The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that Tax Deduction at Source ( TDS ) provision will not be applicable for Broadcast Company on Channel Placement Fees as per subsequent Amendment in Definition of Royalty.
The Assesse M/s Asianet News Network P. Ltd has filed return submission on all admission made by the AO and deleted the additions made by the AO towards disallowance of agency commission and transponder fees. In respect of the disallowance of channel placement fee is a carriage fee according to the AO which comes under the definition of ‘royalty’. The issue is that disallowance of carriage fees /channel placement fees u/s 40(a)(ia) for failure to deduct tax at source of the income tax act.
While relying on a Bombay high court decision in CIT v NGC networks(India)Pvt Ltd, the tribunal bench comprising of Judicial Member Mahavir Singh and Accountant Member G.Manjunatha held that, in the case channel placement fees is not a royalty in term of Explanation 2to section 9 (i)((vi) of the Income Tax Act 1961. Hence no disallowance could be made u/s 40(a)(ia) for failure to deduct tax source u/s 194J Income Tax Act 1961.
Allowing the appeal, the Tribunal also observed that “The assessee could not have deducted tax u/s 194J on account of subsequent amendment in the definition of royalty by Explanation 6. Consequently, the disallowance by the AO by treating channel placement fees as process royalty under Explanation 6 to 9(1)(vi) is not warranted.”
“AO has erred in determining disallowance of expenses incurred in relations to exempt income u/s 14A of the Act”, the bench also added.
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