Case Law Details
DCIT Vs. Yash Raj Films (P) Ltd. (ITAT Mumbai)
In this case stand of assessee has been that assessee company had deducted TDS on the negative processing charges paid to Kodak India Ltd. as per the provisions of section 194J of the Act, as the negative processing involves specific tasks of editing, enhancement of quality of film, etc. However, the contract for making multiple prints of the final negative was given to Adlabs, on which the TDS is liable to be deducted only as per the provisions of section 194C of the Act, as work does not involve any technical or professional services, but it is restricted to making copies of the original print.
In view of above, such payments would be covered under sub-clause (e) of Explanation to section 194C of the Act and may not be covered under section 194J of the Act, as no specialized job was to be done, nor any technical services have been rendered to the assessee. In the order under section 201 of the Act, assessing officer had given details about various facilities available in Adlabs, but those facilities are used only for preparation of the final copy of negative. There is no technical service in such activity. Such jobs or work contracts of making several prints or the same final negative may not involve any technical or professional services as such, requiring the assessee to deduct tax under section 194J of the Act, but such contracts will be covered under the provisions of section 194C of the Act. It was found 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 payments, it had been deducting TDS under the provisions of section 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 circumstances. Payments for supplying various copies of final negative has been made by assessee to Adlabs at the rate of Rs. 220 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., for 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, Commissioner (Appeals) was justified in holding that assessee has rightly deducted TDS on the payments made to Adlabs, for supplying copies of final negative, as per the provisions of section 194C of the Act. Consequently, Commissioner (Appeals) was justified in granting relief to assessee on this account. Same is upheld.
Full Text of the ITAT Order is as follows:-
Both appeals have been filed by Revenue against the orders of Commissioner (Appeals)-52, Mumbai, dated 23-2-2015 for assessment year 2005-06 on the issue of applicability of provisions of section 194C as against the provisions of section 194J of the Act with regard to payments made for processing charges to Adlab for supplying copies of final negative.
2.1 Assessee is a Private Limited Company and is engaged in the business of film production and distribution. A survey action under section 133A of the Act was conducted at the premises of the assessee company for ascertaining whether the assessee was complying with the provisions of Chapter XVII-B of the Act. It was noticed by assessing officer 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 films produced by assessee. Accordingly, assessing officer issued a show cause notice under section 201(1)/201(1A) of the Act to the assessee, communicating the defaults noticed. The stand of assessee has been that such payments were covered under section 194C of the Act and not under section 194J of the Act, but the assessing officer rejected the same and held the assessee to be in default for short deduction of TDS of Rs. 37,95,763.
2.2 In appeal, assessee has raised various arguments and having considered the same, Commissioner (Appeals) granted relief to assessee as prayed. Same has been opposed on behalf of Revenue inter alia objected the applicability of provisions of section 194C of the Act instead of provisions of section 194J of the Act. On the other hand, none appeared on behalf of assessee. Therefore, I proceed to decide the case ex parte on the basis of submission of learned Departmental Representative and materials available on record.
2.3 After going through the submission of learned Departmental Representative and perused the material 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 necessary to analyze the provisions of section 194C. The provisions 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 supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor 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 —
(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 or 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.
……………..
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 under :–
“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 purpose of section 44AA of this section;
(b) “fees for technical services” shall have the same 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 section 194J, reads as under :–
“Explanation 2.–For the purposes of this clause, “fees for technical services” means any consideration (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 section 194J, reads as under :–
“Explanation 2.–For the purposes of this clause, “royalty” means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head “Capital gains”) for–
(i) the transfer of all or any rights (including the granting of a license) 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, commercial or scientific equipment but not including the amounts referred to in section 44BB;
(v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or 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 with the activities referred to in sub-clauses (i) to (iv), (iva) and (v).”
2.6 While passing the order under section 201 of the Act, assessing officer held that TDS in respect of payments made by the assessee for obtaining copies of film prints should have been made as per the provisions of section 194J of the Act, and not under section 194C of the Act, as was done by assessee, and, accordingly, he worked out the shortfall in TDS at Rs. 37,95,763. During course of appellate proceedings, the stand of assessee has been that assessee company had deducted TDS on the negative processing charges paid to Kodak India Ltd. as per the provisions of section 194J of the Act, as the negative processing involves specific tasks of editing, enhancement of quality of film, etc. However, the contract for making multiple prints of the final negative was given to Adlabs, on which the TDS is liable to be deducted only as per the provisions of section 194C of the Act, as work does not involve any technical or professional services, but it is restricted to making copies of the original print.
2.7 In view of above, such payments would be covered under sub-clause (e) of Explanation to section 194C of the Act and may not be covered under section 194J of the Act, as no specialized job was to be done, nor any technical services have been rendered to the assessee. In the order under section 201 of the Act, assessing officer had given details about various facilities available in Adlabs, but those facilities are used only for preparation of the final copy of negative. There is no technical service in such activity. Such jobs or work contracts of making several prints or the same final negative may not involve any technical or professional services as such, requiring the assessee to deduct tax under section 194J of the Act, but such contracts will be covered under the provisions of section 194C of the Act. It was found 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 payments, it had been deducting TDS under the provisions of section 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 circumstances. Payments for supplying various copies of final negative has been made by assessee to Adlabs at the rate of Rs. 220 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., for 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, Commissioner (Appeals) was justified in holding that assessee has rightly deducted TDS on the payments made to Adlabs, for supplying copies of final negative, as per the provisions of section 194C of the Act. Consequently, Commissioner (Appeals) was justified in granting relief to assessee on this account. Same is upheld.
3. In the result, appeal filed by Revenue for assessment year 2005-06 is dismissed.
4. In ITA No. 2719/Mum/2015 for assessment year 2008-09, similar issue arose as in above appeal. Facts being similar, so, following same reasoning, I am not inclined to interfere with the order of Commissioner (Appeals) who has rightly granted relief to assessee as prayed. Same is upheld.
5. In the result, both appeals filed by Revenue are dismissed.
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