IN HIGH COURT AT CALCUTTA Special Jurisdiction (INCOME TAX) Original Side ITA 23 of 2015 Commissioner of Income Tax, Kolkata - I (TDS) -Vs.- Media World Wide Pvt. Ltd. Before: Hon ble Chief Justice Thottathil B. Radhakrishnan & Hon ble Justice Arijit Banerjee For appellant : Mr. Smarajit Roy Chowdhury, Adv. For Respondent : Mr. J.P. Khaitan, Sr. Adv. Mr. Ananda Sen, Adv. Heard On : 12.12.2019 CAV on : 12.12.2019 Judgment On : 08.01.2020 Arijit Banerjee, J.:- 1. This is appeal against order dated 29th August, 2014 passed by Income Tax Appellate Tribunal B Bench, Kolkata in ITA No.1422/KOL/2012 A.Y. 2010-11. By said order Learned Tribunal 2 dismissed department s appeal against order dated 16th July, 2012 passed by Commissioner of Income Tax (Appeals) I, Kolkata in Appeal No.543/CIT(A) 1/58(3)/11-12. By said appellate order, CIT had allowed assessee s appeal against order dated 29th July, 2011 passed by ITO Wd. 58(3), Kolkata ITNS 51 under Sections 201(1)/201(1A) of Income Tax Act (hereinafter referred as said Act ), whereby Assessing Officer had held that Section 194J of said Act applied to assessee and not Section 194C. Accordingly, Assessing Officer had held assessee liable on account of short deduction and interest thereon to tune of Rs.1,46,36,656/-. 2. brief facts of case are that assessee, at all material times, was engaged in business of media broadcasting and telecasting. It had entered into Up-linking Service Agreement with one ESSEL Shyam Communication Ltd. (ESCL) for Up-linking and Bandwidth Services as also Agreement with one Celebrities Management Pvt. Ltd. (CMPL) for Air Time service charges. While making payment to such parties for services rendered by them, assessee deducted tax at source in accordance with Section 194C of said Act. survey was conducted in office premises of assessee company on 20th June, 2011. All documents and records as were called for by Assessing Officer were supplied by assessee. Subsequently, assessment order was passed whereby Assessing Officer held that payments made by assessee to Multi System Operators on account of channel carriage fees and other payments related to Up-linking charges and down-linking charges, Bandwidth and Air Time 3 charges are covered by Section 194J of said Act since such payments were in nature of fees for professional and technical services. assessee was held responsible for short deduction and interest thereon. Penalty was also imposed on assessee under Section 271C and 221(1) of said Act. 3. At this juncture, it would be helpful and profitable to note relevant provisions of said Act. Section 194C in so far as same is material for present purpose, provides as follows:- (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of contract between contractor and specified person shall, at time of credit of such sum to account of contractor or at time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier, deduct amount equal to- (i) one per cent. where payment is being made or credit is being given to individual or Hindu undivided family; (ii) two per cent. where payment is being made or credit is being given to person other than individual or Hindu undivided family, of such sum as income-tax on income comprised therein. 4. Explanation (iv) after sub-section (7) of Section 194(c) provides inter alia that work shall include broadcasting and telecasting including production of programmes for such broadcasting or telecasting. 5. Section 194J of said Act insofar as same is relevant for instant case, provides as follows:- 4 (1) Any person, not being individual or Hindu undivided family, who is responsible for paying to resident any sum by way of- (a) Fees for professional services, or (b) Fees for technical services, [or [(ba) any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to director of company, or] (c) Royalty, or (d) Any sum referred to in clause (va) of section 28,] Shall, at time of credit of such sum to account of payee or at time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier, deduct amount equal to [ten per cent.] of such sum as income-tax on income comprised therein: 6. Explanation (b) at end of Section 194J states that fees for technical services shall have same meaning as in Explanation 2 to Clause (vii) of sub-section (1) of Section 9. Explanation 2 to Section 9(1)(vii) of Act provides that fees for technical services means any consideration (including any lump sum consideration) for rendering of any managerial, technical or consultancy services (including provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by recipient or consideration which would be income of recipient chargeable under head salaries . 7. assessee preferred appeal before CIT against order of Assessing Officer. CIT in its order held that services of Up- linking, Bandwidth Services, Air Time and Channel Carriages to Multi System Operators were related to broadcasting and telecasting which is covered specifically by definition of work in Section 194C(iv)(b) in Explanation part of Section. Such services require use of sophisticated 5 equipment for transmission of assessee s programmes and such equipment was made available to assessee company for which it had made payments after deducting TDS under Section 194C of Act. Learned CIT held that Section 194J is not applicable to facts of case. In coming to such conclusion, Learned CIT relied on decisions of various High Courts as well as Income Tax Appellate Tribunal. Learned CIT further recorded that assessee had provided details of income tax assessment returns and PANs of all companies with whom it had entered into transactions which demonstrated that said companies duly paid requisite balance tax amount after allowing for deduction of tax at source at rate of two per cent under Section 194C. 8. department carried matter by way of second appeal before Income Tax Appellate Tribunal. Learned Tribunal observed that case was squarely covered in favour of assessee by decision of Income Tax Appellate Tribunal, Kolkata in case of M/s Sristi Television (ITA Nos.1297/KOL/2012 & 276/KOL/2013). relevant part of that decision extracted in order of Learned Tribunal reads as follows:- We find that assessee produced various types of programmes / serials and news and these were telecasted / broadcasted through Multi System Operators for which payments were made to them under head carriage charges . assessee has duly deducted and paid tax under Section 194C of Act. We agree with Id. CIT (Appeals) that no technical services were involved in payment of carriage charges made by assessee for broadcasting of programmes produced by assessee. assessee produced various types of programmes /serials and news and these were telecasted / broadcasted through Multi System Operators. Payments in 6 this regard were made as carriage charges for which payment of tax was deductible under Section 194C of Income Tax Act. As per definition of technical services given in Explanation to Section 9 of Act, deductee should have rendered managerial, technical or consultancy services. In this case, we find that there is no such finding of Assessing Officer. deductee has only telecasted programmes produced by assesses. In this case law referred to by Id. CIT (Appeals) decision in case of DCIT vs NNM Securities Limited, IT AT held that if assessee is using any facility of any one same is not technical services. Hon ble Punjab & Haryana High Court in case of Karukshetra Darpan (P) Ltd. vs. CIT (217 CTR 326) has held that telecasting of programme was covered under Section 194C of Act. 9. Relying on aforesaid decision of ITAT, Learned Tribunal dismissed appeal of department. 10. Revenue has come up on appeal before us under Section 260A of said Act. appeal was admitted by order dated 23rd September, 2015 on five substantial questions of law which essentially boil down to one issue, i.e., whether it is Section 194C of said Act or whether it is Section 194J which applies to facts of present case. 11. We have heard Learned Counsel for Revenue/appellant and Learned Senior Counsel for assessee/respondent in extenso. 12. moot question is whether payments made by assessee to companies with which it had entered into contracts can be said to be remuneration for rendering of any managerial, technical or consultancy services? Only then would it amount to payment of fees for technical services and would attract Section 194J. We are in agreement with submission of Learned Senior Counsel for assessee that technical services referred to in Section 9(1)(vii) contemplates rendering of service 7 to payer of fee. Mere collection of fee for use of standard facility which is available to everybody against payment of fee, does not amount to provider of facility receiving fee for technical services. In case of Commissioner of Income Tax v. Bharti Cellular Ltd. (2009) 319 ITR 139, Delhi High Court held that expression technical services has to be understood in sense in which it is used in Explanation 2 to Section 9(1)(vii) of Act and applying rule of noscitur-a-sociis, word technical would take colour from words managerial and consultancy , between which it is sandwiched. Since words managerial and consultancy involve personal element, even expression technical services has to be understood as service which predominantly involves personal element. We are in agreement with this view of Delhi High Court. companies with which assessee entered into agreements held licence from Central Ministry pursuant to which they have created platform for Up-linking and broadcasting of programmes in electronic media. It is all mechanized and automated. Anybody desirous of taking advantage of such platform can do so against payment of prescribed fee. No technical service , in our opinion, is provided by such service providers and payments they receive cannot be termed as fee for technical services . 13. In Commissioner of Income Tax v. ESTEL Communication (P) Ltd. (2009) 318 ITR 185, Delhi High Court held that assessee in that case was merely paying for internet bandwidth to deductee and then selling it to its customers. use of internet facility may require sophisticated equipment but that does not mean that technical services 8 were being rendered by deductee to assessee. It was simple case of purchase of internet bandwidth by assessee from deductee. High Court upheld Appellate Tribunal s decision that provisions of Section 9(1)(vii) of Act did not apply. 14. In Skycell Communications Ltd. & Ors. v. Deputy Commissioner of Income Tax & Ors. (2001) 119 Tax Mann 496, Madras High Court held that installation and operation of sophisticated equipment with view to earning income by allowing customers to avail of benefit by use of such equipment does not result in providing technical service to customer for fee. In modern world, every instrument or gadget that is used to make life easier is result of scientific invention or development and involves use of technology. It would be absurd to suggest that every provider of every instrument or facility used by person can be regarded as providing technical service. Collection of fee for use of standard facility that is provided to all those willing to pay for it would not amount to receipt of fee for technical services. 15. In Commissioner of Income Tax v. DE Beers India Minerals (P) Ltd. (2012) 21 Tax Mann 214, Karnataka High Court held in context of Section 9(1)(vii) of Act that technical or consultancy service rendered should be of such nature that it makes available to recipient technical knowledge, know-how and like. service should be such that results in transmitting technical knowledge, etc., so that payer of service fee could derive enduring benefit and utilize knowledge and know-how on his own in future without aid of service provider. 9 16. In Commissioner of Income Tax (TDS) v. UTV Entertainment Television Ltd. (2017) 399 ITR 443, Division Bench of Bombay High Court held that when services were rendered as part of contract accepting placement fees or carriage fees, they were similar to services rendered against payment of standard fees paid for broadcasting of channels on any frequency. High Court upheld Commissioner s finding that if contract was executed for broadcasting and telecasting channels of assessee, payment was covered by Section 194C of Act. When placement charges were paid by assessee to cable operators and multi-system operators for placing signals on preferred bandwidth, it was part of work of broadcasting and telecasting covered by Sub-clause (b) of Clause (iv) of Explanation 2 to Section 194C. 17. In case of Commissioner of Income Tax v. Kotak Securities Ltd., (2016) 383 ITR 1, Hon ble Supreme Court held that it is only separate, exclusive or customized service rendered by human effort that would come within ambit of expression technical services appearing in Explanation 2 to Section 9(1)(vii) of said Act. In absence of such distinguishing feature, service, though rendered, would be merely in nature of facility offered or available which would not be covered by Section 194J of Act. It was observed that technical services like managerial and consultancy services would denote seeking services to cater to special needs of consumer as may be felt necessary and service provider making them available. It is this feature that would distinguish service provided from facility offered. While former is exclusive to seeker of service, later, even if termed as service, is 10 available to all for charge and would therefore, stand out in distinction to former. 18. We are of view that deductees in instant case simply carried out contractual work of up-linking and broadcasting programmes made or produced by assessee in electronic media by permitting assessee to avail benefit of requisite electronic set up against payment of fee. It is purely contractual in nature and assessee has right to use set up only so long as contract subsists and facilities offered by deductees do not amount to providing technical services and hence, payments they received from assessee cannot be termed as fees for technical services . Therefore, Section 194J is not attracted. 19. In our considered in opinion, it is Section 194C which would apply to facts of case. definition of work under that Section is inclusive and specifically includes broadcasting and telecasting. deductees do broadcasting and telecasting work for assessee and therefore, Section 194C would apply to facts of this case. assessee rightly deducted tax at source at rate prescribed in Section 194C of Act and there is no short deduction. We find no infirmity in order under appeal. decision of Hon ble Supreme Court and decisions of other High Courts referred to above clearly support this view. 20. In any event, imposition of penalty on assessee by Assessing Officer is not defensible. relevant tax records of deductee companies were produced and CIT found that said companies have paid entirety of tax payable after giving credit for tax deducted at source. It is not 11 that because of assessee making deductions under Section 194C, Revenue has suffered any loss. In case of Hindustan Coca Cola Beverages Pvt. Ltd. v. Commissioner of Income Tax, (2007) 293 ITR 226 (SC), Hon ble Supreme Court noted Circular no.275/201/95-IT (B) dated January 29, 1997, issued by Central Board of Direct Taxes. said circular declares that no payment visualized under Section 201(1) of Income Tax Act should be enforced after tax deductor has satisfied Officer-in-Charge of TDS that taxes due have been paid by deductee- assessee. 21. For aforesaid reasons we find no ground to interfere with order of Learned Tribunal which is impugned before us. appeal is accordingly dismissed without any order as to costs. 22. Urgent certified photocopy of this judgment and order, if applied for, be given to parties upon compliance of necessary formalities. I agree. (Thottathil B. Radhakrishnan, CJ.) (Arijit Banerjee, J.) Commissioner of Income-Tax, Kolkata-I (TDS) v. Media World Wide Pvt. Ltd