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.