2017 (3) TMI 34 - AT - Income Tax

Levy of TDS on provision for payment to artistes - Held that - Since the payees are not identifiable in this case at the time of making of the provision, therefore no statutory obligation was thus cast upon the assessee to deduct tax at source on the above amount. However, we find that the facts as averred by the Ld. A.R that the entire provision has been written back in the next year and the actual amounts paid/credited were subjected to TDS in the subsequent years as per the detailed statements filed before the authorities, are not borne from the records, but are merely supported by the hollow and unsubstantiated claim of the assessee, therefore we herein set aside the matter to the file of the ITO(TDS) for making necessary verifications as regards the said claim of the assessee, and if the same is found to be in order, then as observed by us hereinabove, no obligation would be fastened upon the assessee for deduction of any tax at source as regards the aforesaid amount of ₹ 20,00,000/- during the year under consideration, viz A.Y. 2008-09, and as such the order of the lower authorities treating the assessee as being in default u/s 201(1)/201(1A) shall stand vacated. The matter is thus restored to the file of the ITO(TDS), who however is directed to restrict himself to making of the verifications as directed by us hereinabove. TDS u/s 194C or 194J - production of programmes for broadcasting or telecasting - short of deduction - Held that - We are of the considered view that in the backdrop of the fact that though the legislature had vide the Finance Act, 1995, therein specifically earmarked a separate statutory provision in the form of Sec. 194J to regulate the obligation of an assessee to deduct tax at source in respect of fess for professional and technical services, however interestingly we find that the legislature in all its wisdom had simultaneously broadened the scope and gamut of Sec. 194C and had brought production of programmes for such broadcasting or telecasting within the sweep of Sec. 194C. The aforesaid specific earmarking of the production of programmes for such broadcasting or telecasting in the body of Sec. 194C, in light of the aforesaid legal juxtaposition can thus safely be concluded to have been carried out with a purposive intent of making the same as an exclusive subject matter of Sec. 194C. We are of the considered view that the very insertion of the Explanation III to Sec. 194C by the Finance Act, 1995, alongwith a simultaneous insertion of Sec. 194J, can safely be held to be a conscious, purposive and intentional act on the part of the legislature, in order to avoid any doubt or debate as regards the statutory provision which would regulate the deduction of tax at source as regards the services contemplated therein. We are of the considered view that in light of the fact that the legislature had clearly brought production of programmes for such broadcasting or telecasting within the sweep of Sec. 194C, therefore the deduction of tax at source as regards the services rendered therein would inescapably be a subject matter of Sec. 194C, and the same would not fall within the sweep and domain of the provisions of the newly inserted Sec. 194J.

Summary

Issues Involved:
1. Levy of TDS on provision for payment to artistes.
2. Charging of interest under Section 201(1A) of the Income Tax Act.
3. Deduction of tax at source under Section 194C vs. Section 194J for payments made under film production agreements.

Issue-wise Detailed Analysis:

1. Levy of TDS on Provision for Payment to Artistes:
The assessee challenged the CIT(A)'s confirmation of TDS levy on a ?20,00,000 provision for payment to artistes. The assessee argued that the provision was made on a prudent basis under the mercantile system of accounting and was not crystallized, hence not subject to TDS. The AO held that TDS was required at the time of credit or provision in the books. The CIT(A) agreed with the AO, stating that the liability was acknowledged by the assessee through disallowance under Section 40(a)(ia). The Tribunal, however, concluded that since the payees were not identifiable and the amounts were not crystallized, the TDS mechanism could not be applied. The Tribunal referred to judgments from the Karnataka High Court and ITAT Mumbai, emphasizing that TDS liability is a vicarious liability requiring an identifiable payee and a crystallized amount. The Tribunal remanded the matter to the ITO(TDS) for verification of the assessee's claim that the provision was reversed and actual payments were subjected to TDS in subsequent years.

2. Charging of Interest under Section 201(1A):
The AO charged interest of ?74,160 under Section 201(1A) on the TDS amount of ?2,06,000, which the assessee contested. The Tribunal's decision on the primary issue of TDS applicability would directly impact the interest charged. If the provision was not subject to TDS, the interest under Section 201(1A) would also not be applicable. The Tribunal directed the ITO(TDS) to verify the assessee's claims regarding the reversal of the provision and subsequent TDS compliance, which would determine the applicability of interest.

3. Deduction of Tax at Source under Section 194C vs. Section 194J:
The Revenue contested the CIT(A)'s decision that the assessee was liable to deduct tax under Section 194C for payments made under film production agreements, instead of Section 194J as held by the AO. The AO argued that the payments were for professional or technical services, requiring deduction under Section 194J. The CIT(A) and the Tribunal relied on the Delhi High Court's judgment in CIT vs. Prasar Bharti Broadcasting Corporation of India, which held that "production of programmes for broadcasting or telecasting" falls under Section 194C. The Tribunal noted that the legislature's simultaneous introduction of Sections 194C and 194J, with Section 194C specifically including "production of programmes," indicated a clear legislative intent. The Tribunal upheld the CIT(A)'s decision, affirming that the payments were rightly subjected to TDS under Section 194C, and dismissed the Revenue's appeal.

Conclusion:
The Tribunal allowed the assessee's appeal for statistical purposes, remanding the matter for verification of claims regarding the provision for payment to artistes. The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision that TDS on payments for film production agreements was correctly deducted under Section 194C.