Case Law Details
Income Tax Appellate Tribunal, Mumbai
Kodak India (P.) Ltd.
v.
Deputy Commissioner of Income-tax
Income Tax Appeal No. 9080 (Mum.) of 2010
[Assessment Year 2009-10]
Date of Pronouncement – 20.02.2013
M.M. Golvala and Sandeep Chetiwal for the Appellant. Manoj Kumar for the Respondent.
ORDER
D. Karunakara Rao, Accountant Member
This appeal filed by the assessee on December 28, 2010 is against the order of the Commissioner of Income-tax (Appeals)-14, Mumbai, dated October 29, 2010 for the assessment year 2009-10.
In this appeal, the assessee raised the following grounds which read as under :
“1. Both the lower authorities erred in holding that the payment made to Ms. Katrina Resomary Turcotte required withholding under section 194J. Having regard to the facts and circumstances of the case, the appellant submits that the orders of the lower authorities holding that the relevant payments were covered under section 194J be cancelled.
2. Without prejudice, both the lower authorities failed to consider that the payments made till the date of passing of the order was only Rs. 44,94,400 and not Rs. 70 lakhs as presumed by the Assessing Officer. The demand under section 201 requires to be reduced accordingly.
3. In any event, the interest levied under section 201(1A) is excessive and arbitrary and requires to be reduced substantially.
4. Without prejudice to the foregoing grounds, both the lower authorities erred in holding that the payment was made to Ms. Katrina Resomary Turcotte. The appellant submits the payment has been made to Matrix India Entertainment Consultants P. Ltd. and consequently, the provisions of section 194J do not apply to the payment.
5. Without prejudice, the Assessing Officer should have refrained from passing an order under section 201(1) and 201(1A) considering that Ms. Katrina Resomary Turcotte was an assessee on record and had duly filed her return of income.”
2. Briefly stated relevant facts of the case are that the assessee is a subsidiary company of Kodak, Rochester (USA) engaged in the manufacturing cameras, trading in cameras and dealing in photographic films in and out of India. During the action under section 133A of the Act on September 18, 2008, the Assessing Officer examined the assessee’s compliance to the provisions relating to TDS for the period from April 1, 2008 to September 18, 2008 and found certain non-compliances by the assessee. One such non-compliance relates to the TDS provision on the payments, i.e., short deduction of TDS made to Ms. Katrina Resomary Turcotte (Ms. Katrina Kaif). As per the Assessing Officer, the assessee has entered into an agreement with Ms. Katrina Resomary Turcotte to act as model for all promotional materials created by Kodak including posing for photographs or promotion of product of Kodak. The Assessing Officer is of the opinion that the payment made by the assessee are towards fees for a model and it falls within the purview of Explanation (a) to section 194J of the Act, where the Explanation provides for definition of “professional services” which means any services rendered in case of carrying business of advertising. He also invoked the provisions of clause (va)(a) of section 28 of the Act in an attempt to make it a case of payment for compete fee. Finally, the Assessing Officer invoked the provisions of section 194J of the Act deeming the impugned payment “professional fees”. Otherwise, the assessee applied the provisions of section 194C of the Act to the impugned payments. In other words, the assessee made TDS at 1.133 per cent as per section 194C, whereas the Assessing Officer applied at 11.33 per cent as per section 194J of the Act. The Assessing Officer applied the same to Rs. 70 lakhs, the payment in the year, instead of sum of Rs. 44,94,400 received till that date (September 18, 2008) and the order under section 201 was passed raising demand of Rs. 7,13,790. Otherwise, the contract amount is Rs. 1.40 crores. Aggrieved with the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income-tax (Appeals).
3. During the proceedings before the first appellate authority (FAA), the assessee made various submissions to demonstrate that the assessee has not received the sum for “professional services” as defined in the Explanation to section 194J of the Act and therefore, the order of the Assessing Officer under section 201 of the Act is erroneous. However, the Commissioner of Income-tax (Appeals) discussed the contents of the agreements dated September 29, 2005 and mentioned that Ms. Katrina Kaif has to render services as model for photo shots under the agreement in respect of cameras. During the first appellate authority proceedings, the assessee submitted that the said Explanation (a) is exhaustive in nature, so far as the classification of services are concerned, the modelling does not fit into the services so satisfied therein. In this regard, the assessee relied on the Notification of the Central Board of Direct Taxes dated August 21, 2008 (304 ITR statute page 62) and mentioned that it is not that all professional services are included in the said list and therefore, the attempt of the Assessing Officer to include the impugned service of modelling for advertisement for marketing digital cameras manufactured by the assessee for applying the said provisions of section 194J is uncalled for and is not legal. Without prejudice, it was also submitted that the payee in this case was M/s. Matrix India Entertainment Consultants P. Ltd., and it does not engage in any professional services within the meaning of the said Explanation to section 194J of the Act. Therefore, the provisions of section 194J have no application to the impugned payments. The assessee also submitted details relating to the allegation of non-compete fees. Finally, after examining the submissions of the assessee, the Commissioner of Income-tax (Appeals) came to the conclusion that the payments made are not for non-compete fees and the said payment in substance constitutes the payment to Ms. Katrina Kaif attracting the provisions of section 194J of the Act and thus, confirmed the views of the Assessing Officer as per the discussion given in para 10 of the impugned order. In the background of the above facts, the assessee filed the present appeal raising the grounds mentioned above.
4. During the proceedings before us, Shri M. M. Golvala and Sandeep Chetiwal, learned counsels for the assessee filed a paper book giving copies of the agreements, the copy of the Notification of the Central Board of Direct Taxes issued for operation of section 194J of the Act and also certain judicial pronouncements for demonstrating how the impugned payments are outside the scope of section 194J of the Act. To start with, learned counsel brought our attention to the agreement and mentioned that it is a tripartite agreement and the assessee, Ms. Katrina Kaif and M/s. Matrix Entertainment Consultant P. Ltd. (Matrix India) are the signatories to it. Matrix India works for Ms. Katrina Kaif. Further, learned counsel referred to the assessee’s letter dated October 7, 2008, which is filed before the Assessing Officer and mentioned that the consideration for required services is payable to Matrix India subject to TDS on behalf of Ms. Katrina Kaif and she agreed to act as model for all promotional materials created by Kodak including posing for photographs for promotional and point of sale merchandise and the images will be used for all communication where LCD panel is features for the said product in any part of India. There are two agreements, i.e. one agreement is dated September 29, 2005 and another is April 28, 2008 in connection with the present contract. As per the same, the contract amount is Rs. 1.4 crores. The terms and conditions are mentioned in item No. 2 of clause (c) relating to consideration. It is seen from the said clause that the assessee is under obligation to make payments and the cheque/demand draft will be drawn in the name of M/s. Matrix India. The artist is under obligation to personally be available for photo sessions or live sessions for the purpose of promoting products of Kodak. Further, learned counsel brought to our attention the provisions of Explanation (a) to section 194J and mentioned that the fees for professional service is defined there and the same does not include modelling as a defined profession for this purpose of section 194J. It is also brought to our attention the Notifications dated January 12, 1977 issued by the Central Board of Direct Taxes in the context of section 44AA of the Act in the context of list of professionals who must get their accounts audited and it was issued to include various professions. The profession of film artist is included in the said Notification. Further, the learned authorised representative brought our attention to another notification where the film artist is also defined to mean any person engaged in professional capacity in the profession of cinematography film whether produced by him or other person as an actor ; cameraman ; director including assistant director ; music director including assistant music director ; dance director including assistant dance director, an editor ; a singer ; a lyricist ; a story writer ; a screenplay writer ; a dialogue writer and a dress designer as well as the notification dated August 21, 2008 issued for the purpose of section 115J, Explanation (a) of the Act and mentioned that modelling is not a profession for this purpose. Later, learned counsel brought to our attention to the decision of this Tribunal in the case of Dy. CIT v. Movies Stunt Artists Association [2006] 6 SOT 204 (Mumbai) and mentioned, considering the above notification, the stunt artist is held not an actor. In this regard, learned counsel read out the contents of paragraphs from 13 to 15 where the Tribunal held that the Notification does not include the stunt artist as an actor, therefore, the contention that the stunt artist is an actor is farfetched and therefore, the same is not accepted. Further, he relied on another decision of the Tribunal in the case of EMC v. ITO [2010] 37 SOT 31 (Mum) which relates to the case of payments involving event management services. In this case, the Tribunal came to the conclusion that the artwork and photography would not come in the purview of professional services. In the said decision, it was discussed that photography and artwork when not done in relation to the production of cinematographic film, the services rendered shall be covered only by the provisions of section 194C and not under the provisions of section 194J of the Act. To get covered by the said notifications, professional services must be rendered in relation to production of cinematographic film. Learned counsel read out para 4.1 of the said decision in this regard. Learned counsel also mentioned that the Notification as well as the definition for professional services given in the said Explanation to section 194J provides in principle, exhaustive definitions as evident from the use of expression “means”. In this regard, learned counsel referred to the Hon’ble Karnataka High Court judgment in the cases of CIT v. Vijaya Bank [2006] 285 ITR 97 ; (2) CIT v. Corporation Bank [2006] 285 ITR 97; and (3) CIT v. Vysya Bank [2006] 285 ITR 97 and stated that (page 110) “when the definition of a word begins with ‘means’ it is indicative of the fact that the meaning of the word has been restricted ; that is to say, it would not mean anything else but what has been indicated in the definition itself. . . .” Referring to the issue of alternative grounds for restricting the orders only to the amount of Rs.44,94,500 only and not to Rs. 70 lakhs and also the fact that the amount was paid only to M/s. Matrix India and not to Ms. Katrina Kaif, learned counsel mentioned that the order passed under section 201 by the Assessing Officer needs to be cancelled and the impugned order of the Commissioner of Income-tax (Appeals) is ought to be set aside.
5. Per contra, the learned Departmental representative heavily relied on the orders of the Revenue authorities. Further, he mentioned that the profession of modelling is a part of acting and since the film actor is a professional, the services rendered by such actor constitute “professional services”. Thus, as per the learned Departmental representative, the fee paid to such an actor constitutes “fees for professional services-FPS”. In that sense, the assessee is covered by the Notification in the capacity of an actor qua the provisions of section 194J of the Act.
6. During the rebuttal time, learned counsel vehemently objected to the learned Departmental representative’s argument that the modelling is a part of acting and stated forcefully objecting to this new argument raised before the Tribunal for the first time. Learned counsel mentioned that the learned Departmental representative must restrict himself to arguments emanating from the impugned orders of the Assessing Officer/Commissioner of Income-tax (Appeals) and his job in only defend the orders of the Revenue authorities and he must not make a new case at this level of second appellate proceedings. Notwithstanding the above, learned counsel mentioned that it is not that all actors are covered by the Notification of 1977, only the actors who are involved in the production of cinematography alone covered by the said Notification. Therefore, even if she is a film actor, the services rendered by her to the assessee are not in connection with the production of cinematographic film and therefore, the impugned payment should not be deemed as professional services for the purpose of section 194J of the Act.
7. We have heard both parties, perused the material placed before us. The case of the assessee is that the assessee being an actor-model rendered modelling services for marketing the products of the assessee-payer of the fee. The services since not rendered for production of cinematographic film, the impugned payments are outside the scope of section 194J of the Act. Taking analogy that the “stunt actor” is not an actor, the modelling actor is also not an actor. The definitions and notifications ought not to be extended to cover the modelling services of this kind. These modelling services are not notified by the Central Board of Direct Taxes for the reasons better known to them. Therefore, the fee received directly by the Matrix India-a front company, on behalf of the Ms. Katrina Kaif, who modelled for marketing of the camera-products of the assessee-Kodak, does not constitutes professional services as the said modelling/acting is not done in relation to production of cinematographic film and she is not an actor for this purpose of section 194J of the Act.
8. On the other hand, the case of the Revenue is that the payments made by the assessee to Ms. Katrina Kaif should have been done after making TDS in accordance with the provisions of section 194J of the Act and as per the provisions of section 194C of the Act as the impugned payments made constitute fee for professional services for the modelling service, which is a profession by itself. As per the Departmental representative, modelling is done in the capacity of an actor-the film artist.
9. We have considered the divergent stands of the parties in dispute. We have perused the paper book and the copies of the decisions filed before us. For adjudication of the issue on hand, i.e., if the payments made by the assessee in lieu of the services rendered by Ms. Katrina Kaif attracts the provisions of section 194J of the Act, we should first analyse the available information relating to the legal scope of the matter. For this, we shall first analyse the provisions of section 194J and the notification issued in connection with the said provisions. To start with, we shall take up the provisions of section 194J of the Act. They read as follows :
“194J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying 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 account 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 :
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 purposes of section 44AA or of this section.”
10. The above definition assumes great significance for adjudicating the issue on hand. Fee for professional services-FPS is defined in the Explanation to section 194J of the Act and it is exhaustive definition and of course, with the power to notify the professions. Therefore, the definition is exhaustive in form in view of the use of expression “means” and inclusive in substance as the Board has power to extend the list of professional services. The professions notified for the purpose of section 44AA of the Act hold good for section 194J too. As per the said Explanation qua fee for professional services, the services rendered by a person in the course of carrying on listed professions and other notified professions constitutes fee for professional services and thus the payments in connection with such services attracts the provisions of section 194J of the Act. The payer is legally bound to make TDS at the rate of 10 per cent of such payment.
11. Now, coming to section 44AA, referred to an Explanation the rules are notified. Rule 6F explains the means of film artist. Rule 6F to Explanation (c) reads as under :
“‘film artist’ means any person engaged in his professional capacity in the production of a cinematograph film whether produced by him or by any other person, as-
(i) an actor ;
(ii) a cameraman ;
(iii) a director, including an assistant director ;
(iv) a music director, including an assistant music director ;
(v) an art director, including an assistant art director ;
(vi) a dance director, including an assistant dance director ;
(vii) an editor ;
(viii) a singer ;
(ix) a lyricist ;
(x) a story writer ;
(xi) a screen-play writer ;
(xii) a dialogue writer ; and
(xiii) a dress designer.”
12. A film artist is also notified as professional and an actor engaged in his or her professional capacity in the production of a cinematograph film is a professional and the payments made to such an actor attracts the provisions of section 194J of the Act. Essentially, the above list of artists is those who are engaged in the production of a cinematograph film. An actor who is engaged in modelling should not be deemed to be engaged in the production of a cinematographic film. Therefore, the actors who are not engaged in production of film are outside the scope of the said notification and the decision of the co-ordinate Bench in the case of EMC v. ITO [2010] 37 SOT 31 (Mum).
13. Further, we have also examined the notification issued by the Board for the purpose of Explanation (a) to section 194J of the Act, vide Notification No. S.O. 2085(E), dated August 21, 2008 and find the Board notified the services rendered by following persons in relation to the sports activities as “professional services” for the purpose of the said section, namely, sports persons, umpires and referees, coaches and trainers, team physicians and physiotherapists, event managers, commentators, anchors and sports columnists.
14. Further, we have examined the decision of the coordinate Bench in the case of Dy. CIT v. Movies Stunt Artists Association [2006] 6 SOT 204 (Mum.) and find the Tribunal discussed the issue, i.e., if the “stunt actor” qualifies to be film artist and answer is negative as the same is not included in the list of the film artists. Relevant discussion is given in paras 16 and 17 and they are reproduced as under :
“16. As rightly contended by the counsel for the assessee, the omission to include the ‘stunt artist’ anywhere in the Rules referred in para 4 cannot be treated as accidental or immaterial. The case of the Revenue is that stunt actor is also an actor, because he is also acting. Stunt artist is not included in the notification made for the purpose of section 44AA/this section 194J. Nothing prevented the competent authority, while enumerating the persons engaged in the production of cinematograph film to include a stunt artist as well in this category, this is all the more so. It does not say an actor includes a stunt artist/dupe. Therefore, the contention that stunt artist is an actor within the meaning of the rules is farfetched and cannot be accepted. Particularly, considering the fact that while enumerating a director, a music director, art director, dance director and their assistants as well included. Had the Legislature any inclination to include ‘stunt artist’ it would have specifically mentioned the same.
17. In the light of the above discussion and on the clear provision of law, we are of the view that there is no reason to disturb the order of the first appellate authority. Hence, the appeal by the Revenue fails and dismissed.”
15. Further, in the case of EMC v. ITO [2010] 37 SOT 31 (Mum.), the issue of whether the work of photography and artwork attracts the provisions of section 194J of the Act came up for adjudication and the Tribunal held that the said works since not done in production of the cinematographic film, the payments made to such photographers are outside the scope of the notification and consequently, the provisions of section 194J of the Act does not apply. Para 4.1 is relevant here and the same read as follows :
“4.1 The only other dispute is whether in respect of artwork and photography the parties to whom payments had been made by the assessee should be treated as a professional or as a contractor. The department has treated the artwork and photography work as a professional. The professional service has been defined in clause (a) to the Explanation to section 194J which had been reproduced in para 3 earlier. None of the services mentioned in clause (a) is relevant to the services of the assessee and only other services which have been notified by the Board and not appearing in the clause are the profession of authorised representative and the profession of film artist. Again the profession of authorised representative is not applicable to the case of the assessee and the phrase ‘film artist’ has been defined in the notification itself to mean any person engaged in his professional capacity in the production of cinematography film whether produced by him or any other person, actor, cameraman, etc. The photography and the art work in case of the assessee has not been done in relation to production of any cinematography. Therefore, the artwork and photography as has been rightly point out by the learned authorised representative will not come within the purview of professional services. Since the assessee had assigned the job of artwork and photography to others, the claim of the assessee that job often had been given on contract basis has to be accepted. Therefore, the case of artwork and photography will also be covered under the provision of section 194C(1). In other words, all the payments made by the assessee will be covered under the provisions of section 194C(1). The order of the Commissioner of Income-tax (Appeals) is modified to that extent.”
16. The provisions of Explanation (a) to section 194J of the Act and Notifications issued by the Board in this regard suggest that the 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 notified sports professionals or other notified professions for the purpose of section 44AA of the Act which includes the film artist as listed in the rules, who are engaged in production of cinematographic film, constitute “fees for professional service” (FPS) for the purposes of section 194J of the Act. It is also a settled position vide the decisions cited above that the list of film artist cannot be extended to include other category of stunt actors, although they are engaged in the production of cinematographic film. It is also the decision of the Tribunal in other case that the photographer-cameraman, who of course figure in the list of film artist, cannot be covered by the above list when such cameraman is not engaged in skills, i.e., acting skill in films, modelling skills for display of merchandise, singing skills, etc., and such person can make earning out of such skills. It is not that the total earning of that person in lieu of services rendered which must attract the provisions of section 194J of the Act. The expressions “services rendered” used in the said Explanation assume significance and therefore, the taxable receipts under section 194J of the Act are services-specific and not person specific. In the instant case, the payments are payable for the services of modelling and it is unconnected with the production of cinematographic film. While “modelling” is aimed at display of merchandise, the “acting” is defined as “to act in play or film” (www.freedictionary.com), i.e., to portray a role authored by a story-writer with different purposes and objects and certainly not to displace merchandise to boost the sales of a manufacturer or a trader of the product or services. Therefore, the impugned payments made by the assessee to Matrix India on behalf of Ms. Katrina Kaif did not attract the provisions of section 194J of the Act. Accordingly, the grounds raised are allowed.
17. Thus, we have granted relief to the assessee on the main issue. Therefore, adjudication of other ground constitutes an academic exercise. Therefore, the said grounds are dismissed as academic.
18. In the result, the appeal of the assessee is allowed.
