Tv Today Network Ltd., New Delhi vs Assessee

Appellant by: S/Sh. Salil Aggarwal, Adv. & Shailesh Gupta, CA Respondent by: Shri J.P. Chandrakar,Sr. DR

Date of hearing : 03.03.2015 Date of pronouncement: 19:05.2015

ORDER

PER I.C. SUDHIR: JUDICIAL MEMBER The assessee has questioned first appellate order on the sole ground

that the Learned CIT(Appeals) has gone wrong in upholding the assessment

order in not allowing the assessee firm nil deduction of tax deducted at

source for payment made to PANAMSAT (who is a non-resident

broadcaster having no PE in India) for down linking of television signal into

India and international foot print through satellite.

2. We have heard and considered the arguments advanced by the parties

in view of orders of the authorities below, material available on record and

the decisions relied upon.

2

3. The relevant facts are that the assessee is a broadcaster of news

channels which "AAJ TAK", Headlines Today, "Tej" and "Delhi AAJ

TAK". For telecasting the said channels down linking of television signals

into India and international foot prints through the satellite is necessary. The

Assessing Officer did not allow assessee for nil deduction of tax deducted at

source or payment made to PANAMSAT, a non-resident broadcaster having

no PE in India, for down linking of television signals into India and

international foot prints through the satellite. The Assessing Officer denied

the claim on the basis that the Revenue had gone in appeal before the

Hon'ble Delhi High Court against the decision of Delhi Bench of the ITAT

(ITA No. 1796/Del/2001) for the assessment year 1997-98 in the case of

DCIT vs. PANAMSAT International System. The assessee questioned the

action of the Assessing Officer in not granting a certificate under sec. 195(2)

for not withholding the tax on the amounts paid/to be paid to a non-resident

company for down linking the signals into India and international foot prints

through the satellite which were owned by a non-resident company. The

Learned CIT(Appeals) upheld the action of the Assessing Officer following

the decision of Special Bench of the ITAT in the case of New Style Set

Light N.V. vs. ACIT (2009) - 319 ITR (AT) 269 (Del.) with this finding that 3

the payment made by the assessee to PANAMSAT International (owner of

satellite) is to be treated as royalty. The ITAT, however, reversed the First

Appellate Order vide order dated 30.9.2011 with this finding that services

charges received by the assessee from various TV Channels were not liable

to be taxed as royalty in India and the amount remitted to PANAMSAT

which is not having a PE in India, were not liable to be TDS at the time of

payment by the assessee. Against this order of the ITAT, the Revenue went

in appeal vide ITA Nos. 600/2012 before the Hon'ble Delhi High Court and

the Hon'ble Delhi High Court vide order dated 12.11.2013 while answering

the question of law in favour of the Revenue, remitted the matter back to the

Tribunal to decide the other contention raised by the assessee as to whether

the payments made, nevertheless remain untaxable in view of the provisions

of the DTAA. Thus, it is second round of the proceedings before the ITAT.

4. The Learned AR referred para No.7 of the order of the Hon'ble High

Court. The Senior DR also placed reliance on the order of the Hon'ble High

Court.

5. After considering the above submissions, we find that the Hon'ble

High Court while deciding the issue raised before it as to "whether the ITAT

in the impugned order is in error of law to hold that the amount paid by the

assessee to PANAMSAT International was liable for deduction of tax by 4

virtue of sec. 195 read with section 9(1)(vi) of the Income-tax Act, 1961?"

has been pleased to note that reason given by the ITAT that the payments

made for providing DATA Transmission Services through provisions of

Space Segment Capacity on satellite did not construe royalty within the

meaning of sec. 9(1)(vi) of the Income-tax Act, 1961, has not considered the

subsequent amended provisions under sec. 9(1)(vi) of the Act and

Explanations 5 & 6 inserted thereto by Finance Act, 2012 with retrospective

effect from 01.06.1976. In view of the said statutory amendments, the

Hon'ble High Court has held that the reasoning given by the ITAT cannot be

sustained. The Learned counsel appearing for the assessee pointed out to the

Hon'ble High Court that before the Assessing Officer, the assessee had also

pleaded and submitted that the payments made cannot be considered as

royalty or free for included services as defined in Double Taxation

Avoidance Agreement (DTAA) between India and United States of

America. It was submitted by the assessee that the payments were business

profits and accordingly not taxable or chargeable to tax under the Act. This

fact was also noticed in para No.2 of the order of the ITAT. The ITAT had

not referred to and examined the effect of DTAA between India and USA

and whether the assessee was entitled to benefit or advantage under the said

agreement and, therefore, payments made were not taxable in India in the 5

hands of the recipient. The Hon'ble High Court thus while answering the

question of law in favour of the Revenue has been pleased to remit the

matter to the ITAT with direction to decide the other contentions raised by

the assessee. We thus respectfully following the direction of the Hon'ble

Delhi High Court in the order dated 12.11.2013, discussed above, set aside

the matter to the file of the Assessing Officer to examine the above

contention of the assessee that the payments made cannot be considered as

royalty or fee for included services as defined in DTAA between India and

USA and that the payments were business profit and accordingly not taxable

or chargeable to tax under the Income-tax Act, 1961 and decide the issue

afresh after affording opportunity of being heard to the assessee on the effect

of DTAA between India and USA and as to whether the assessee is entitled

to benefit or advantage under the said agreement and, therefore, payments

made were not taxable in India in the hands of the recipient. The ground is

thus allowed for statistical purposes.

6. In result, the appeal is allowed for statistical purposes.

Decision pronounced in the open court on 19.05.2015

Sd/- Sd/-

( R.S. SYAL ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 19 /05/2015 Mohan Lal 6

Copy forwarded to:

1) Appellant

2) Respondent

3) CIT

4) CIT(Appeals)

5) DR:ITAT

ASSISTANT REGISTRAR

Date Draft dictated on computer 19 .05.2015 Draft placed before author 19..05.2015 Draft proposed & placed before the second member Draft discussed/approved by Second Member. 19.05.2015 Approved Draft comes to the Sr.PS/PS 19.05.2015 Kept for pronouncement on 19.05.2015 File sent to the Bench Clerk 19.05.2015 Date on which file goes to the AR Date on which file goes to the Head Clerk. Date of dispatch of Order.