produced by M/s TVAM latter had rendered technical services to appellant company on which provisions of s. 194J are not applicable, impugned demand raised by AO is hereby quashed. Consequently, demand under s. 20 1(1A) will also not remain." 2 . 4 Revenue is in further appeal before us. learned Departmental Representative Shri M.P. Singh submitted that assessee was treated as assessee-in-default based on statement of Shri M.M. Pokhrian recorded during course of survey. assessee was making periodic payment to TVAM towards production of TV serial. This serial was produced for and on behalf of assessee. Thus, services rendered by TVAM should be treated as technical services within meaning of s. 194J and hence, for failure to deduct tax, assessee is to be treated as assessee-in-default. He further submitted that FCT was sold by assessee through various agents. agents were paid commission. Thus, on payment of such commission assessee should have deducted tax as per provision of s. 194H of Act. For failure to deduct tax under s. 194H, assessee is to be treated as assessee-in-default under s. 20 1(1) of Act. Since assessee is to be treated as assessee-in-default under s. 20 1(1), interest is consequential and hence, interest under s. 20 1(1A) is also to be charged. 2.5 Learned counsel for assessee, on other hand, strongly relied by appellate authority. He submitted that survey was conducted on assessee s premises on 30th Jan., 20 3, and agreement dt. 25th March, 1999 between assessee and its subsidiary, TVAM was found. Statement was also recorded of accountant. Show cause was issued to assessee on 6th Feb., 20 3. Assessee replied on very next working day, 10th Feb., 20 3, wherein all facts were detailed. AO has ignored submissions of assessee as facts were detailed. AO has ignored submissions of assessee as being afterthought , and also not paid attention to agreement discovered during survey. Interestingly, AO on p. 1 of AO s order refers to agreement, but ignored same while arriving at his conclusions. assessee, MPCL and its subsidiary, TVAM are both taxpayers and have been assessed to tax. AO has not brought any other transaction where provisions of TDS have not been complied by assessee. As such provisions of s. 20 1 could not have been applied by AO, as tax had been recovered by Department. This proposition has been held in number of cases including by Delhi High Court inCIT vs. Adidas India Marketing (P) Ltd. ( 20 6) 20 6 CTR (Del) 499 : ( 20 6) 157 Taxman 519 (Del), by Tribunal inITO vs. Alfred Allan Advertising ( 20 6) 8 SOT 312 (Del). AO had then, incorrectly, interpreted that TVAM had been rendering technical services to MPCL and MPCL erred in not charging TDS under s. 194J. AO also proceeded to hold that agency sales commission , had been paid by assessee to advertising agencies and TDS under s. 194H not charged on it. CIT(A) had gone into matter in depth. He has examined entire transactions and also considered decision of Tribunal inAsstt. CIT vs. Samaj ( 20 1) 71 TTJ (Ctk) 783 : ( 20 1) 77 ITD 358 (Ctk), where this matter had been discussed in last para, and finally held on p. 14 of his order that : (i) advertising agency was entitled to retain 15 per cent from sale proceeds of FCT which partakes character of trade discount, and (ii) to attract provisions of s. 194H there should be three parties involved in transaction whereas in instant case only two parties were involved, and held that provisions of s. 194H were not attracted in this case. Again, on p. 15 of his order, CIT(A) recorded finding of fact that M/s TVAM produced morning programme Subah Savere for Doordarshan and in consideration of supplying programme, Doordarshan allowed M/s TVAM Free Commercial Times (FCT). In turn M/s TVAM appointed appellant company as sole marketing representative and exclusive holder of world rights for subsequent resale/re-telecast of programme as well as FCT. programme was only produced by TVAM who had been commissioned by M/s Doordarshan. In such facts and circumstances, AO fell into error, under wrong appreciation of facts, by inferring that producer of programme was appellant company and consequently since programme had been produced by M/s TVAM latter had rendered technical services to appellant company on which provisions of s. 194J were attracted. In such facts and circumstances of case, as provisions of s. 194J are not applicable, impugned demand raised by AO is to be quashed. He pleaded that order of CIT(A) needs to be upheld. 3. We have considered rival submissions. From agreement, it is clear that programme was produced by TVAM only. expenditure was incurred by TVAM for production of TV programme. To earn Revenue out of production of programme, FCT available to TVAM was transferred in favour of MPCL (assessee). FCT could be utilized by assessee or by its nominee. assessee was to pay entire cost of production expenses plus 7.5 per cent towards profit of TVAM. However, payments by assessee to TVAM was for acquiring right in FCT. measure for acquiring right in FCT was in form of cost of production plus 7.5 per cent. TV programme was not produced at instance of assessee but TVAM had direct contract with Doordarshan for production of programme Subah Savere . TVAM has n o t rendered any technical services but has transferred its right in TV programme and also its right in FCT made available by Doordarshan to it. Thus, payment is not for any technical services rendered by TVAM but for acquiring right in programme and FCT. Fees for technical services in s. 194J is to have same meaning as assigned in Expln. 2 to cl. (vii) of sub-s. (1) of s. 9 which provides that fees for technical services means any consideration for rendering of any managerial, technical or consultancy services. In present case, TVAM has not rendered any managerial, technical or consultancy services for payments made by assessee to it. Rather TV serial was produced by TVAM itself availing services of various artists etc. entire cost of production of TV serial is reimbursed by assessee. payments by assessee is for acquiring right in FCT which is merely measured on basis of cost plus 7.5 per cent. Thus, it cannot be said that amount was paid by assessee to TVAM in nature of fees for technical services as defined in Explanation to s. 9(1)(vii). Thus, there is no error in order of learned CIT(A) in this regard. 3.1 As regards payments of commission, it is seen that assessee has not paid any commission to advertising agents. Rather assessee has sold air time to advertising agents who in their turn have sold such air time to various other advertisers. assessee was to receive certain consideration for selling air time to advertising agent and advertising agents had retained part of that commission which is in nature of agency commission. Thus, assessee received payment from advertising agent net of such agency commission. These are in form of trade discount offered and not in form of commission paid. On payment made by advertising agents to assessee, tax is deducted at source under s. 194C of Act. Since assessee has not paid any commission within meaning of s. 194H of Act to advertising agents rather have received amount from such advertising agents, there is no occasion for assessee to deduct tax at source as no payment is made by assessee to such advertising agents. decision of Tribunal, Cuttack Benches in case ofAsstt. CIT vs. Samaj(supra) squarely applies. Tribunal held as under : "As regards commission to advertising agencies, newspaper published by assessee was used by various advertising agencies for placing advertisements. said agencies purchased space on newspaper and supplied material to be published in such space. From bill raised by assessee for space and printing charges agencies deducted specified percentage as their charges and paid balance to assessee. Although payment deducted by advertising agencies was described as commission , transaction between assessee and agencies was entered into on principal to principal basis. Therefore, CIT(A) was justified in holding that above transaction was made to advertising agencies on principal to principal basis instead of principal to agent basis." In present case also, facts being identical, amount deducted by various advertising agents cannot be considered as commission but is also to be treated as discount given and hence, assessee was not under any obligation to deduct tax under s. 194HH of Act. 4. In result, both appeals are dismissed. *** INCOME TAX OFFICER v. MOVING PICTURE CO. (INDIA) LTD.