2016 (10) TMI 703 - HC - Income Tax

TDS u/s 194C OR 194J - payment of production charges - Held that - The definition of work as provided in the Explanation to Section 194C of the Act is itself inclusive. It include all work necessary for preparation / production of any programme so as to put it in a state fit for broadcasting and / or telecasting. In view of the self evident position in law, by virtue of the definition of work as provided in Section 194C of the Act, the view taken by the CIT(A) as well as the Tribunal is unexceptionable. No substantial question of law. Appeal admitted on following question of law Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding on interpretation of the Agreements that the assessee was liable to deduct tax at source from the payment of production charges under Section 194C instead of under Section 194J of the Act as held by the Assessing Officer?

Summary

Issues:
Interpretation of Sections 194C and 194J of the Income Tax Act for tax deduction on payments for production charges, processing fees, and dubbing expenses.

Analysis:
The judgment involves appeals challenging an order by the Income Tax Appellate Tribunal regarding the deduction of tax at source under Sections 194C and 194J of the Income Tax Act for Assessment Years 2008-09 and 2009-10. The main issue revolves around whether the payments made by the respondent assessee for production charges, processing fees, and dubbing expenses should be subject to tax deduction under Section 194C or Section 194J of the Act.

In the case of processing fees and dubbing expenses, the Assessing Officer initially held that tax should be deducted under Section 194J at 10% for technical services. However, the Commissioner of Income Tax (Appeals) allowed the respondent's appeal, stating that these expenses fall under the definition of "work" as per Explanation iv to Section 194C. The Tribunal upheld this view, considering all work from planning to post-production as falling under Section 194C.

The Revenue contended that the payments for dubbing and processing should be treated as technical fees under Section 194J, not as a contract for work under Section 194C. However, the court noted that the inclusive definition of "work" under Section 194C encompasses all activities necessary for preparing a program for broadcasting or telecasting. Therefore, the view taken by the CIT(A) and the Tribunal was deemed legally sound.

The court found that the questions related to the interpretation of Sections 194C and 194J did not raise any substantial legal issues, except for the question regarding the deduction of tax on production charges. Hence, the appeal was admitted only on the substantial question of law raised in that context. The Registry was directed to inform the Tribunal about the order for further proceedings.

In conclusion, the judgment clarified the application of Sections 194C and 194J of the Income Tax Act concerning tax deduction on specific payments related to production charges, processing fees, and dubbing expenses, emphasizing the inclusive definition of "work" under Section 194C for determining the appropriate tax treatment.