By TIOL News Service

MUMBAI, NOV 17, 2017: THE issue is - Whether activities covered by Section 194C are more specific as compared to Section 194J, which is more general in terms, therefore, for the activities covered by Section 194C, Section 194J cannot be applied. YES is the verdict.

Facts of the case

The Assessee-company was carrying on business of broadcasting of Television (TV) channels. A Survey was carried out firstly of the books of accounts of the Assessee and it was observed by the AO that certain amounts were paid by the Assessee on account of carriage fees, editing expenses and dubbing charges and tax was deducted on the said amounts as per Section 194C of the Act. The AO was of the opinion that the carriage fees, editing charges and dubbing charges were in the nature of fees payable for technical services and, therefore, tax should have been deducted u/s 194J of the Act. Accordingly, a show cause notice was issued to the Assessee asking for explanation in that regards. After considering the reply of the Assessee, it was held that an aggregate amount of Rs.34,71,36,096/- was in the nature of fees for rendering technical services and therefore tax should had been deducted u/s 194J of the Act. Therefore, a demand of Rs.1,11,13,964/-was raised. On appeal, the CIT(A) partly allowed the appeal fholding that there was no short deduction of tax by the Assessee on account of payment of placement charges, subtitling charges and dubbing charges. On further appeal by Revenue, the Tribunal dismissed the appeal.

On appeal, the High Court held that,

++ subtitles are textual versions of the dialogs in the films and television programmes which are normally displayed at the bottom of the screen. Sometimes, it is a textual version of the dialogs in the same language. It can also be a textual version of the dialogs in a particular language other than the language of the film or the TV programme. Again the stand of the Revenue was that this will be covered by Section 194J and not by Section 194C. We must note here that in this appeal, the Revenue has not made any grievance regarding applicability of Section 194C to dubbing charges. The finding of fact recorded by the Commissioner (Appeals), which is confirmed by the Appellate Tribunal, is that work of subtitling will be covered by the definition of "work" in clause (iv) of explanation to Section 194C. Reliance is placed by the Commissioner (Appeals) on the CBDT notification dated 12th January 1977. The said notification includes editing in the profession of film artists for the purpose of Section 44AA of the Income Tax Act. However, the service of subtitling is not included in the category of film artists. As noted earlier, sub-clause(b) of clause (iv) of the explanation to Section 194C covers the work of broadcasting and telecasting including production of programmes for such broadcasting or telecasting. The work of subtitling will be naturally a part of production of programmes. Apart from confirming the finding of fact recorded by the Commissioner (Appeals) on both the aspects on placement fee and subtitling charges, the Appellate Tribunal has noted that both Sections 194C and 194J having introduced into the Income Tax Act on the same day, it is observed that the activities covered by Section 194C are more specific and the activities covered by Section 194J are more general in terms. Therefore, for the activities covered by Section 194C, Section 194J cannot be applied being more general out of the two. In the alternative, a submission was canvassed by the counsel for the Revenue that the carriage fees or the placement charges are in the nature of commission or brokerage as defined in explanation to Section 194H of the Income Tax Act. Further, in the alternative, it was submitted that carriage fees/ placement charges were in the nature of royalty covered by Section 194J of the Income Tax Act;

++ we have already discussed in detail the findings of fact recorded by the Commissioner (Appeals) as regards placement fees/ carriage fees. We have agreed with the findings of fact based on material on record that when the payment is made towards standard fee or placement fee, the activity involved is the same in both cases. As stated earlier, when services are rendered as per the contract by accepting placement fee or carriage fee, the same are similar to the services rendered against the payment of standard fee paid for broadcasting of channels on any frequency. In the present case, the placement fees are paid under the contract between the respondent and the cable operators/ MSOs. Therefore, by no stretch of imagination, considering the nature of transaction, the argument of the Revenue that carriage fees or placement fees are in the nature of commission or royalty can be accepted.

(See 2017-TIOL-2417-HC-MUM-IT)