2016 (3) TMI 539 - AT - Income Tax

TDS U/S 194J - initiation of proceedings u/s 201(1)/(1A) - Held that - We hold that payment made to M/s Glow Show Stage Events requires deduction of tax u/s 194J of the Act. There will be no liability of the payer u/s 201(1) to the extent of the payee including the amount received in its total income and paying tax thereon. However, liability towards interest u/s 201(1A) will still be there from the date on which such tax was deductible to the date of furnishing of return of income by M/s Glow Show Stage Events even if the assessee is not treated as in default u/s 201(1). Non deduction of tds u/s 192 - TDS ON TIPS TO EMPLOYEES - assessee found to have paid Tips to its employees during the two years under consideration on which no deduction of tax at source was made as AO treated such tips to employees as part of Salaries - initiation of proceedings u/s 201(1)/(1A) - Held that - As decided in ITC Ltd. 2011 (5) TMI 310 - DELHI HIGH COURT such tips have been held to be chargeable to tax in the hands of employees. However, as regards the obligation of the employer to deduct tax at source and the consequential liability u/s 201(1), the Hon ble Court held that the benefit of bonafide belief be given to the assessee. However, the obligation for interest u/s 201(1A) still remains as has been clarified by the Hon ble Delhi High Court in the aforestated case of the assessee with the caption of ITC Ltd. (supra). The action of the ld. CIT(A) in also erasing the liability u/s 201(1A) is, therefore, set aside. We, therefore, hold that the assessee is liable for interest u/s 201(1A) in respect of non-deduction of tax at source from tips given to its staff.

Issues Involved:
1. Combined or separate appeals against order u/s 201(1) / (1A) for one year.
2. Limitation period for passing the order u/s 201(1)/(1A).
3. Payments to two parties - TDS u/s 194J or 194C.
4. TDS on tips to employees.

Detailed Analysis:

Combined or Separate Appeals Against Order U/S 201(1) / (1A) for One Year:
The primary question was whether separate appeals are required to be filed against the order u/s 201(1) [Quantum] and 201(1A) [Interest]. The Tribunal found that section 246A, which deals with appealable orders before Commissioner (Appeals), does not distinguish between orders under sub-sections (1) and (1A) of section 201. Therefore, one common order by the AO(TDS) u/s 201 covering both sub-sections and one appeal against such order before the CIT(A) and subsequently before the tribunal is sufficient. The Tribunal rejected the contention that separate appeals should be filed and held that the two original consolidated appeals filed by the Revenue for both years are sufficient to protect the interest of the Department. Consequently, the four separate appeals filed subsequently were deemed infructuous.

Limitation:
The Tribunal addressed whether the period of four years should be counted from the end of the financial year or the relevant assessment year, and whether this limitation applies to the initiation of proceedings or the passing of the order. It was held that the period of four years is to be reckoned from the end of the relevant financial year. Furthermore, the limitation period applies to the initiation of proceedings u/s 201, not the passing of the order. Since the proceedings were initiated within four years from the end of the financial year 2005-06, the argument of limitation was rejected.

Payments to Two Parties - TDS U/S 194J or 194C:
Divya Ahuja:
The Tribunal examined whether payments to M/s Divya Ahuja, a Gazal group, required deduction of tax at source u/s 194J or 194C. It was determined that the payments were for live performances and did not involve the production of a cinematograph film. Therefore, the services did not qualify as "Professional services" under section 194J. The Tribunal held that the provisions of section 194J were not applicable, and the deduction of tax at source u/s 194C was in order.

Glow Show Stage Events:
The Tribunal analyzed the nature of services provided by M/s Glow Show Stage Events, which included advisory services and entertainment consultancy. It was concluded that these services fell within the purview of section 194J. However, the Tribunal provided an opportunity for the assessee to demonstrate that the payee included the amount received in its total income. If proven, there would be no liability u/s 201(1), but the liability for interest u/s 201(1A) would still apply.

TDS on Tips to Employees:
The Tribunal considered the obligation of the employer to deduct tax at source on tips given to employees. The Hon'ble Delhi High Court in the case of the assessee (CIT vs. ITC Ltd.) held that tips charged to the bill and subsequently disbursed to employees constitute income for the purpose of section 15 and are subject to TDS u/s 192. However, the benefit of bona fide belief was given to the assessee for periods up to the assessment years in question, waiving the liability u/s 201(1). The Tribunal upheld this view but clarified that the liability for interest u/s 201(1A) still remains, as interest is mandatory and not subject to waiver based on bona fide belief.

Conclusion:
The appeals of the assessee for both years were partly allowed, the separate appeals filed by the Revenue were dismissed as infructuous, and the consolidated appeals of the Revenue for each of the two years were partly allowed. The Tribunal provided detailed reasoning for each issue, ensuring that the legal terminology and significant phrases from the original text were preserved.

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