SKN 1 525.15 itxa IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 525 OF 2015 WITH INCOME TAX APPEAL NO. 732 OF 2015 WITH INCOME TAX APPEAL NO. 741 OF 2015 WITH INCOME TAX APPEAL NO. 1035 OF 2015 Commissioner of Income Tax, TDS 2 Mumbai. Appellant. V/s. M/s. UTV Entertainment Television Ltd. Respondent. Mr. Prakash C. Chhotaray for appellants. Mr. F V. Irani with Mr.A.K. Jasani for respondent. CORAM : A.S. OKA & A.K. MENON, JJ. DATE : 10th and 11th October 2017. P.C. submissions of learned counsel appearing for parties were heard on earlier date. As there is challenge to same impugned judgment and order dated 29th October, 2014 in these appeals, for sake of convenience, we are referring to facts of Appeal No.1035 of 2015. 2. With view to appreciate submissions made across bar, it will be necessary to briefly highlight controversy involved. respondent is Public Limited Company carrying on business of broadcasting of Television (TV) channels. It is stated that respondent operates certain 1 of 9 ::: Uploaded on - 15/11/2017 ::: Downloaded on - 17/11/2017 11:42:32 ::: SKN 2 525.15 itxa TV entertaining channels. Survey was carried out firstly of books of accounts of respondent. Assessing Officer found that certain amounts were paid by respondent on account of carriage fees, editing expenses and dubbing charges. Tax was deducted on said amounts as per Section 194C of Income Tax Act, 1961. 3. Assessing Officer was of opinion that carriage fees, editing charges and dubbing charges were in nature of fees payable for technical services and, therefore, tax should have been deducted under Section 194J of Income Tax Act, 1961 (for short Act ). Accordingly, show cause notice was issued to respondent asking for explanation with respect to following payments made. (i) Carriage Fees / Placement Charges. (ii) Subtitling charges (Editing Expenses) (iii) Dubbing Charges. 4. After considering reply of respondent assessee, it was held that aggregate amount of Rs.34,71,36,096/ is in nature of fees for rendering technical services and therefore tax should have been deducted under Section 194J of said Act. Before we come to submissions made across bar, it will be necessary to make reference to relevant provisions of Income Tax Act. Section 194C and Section 194J of Income Tax Act form part of Chapter XVII which generally deals with collection and recovery of tax. Section 194C deals with payment to contractors while Section 194J deals with fees for professional or technical services. 5. As observed earlier, Assessing Officer passed order dated 18th March 2011 under Section 201(1)/ 201(1A) of Income Tax Act holding that three items were not covered by Section 194C but by Section 194J. 2 of 9 ::: Uploaded on - 15/11/2017 ::: Downloaded on - 17/11/2017 11:42:32 ::: SKN 3 525.15 itxa 6. Therefore, demand of Rs.1,11,13,964/ was raised. Being aggrieved by said order, appeal was preferred by respondent before Commissioner of Income Tax (Appeals). appeal preferred by respondent was partly allowed holding that there was no short deduction of tax by appellant on account of payment of placement charges, subtitling charges and dubbing charges. appeal was preferred by Revenue to Income Tax Appellate Tribunal, F Bench, Mumbai. By impugned judgment and order, appeal preferred by Revenue was dismissed and cross objection was held to be academic in nature and therefore, held to be infructuous. 7. learned counsel appearing for appellant Revenue has taken us through impugned orders. learned counsel appearing for appellant submitted that payments made by respondent will not be covered by Section 194C. It was submitted that, in fact, Section 194J will be applicable. He invited our attention to findings of fact recorded by Assessing Officer. He submitted that various substantial questions of law arise in these appeals, which are set out as questions (a) to (e) in appeal. 8. According to learned counsel appearing for appellant, Appellate Tribunal as well as Commissioner (Appeals) have committed gross error by applying Section 194C. He submitted that payments made by respondent are not contractual payments and, therefore, Section 194C of Income Tax Act will not be applicable. His contention is that activity for which payments were made by respondent are either for professional or for technical services and, therefore, Section 194J will apply to present case. His submission is that reasons recorded by Appellate Tribunal are completely erroneous and need to be interfered with by this Court. learned counsel for respondent supported impugned judgment and order. 3 of 9 ::: Uploaded on - 15/11/2017 ::: Downloaded on - 17/11/2017 11:42:32 ::: SKN 4 525.15 itxa 9. We have given careful consideration to submissions. Firstly, it will be necessary to advert to facts of case. For that purpose, it will be necessary to make reference to order passed by Income Tax Officer. Paragraph 3 of order reads thus : 3. During Survey, on perusal of books of accounts of assessee company, it was found that for Financial Years 2010 11, year under consideration assessee company has debited amount of Rs. 33,24,56,189/ on account of carriage fees Rs.8,20,650/ on account of Editing expenses and Rs.12,95,400/ on account of Dubbing Charges. assessee was asked to give details of Carriage Fees, Editing Expenses and Dubbing Charges paid by company and services rendered to them along with copies of Agreements made in this regard. assessee has deducted TDS as per provisions of section 194C of I.T.Act on such payment. On further perusal of Agreements submitted by assessee it is seen that these payments are given to MSO/Cable Operators to retransmit and/or carry service of channels on 'S' Band in their respective territories. services provided by these MSOs / Cable Operators does not come within purview of section 194C of I. T. Act, as placing service of channel on 'S' Band is Technical Service for which TDS is required to be deducted as per provisions of Section 194J of I.T.Act instead deducted by assessee company as per provisions of section 194C of I.T.Act, 1961. 10. Thus, we are concerned with three categories of charges i.e. carriage fees, editing expenses and dubbing charges. It is to be noted that respondent assessee had deducted TDS as per provision of Section 194C of said Act. show cause notices were issued to assessee for Financial Years 2007 08, 2008 09, 2009 10 and 2010 11. 4 of 9 ::: Uploaded on - 15/11/2017 ::: Downloaded on - 17/11/2017 11:42:32 ::: SKN 5 525.15 itxa 11. Assessing Officer held that placement charges will be governed by Section 194J. Similarly in case of dubbing charges, same finding was recorded. Even same view was taken in respect to editing expenses. As stated earlier, Commissioner (Appeals) (the first appellate authority) interfered in appeal preferred by assessee. 12. first Appellate Authority has made in depth consideration of factual aspects. Reference to factual aspects will be necessary to understand technicalities associated with carriage fees, editing expenses and dubbing charges. Firstly, it will be necessary to consider nature of carriage fees or placement fees in context of nature of business carried on by respondent. 13. Commissioner (Appeals) has recorded finding of fact after having perused copies of agreements entered into between respondent assessee and cable operators/ Multi System Operators (MSOs), that cable operators pay fee to respondent for acquiring rights to distribute channels. It is pointed out that cable operators face bandwidth constraints and due to same, cable operators are in state to decide which channel will reach end viewer at what frequency (placement). Accordingly, broadcasters make payments to cable operators to carry their channels at particular frequency. Fee paid in that behalf is known as carriage fee or placement fee . payment of placement fee leads to placement of channels in prime bands, which in turn, enhances viewership of channel and it also leads to better advertisement revenues to TV channel. 14. Commissioner (Appeals) has given finding of fact on perusal of sample copies of agreements. agreements are entered into with respondent by cable operators for placement of channels on 5 of 9 ::: Uploaded on - 15/11/2017 ::: Downloaded on - 17/11/2017 11:42:32 ::: SKN 6 525.15 itxa agreed frequencies on which respondent wishes to place particular channel. placement fee is consideration for providing choice of desired placement of channels. That is how, channel placement charges are paid to cable operators under agreement. Under agreement, cable operators agree for placing particular channel on agreed frequency band. As stated earlier, respondent has deducted tax at rate of 2% at source by invoking Section 194C of Income Tax Act while making payment towards placement fees to cable operators/ MSOs. If Section 194J is to be applied, deduction would be of 10%. Commissioner (Appeals) has also gone through method followed by cable operators/ MSOs. Commissioner (Appeals) has also gone into submission of Revenue that, in fact, Section 194J would apply. In substance, argument is that placement charges are basically for rendering technical service. Commissioner (Appeals) has recorded finding of fact on basis of material on record that placement charges are consideration for placing channels on agreed frequency bands. It was found that, as matter of fact, by agreeing to place channel on any preferred band, cable operator does not render any technical service to distributor/ TV channel. Reference is made to standard fee paid for basic broadcasting of channel at any frequency. Commissioner (Appeals) has considered clause (iv) of explanation to Section 194C which incorporates inclusive definition of work . Clause (iv) includes broadcasting and telecasting including production of programmes for such broadcasting and telecasting. Commissioner (Appeals) rightly found that if contract is executed for broadcasting and telecasting channels of respondent, same would be covered by Section 194C as it falls in clause (iv) of definition of work . Therefore, when placement charges are paid by respondent to cable operators/ MSOs for placing signals on preferred band, it is part of work of broadcasting and telecasting covered by sub clause (b) of clause (iv) of explanation to Section 194C. As matter of fact, it was found by 6 of 9 ::: Uploaded on - 15/11/2017 ::: Downloaded on - 17/11/2017 11:42:32 ::: SKN 7 525.15 itxa Commissioner (Appeals) that whether payment is towards standard fee or placement fee, activities involved on part of cable operators/ MSOs are same. When placement fee is received, channel is placed on particular prime band. It was found that by agreement to place channel on prime band by accepting placement fee, cable operator/ MSO does not render any technical service. As far as Appellate Tribunal is concerned, again definition of work in clause (iv) of explanation to Section 194C was looked into. We must note here that grievance was made by learned counsel appearing for appellant that there are no detailed findings recorded by Appellate Tribunal. However, Commissioner (Appeals) has recorded detailed findings on basis of material on record and by referring to findings, Appellate Tribunal has expressed general agreement with findings recorded by first Appellate Authority. While affirming judgment of first Appellate Authority, it is open for Appellate Tribunal to express such general agreement. 15. Now, turning to second grievance regarding subtitling charges, again Commissioner (Appeals) has gone into details of factual aspects. Subtitles are textual versions of dialogs in films and television programmes which are normally displayed at bottom of screen. Sometimes, it is textual version of dialogs in same language. It can also be textual version of dialogs in particular language other than language of film or TV programme. Again stand of Revenue was that this will be covered by Section 194J and not by Section 194C. We must note here that in this appeal, Revenue has not made any grievance regarding applicability of Section 194C to dubbing charges. finding of fact recorded by Commissioner (Appeals), which is confirmed by Appellate Tribunal, is that work of subtitling will be covered by definition of work in clause (iv) of explanation to Section 194C. Reliance is placed by Commissioner (Appeals) on CBDT notification dated 12 th 7 of 9 ::: Uploaded on - 15/11/2017 ::: Downloaded on - 17/11/2017 11:42:32 ::: SKN 8 525.15 itxa January 1977. said notification includes editing in profession of film artists for purpose of Section 44AA of Income Tax Act. However, service of subtitling is not included in category of film artists. As noted earlier, sub clause (b) of clause (iv) of explanation to Section 194C covers work of broadcasting and telecasting including production of programmes for such broadcasting or telecasting. work of subtitling will be naturally part of production of programmes. Apart from confirming finding of fact recorded by Commissioner (Appeals) on both aspects on placement fee and subtitling charges, Appellate Tribunal has noted that both Sections 194C and 194J having introduced into Income Tax Act on same day, it is observed that activities covered by Section 194C are more specific and activities covered by Section 194J are more general in terms. Therefore, for activities covered by Section 194C, Section 194J cannot be applied being more general out of two. 16. In alternative, submission was canvassed by learned counsel for appellant that carriage fees or placement charges are in nature of commission or brokerage as defined in explanation to Section 194H of Income Tax Act. Further, in alternative, it was submitted that carriage fees/ placement charges were in nature of royalty covered by Section 194J of Income Tax Act. 17. We have already discussed in detail findings of fact recorded by Commissioner (Appeals) as regards placement fees/ carriage fees. We have agreed with findings of fact based on material on record that when payment is made towards standard fee or placement fee, activity involved is same in both cases. As stated earlier, when services are rendered as per contract by accepting placement fee or carriage fee, same are similar to services rendered against payment of standard fee paid for broadcasting of channels on any frequency. In present case, 8 of 9 ::: Uploaded on - 15/11/2017 ::: Downloaded on - 17/11/2017 11:42:32 ::: SKN 9 525.15 itxa placement fees are paid under contract between respondent and cable operators/ MSOs. Therefore, by no stretch of imagination, considering nature of transaction, argument of appellant that carriage fees or placement fees are in nature of commission or royalty can be accepted. 18. Thus, as far as both grounds of challenge are concerned, there are findings of fact recorded by both authorities. We concur with view taken by Appellate Tribunal. In our view, no question of law arises in these appeals. There is no merit in appeals and same are dismissed with no order as to costs. (A.K. MENON, J) (A.S. OKA, J) 9 of 9 ::: Uploaded on - 15/11/2017 ::: Downloaded on - 17/11/2017 11:42:32 ::: TheCommissionerofIncome-tax,TDS-2 Mumbai v. UTVEntertainmentTelevisionLtd