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Tax on foreign telecast firms to create more problems

Tax on foreign telecast firms to create more problems

Author | NULL | Tuesday, Mar 13,2001 12:00 AM

Tax on foreign telecast firms to create more problems

The government's decision to tax foreign telecasting companies (FTC’s) operating in India as per the provisions of the Income Tax Act is set to create more problems than solving one. The budgetary announcement of taxing FTC’s income from India operations under the Income Tax Act would lead to protracted litigation’s as the broadcasting business included shared cost, and computation of country-wise break up would be difficult.

Other shared costs incurred by most foreign channels include programming cost under which television software is acquired on a global basis or on the basis of big regions. Prior to the current proposal on taxation of FTC’s, such companies used to pay 48 per cent tax on their 10 per cent of revenues from India (receipts from advertising mostly), which was deemed as profits.

From the next financial year onwards, the total income of FTC’s from their Indian operation would be determined by the assessing officer in accordance with the provisions of the Income Tax Act, 1961.

Rule 10 of the Income Tax Rules, providing discretionary powers to the assessing officer, suggests various methods for calculating income from India operations which is not definitely ascertainable. The assessing officer, under Rule 10, can ascribe a percentage of turnover, an amount bearing the same proportion to the total profit as the receipts bear to the total receipt, or an amount calculated in the manner which he deems suitable, as the income of an FTC from India operations.

Industry sources said there would be arbitrariness in the computation of taxable income as it will totally depend on the assessment officer concerned on how he reaches at the amount to be taxed.

The government's move may force companies like Sony Entertainment Television India to pay taxes here, which it had been avoiding on the plea that it pays taxes in Singapore, a country with which India has a double taxation avoidance treaty. On the other hand, channels like, Discovery, CNN, and BBC may benefit.

Members of Indian broadcasting foundation, an apex body of broadcasters, television software producers and airtime sellers, will meet this week to discuss the new taxation norms and seek clarification from the government.

Tags: e4m

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