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D. Murali

Is television news software the same as computer software? Here's a recent ruling to throw some light on the question.

IS television news software the same as computer software? This question came up in a recent case before the Delhi Income-Tax Appellate Tribunal, and it concerned the popular NDTV, or New Delhi Television Ltd.

The company had filed its income-tax return for the Assessment Year 1999-2000, showing an income of Rs 3.15 crore, but the Assessing Officer (AO) did a recalculation of the numbers to get Rs 19.64 crore. The chasm of Rs 16.49 crore was mainly due to disallowance of the company's claim for its TV news software.

While NDTV wanted the taxman to bestow upon it the benefit of Section 80HHE of the Income-tax Act, the AO said that the section was only for companies engaged in production and export of computer software, and not for those into TV software.

Lest you despise tax law as un-`telly'-friendly, there is another provision to help companies engaged in export or transfer film software and so on: Section 80HHF.

This conferred a tax advantage on businesses in film, TV, music, and TV news software. `Television news software' is defined in that section as "a collection of sounds and images, reportage, data and voice of actualities broadcast either through terrestrial transmission, wire or satellite, live or pre-recorded on video cassettes or digital media."

Isn't there a clear case for NDTV to be covered by this? Yes, but Section 80HHF came into effect only from Assessment Year 2000-2001.

For those interested, there are tax tomes to show how there is a sunset clause built into these sections; the Y2K Budget had curtailed the advantage to trail off at Assessment Year 2004-05.

NDTV appealed before the Commissioner of Income-Tax and explained the `details of production of news software', and furnished a list of major hardware and software used for exporting news software to Star TV, Hong Kong. However, the Commissioner could not agree that it was computer programme, eligible for Section 80HHE benefit.

At the Tribunal, forceful arguments were placed by NDTV to press its point. It said it was collecting data for preparing news software, and that "data includes in (it) the definition of computer software". It was further explained that TV news software is nothing but computer software because "it cannot be handled without the use of computer."

In what is key to the case, NDTV cited an `explanation' in Section 80HHE defining `computer software' as any computer programme recorded on any disc, tape, perforated media or other information storage device, or any customised electronic data or any product or service of similar nature, which is transmitted or exported from India to a place outside India by any means.

The company also drew support from an earlier decision of the Tribunal, in the Amadeus India P Ltd case, that had gone in favour of the assessee.

The Department rebutted these contentions with the reasoning that if the law had meant to give the tax benefit thus, there would not have been any need for a new section in the form of Section 80HHF subsequently.

"The assessee is doing nothing but merely editing and collecting figures of news and thereafter the news is transferred to other channels run by other parties," said the taxman.

"The assessee is dealing in data processing and editing of news software but not dealing in computer software."

The Tribunal heard both the sides and said that NDTV's activity was that of `customised electronic data' as in the above-cited `explanation', and so it was not proper to deny the company the benefit of Section 80HHE.

It chided the taxman for looking at only the main body of the section, without considering the `explanation'.

To explain this further, the Tribunal gave an analogy: "For example, ... cigarette includes bidi, men include women. If somewhere it is mentioned cigarette and men only, then it cannot be said in any way that they include bidis and women (respectively).

However, if it is mentioned cigarette including bidis and men including women, then it cannot be said that women and bidis are not included." So?

"Likewise, here if there would not have been any explanation added to Section 80HHE, then in no manner it can be presumed that the computer software includes customised electronic data."

Well, that was not a commercial break for tobacco advertising, you'd appreciate.

To recap, after all that smoke around, the Tribunal directed the AO to allow the deduction to NDTV.

Picture by Parth Sanyal

Cases@TheHindu.co.in

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