V.R. ENTERTAINER P.LTD, MUMBAI V. ITO (TDS)-3(5), MUMBAI

ITA 2497/MUM/2010

• Counselvise Citation: 249719914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 27-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 30-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Bonafide belief
• Section: 133A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, F, MUMBAI BEFORE SHRI R V EASWAR, PRESIDENT AND SHRI R K PANDA, ACCOUNTANT MEMBER I T A NOS: 2496/MUM/2010 AND 2497/MUM/2010 (ASSESSMENT YEARS: 2003-04 AND 2004-05) M/S V R ENTERTAINERS PVT. LTD., MUMBAI APPELLANT (PAN: AAACV8417D) VS INCOME TAX OFFICER (TDS) 3(5), MUMBAI RESPONDEN T APPELLANT BY: MR SANJIV M SHAH RESPONDENT BY: MR VIJAY SHANKAR O R D E R R V EASWAR, PRESIDENT: THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST ORDERS PASSED BY THE ASSESSING OFFICER UNDER SECTIO N 201(1) AND SECTION 201(1A) OF THE INCOME TAX ACT, 1961, FOR TH E ASSESSMENT YEARS 2003-04 AND 2004-05. THE APPEALS ARISE IN TH E FOLLOWING CIRCUMSTANCES. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGE D IN THE PRODUCTION OF FILMS. ON THE BASIS OF THE SURVEY CO NDUCTED IN ITS PREMISES UNDER SECTION 133A OF THE ACT, IT WAS NOTI CED THAT FOR THE ASSESSMENT YEAR 2003-04 THE ASSESSEE HAD PAID AN AM OUNT OF ` 2,50,000/- TO CIDCO LTD. AND IN THE ASSESSMENT YEAR 2004-05 THE ASSESSEE HAD PAID ` 8,62,500/- TO AIR INDIA AS WELL AS CIDCO LTD. BOTH THE PAYMENTS WERE MADE IN CONNECTION WITH THE SHOOTING OF THE FILM ZAMEEN. HOWEVER, THE ASSESSEE DID NOT D EDUCT TAX FROM THE PAYMENTS WHICH ACCORDING TO THE ASSESSING OFFIC ER THE ITA NO: 2496/MUM/2010 ITA NO: 2497/MUM/2010 2 ASSESSEE OUGHT TO HAVE DEDUCTED UNDER SECTION 194-I OF THE ACT. IN HIS VIEW THE PAYMENTS AMOUNTED TO RENT WITHIN THE MEANING OF THE ABOVE SECTION AND THEREFORE TAX WAS DEDUCTIBLE. HE THEREFORE PASSED ORDERS UNDER SECTION 201(1) AND SECTION 201( 1A) RAISING A DEMAND FOR THE TAX AND ALSO LEVYING INTEREST. IN R ESPECT OF THE ASSESSMENT YEAR 2003-04, THE TAX PAYABLE BY THE ASS ESSEE CAME TO ` 51,500/- AND THE INTEREST CHARGED WAS ` 1,85,000/-. IN RESPECT OF THE ASSESSMENT YEAR 2004-05, THE TAX PAYABLE CAM E TO ` 1,77,675/- AND THE INTEREST CHARGED AMOUNTED TO ` 5,70,676/-. THE ORDERS WERE PASSED ON 30.11.2008. 3. THE ASSESSEE APPEALED TO THE CIT(A), WHO DISMISS ED THE APPEALS BY OBSERVING AS UNDER: - 6. I HAVE GONE THROUGH THE SUBMISSION VERY CAREFULLY AND PERUSED THE ORDER OF THE ASSESSING OFFICER. THE APPELLANT IS ENGAGED IN THE BUSINESS OF PRODUCTION OF FILMS. THE APPELLANT HAS MADE PAYMENT TO CIDCO LTD. / AIR INDIA FOR LOCATION AS HIRE CHARGES. THE APPELLANT HAS NOT DEDUCTED ANY TAX UNDER THE IMPRESSION THAT NO TAX WAS REQUIRED TO BE DEDUCTED AS SUCH PAYMENTS WERE MADE TO A GOVT. BODY. THE AO OBSERVED THAT CIDCO / AIR INDIA IS NOT A GOVT. BODY BUT IS A UNDERTAKING AND AS SUCH THE LOCATION CHARGES PAID TO CIDCO / AIR INDIA HAS BEEN TREATED AS RENT AND IS BROUGHT TO TAX U/S. 194-I @ 20.6%. 4. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRI BUNAL. THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT THE AMOUNTS PAID TO CIDCO AND AIR INDIA DID NOT AMOUNT TO RENT WITHIN THE MEANING OF EXPLANATION (I) BELOW THE SECTION 19 4-I AND THEREFORE THE ASSESSEE WAS NOT UNDER ANY OBLIGATION TO DEDUCT TAX. ACCORDING TO HIM THE ASSESSEE PAID LUMPSUM PAYMENTS FOR THE USE OF A LOCATION OR A FACILITY IN CONNECTION WITH THE PRODUCTION OF THE FILM ITA NO: 2496/MUM/2010 ITA NO: 2497/MUM/2010 3 AND THERE WAS NO SPECIFIC USE OF THE LAND OR BUILDI NG AS REQUIRED BY THE SECTION IN ORDER THAT THE PAYMENT MAY BE CALLED RENT. IT WAS SUBMITTED THAT SO FAR AS THE PAYMENT TO AIR INDIA I S CONCERNED, AIR INDIA WAS NOT IN THE BUSINESS OF LETTING OUT ITS PR OPERTIES. OUR ATTENTION WAS DRAWN TO THE LETTERS ISSUED BY AIR IN DIA AND CIDCO ON 02.05.2003, 09.05.2003 AND 21.02.2003 (COPIES FILED ), IN WHICH THE PAYMENT HAS BEEN REFERRED TO AS CHARGES OR ADMIN ISTRATIVE CHARGES AND NOT AS RENT. IT WAS ALTERNATIVELY C ONTENDED THAT IF THE TAX IS PAID BY THE RECIPIENTS OF THE AMOUNTS, THEN THE DEFAULT OF THE ASSESSEE CAN BE RECKONED ONLY UP TO THAT DATE AND T HIS ASPECT HAS TO BE EXAMINED BY THE ASSESSING OFFICER WHILE CHARG ING INTEREST. IN THIS CONNECTION RELIANCE WAS PLACED ON THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. TRANS BHARAT AVIA TION (P) LTD. (2010) 320 ITR 671 (DEL), IN WHICH IT WAS HELD THAT IN THE CASE OF GOVERNMENT COMPANIES / UNDERTAKINGS IT CANNOT BE PR ESUMED THAT THEY HAVE NOT PAID THE TAX AND ON THE BASIS OF THE PRESUMPTION THE ASSESSEE CAN BE HELD LIABLE FOR THE INTEREST ONLY U P TO THE DATE ON WHICH THE TAXES WERE PAID BY THE PAYEE COMPANIES. WITH REGARD TO THE PAYMENT TO CIDCO, IT WAS SUBMITTED THAT THE ASS ESSEE WAS UNDER A BONAFIDE BELIEF THAT CIDCO WAS EXEMPT FROM PAYING INCOME TAX ON ITS INCOME UNDER SECTION 10(20A) OF T HE ACT. IT WAS POINTED OUT THAT THE EXEMPTION ENJOYED BY CIDCO WAS WITHDRAWN BY THE FINANCE ACT, 2002, WITH EFFECT FROM THE ASSE SSMENT YEAR 2003-04, WHICH WAS OVERLOOKED BY THE ASSESSEE, WHO BONAFIDE BELIEVED THAT THE EXEMPTION CONTINUED EVEN FOR THE SAID ITA NO: 2496/MUM/2010 ITA NO: 2497/MUM/2010 4 ASSESSMENT YEAR. IT WAS THUS POINTED OUT THAT THE LAPSE WAS NOT INTENTIONAL BUT WAS BONAFIDE. 5. THE LEARNED CIT DR, ON THE OTHER HAND, CONTENDED THAT A STRICT INTERPRETATION SHOULD BE ADOPTED IN RESPECT OF PROVISIONS RELATING TO TAX DEDUCTED AT SOURCE AND THAT THE ASS ESSEE, UNLESS IT HAD TAKEN CARE TO OBTAIN LETTERS FROM AIR INDIA AND CIDCO TO THE EFFECT THAT THEY ARE NOT LIABLE TO PAY TAX ON THEIR INCOME, WAS LIABLE TO DEDUCT TAX FROM THE PAYMENTS MADE TO THEM AND SI NCE THE ASSESSEE HAS NOT TAKEN SUCH A PRECAUTION IT CANNOT ARGUE THAT IT WAS NOT LIABLE TO DEDUCT TAX UNDER SECTION 194-I OF THE ACT. IT WAS SUBMITTED THAT IN THE CASE OF THE PAYMENT MADE TO C IDCO THERE WAS USE OF THE LAND FOR THE PURPOSE OF SHOOTING THE FILM AND THEREFORE THE PAYMENT CLEARLY AMOUNTED TO RENT, W HEREAS IN THE CASE OF PAYMENT MADE TO AIR INDIA IT WAS FOR THE US E OF LAND AND BUILDING TOGETHER WITH THE FITTINGS WHICH AMOUNTED TO CABIN CREW TRAINING MOCK-UP FACILITY AND THUS THE PAYMENT AMOU NTED TO RENT FROM WHICH THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX. STRONG RELIANCE WAS PLACED ON THE DEFINITION OF THE WORD RENT IN EXPLANATION (I) BELOW SECTION 194-I, AS IT STOOD PR IOR TO THE SUBSTITUTION MADE WITH EFFECT FROM 13.07.2006. 6. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE R IVAL CONTENTIONS. SO FAR AS THE PAYMENT OF ` 1,50,000/- MADE TO CIDCO ON 20.02.2003 IS CONCERNED, THE LETTER ISSUED BY CI DCO ON 21.02.2003 SHOWS THAT IT HAS BEEN PAID AS ADMINISTR ATIVE CHARGES FOR GRANTING PERMISSION FOR SHOOTING A FILM ON ROA DS OF KHARGHAR NODE FOR SIX DAYS I.E. FROM 25.02.2003 TO 02.03.200 3 AND THIS ITA NO: 2496/MUM/2010 ITA NO: 2497/MUM/2010 5 INCLUDES PERMISSION TO LAND A HELICOPTER ON VACANT SPACE FOR ONE DAY SUBJECT TO THE CONDITION THAT THE ASSESSEE WILL NOT DISTURB OR DAMAGE ANY OVERHEAD LINES OR STRUCTURES IN THE NEAR BY VICINITY. WE ARE UNABLE TO SAY THAT SECTION 194-I DOES NOT APPLY TO THIS PAYMENT. THE DEFINITION OF THE WORD RENT, AS IT STOOD BEFO RE 13.07.2006 IS AS UNDER: - 194-I. . EXPLANATION FOR THE PURPOSES OF THIS SECTION (I) RENT MEANS ANY PAYMENT, BY WHATEVER NAME CALLED, UNDER ANY LEASE, SUB- LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF ANY LAND OR ANY BUILDING (INCLUDING FACTORY BUILDING), TOGETHER WITH FURNITURE, FITTINGS AND THE LAND APPURTENANT THERETO, WHETHER OR NOT SUCH BUILDING IS OWNED BY THE PAYEE. THE ABOVE DEFINITION IS SATISFIED IN ALL RESPECTS W ITH REGARD TO THE PAYMENT OF ` 1,50,000/- TO CIDCO. THE PAYMENT WAS DESCRIBED AS ADMINISTRATIVE CHARGES BUT THE SECTION APPLIES TO THE PAYMENT BECAUSE THERE WAS USE OF LAND FOR THE PURPOSE OF SH OOTING OF THE FILM. THE DEFINITION ITSELF SAYS THAT IF THE PAYME NT IS IN TRUTH RENT, THE FACT THAT THE PARTIES CALL IT DIFFERENTLY HAS NO IM PACT ON THE LIABILITY OF THE ASSESSEE TO DEDUCT TAX. THE LETTER ISSUED BY C IDCO SHOWS THAT PERMISSION HAS BEEN GRANTED TO THE ASSESSEE FOR SHO OTING THE FILM ON THE ROADS OF KHARGHAR NODE AND THE ASSESSEE WAS ALSO ALLOWED TO LAND A HELICOPTER ON THE VACANT SPACE FOR ONE DA Y. THERE CAN BE NO DOUBT THAT THE PAYMENT IS FOR THE USE OF THE LAN D. IT IS THEREFORE RENT WITHIN THE MEANING OF THE SECTION AND THE AS SESSEE OUGHT TO HAVE DEDUCTED TAX ACCORDINGLY. WE THEREFORE UPHOLD THE ORDERS ITA NO: 2496/MUM/2010 ITA NO: 2497/MUM/2010 6 PASSED BY THE REVENUE AUTHORITIES FOR THE FINANCIAL YEAR 2002-03 (ASSESSMENT YEAR 2003-04) IN ITA NO: 2496/MUM/2010. THE APPEAL IS DISMISSED. 7. AS REGARDS THE NEXT YEAR, THE DISPUTE IS WITH RE GARD TO THE PAYMENTS MADE TO AIR INDIA. THE LETTER DATED 02.05 .2003 ISSUED BY AIR INDIA SHOWS THAT THE PAYMENT IS FOR SHOOTING TH E FILM ZAMEEN AT AIR INDIAS CABIN CREW TRAINING MOCK-UP AS PER T HE SCHEDULE GIVEN IN THE LETTER FROM 02.05.2003 TO 07.05.2003. THE L ETTER DESCRIBES THE PAYMENT OF ` 7,12,500/- AS CHARGES FOR THE SHOOT. THE FURTHER CONDITIONS ARE THAT THE FILM SHOULD NOT DIRECTLY OR INDIRECTLY SHOW AIR INDIA IN POOR OR CONTROVERSIAL LIGHT, THAT AIR INDI AS ASSISTANCE SHOULD BE ACKNOWLEDGED IN THE FILM, THAT NO FOREIGN NATION ALS WILL BE ALLOWED TO ENTER THE PREMISES AND AIR INDIA SHOULD BE ALLOWED TWO SHOWS IN THEIR AUDITORIUM WITHIN THREE MONTHS OF TH E RELEASE OF THE FILM. THE LETTER FURTHER SAYS THAT IN VIEW OF THE SECURITY MEASURES AT THE LOCATION, THE EMPLOYEES OF THE ASSESSEE SHOULD FOLLOW THE SECURITY PROCEDURES LAID DOWN BY AIR INDIA STRICTLY . THE OTHER LETTER DATED 09.05.2003 IS FOR THE SCHEDULE OF SHOOTING ON THAT DATE FOR CHARGES OF ` 50,000/-. THE SHOOTING WAS AT AIR INDIAS BOOKING OFFICE AT NARIMAN POINT. THE CONDITIONS ARE ALSO T HE SAME AS IN THE OTHER LETTER. IN BOTH THE LETTERS THE ASSESSEE WAS REQUIRED TO DEPOSIT THE AMOUNT BY DEMAND DRAFT IN ADVANCE OF TH E SHOOTING. 8. IT SEEMS TO US THAT SO FAR AS THE PAYMENT MADE F OR THE SHOOTING IN AIR INDIAS BOOKING OFFICE AT NARIMAN P OINT IS CONCERNED IN THE AMOUNT OF ` 50,000/-, IT IS FOR THE USE OF THE BUILDING TOGETHE R WITH THE FURNITURE AND FITTINGS AND THUS THE PAYMEN T OF ` 50,000/- IS ITA NO: 2496/MUM/2010 ITA NO: 2497/MUM/2010 7 NOTHING BUT RENT. HOWEVER, THE PAYMENT OF ` 7,12,500/- MADE TO AIR INDIA FOR SHOOTING AT ITS CABIN CREW TRAINING M OCK-UP DOES NOT APPEAR TO US TO FALL WITHIN THE MEANING OF RENT I N SECTION 194-I OF THE ACT. HERE THE PREDOMINANT INTENTION IS TO MAKE USE OF THE CABIN CREW TRAINING MOCK-UP FACILITY FOR THE PURPOSE OF T HE SHOOTING OF THE FILM AND IT WOULD BE MORE APPROPRIATE TO VIEW THE C ABIN CREW TRAINING MOCK-UP AS A FACILITY OR SHOOTING LOCATION FOR THE USE OF WHICH THE ASSESSEE MADE PAYMENT TO AIR INDIA RATHER THAN FOR THE USE OF ANY LAND OR BUILDING TOGETHER WITH FURNITURE , FITTINGS, ETC. THE ASSESSEE IS NOT INTERESTED IN THE USE OF THE LAND O R THE BUILDING IN WHICH THE CABIN CREW TRAINING MOCK-UP FACILITY IS L OCATED; IT IS MORE INTERESTED IN CAPTURING THE FACILITY AS SUCH IN ITS FILM. IT THEREFORE APPEARS TO US THAT THIS PAYMENT CANNOT BE APPROPRIA TELY CALLED RENT WITHIN THE MEANING OF SECTION 194-I OF THE A CT. ACCORDINGLY WE AGREE WITH THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX UNDER SECTION 194-I FROM THE PAYMENT OF ` 7,12,500/- MADE TO AIR INDIA. 9. IN THE RESULT, THE APPEAL FOR THE ASSESSMENT YEA R 2004-05 IN ITA NO: 2497/MUM/2010 IS PARTLY ALLOWED. 10. TO SUM UP, ITA NO: 2496/MUM/2010 IS DISMISSED A ND ITA NO: 2497/MUM/2010 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MAY 2011. SD/- SD/- (R K PANDA) (R V EASWAR) ACCOUNTANT MEMBER PRESIDE NT MUMBAI, DATED 18 TH MAY 2011 SALDANHA ITA NO: 2496/MUM/2010 ITA NO: 2497/MUM/2010 8 COPY TO: 1. M/S V R ENTERTAINERS PVT. LTD. FLAT NO.1 & 2, BLDG. NO.1, MHADA COMPLEX NEW LINK ROAD, ANDHERI WEST, MUMBAI 400 053 2. ITO (TDS) 3(5), MUMBAI 3. CIT- (TDS), MUMBAI 4. CIT(A)-14, MUMBAI 5. DR F BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI