DCIT (TDS) 2(3), MUMBAI V. YASH RAJ FILMS P.LTD, MUMBAI

ITA 2719/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3919 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANDHIR GUPTA
• Section: 194C; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI SMC BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, ITA. NOS. 2716 & 2719/MUM/2015 (ASSESSMENT YEARS:2005-06 & 2008-09) DEPUTY COMMISSIONER OF INCOME TAX (TDS)-2(3), MUMBAI -400 002 APPE LLANT VS. M/S. YASH RAJ FILMS PVT. LTD., 5, SHAH INDUSTRIAL ESTATE, VEERA DESAI ROAD, ANDHERI (WEST), MUMBAI-400053 RESPONDENT PAN: AAACY1176E /BY APPELLANT : SHRI RANDHIR GUPTA, D.R. /BY RESPONDENT : NONE /DATE OF HEARING : 03.08.2016 /DATE OF PRONOUNCEMENT : 08.08.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: BOTH APPEALS HAVE BEEN FILED BY REVENUE AGAINST THE ORDERS OF COMMISSIONER OF INCOME-TAX (APPEALS)-52, MUMBAI, DATED 23.02.2015 FOR A.Y. 2005-06 ON THE IS SUE OF APPLICABILITY OF PROVISIONS OF SECTION 194C AS AGAI NST THE PROVISIONS OF SECTION 194J OF THE ACT WITH REGARD T O ITA NO. 2716 & 2719/MUM/15 A.YS. 05-06 & 08-09 [DCIT VS.M/S. YASH RAJ FILMS P. LTD.] PAGE 2 PAYMENTS MADE FOR PROCESSING CHARGES TO ADLAB FOR SUPPLYING COPIES OF FINAL NEGATIVE. 2.1 ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS EN GAGED IN THE BUSINESS OF FILM PRODUCTION AND DISTRIBUTION . A SURVEY ACTION U/S.133A OF THE ACT WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE COMPANY FOR ASCERTAINING W HETHER THE ASSESSEE WAS COMPLYING WITH THE PROVISIONS OF C HAPTER XVII-B OF THE ACT. IT WAS NOTICED BY ASSESSING OFF ICER THAT ASSESSEE HAD NOT MADE TDS AS PER THE PROVISIONS OF SECTION L94J OF THE ACT, IN RESPECT OF PAYMENTS MADE TO M/S . ADLABS LTD., FOR MAKING COPIES OF FILMS/PRINTS FOR THE FIL MS PRODUCED BY ASSESSEE. ACCORDINGLY, ASSESSING OFFIC ER ISSUED A SHOW CAUSE NOTICE U/S.201(1)/201(1A) OF TH E ACT TO THE ASSESSEE, COMMUNICATING THE DEFAULTS NOTICED. T HE STAND OF ASSESSEE HAS BEEN THAT SUCH PAYMENTS WERE COVERED U/S.194C OF THE ACT AND NOT U/S.194J OF THE ACT, BUT THE ASSESSING OFFICER REJECTED THE SAME AND HEL D THE ASSESSEE TO BE IN DEFAULT FOR SHORT DEDUCTION OF TD S OF RS.37,95,763/-. 2.2. IN APPEAL, ASSESSEE HAS RAISED VARIOUS ARGUMEN TS AND HAVING CONSIDERED THE SAME, CIT(A) GRANTED RELIEF T O ASSESSEE AS PRAYED. SAME HAS BEEN OPPOSED ON BEHAL F OF REVENUE INTER ALIA OBJECTED THE APPLICABILITY OF PR OVISIONS OF SECTION 194C OF THE ACT INSTEAD OF PROVISIONS OF SE CTION 194J OF THE ACT. ON THE OTHER HAND, NONE APPEARED ON ITA NO. 2716 & 2719/MUM/15 A.YS. 05-06 & 08-09 [DCIT VS.M/S. YASH RAJ FILMS P. LTD.] PAGE 3 BEHALF OF ASSESSEE. THEREFORE, I PROCEED TO DECIDE THE CASE EX PARTE ON THE BASIS OF SUBMISSION OF LD. DEPARTMENTA L REPRESENTATIVE AND MATERIALS AVAILABLE ON RECORD. 2.3 AFTER GOING THROUGH THE SUBMISSION OF LD. DEPARTMENTAL REPRESENTATIVE AND PERUSED THE MATERIA L ON RECORD, I FIND THAT THIS ISSUE OF APPLICABILITY OF THE PROVISIONS OF SECTION 194C VERSUS 194J OF THE ACT WITH REGARD TO PAYMENT MADE FOR PROCESSING CHARGES TO ADLAB FOR SUPPLYING COPIES OF FINAL NEGATIVE. SO, IT IS NECE SSARY TO ANALYZE THE PROVISIONS OF SECTION 194C. THE PROVIS IONS OF SECTION 194C READS AS UNDER: '194C. ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE CONTRACTOR) FOR CARRYING OUT ANY WORK (INCLUDING SU PPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE O F A CONTRACT BETWEEN THE CONTRACTOR AND A SPECIFIED PER SON SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACC OUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MO DE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO (I) ONE PER CENT WHERE THE PAYMENT IS BEING MADE OR CREDIT IS BEING GIVEN TO AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY; (II) TWO PER CENT WHERE THE PAYMENT IS BEING MADE O R CREDIT IS BEING GIVEN TO A PERSON OTHER THAN AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THEREIN. ITA NO. 2716 & 2719/MUM/15 A.YS. 05-06 & 08-09 [DCIT VS.M/S. YASH RAJ FILMS P. LTD.] PAGE 4 EXPLANATION. - FOR THE PURPOSES OF THIS SECTION, - (IV) 'WORK' SHALL INCLUDE (A) ADVERTISING; (B) BROADCASTING AND TELECASTING INCLUDING PRODUCTION OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING; (C) CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS; (D) CATERING; (E) MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON, OTHER THAN SUCH CUSTOMER.' 2.4 WHILE THE PROVISIONS OF SECTION 194J READ AS UN DER:- '194J. (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYI NG TO A RESIDENT ANY SUM BY WAY OF- (A) FEES FOR PROFESSIONAL SERVICES, OR (B) FEES FOR TECHNICAL SERVICES, OR (C) ROYALTY, OR (D) ANY SUM REFERRED TO IN CLAUSE (VA) OF SECTION 28 SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACC OUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO TEN PER CENT OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THEREIN: ITA NO. 2716 & 2719/MUM/15 A.YS. 05-06 & 08-09 [DCIT VS.M/S. YASH RAJ FILMS P. LTD.] PAGE 5 EXPLANATION. - FOR THE PURPOSES OF THIS SECTION, A) 'PROFESSIONAL SERVICES' MEANS SERVICES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR ADVERTISING OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD FOR THE PURP OSE OF SECTION 44AA OF THIS SECTION; (B) 'FEES FOR TECHNICAL SERVICES' SHALL HAVE THE SA ME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB- SECTION (1) OF SECTION 9; (BA)'ROYALTY' SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 12. EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (1 ) OF SECTION 9, REFERRED TO IN CLAUSE (B) OF EXPLANATION TO SEC. 194J, READS AS UNDER :- 'EXPLANATION 2. - FOR THE PURPOSES OF THIS CLAUSE, 'FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATI ON (INCLUDING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD 'SALARIES'. ' 2.5 EXPLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9, REFERRED TO IN CLAUSE (BA) OF EXPLANATION TO SEC . 194J, READS AS UNDER :- 'EXPLANATION 2. - FOR THE PURPOSES OF THIS CLAUSE, 'ROYALTY' MEANS CONSIDERATION (INCLUDING ANY LUMP S UM ITA NO. 2716 & 2719/MUM/15 A.YS. 05-06 & 08-09 [DCIT VS.M/S. YASH RAJ FILMS P. LTD.] PAGE 6 CONSIDERATION BUT EXCLUDING ANY CONSIDERATION WHICH WOULD BE THE INCOME OF THE RECIPIENT CHARGEABLE UND ER THE HEAD 'CAPITAL GAINS') FOR (I) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (II) THE IMPARTING OF ANY INFORMATION CONCERNING THE WORKING OF OR THE USE OF A PATENT, INVENTION, MODEL , DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (III) THE USE OF ANY PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (IV) THE IMPARTING OF ANY INFORMATION CONCERNING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL; (IVA) THE USE OR RIGHT TO USE ANY INDUSTRIAL, COMME RCIAL OR SCIENTIFIC EQUIPMENT BUT NOT INCLUDING THE AMOUNTS REFERRED TO IN SECTION 44BB; (V) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING T HE GRANTING OF A LICENCE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING FIL MS OR VIDEO TAPES FOR USE IN CONNECTION WITH TELEVISION O R TAPES FOR USE IN CONNECTION WITH RADIO BROADCASTING , BUT NOT INCLUDING CONSIDERATION FOR THE SALE, DISTRIBUTION OR EXHIBITION OR CINEMATOGRAPHIC FILMS ; OR (VI) THE RENDERING OF ANY SERVICES IN CONNECTION WI TH THE ACTIVITIES REFERRED TO IN SUB-CLAUSES (I) TO (IV), (IVA) AND (V).' ITA NO. 2716 & 2719/MUM/15 A.YS. 05-06 & 08-09 [DCIT VS.M/S. YASH RAJ FILMS P. LTD.] PAGE 7 2.6 WHILE PASSING THE ORDER U/S.201 OF THE ACT, ASS ESSING OFFICER HELD THAT TDS IN RESPECT OF PAYMENTS MADE B Y THE ASSESSEE FOR OBTAINING COPIES OF FILM PRINTS SHOULD HAVE BEEN MADE AS PER THE PROVISIONS OF SEC. 194J OF THE ACT, AND NOT U/ S. 194C OF THE ACT, AS WAS DONE BY ASSES SEE, AND, ACCORDINGLY, HE WORKED OUT THE SHORTFALL IN TD S AT RS.37,95,763/-. DURING COURSE OF APPELLATE PROCEEDI NGS, THE STAND OF ASSESSEE HAS BEEN THAT ASSESSE COMPANY HAD DEDUCTED TDS ON THE NEGATIVE PROCESSING CHARGES PAI D TO KODAK INDIA LTD. AS PER THE PROVISIONS OF SECTION 1 94J OF THE ACT, AS THE NEGATIVE PROCESSING INVOLVES SPECIF IC TASKS OF EDITING, ENHANCEMENT OF QUALITY OF FILM, ETC. HOWEV ER, THE CONTRACT FOR MAKING MULTIPLE PRINTS OF THE FINAL NE GATIVE WAS GIVEN TO ADLABS, ON WHICH THE TDS IS LIABLE TO BE D EDUCTED ONLY AS PER THE PROVISIONS OF SECTION 194C OF THE A CT, AS WORK DOES NOT INVOLVE ANY TECHNICAL OR PROFESSIONAL SERVICES, BUT IT IS RESTRICTED TO MAKING COPIES OF THE ORIGIN AL PRINT. 2.7 IN VIEW OF ABOVE, SUCH PAYMENTS WOULD BE COVERE D UNDER SUB-CLAUSE (E) OF EXPLANATION TO SECTION 194C OF THE ACT AND MAY NOT BE COVERED U/S. 194J OF THE ACT, AS NO SPECIALISED JOB WAS TO BE DONE, NOR ANY TECHNICAL S ERVICES HAVE BEEN RENDERED TO THE ASSESSEE. IN THE ORDER U /S.201 OF THE ACT, ASSESSING OFFICER HAD GIVEN DETAILS ABOUT VARIOUS FACILITIES AVAILABLE IN ADLABS, BUT THOSE FACILITIE S ARE USED ONLY FOR PREPARATION OF THE FINAL COPY OF NEGATIVE. THERE IS NO TECHNICAL SERVICE IN SUCH ACTIVITY. SUCH JOBS OR WORK ITA NO. 2716 & 2719/MUM/15 A.YS. 05-06 & 08-09 [DCIT VS.M/S. YASH RAJ FILMS P. LTD.] PAGE 8 CONTRACTS OF MAKING SEVERAL PRINTS OR THE SAME FINA L NEGATIVE MAY NOT INVOLVE ANY TECHNICAL OR PROFESSIO NAL SERVICES AS SUCH, REQUIRING THE ASSESSEE TO DEDUCT TAX U/S. 194J OF THE ACT, BUT SUCH CONTRACTS WILL BE COVERED UNDER THE PROVISIONS OF SECTION 194C OF THE ACT. IT WAS F OUND EVIDENT THAT ASSESSEE HAS BEEN CONSISTENTLY MAKING TDS ON PAYMENTS FOR TAKING PRINTS OF NEGATIVE, AS PER THE PROVISIONS OF SECTION 194C OF THE ACT, WHILE FOR ORIGINAL PAYM ENTS, IT HAD BEEN DEDUCTING TDS UNDER THE PROVISIONS OF SECT ION 194J OF THE ACT AND SUCH DEDUCTION OF TAX HAD BEEN ACCEPTED BY SAME ASSESSING OFFICER AND IN ASSESSEE' S OWN CASE FOR SUBSEQUENT YEARS IN SIMILAR STATE OF CIRCU MSTANCES. PAYMENTS FOR SUPPLYING VARIOUS COPIES OF FINAL NEGA TIVE HAS BEEN MADE BY ASSESSEE TO ADLABS AT THE RATE OF RS.2 20/- PER 100 MTRS., WHICH ITSELF INDICATED THAT THE KIND OF WORK DONE BY THEM WAS NOT VERY SOPHISTICATED OR SPECIALIZED. AT THE SAME TIME, THE PAYMENT MADE TO KODAK INDIA LTD., FO R PROCESSING OF THE FINAL NEGATIVE, WAS SIGNIFICANTLY HIGHER, INDICATING THAT THE NATURE OF THE WORK DONE BY THEM WAS TECHNICAL AND SPECIALIZED MANNER. IN VIEW OF ABOVE , CIT(A) WAS JUSTIFIED IN HOLDING THAT ASSESSEE HAS RIGHTLY DEDUCTED TDS ON THE PAYMENTS MADE TO ADLABS, FOR SUPPLYING C OPIES OF FINAL NEGATIVE, AS PER THE PROVISIONS OF SECTION 194C OF THE ACT. CONSEQUENTLY, CIT(A) WAS JUSTIFIED IN GRAN TING RELIEF TO ASSESSEE ON THIS ACCOUNT. SAME IS UPHELD. ITA NO. 2716 & 2719/MUM/15 A.YS. 05-06 & 08-09 [DCIT VS.M/S. YASH RAJ FILMS P. LTD.] PAGE 9 3. IN THE RESULT, APPEAL FILED BY REVENUE FOR A.Y. 2005-06 IS DISMISSED. 4. IN ITA NO. 2719/MUM/2015 FOR A.Y. 2008-09, SIMIL AR ISSUE AROSE AS IN ABOVE APPEAL. FACTS BEING SIMILA R, SO, FOLLOWING SAME REASONING, I AM NOT INCLINED TO INTE RFERE WITH THE ORDER OF CIT(A) WHO HAS RIGHTLY GRANTED RELIEF TO ASSESSEE AS PRAYED. SAME IS UPHELD. 5. IN THE RESULT, BOTH APPEALS FILED BY REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 08 TH DAY OF AUGUST, 2016. SD/- (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER MUMBAI: DATED 08/08/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. / CONCERNED CIT 4. - / CIT (A) 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. BY ORDER / , / , ,