Whether payer can be held liable to deduct TDS on payment made and suffer disallowance u/s 40(a)(ia) on account of subsequent retrospective amendment?

Last updated: 25 June 2014

Court :
ITAT Cochin

Brief :
The assesse company is engaged in the business of distributing cable signals. It receives satellite signals from various channel companies like Star Den Media Ltd., U.T.V. Global Broadcasting etc. in the capacity of Multi System Operator. for which the assessee is liable to make payment for receiving the signals. During the course of assessment proceedings, the Assessing officer noticed that the assessee has paid/credited to various channel companies a sum of Rs. 163.30 lakhs as “Pay channel charges”. The Assessing officer took the view that the “Pay channel charges” is “royalty” and is liable for deduction of TDS u/s 194J and invoked provisions of sec. 40(a)(ia). It was held that according to retrospective insertion of Explanation 6 by the Finance Act, 2012, the payment made by the assessee as “Pay Channel Charges” constitutes “royalty” as defined in clause (i) of Explanation 2 to s. 9(1). However, the assessee cannot be held tobe liable to deduct tax at source relying on the subsequent amendments made inthe Act with retrospective effect by placing reliance on judgments of Channel Guide India Limited Vs. ACIT, Infotech Enterprises Limited Vs. Addl. CIT and Sonata Information Technology Ltd Vs. DCIT.

Citation :
M/s. Kerala Vision Ltd. – Appellant – Versus - The Assistant Commissioner of Income-tax - Respondent