VIACOM 18 MEDIA P.LTD, MUMBAI v. ASST CIT RG 11(1), MUMBAI

ITA 3888/MUM/2013 | 2006-2007
Pronouncement Date: 26-11-2014 | Result: Partly Allowed

Appeal Details

RSA Number 388819914 RSA 2013
Assessee PAN AAACM9164E
Bench Mumbai
Appeal Number ITA 3888/MUM/2013
Duration Of Justice 1 year(s) 6 month(s) 10 day(s)
Appellant VIACOM 18 MEDIA P.LTD, MUMBAI
Respondent ASST CIT RG 11(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 26-11-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted F
Tribunal Order Date 26-11-2014
Date Of Final Hearing 03-11-2014
Next Hearing Date 03-11-2014
Assessment Year 2006-2007
Appeal Filed On 16-05-2013
Judgment Text
Q Q Q Q INCOME TAX APPELLATE TRIBUNAL MUMBAI - F BENCH. ! BEFORE S/SH.VIJAY PAL RAO JUDICIAL MEM BER & RAJENDRA ACCOUNTANT MEMBER /. ITA NO.3887/MUM/2013 ' ' ' ' # # # # / ASSESSMENT YEAR-2005-06 M/S VIACOM 18 MEDIA PVT. LTD. ZION BIZWORLD SUBHADH ROAD-A NEAR GARWARE OFFICE VILE PARLE (E) MUMBAI-400057 PAN:AAACM9164E VS ACIT RANGE - 11(1) AAYKAR BHAVAN MUMBAI-400020 ( $% / APPELLANT) ( &'$% / RESPONDENT) /. ITA NO.3888/MUM/2013 ' ' ' ' # # # # / ASSESSMENT YEAR-2006-07 M/S VIACOM 18 MEDIA PVT. LTD. ZION BIZWORLD SUBHADH ROAD-A NEAR GARWARE OFFICE VILE PARLE (E) MUMBAI-400057 PAN:AAACM9164E VS ACIT RANGE-11(1) AAYKAR BHAVAN MUMBAI-400020 ( $% / APPELLANT) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY : SHRI FAROKH IRANI + * / REVENUE BY : SHRI PAWAN KUMAR BEERLA & PARMINDER KAUR ' ' ' ' + ++ + ) ) ) ) / DATE OF HEARING : 03-11-2014 -.# + ) / DATE OF PRONOUNCEMENT : 26-11-2014 ' ' ' '1961 1961 1961 1961 + + + + 254 254 254 254( (( (1 11 1) )) ) )7) )7) )7) )7) 8 8 8 8 ORDER U/S.254(1)OF THE INCOME-TAX ACT 1961(ACT) PER RAJENDRA AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDERS DATED OF CIT(A)-3 MUMBAI THE ASSESSEE HAD FILED FOLLOWING GROUNDS OF APPEAL FOR THE ABOVE REFERRED TWO ASSESSMENT YEARS. ITA/3887/MUM/2013-AY.2005-06: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONBLE COMMISSIONER OF INCOME-TAX (APPEALS)-3 MUMBAI {CIT(A)] OUGHT TO HAVE HELD THAT REASSESSMENT PROCEEDINGS ARE BAD IN LAW AND THE ORDER PASSED BY THE LEARNED ASSE SSING OFFICER UNDER SECTION 143(3) R.W.S. 147 OF THE ACT IS UNWARRANTED WITHOUT JURISDICTION BA D IN LAW BARRED BY LIMITATION VOID AB-INITIO AND HENCE OUGHT TO BE QUASHED IN LIGHT OF THE PROVISION S OF THE INCOME-TAX ACT 1961 (THE ACT). 2.WITHOUT PREJUDICE TO THE ABOVE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW EVEN ASSUMING (WITHOUT ADMITTING) THAT THE REASSESS MENT PROCEEDINGS ARE WITHIN THE JURISDICTION THE HONBLE CIT(A) OUGHT TO HAVE ALLOWED DEDUCTION FOR THE DISTRIBUTION EXPENSES OF RS. 2 23 04 019 PAID BY THE APPELLANT TO NICKELODEON ASIA PTE L TD (NICK ASIA) FOR AY 2005-06. 3.WITHOUT PREJUDICE TO THE ABOVE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE HONBLE CIT(A) OUGHT TO HAVE ADMITTED THE ADDITIONA L EVIDENCE UNDER RULE 46A OF THE INCOME-TAX RULES 1962. 4.WITHOUT PREJUDICE TO THE ABOVE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW DISTRIBUTION EXPENSES OF RS. 1 92 72 111 OUGHT TO B E ALLOWED AS DEDUCTION IN AY 2005-06 AS APPROPRIATE TAXES IN RESPECT OF THE SAME WERE DEDUC TED AT SOURCE IN AY 2005-06 AS PER THE PROVISIONS OF SECTION 195 R.W.S 197 OF THE ACT.IT I S PRAYED THAT THE LEARNED AO BE DIRECTED TO ALLOW DEDUCTION OF DISTRIBUTION EXPENSES OF RS 1 92 72 11 1 (OUT OF RS. 2 23 04 019 PAID TO NICK ASIA FOR AY 2005-06) AS THE TAXES HAVE BEEN APPROPRIATELY DE DUCTED AT SOURCE IN AY 2005-06 AND PAID INTO 2 ITA NO. 3887 & 3888/M/2013 M/S VIACOM 18 MEDIA PVT. LTD. THE GOVERNMENT TREASURY AS PER THE PROVISIONS OF TH E ACT. 5.WITHOUT PREJUDICE TO THE ABOVE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE BALANCE DISTRIBUTION EXPENSES OF RS. 30 31 908 (2 2 3 04 019 - 1 92 72 111) OUGHT TO HAVE BEEN ALLOWED IN THE SUBSEQUENT YEARS IN WHICH THE TAXES HAVE BEEN DEDUCTED AT SOURCE AND PAID INTO THE GOVERNMENT TREASURY AS PER THE PROVISIONS OF SECTIO N 195 R.W.S 197 OF THE ACT. IT IS PRAYED THAT THE LEARNED AO BE DIRECTED TO ALL OW DEDUCTION OF BALANCE DISTRIBUTION EXPENSES OF RS. 30 31 908 (2 23 04 019 - 1 92 72 111) IN THE YE AR(S) IN WHICH THE TAXES HAVE BEEN DEDUCTED AT SOURCE AND PAID INTO THE GOVERNMENT TREASURY AS PER THE PROVISIONS OF SECTION 195 R.W.S 197 OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD ALTER AMEND OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL HEREIN AND TO SUBMIT SUCH STATEMENTS DOCUMENTS AND PAPERS AS MAY BE CONSIDERED NECESSARY EITHER AT OR BEFORE THE APPEAL HEARING. ITA/3888/MUM/2013-AY.2006-07: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONBLE COMMISSIONER OF INCOME-TAX (APPEALS)-3 MUMBAI [CIT(A)] OUGHT TO HAVE HELD THAT REASSESSMENT PROCEEDINGS ARE BAD IN LAW AND THE ORDER PASSED BY THE LEARNED ASSE SSING OFFICER UNDER SECTION 143(3) R.W.S. 147 OF THE ACT IS UNWARRANTED WITHOUT JURISDICTION BA D IN LAW BARRED BY LIMITATION VOID AB-INITIO AND HENCE OUGHT TO BE QUASHED IN LIGHT OF THE PROVISION S OF THE INCOME-TAX ACT 1961 (THE ACT). 2.WITHOUT PREJUDICE TO THE ABOVE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW EVEN ASSUMING (WITHOUT ADMITTING) THAT THE REASSESS MENT PROCEEDINGS ARE WITHIN THE JURISDICTION THE HONBLE CIT(A)OUGHT TO HAVE ALLOWED DEDUCTION F OR THE DISTRIBUTION EXPENSES OF RS. 5 55 28 565 PAID BY THE APPELLANT TO MTV ASIA LDC ( MTV ASIA) FOR AY.2006-07. 3.WITHOUT PREJUDICE TO THE ABOVE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE HONBLE CIT(A) OUGHT TO HAVE ADMITTED THE ADDITIONA L EVIDENCE UNDER RULE 46A OF THE INCOME-TAX RULES 1962. 4.WITHOUT PREJUDICE TO THE ABOVE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW DISTRIBUTION EXPENSES OF RS. 1 72 88 715 OUGHT TO B E ALLOWED AS DEDUCTION IN AY 2006-07 AS APPROPRIATE TAXES IN RESPECT OF THE SAME WERE DEDUC TED AT SOURCE IN AY 2006-07 AS PER THE PROVISIONS OF SECTION 195 R.W.S 197 OF THE ACT. IT IS PRAYED THAT THE LEARNED AO BE DIRECTED TO ALL OW DEDUCTION OF DISTRIBUTION EXPENSES OF RS.1 72 88 715 (OUT OF RS.5 55 28 565 PAID TO MTV A SIA FOR AY 2006-07) AS THE TAXES HAVE BEEN APPROPRIATELY DEDUCTED AT SOURCE IN AY 2006-07 AND PAID INTO THE GOVERNMENT TREASURY AS PER THE PROVISIONS OF THE ACT. 5.WITHOUT PREJUDICE TO THE ABOVE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE BALANCE DISTRIBUTION EXPENSES OF RS. 3 61 92 613 (5 55 28 565-1 72 88 715- 20 47 237) OUGHT TO HAVE BEEN ALLOWED IN THE SUBSEQUENT YEARS IN WHICH THE TAXES HAVE BEEN DEDUCTED AT SOURCE AND PAID INTO THE GOVERNMENT TREASURY AS PER THE PROVIS IONS OF SECTION 195 R.W.S 197 OF THE ACT. IT IS PRAYED THAT THE LEARNED AO BE DIRECTED TO ALL OW DEDUCTION OF BALANCE DISTRIBUTION EXPENSES OF RS. 3 61 92 613 (5 55 28 565-1 72 88 715-20 47 237) IN THE YEAR(S) IN WHICH THE TAXES HAVE BEEN DEDUCTED AT SOURCE AND PAID INTO THE GOVERNMENT TRE ASURY AS PER THE PROVISIONS OF SECTION 195 R.W.S 197 OF THE ACT. 6.WITHOUT PREJUDICE TO THE ABOVE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW DISTRIBUTION EXPENSES OF RS. 20 47 237 WHICH WERE REVERSED IN AY 2008-09 SHOULD BE REDUCED WHILE COMPUTING INCOME OF THE APPELLANT FOR AY 2008 -09.IT IS PRAYED THAT IN CASE DISTRIBUTION FEES PAID TO MTV ASIA OF RS 20 47 237 IS DISALLOWED IN A Y 2006-07 THE LEARNED AO BE DIRECTED TO REDUCE THE SAME WHILE COMPUTING INCOME OF THE APPEL LANT FOR AY 2008-09 AS THE SAID AMOUNT IS WRITTEN BACK IN AY 2008-09. 7.WITHOUT PREJUDICE TO THE ABOVE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW DISTRIBUTION EXPENSES OF RS. 29 97 586 PAID TO NICK ELODEON ASIA HOLDINGS PTE LTD FOR AY 2005-06 OUGHT TO HAVE BEEN ALLOWED IN AY 2006-07 SINCE THE TAXES HAVE BEEN DEDUCTED AT SOURCE AND PAID INTO THE GOVERNMENT TREASURY AS PER THE PROVISIONS OF SECTION 195 R.W.S 197 OF THE ACT IN AY 2006- 07.IT IS PRAYED THAT THE LEARNED AO BE DIRECTED TO ALLOW DEDUCTION OF DISTRIBUTION EXPENSES OF RS. 29 97 586 IN AY 2006-07 AS THE TAXES HAVE BEEN DEDU CTED AT SOURCE AND PAID INTO THE GOVERNMENT TREASURY IN AY 2006-07. 8.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE HONBLE CIT(A) HAD ERRED HOLDING THAT INTEREST UNDER SECTION 234B AND 234C O F THE ACT SHOULD BE LEVIED DESPITE THERE NOT BEING ANY SPECIFIC DIRECTION IN THE ASSESSMENT ORDE R REGARDING LEVY OF INTEREST. 3 ITA NO. 3887 & 3888/M/2013 M/S VIACOM 18 MEDIA PVT. LTD. IT IS PRAYED THAT THE LEARNED AO BE DIRECTED NOT TO LEVY INTEREST UNDER SECTION 234B AND 234C IN THE ABSENCE OF ANY SPECIFIC DIRECTION IN THE ASSESS MENT ORDER. THE APPELLANT CRAVES LEAVE TO ADD ALTER AMEND OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL HEREIN AND TO SUBMIT SUCH STATEMENTS DOCUMENTS AND PAPERS AS MAY BE CONSIDERED NECESSARY EITHER AT OR BEFORE THE APPEAL HEARING. ITA/3887/MUM/2013-AY.2005-06: ASSESSEE-COMPANY ENGAGED IN THE BUSINESS OF PRODUCT ION/ACQUISITION OF PROGRAMMES FILED ITS RETURN OF INCOME ON 31.10.2005 DECLARING LOSS OF RS . 11.02 CRORES.LATER ON A REVISED RETURN WAS FILED ON 06.12.2006 DECLARING TOTAL INCOME OF RS. N IL.THE AO FINALISED THE ASSESSMENT U/S 143(3) OF THE ACT ON 15.12.2008 DETERMINING THE INCOME OF THE ASSESSEE AT RS. 17.12 CRORES THE ASSESS - MENT WAS REOPENED BY ISSUE OF NOTICE U/S 148 OF THE ACT DATED 29.03.2011. THE REASONS RECORDED FOR REOPENING THE ASSESSMENT WERE AS UNDER: 'THE ASSESSMENT IN THIS CASE FOR THE ASSESSMENT YEA R 200506 HAD BEEN COMPLETED U/S.143(3) OF THE I.T. ACT 1961 VIDE ORDER DATED 15.12.2008 ASSESSIN G THE INCOME AT RS.17 12 83 880/-. THE ASSESSMENT WAS SUBSEQUENTLY RECTIFIED IN JANUARY 2 009 TO ALLOW SET OFF OF BROUGHT FORWARD LOSSES AND THEREBY TAXABLE INCOME WAS REVISED TO RS.7 51 3 1 480/-. THE ASSESSEE COMPANY AS PER AGREEMENT ENTERED INTO PAID 50% OF SUBSCRIPTION INCOME TO M/ S. NICKELODEON ASIA HOLDING PIN. LTD. FOR ACTING AS A DISTRIBUTOR OF THEIR CHANNEL. IT WAS OBSERVED FROM THE RECORDS OF NICKELODEON ASIA HOLDINGS PVT. LTD. (NICK] FOR A. Y.2005-06 WHICH IS BEING ASSESSED IN THE CHARGE OF DDIT(IT) 4(2) MUMBAI THA T WHILE FINALIZING THE ASSESSMENT THE DEPARTMENT HELD THAT DISTRIBUTION REVENUE RECEIVED FROM VIACOM 18 MEDIA PVT. LTD. IS IN THE NATURE OF ROYALTY AS PER INDO-SINGAPORE DTAA. ACCOR DINGLY ROYALTY INCOME OF RS.2 20 70 048/- RECEIVED FROM VIACOM 18 WAS TAXED 15% F THE AMOUNT IS IN FACT RS.2123 04 019/- AS PER THE BOOKS OF ACCOUNTS OF VIACOM 18 THE VARIATION APPEARS TO BE DUE TO DIFFERENCE IN RATE OF EXCHANGE ADOPTED BY DDIT (IT) 4(2). IT WAS FURTHER OBSERVED THAT THE ABOVE STAND OF DDIT(IT) 4(2) WAS CONFIRMED BY CIT(A)-XI IN JULY 2009. IT WAS HOWEVER OBSERVED FROM THE RECORDS OF M/ S. NICKELODEON ASIA HOLDING PVT. LTD. THAT NO TDS WAS DEDUCTED BY VIACOM 18 IN RESPECT OF DISTRIB UTION ROYALTY PAID. FURTHER; IT ALSO APPEARED FROM THE R. CORDS THAT THE NON OBSERVANCE OF TDS PR OVISION WAS NOT REPORTED TO ACIT 11(1) FOR INVOKING THE PROVISIONS OF SECTION 40(A)(IA). THUS THE NON-COORDINATION BETWEEN DDIT (IT) 4(2) AND ACIT-11(1) RESULTED IN ASSESSEE GETTING IRREGUL AR DEDUCTION OF DISTRIBUTION ROYALTY OF RS.2 23 04 019/ WITHOUT OBSERVING TDS PROVISION. T HE OMISSION TO DISALLOW THE SAME RESULTED IN UNDER ASSESSMENT OF INCOME. SIMILARLY FOR NON-DEDUCTION OF TDS @15% AMOUNTING TO RS.33 45 603/- AND NOT CREDITING THE SAME TO GOVERNMENT ACCOUNT THE ASSESSEE IS ALSO LI ABLE FOR INTEREST U/S. 201 (1A) OF RS.2 07 362/- ON ACCOUNT OF THE FACTS AND CIRCUMSTANCES AS ABOVE I HAVE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT FOR A. Y.200S-06 UNDER THE MEANI NG OF SECTION; 147 OF THE I T. ACT. 2.1. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).AFTER CONSIDERING THE ORDER OF THE A O AND THE SUBMISSIONS OF THE ASSESSEE HE HELD THAT THE ASSESSMENT HAD BEEN REOPENED BEYOND 4 YEARS AT THE END OF RELEVANT ASSESSMENT YEAR THAT AS PER EXPLANATION-2 TO SECTION 147 THE ASSESSMENT COULD BE REOPENED AFTER RECORDING REASONS FOR THE REOPENING IN CASE ASSESSMENT WAS MA DE AT TOO LOW RATE THAT THE PAYMENT MADE BY THE ASSESSEE TO NAHPL WAS IN THE NATURE OF ROYALTY AS PER INDO SINGAPORE DTAA ON WHICH NO TDS WAS DEDUCTED BY IT THAT THE ASSESSMENT WAS MADE AT LOWER A RATE THAT THE WORD ASSESSMENT MEANT THE ASCERTAINMENT OF THE ACCOUNT OF TAXABLE I NCOME AND ALL THE TAX PAYABLE THEREON THAT WHEN THERE WAS NO ASCERTAINMENT OF TAX PAYABLE THER EON IT COULD NEVER BE SAID THAT SUCH INCOME WAS ASSESSED THAT IT HAD MERELY FILED SOME DETAILS OF DISTRIBUTION EXPENSES AS PER AUDIT REPORT THAT IT COULD NOT BE SAID THAT RELEVANT MATERIAL WAS ON RECORD.REFERRING TO THE CASE OF PRAFUL CHUNILAL PATEL(236ITR832)OF HONBLE GUJARAT HIGH COURT HE HE LD THAT THE AO WOULD ACQUIRE JURISDICTION TO REOPEN OF ASSESSMENT U/S.147 ON THE BASIS OF SPE CIFIC RELIABLE AND RELEVANT INFORMATION COMING TO HIS POSITION SUBSEQUENTLY THAT IN THE CASE UNDER CONSIDERATION THE AO HAD RECEIVED INFORMATION SUBSEQUENTLY THAT THE PAYMENT OF SUBSCRIPTION INCOM E TO NAHPL WAS IN THE NATURE OF ROYALTY AS HELD BY THE DDIT(IT)-4(2) MUMBAI THAT THE FAA HAD UPHELD THE ORDER OF THE DDIT(IT)-4(2) THAT 4 ITA NO. 3887 & 3888/M/2013 M/S VIACOM 18 MEDIA PVT. LTD. THE AO HAD REASON TO BELIEVE THAT BY REASON OF OMIS SION OR FAILURE ON THE PART OF THE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT INCOME HAD ESCAPED ASSESSMENT THAT DEDUCTION OF PAYMENT ALLOWE D RESULTED IN IRREGULAR ASSESSMENT AND SAID AMOUNT REMAINED TO BE DISALLOWED U/S.40(A) (IA) OF THE ACT THERE HAD BEEN REASONABLE BELIEF OF THE AO THAT SUFFICIENCY OF THE REASON FOR FORMING THE B ELIEF WAS NOT TO BE JUDGED THAT IT WOULD BE IMMATERIAL WHETHER THE AO AT THE TIME OF MAKING ORI GINAL ASSESSMENT COULD OR COULD NOT HAVE FOUND THE SAID FACT THAT EVERY DISCLOSURE WAS NOT A ND COULD NOT BE TREATED AS TRULY OR FULLY DISCLOSURE.HE PLACED RELIANCE IN THE CASE SHREE KRI SHNA PVT. LTD. (221 ITR 538) WHEREIN IT WAS HELD THAT EVERY DISCLOSURE COULD NOT BE TREATED TO BE TRULY AND FULL DISCLOSURE.HE FURTHER HELD THAT THE AR OF THE ASSESSEE HAD CITED VARIOUS DECISIONS BUT THERE COULD NOT BE ANY PRECEDENT OF FACT THAT PRECEDENT COULD BE ONLY ON POINT OF LAW THAT T HE AO HAD APPROPRIATELY RECORDED THE REASONS AND CONVEYED TO THE ASSESSEE THAT IT COULD BE CONCL UDED THAT REOPENING OF ASSESSMENT WAS IN ACCORDANCE WITH LAW THAT THE REASONS SO RECORDED WE RE MADE AVAILABLE TO THE ASSESSEE AND OBJECTIONS FOR REOPENING OF ASSESSMENT WERE ALSO DI SPOSED OF BY PASSING SEPARATE ORDER ON 24.11. 2011 THAT THE DISTRIBUTION OF PAYMENT WAS WRONGLY A LLOWED AS DEDUCTION AS IT WAS REQUIRED TO BE SUBJECTED TO TDS PROVISIONS AND IT DID NOT COME TO THE NOTICE OF THE AO THAT IT AMOUNTED TO NON- DISCLOSURE OF FACTS. 2.3. THE AR ARGUED THAT THERE WAS NO FAILURE ON PART OF THE ASSESSEE THAT IN THE REASONS RECORDED NO ALLEGATION WAS MADE BY THE AO THAT ASSESSEE HAD NOT FURNISHED FULL AND TRUE PARTICULARS OF THE INCOME FOR THE YEAR UNDER CONSIDERATION THAT FAILU RE OF THE ASSESSEE HAD TO BE RECORDED BY THE AO THAT THE TAXABILITY OF ROYALTY WAS DEBATABLE ISSUE THAT ON DEBATABLE ISSUES NOTICE U/S 148 COULD NOT BE ISSUED.HE RELIED UPON THE CASES OF HINDUSTAN LEV ER LTD.(268 ITR 332) AND ARTHUR ANDERSON AND CO.(324 ITR 240). DR SUPPORTED THE ORDER OF THE FAA. 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.IN OUR OPINION THE PRIMARY REQUIREMENT TO REOPEN ANY ASSESSMENT IS A R EASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT.SECONDLY THE REASONS FOR REO PENING AN ASSESSMENT HAVE TO BE TESTED OR EXAMINED ONLY ON THE BASIS OF THE REASONS RECORDED AT THE TIME OF ISSUING A NOTICE UNDER SECTION 148 OF THE ACT SEEKING TO REOPEN AN ASSESSMENT.BESI DES THE REASONS CANNOT BE IMPROVED UPON OR SUPPLEMENTED.IT IS SAID THAT THE MANDATE OF PROVISO TO SECTION 147 OF THE ACT IS VERY CLEAR.IT REQUIRES THE AO NOT ONLY TO CLEARLY MENTION BUT ALS O TO PROVE THAT BECAUSE OF THE FAILURE OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS TRULY AND FULLY TAXABLE INCOME HAD ESCAPED ASSESSMENT. PROVISO WAS INCORPORATED IN THE ACT TO PREVENT MISUSE OF RE -OPENING THE ASSESSMENTS BY THE AOS AFTER PERIOD OF FOUR YEARS.TAX LAWS ENVISAGE THAT COMPLET ED ASSESSMENT SHOULD NOT BE DISTURBED WITHOUT SOLID REASONS.WE HOLD THAT THE PROVISO CAST S ONUS ON THE AO TO PROVE FAILURE OF THE ASSESSEE.IN OTHER WORDS THE AO HAD TO MENTION IN TH E REASONS RECORDED ABOUT THE ALLEGED FAILURE AND HAD TO EXPLAIN AS WHICH MATERIAL FACTS WERE NOT DISCLOSED BY THE ASSESSEE.IF THE AO FAILS TO DO SO THEN ASSESSMENT PASSED BY HIM IN PURSUANCE OF RE -OPENING NOTICE LOOSES LEGAL VALIDITY AND SANCTITY.AT THIS JUNCTURE WE WOULD LIKE TO CONSIDER THE LATEST LEGAL POSITION REGARDING RE-OPENING OF ASSESSMENT AFTER EXPIRY OF PERIOD OF FOUR YEARS.IN THE MATTER OF TECUMSEH PRODUCTS INDIA PVT. LTD.(361ITR429)THE HONBLE AP HIGH COURT HAD DISCUS SED THE PROVISO TO THE SECTION 147 AS UNDER: BEFORE ANY NOTICE IS ISSUED AFTER THE EXPIRY OF FO UR YEARS THE OFFICER CONCERNED MUST BE SATISFIED THAT THERE HAD BEEN AN ESCAPEMENT IN ASSESSMENT OF INCOME WHICH IS CHARGEABLE TO TAX AND THAT THIS IS BECAUSE OF THE FAILURE ON THE PART OF THE A SSESSEE TO MAKE A RETURN UNDER SECTION 139 OF THE INCOME-TAX ACT 1961 OR IN RESPONSE TO A NOTICE IS SUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 FOR NOT DISCLOSING THE MATERIAL FACTS. THESE CONDITIONS MUST BE REFLECTED IN THE NOTICE ITSELF. IN THE ABSENCE OF THE CONDITIONS EXERCISE OF JURISDICTION IN ISSUANCE OF THE NOTICE UNDER THE PROVISION IS PATENTLY ILLEGAL. SIMILARLY IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD.(360ITR527)THE HONBLE GUJARAT HIGH COURT HAD ALSO DEALT WITH THE SIMILAR ISSUE.IN THAT MATTER THE ASSESSEE HAD CHALLENGED THE VALIDITY OF THE NOTICE ISSUE U/S.148 AFTER THE EXPIRY OF FOU R YEARS.DECIDING THE WRIT PETITION IN FAVOUR OF THE 5 ITA NO. 3887 & 3888/M/2013 M/S VIACOM 18 MEDIA PVT. LTD. ASSESSEE THE HONBLE COURT HELD AS FOLLOW: ...THERE WAS NOT EVEN A WHISPER TO THE EFFECT THAT INCOME HAD ESCAPED ASSESSMENT ON ACCOUNT OF ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR I TS ASSESSMENT.IN THE ABSENCE OF ANY SATISFACTION HAV ING BEEN RECORDED BY THE ASSESSING OFFICER THAT THE INCOME HAD ESCAPED BY REASON OF THE FAILUR E ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSE SSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ASSUMPTION OF JURISDICTION UNDER SEC TION 147 WAS NOT VALID AND THEREFORE NOTICE UNDER SECTION 148 COULD NOT BE SUSTAINED. FROM THE ABOVE IT IS CLEAR THAT WHERE THE PROVISION S OF SECTION 147 ARE BEING INVOKED AFTER THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR IN ADDITION TO THE AO HAVING REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT IT MUST ALSO BE ESTABLISHED AS A FACT THAT SUCH ESCAPEMENT OF ASSES SMENT HAD BEEN OCCASIONED BY EITHER THE ASSESSEE FAILING TO MAKE A RETURN UNDER SECTION 139 EITHER ETC. OR BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. UNDISPUTED FACTS OF THE PRESENT CASE ARE THAT THE A SSESSEE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT THAT THE AO HAD ISSUED NOTICE U/S.148 AS THE AO HAD REASONS TO BELIEVE THAT TAXABLE INCOME HAD ESCAPED ASSESSMENT THAT THE ASSE SSEE HAD OBJECTED TO THE NOTICE ISSUED U/S.148 THAT THE FAA HAD UPHELD THE REOPENING OF AS SESSMENT THAT THE AO HAD NEVER HELD THAT THERE WAS ANY FAILURE ON PART OF THE ASSESSEE TO DI SCLOSE MATERIAL FACTS FULLY AND TRULY.IN THE REASONS RECORDED HE HAD HELD THAT BECAUSE OF BETW EEN THE DDIT(IT)AND CERTAIN AMOUNTS REMAINED UNTAXED.HE HAD NOT HELD THAT THE ASSESSEE HAD CONCEALED THE FACTS THAT RESULTED IN ESCAPEMENT OF INCOME.IF THERE WAS LACK OF COORDINAT ION BETWEEN TWO AO.S. THE ASSESSEE CANNOT BE PENALISED FOR THAT.THE POWER TO REOPEN A COMPLETED ASSESSMENT IS ONE OF THE EXTRAORDINARY POWERS CONFERRED UPON THE AO.S. BUT IT CANNOT BE US ED IN A ROUTINE MATTER-ESPECIALLY WHEN A NOTICE U/S.148 OF THE ACT IS TO ISSUED AFTER FOUR Y EARS.IN THE MATTER BEFORE US FAILURE OF THE ASSESSE E HAD NOT BEEN BROUGHT ON RECORD.IN THESE CIRCUMSTANC ES WE HOLD THAT THE RE-ASSESSMENT PROCEEDINGS WERE NOT INITIATED VALIDILY.REVERSING THE ORDER OF THE FAA WE DECIDE GROUND NO.1 IN FAVOUR OF THE ASSESSEE.AS THE RE-OPENING HAD BEEN HELD INVALID SO THE REMAINING GROUNDS OF APPEAL ARE NOT BEING ADJUDICATED. CONSIDERING THE FACTS OF THE CASE AND CIRCUMSTANCES APPEAL FILED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION STANDS ALLOWED. ITA/3888/MUM/2013-AY.2006-07: 3. THE FIRST GROUND OF APPEAL DEALS WITH REASSESSMENT PROCEEDINGS.THE ASSESSEE HAD FILED ITS RETURN ON 29.11.2011 DECLARING NIL INCOME.THE AO COMPLETED THE ASSESSMENT ON 11.11.2010 U/S 143(3) R.W.S.144C(5)OF THE ACT IN ACCORDANCE WITH THE DIR ECTIONS OF THE DISPUTE RESOLUTION PENAL (DRP) MUMBAI.THE ASSESSMENT WAS RE-OPENED AS PER THE NOT ICE ISSUED U/S.148 OF THE ACT ON 29. 03. 2011 RECORDING FOLLOWING REASONS: 1. IT WAS OBSERVED FROM THE RECORDS OF MTV ASIA LDC(NO N-RESIDENT) WHICH IS ASSESSED IN THE CHARGE OF DDIT(IT) 4(1) MUMBAI THAT MTV ASIA LDC ENTERED INTO AGREEMENT WITH VIACOM 18 ON PRINCIPAL TO PRINCIPAL BASIS OF SHARING OF 50% OF D ISTRIBUTION REVENUE COLLECTED BY VIACOM 18 MEDIA PUT. LTD. THE DDIT (I.T.) 4(1) WHILE FINALIZI NG ASSESSMENT FOR AY2006-07 OF MTV ASIA WE HAD HELD THAT DISTRIBUTION REVENUE RECEIVED FROM VI ACOM 18 IN THE NATURE OF ROYALTY IN TERMS OF ARTICLE 12 OF INDO-SINGAPORE DTAA. THIS ISSUE WAS D ISCUSSED AT LENGTH IN THE ASSESSMENT ORDER. ACCORDINGLY THE DISTRIBUTION RECEIPTS OF 5 69 64 4 521- ( THE AMOUNT IS IN FACT 5 55 28 565/- AS PER THE BOOKS OF ACCOUNTS OF VIACOM 18 THE VARIATION AP PEARS TO BE DUE TO DIFFERENCE IN RATE OF EXCHANGE ADOPTED BY DDIT (IT) 4(1)] RECEIVED FROM VIACOM 18 WAS TAXED TREATING THE SAME AS ROYALTY. IT WAS FURTHER OBSERVED THAT THE ABOVE STA ND OF DDIT(IT) 4(1) WAS UPHELD BY CIT(A) IN EARLIER ASSESSMENT YEARS. IT WAS HOWEVER OBSERVED FROM RECORDS OF MTV ASIA LDC THAT IDS WAS DEDUCTED BY VIACOM 18 IN RESPECT OF DI1STRILMTICN R OYALTY PAID. THUS THE ASSESSEE HAD BEEN GRANTED RELIEF OF RS. 5 55 28 565/- WHICH OUGHT TO HAVE BEEN DISALLOWED U/S 40(A)(IA) DUE TO NON- OBSERVANCE OF THE PROVISIONS OF TDS WHICH HAD RESUL TED IN ASSESSEE GETTING IRREGULAR DEDUCTION OF 6 ITA NO. 3887 & 3888/M/2013 M/S VIACOM 18 MEDIA PVT. LTD. DISTRIBUTION ROYALTY OF '5 55 28 5651- WITHOUT OBSE RVING TDS PROVISION. THE OMISSION TO DISALLOW THE SAME RESULTED ON UNDER ASSESSMENT OF INCOME. 2. FURTHER IT IS OBSERVED FORM PROFIT & LOSS ACCOUNT T HAT ASSESSEE COMPANY HAD CREDITED BELOW LINE NET PRIOR PERIOD INCOME 12 10 61 803/-. THOUGH THIS INCOME WAS CONSIDERED WHILE COMPUTING BOOK PROFIT THE SAME WAS EXCLUDED WHILE ARRIVING AT PROFIT AND GAINS OF BUSINESS UNDER THE NORMAL PROVISIONS. IN THE NOTE NO.18 TO SCHEDUL E 15 IT IS STATED THAT DURING F. Y.2004-05 AT THE SPECIFIC REQUEST OF M/S. MTV ASIA LDC AND NICKELODE ON ASIA HOLDINGS PVT. LTD. (NICK) CERTAIN ADDITIONAL MARKETING AND SALES PROMOTION EXPENSES I NCURRED FOR PRODUCTION OF PROGRAMMES HOWEVER THE SAME WERE NOT ACCEPTED BY MTV AND NICK. IT IS ALSO STATED THAT AS PER THE OPINION OF THE MANAGEMENT AS THESE EXPENSES ARE NOT OF ROUTINE NATURE THE SAME WERE TREATED AS COST OF PRODUCTION TO BE RECOVERED FROM AND NICK. SIMILARLY ASSESSEE-COMPANY DURING F.Y.2004-05 INCURRED CERTAIN MARKETING COST AT THE REQUEST OF N ICK THE REIMBURSEMENT THEREOF HOWEVER WAS AGAIN NOT ACCEPTED BY NICK. AFTER CONSIDERABLE DELI BERATIONS BOTH THE ABOVE COMPANIES FINALLY AGREED TO PAY THESE EXPENSES TO THE ASSESSEE. ACCOR DINGLY THE ASSESSEE COMPANY ACCOUNTED FOR PRIOR P NOD INCOME OF AGGREGATING TO 12 30 67 766/ - WHICH CONSISTED OF PRODUCTION COST FROM MTV AND NICK OF 7 23 89 976/- AND 4 20 34 314/- RES PECTIVELY. BESIDES MARKETING COST OF '86 43 476/- WAS ALSO RECOVERED FROM NICK. 3. IT IS CRYSTAL CLEAR FROM THE ABOVE THAT ASSESSEE CO MPANY HAD INCURRED EXPENSES IN CONNECTION WITH THE 'PRIOR PERIOD INCOME' IN FY 200 4-05 AND AS PER THE MERCANTILE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE THESE EXPENSES MUST HAVE BEEN BOOKED IN F. Y.2004- 05 ITSELF. EVEN IF IT IS CONSIDERED THAT THESE EXPENSE WERE NO T CLAIMED IN FY 200405 THE SAME BEING PRIOR PERIOD EXPENSES CANNOT BE ALLOWED DURING FY 2005-06 . MOREOVER THE EXPENSES INCURRED I.E. SALES PROMOTION EXPENSES FOR PRODUCTION OF PROGRAMME AND MARKETING EXPENSES FOR EARNING ADVERTISING ALES COMMISSION ARE ALSO IN THE LINE AND IN CONNECT ION WITH THE REGULAR BUSINESS ACTIVITY OF THE ASSESSEE. IN VIEW OF THE ABOVE ENTIRE PRIOR PERIOD INCOME OF 12 10 61 803/- WAS REQUIRED TO BE BROUGHT TO TAX UNDER NORMAL PROVISION OF L. T. ACT. THE OMISSI ON TO DO SO RESULTED IN UNDER-ASSESSMENT OF INCOME. ON ACCOUNT OF FACT AND CIRCUMSTANCES AS ABOVE I HA VE REASONS TO BELIEVE THAT INCOME OF RS. 17 65 90.368/- HAD ESCAPED ASSESSMENT FOR A.Y.2006- 07 UNDER THE MEANING OF SECTION 147 OF THE L T. ACT. YOU MAY NOTE THAT THE SCRUTINY PROCEEDINGS U/S 147 ARE PENDING IN YOUR CA E FOR ASSESSMENT YEAR 2006-07( IN EARLIER NOTICE WRONGLY MENTIONED AS A.Y .2009-10) IN THIS REGARD YOU ARE REQUESTED TO SUBMIT ALL THE RELEVANT INFORMATION ON 18-10-2011. 3.1. IN THE APPELLATE PROCEEDINGS THE FAA HELD THAT A NO TICE U/S.148 HAD BEEN ISSUED WITHIN FOUR YEARS THAT NOTICE WITHIN FOUR YEARS COULD BE ISSUED EVEN IF THERE WAS NO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE ALL MATERIAL TRULY AND FULLY N ECESSARY FOR ASSESSMENT THAT THE NOTICE ISSUED U/S.148 WAS AS PER LAW.PLACING RELIANCE ON THE MATT ER OF GRIND WELL NORTON LTD.(267 ITR 673) HE HELD THAT AS PER THE PROVISIONS OF EXPLANATION 2 T O SECTION 1 47 OF THE ACT WHERE THE DEPARTMENT RE-OPENED ASSESSMENT WITHIN A PERIOD OF 4 YEARS IT COULD DO SO ON THE GROUND OF INCOME HAVING ESCAPED ASSESSMENT EVEN IF THERE IS NO FAILURE ON T HE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACT.HE ALSO RELIED UPON THE CASE OF DR AM IN'S PATHOLOGY LABORATORY(252 ITR 673) AND HELD THAT THE REASON HAD TO BE A REASON OF A PRUDE NT PERSON THAT REASON SHOULD BE FAIR AND NOT NECESSARILY DUE TO FAILURE OF THE ASSESSEE TO DISCL OSE FULLY OR PARTIALLY SOME MATERIAL FACTS RELEVANT FOR ASSESSMENT THAT MERE PRODUCTION OF ACCOUNT BOOK S FROM WHICH MATERIAL EVIDENCE COULD HAVE BEEN DISCOVERED BY THE AO WILL NOT NECESSARILY AMOU NT TO DISCLOSURE WITHIN THE MEANING OF THE PROVISO THAT MERE PRODUCTION OF THE BALANCE-SHEET PROFIT AND LOSS ACCOUNT OR ACCOUNT BOOKS WILL NOT NECESSARILY AMOUNT TO DISCLOSURE THAT THE PAYME NT MADE BY THE APPELLANT TO MTV ASIA LDC WAS IN THE NATURE OF ROYALTY AS PER INDO SINGAPORE DTAA ON WHICH NO TDS WAS DEDUCTED BY THE APPELLANT THAT ASSESSMENT WAS MADE AT LOWER RATE T HAT THE WORD 'ASSESSMENT' WOULD MEAN THE ASCERTAINMENT OF THE ACCOUNT OF TAXABLE INCOME AND ALL THE TAX PAYABLE THEREON WHEN THERE WAS NO 7 ITA NO. 3887 & 3888/M/2013 M/S VIACOM 18 MEDIA PVT. LTD. ASCERTAINMENT OF TAX PAYABLE THEREON IT COULD NEVER BE SAID THAT SUCH INCOME WAS ASSESSED THAT IN THE MATTER UNDER CONSIDERATION THE ASSESSEE HAD MER ELY FILED SOME DETAILS OF DISTRIBUTION EXPENSES AS PER AUDIT REPORT WHICH COULD NOT BE SAID TO BE RELEVANT MATERIAL WAS ON RECORD.HE FURTHER HELD THAT THE AO HAD RECEIVED INFORMATION SUBSEQUENTLY T HAT THE PAYMENT OF SUBSCRIPTION INCOME TO MTV /VHI WAS IN THE NATURE OF ROYALTY AS HELD BY TH E DDIT(IT)-4(1) MUMBAI WHICH HAD BEEN ALSO CONFIRMED BY THE FAA THAT THE AO HAD REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT FOR THE YEAR UNDER APPEAL THAT THE DEDUCTION OF PAY MENT ALLOWED LEAD TO IRREGULAR ASSESSMENT AND SAID AMOUNT REMAINED TO BE DISALLOWED U/S.40(A) (IA ) OF THE ACT.FINALLY HE UPHELD THE ORDER OF THE AO WITH REGARD TO REOPENING. 3.2. THE AR LEFT THE ISSUE OF REOPENING OF THE ASSESSMEN T FOR THE YEAR UNDER APPEAL TO THE DISCRETION OF THE BENCH.FROM THE REASONS RECORDED I T IS CLEAR THAT NOTICE U/S.148 WAS ISSUE WITHIN THE FOUR YEAR.THE BASIS FOR RE OPENING WAS TAXATION OF ROYALTY INCOME IN THE HANDS OF RECIPIENT. ONCE THE AO FOUND OUT THE FACTUAL POSITION ABOUT TH E PAYMENT HE REACHED AT CERTAIN CONCLUSIONS AND INITIATED PROCEEDINGS U/S.147 OF THE ACT.ESTABL ISHED PRINCIPLES OF REOPENING ENVISAGE THAT THERE SHOULD BE REASONS TO BELIEVE THAT TAXABLE INC OME HAD ESCAPED ASSESSMENT. WE ARE OF THE FIRM OPINION THAT THE TRIBUNAL CANNOT AND SHOULD NOT ENT ER INTO THE MERITS OF THE SUBJECTIVE SATISFACTION OF THE AO NOR SHOULD JUDGE THE SUFFICIENCY OF THE REASONS RECORDED.WHAT CAN BE SEEN TO WHETHER THE BELIEF OF THE AO IS BASED ON TANGIBLE CONCRETE AND NEW INFORMATION AND WHETHER IT IS CAPABLE OF SUPPORTING SUCH A CONCLUSION.THE LAW ONLY REQUIR ES THAT THE INFORMATION OR MATERIAL ON WHICH THE AO RECORDS HIS OR HER SATISFACTION IS COMMUNICA TED TO THE ASSESSEE.THE SATISFACTION ARRIVED AT BY THE AO SHOULD BE PRIMA FACIE LEVEL.CONSIDERING T HE FACTS OF THE CASE WE ARE OF THE OPINION THAT AO HAD RIGHTLY INVOKED THE PROVISIONS OF SECTION 14 7 OF THE ACT FOR REOPENING THE ASSESSMENT. SO CONFIRMING THE ORDER OF THE FAA WE DECIDE GROUND NO .1 AGAINST THE ASSESSEE. 4. NEXT FOUR GROUNDS OF APPEAL (GOA 2-5)DEAL WITH PAYM ENT MADE BY THE ASSESSEE TO MTV ASIA AND OTHER PARTIES.THESE GROUNDS PERTAIN TO DIFFEREN T ASPECTS OF THE PAYMENT.DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD CLAI MED DISTRIBUTION EXPENSES OF RS.5 55 28 565/- UNDER THE HEAD PAYMENT TO MTV ASIA LDC.A PERUSAL OF THE ASSESSMENT RECORDS IN THE CASE OF MTV ASIA LDC REVEALED THAT DISTRIBUTION REVENUE REC EIVED WAS IN THE NATURE OF ROYALTY AS PER INDO- SINGAPORE DTAA.IT WAS ALSO FOUND THAT TAX WAS NOT DEDUCTED BY THE ASSESSEE IN RESPECT OF DISTRIBUTION ROYALTY OF RS.5.55 CRORES.THE AO WAS O F THE OPINION THAT THE MATTER WAS OF IRREGULAR/NON DEDUCTION OF TAX ON DISTRIBUTION OF R OYALTY AS PER TDS NORMS.HE DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME SHOULD NOT B E DISALLOWED U/S.40(A) (IA) OF THE ACT. THE ASSESSEE VIDE ITS LETTER DATED 14.11.2011 STATE D THAT IT HAD DEDUCTED THE TAXES AT APPROPRIATE RATES ON DISTRIBUTION FEES PAYABLE BY THE ASSESSEE COMPANY OF RS.5 55 28 565/- IN ACCORDANCE WITH CERTIFICATE ISSUED U/S. 197 OF THE ACT THAT IT HAD WITHHELD THE TAXES ON A SUM OF RS.3 01 18 939/- IN ACCORDANCE WITH THE CERTIFICATE ISSUED U/S.197 AND PAID THE SAME WITHIN THE TIME LIMIT PRESCRIBED U/S.200(1). THE AO EXAMINED THE SUBMISSION OF THE ASSESSEE AND HELD THAT SAME WERE NOT ACCEPTABLE THAT AS PER AGREEMENT IN QUESTION THE ASSESSEE HAD MADE PAY MENT OF ROYALTY OF RS.5 55 28 565/- THAT TDS WAS NOT DEDUCTED BY THE ASSESSEE AS PRESCRIBED BY C HAPTER XVIIB OF THE ACT THAT AS PER SECTION 40(A)(IA) OF THEACT NO DEDUCTION WOULD BE ALLOWED I N CASE OF NON-DEDUCTION/NON-PAYMENT/LATE PAYMENT OR BELATEDLY DEPOSIT TO THE GOVERNMENT TREA SURY THAT THE AMOUNT PAID BY THE ASSESSEE WAS ROYALTY ON WHICH TDS OUGHT TO HAVE BEEN DEDUCTED TH AT THE ASSESSEE HAD NOT PLACED ON RECORD ANY CLINCHING ANY CONVINCING EVIDENCE INCLUDING PROOF O F PAYMENT OF TDS SUCH AS TDS CHALLANS AND TDS RETURN TO ACCEPT ITS CLAIM OR CONTENTION THAT I T HAD DEFAULTED IN PAYMENT OF TDS AS REQUIRED UNDER THE PROVISIONS OF THE ACT. AS THERE WAS A FAI LURE ON THE PART OF THE ASSESSEE TO DEDUCT TDS ON THE AMOUNT OF RS.2 23 04 019/- THEREFORE HE DISA LLOWED THE SAME U/S.40(A) (IA) OF THE ACT. 4.1. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE FILED AN APPEAL BEFORE THE FAA.AFTER CONSIDERING THE ORDER OF THE AO AND SUBMISSIONS OF THE ASSESSEE HE HELD THAT THE ASSESSEE HAD PAID 8 ITA NO. 3887 & 3888/M/2013 M/S VIACOM 18 MEDIA PVT. LTD. 50% OF SUBSCRIPTION INCOME TO MTV ASIA FOR ACTING A S A DISTRIBUTOR OF THEIR CHANNEL THAT THE PAYMENT RECEIVED FROM MTV ASIA WERE HELD TO BE IN T HE NATURE OF ROYALTY BY THE DDIT(IT)- 4(1) MUMBAI AND THE SAME HAD ALSO BEEN CONFIRMED BY THE FAA THAT MTV ASIA HAD FILED APPEAL AGAINST THE ORDER OF THE FAA CONTESTING THAT PAYMEN T RECEIVED BY THEM IS NOT IN THE NATURE OF ROYALTY AND THAT MTV ASIA HAD NO PE THAT THE ABOVE PAYMENT TO MTV ASIA HAD BEEN HELD TO BE ROYALTY BY DRP MUMBAI IN CASE OF MTV ASIA. THAT MT V ASIA HAD NOT AGITATED THE ABOVE ORDER OF DRP BEFORE THE TRIBUNAL WITHDRAWN THE AFORESAID GROUND DURING THE HEARING BEFORE THE TRIBUNAL THAT THE DECISION OF DRP ATTAINED FINALIT Y THAT THE PAYMENT AMOUNTING TO RS.5 55 28 565/- MADE BY THE ASSESSEE WAS IN THE NATURE OF ROY ALTY AND TAXABLE IN THE HANDS OF M/S. MTV ASIA THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TAX T HEREON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 195 OF THE ACT THAT PAYMENT MADE WITHOUT D EDUCTION OF TDS COULD NOT BE ALLOWED. HE FURTHER MENTIONED THAT THE ASSESSEE HAD PAID 50% SUBSCRIPTION INCOME TO M/S. NICKELODEON ASIA HOLDINGS PVT.LTD.(NAHLP) FOR ACTING AS A DISTR IBUTOR OF THEIR CHANNEL THAT DISTRIBUTION REVENUE RECEIVED WAS IN THE NATURE OF ROYALTY AS PE R INDO SINGAPORE DTAA THAT NO TDS WAS DEDUCTED BY IT IN RESPECT OF DISTRIBUTION ROYALTY P AID OF RS.2.23CRORES THAT IT WAS CASE OF IRREGULAR/ NON DEDUCTION OF TAX ON DISTRIBUTION OF ROYALTY AS PER TDS NORMS THAT THE PAYMENT AMOUNTING TO RS.2 23 04 019/- MADE BY THE ASSESSEE WAS IN THE NA TURE OF ROYALTY AND TAXABLE IN THE HANDS OF NAHPL THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TAX THEREON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 195 OF THE ACT THAT PAYMENT MADE WITHOUT DE DUCTION OF TDS COULD NOT BE ALLOWED AS PER THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT THA T AS PER EXPLANATION 2 TO SECTION 9(1)(VI) OF THE ACT ROYALTY MEANS CONSIDERATION RECEIVED ON ACCOUNT OF TRANSFER OF ALL OR ANY RIGHT (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF PATENT INVENT ION MODEL DESIGN SECRET FORMULA OR PROCESS OR TRADEMARK AND SIMILAR PROPERTY OF TRANSFER OF ALL O R ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF ANY COPYRIGHT LITERARY ARTISTIC OR SCIENTIFIC WORK INCLUDING FILMS OR VIDEO TAPES FOR USE IN CONNECTION WITH TELEVISION OR TAPES FOR USE IN CONNECTION WITH RADIO BROADCASTING THAT EXPLANATION 6 PROVIDED THAT THE EXPRESSION 'PROCESS ' INCLUDED TRANSMISSION BY SATELLITE INCLUDING UP-LINKING AMPLIFICATION CONVERSION FOR DOWN-LINK ING OF ANY SIGNAL CABLE OPTIC FIBER OR BY ANY OTHER SIMILAR TECHNOLOGY THAT DISALLOWANCE MADE U/S .40(A) (IA) WERE ACCORDANCE WITH LAW. FINALLY HE UPHELD THE ORDER OF THE AO. 4.2. BEFORE US THE AR STATED THAT WHILE COMPLETING THE A SSESSMENT ADDITION OF RS. 5.51 CRORE WAS MADE WHEREAS IN THE NOTICE AMOUNT OF RS. 12.10 CROR ES WAS MENTIONED THAT THE ASSESSEE HAD DEDUCTED TAX WITH REGARD TO THE PAYMENT OF RS. 5.51 CRORES @ 4.3% THAT AO WAS OF THE OPINION THAT THE ASSESSEE SHOULD HAVE DEDUCTED TAX @ 15% T HAT FOR SHORT DEDUCTION OF TAX PROVISIONS OF SECTION 40(A)(IA) OF THE ACT COULD NOT INVOKED THA T ASSESSEE HAD NOT BEEN GIVEN CREDIT FOR THE TAX DEDUCTED THAT THE ASSESSEE HAD PRODUCED ADDITIONAL EVIDENCES BEFORE THE FAA THAT HE DID NOT CONSIDER THE EVIDENCES PRODUCED BY THE ASSESSEE. HE REFERRED TO PAGE NO. 72 73 74B 128 OF THE PAPER BOOK AND STATED THAT TAX DEDUCTED AT SOURCE H AD TO BE CONSIDERED IN ONE OF THE YEARS.THE DR RELIED UPON THE ORDER OF THE FAA AND STATED THAT AS SESSEE HAD NOT PRODUCED ANY EVIDENCES BEFORE THE AO. 4.3. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ADIT (IT)-3(2) MUMBAI VIDE ITS ORDER DATED 31.08.2005 PA SSED U/S.197 OF THE ACT ADDRESSED TO MTV ASIA HAS DIRECTED IT THAT TAXES BE DEDUCTED AT SOUR CE AT 4.30% FROM THE SUMS PAYABLE AS DISTRIBUTION REVENUE TO THE ASSESSEE UNDER ITS AGRE EMENT WITH MNIPL(PG.73 OF THE PAPER BOOK).WE FURTHER FIND THAT AT PAGE NO.128 OF THE PA PER BOOK THE ASSESSEE HAD MADE DETAILED SUBMISSIONS AND HAD REQUESTED THE FAA TO ADMIT ADDI TIONAL EVIDENCE IN FORM OF CONFIRMATION CERTIFICATES FROM THE BANKS/EXTRACTS FROM NSDL WEBS ITE ABOUT THE PAYMENT OF TAXES AS PER THE PROVISIONS OF SECTION 46A OF THE INCOME TAX RULES 1 962(RULES).THE ASSESSEE HAD GIVEN THE REASONS FOR NOT SUBMITTING THE SAME BEFORE THE AO.I T IS ALSO FOUND THAT THE ASSESSEE HAD FILED A DETAILED EXPLANATION ABOUT DEDUCTED TAXES AND REASO NS FOR NON DEDUCTION (PG.128-130)OF TAXES.WE FIND THAT WHILE DECIDING THE APPEAL THE FAA HAS NEI THER CONSIDERED THE ADDITIONAL EVIDENCES NOR HAS DELIBERATED UPON THE ARGUMENTS OF THE ASSESSEE. THE REQUEST MADE BY THE ASSESSEE ABOUT GIVING 9 ITA NO. 3887 & 3888/M/2013 M/S VIACOM 18 MEDIA PVT. LTD. CREDIT IN EITHER OF THE YEARS OF THE DEDUCTED TAXES HAS NOT BEEN DEALT BY THE FAA.IN THESE CIRCUMSTANCES WE ARE OF THE OPINION THAT IN THE INT EREST OF JUSTICE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE FAA FOR FRESH ADJUDICATION.HE IS DI RECTED TO CONSIDER THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE WHILE DECIDING THE ISSUE IN ADDITIO N TO THE ISSUE OF GIVING CREDIT OF TAXES IN ONE OF THE ASSESSMENT YEARS.GROUNDS NO.2-5 ARE PARTLY ALLO WED IN FAVOUR OF THE ASSESSEE. 5. SIXTH GROUND OF APPEAL IS ABOUT DISTRIBUTION EXPENS ES OF RS. 20.47 LAKHS THAT WERE REVERSED IN THE AY.2008-09.AS PER THE AR IF THE SAID AMOUNT PAI D TO MTV ASIA WAS TO BE DISALLOWED IN THE AY.2006-07 SAME SHOULD BE REDUCED WHILE COMPUTING T HE INCOME OF THE ASSESSEE FOR THE YEAR 2009-09. WE HAVE IN THE EARLIER PART OF THE ORDER D IRECTED THE FAA TO RECONSIDER THE FACT ABOUT PAYMENT OF TAXES AND PASS FRESH ORDERS.HE IS DIRECT ED TO PASS A SPEAKING ORDER ABOUT THE AMOUNT IN QUESTION WHILE DECIDING THE ISSUES ARISING OUT OF G ROUND NO.2-5. GROUND NO.6 IS ALLOWED IN FAVOUR OF THE ASSESSEE IN PART. 6. NEXT GROUND OF APPEAL IS ABOUT DISTRIBUTION EXPENSE S OF RS. 29 97 586 PAID TO NICKELODEON ASIA HOLDINGS PVT.LTD FOR AY 2005-06.BEFORE US AR STATED THAT IF THE ORDER FOR THE AY.2005-06 WAS DECIDED IN THE FAVOUR OF THE ASSESSEE THE GROUND WO ULD NOT SURVIVE.WE HAVE IN THE PARAGRAPH NO.2.4 OF OUR ORDER HAVE HELD THAT THE ORDER FOR TH E YEAR 2005-06 WAS NOT VALID.THEREFORE IN OUR OPINION GROUND NO.7 NEED NOT TO BE ADJUDICATED. 7. NEXT GROUND DEALS WITH LEVY OF INTEREST U/S.234 B O F THE ACT.BEFORE US THE AR AND THE DR STATED THAT GROUND NO.8 WAS CONSEQUENTIAL IN NATURE.AS THE GROUND IS OF CONSEQUENTIAL NATURE SAME IS NOT BEING ADJUDICATED. AS A RESULT APPEAL FILED BY THE ASSESSEE FOR THE Y EAR 2005-06 STANDS ALLOWED AND THE APPEAL FOR THE AY.2006-07 IS PARTLY ALLOWED.. 9): '() + '..2005-06 > ? + ) @A B '..2006-07 > 8): ? + ) @A. ORDER PRONOUNCED IN THE OPEN COURT ON 26TH NOVEMBER 2014 . 8 + -.# D E' 26 UO UOUO UOACJ ACJACJ ACJ 201 4 . + 7 F SD/- SD/- ( / VIJAY PAL RAO) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI E' /DATE:26.11 . 2014. SK 8 8 8 8 + ++ + &) &) &) &) G #) G #) G #) G #) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ H I 4. THE CONCERNED CIT / H I 5. DR F BENCH ITAT MUMBAI / J7 &)' Q Q Q Q . . . 6. GUARD FILE/ 7 9 ') ') ') ') &) &)&) &) //TRUE COPY// 8' / BY ORDER K / @ DY./ASST. REGISTRAR /ITAT MUMBAI