5 TDS – Section 194C or 194J – subtitling and standard fee paid for basic broadcasting of a channel at any frequency

5.  TDS – Section 194C or 194J – subtitling and standard fee paid for basic broadcasting of a channel at any frequency 

CIT (TDS) vs. UTV Entertainment Television Ltd. [ Income tax Appeal no. 525 of 2015 dated : 11/10/2017 (Bombay High Court)].

[UTV Entertainment Television Ltd. vs. ITO (OSD)(TDS) 3(1). [ITA No. 2699, 4204, 4205 & 2700/Mum/2012; Bench: F ; dated 29/10/2014 ; Mum. ITAT ]

The assessee is a Public Limited Company carrying on business of broadcasting of Television (TV) channels. The assessee operates certain entertaining channels. During the survey, A.O found that certain amounts were paid by assessee on account of ;

 (i) Carriage Fees / Placement Charges.

(ii) Subtitling charges (Editing Expenses).

(iii) Dubbing Charges.

Tax was deducted on the said amounts as per section 194C of the Act. The A.O 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. The A.O passed an order that the three items were not covered by section 194C but by section 194J.

The appeal preferred by the assessee before the CIT(A) was partly allowed holding that there was no short deduction of tax by the assessee on account of payment of placement charges, subtitling charges and dubbing charges. Further appeal was before the ITAT where Revenue appeal was dismissed.

Being aggrieved by the said order, an appeal was preferred by the Revenue before the High Court. The Revenue submitted that the payments made by the assessee was not contractual payments and, therefore, section 194C of the Act will not be applicable. His contention was that the activity for which payments were made by the assessee are either for professional or for technical services and, therefore, section 194J will apply to the present case. As per the Agreements these payments are given to MSO/Cable Operators to retransmit and/or carry the service of the channels on ‘S’ Band in their respective territories. The services provided by these MSOs/Cable Operators does not come within the purview of section 194C of the Act, as placing the service of the channel on ‘S’ Band is a Technical Service for which the TDS is required to be deducted as per the provisions of section 194J of the Act.

The Hon. Court observed that as per the agreements entered into between the assessee and the cable operators/ Multi System Operators (MSOs), the cable operators pay a fee to the assessee for acquiring rights to distribute the channels. It is pointed out that the cable operators face bandwidth constraints and due to the same, the cable operators are in a state to decide which channel will reach the end viewer at what frequency (placement). Accordingly, broadcasters make payments to the cable operators to carry their channels at a particular frequency. Fee paid in that behalf is known as “carriage fee” or “placement fee”. The payment of placement fee leads to placement of channels in prime bands, which in turn, enhances the viewership of the channel and it also leads to better advertisement revenues to the TV channel. The placement charges are consideration for placing the channels on agreed frequency bands. It was found that, as a matter of fact, by agreeing to place the channel on any preferred band, the cable operator does not render any technical service to the distributor/ TV channel. Reference is made to the standard fee paid for basic broadcasting of a channel at any frequency. It has considered clause (iv) of the 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.

The 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. Reliance is placed on the CBDT notification dated 12^th January 1977. The said notification includes editing in the profession of film artists for the purpose of section 44AA of the Act. However, the service of subtitling is not included in the category of film artists. As noted earlier, subclause (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 High Court observed that 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 assessee 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. Thus, the High court concur with the view taken by the Appellate Tribunal. The Revenue appeals were dismissed.