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2017 (3) TMI 333 - AT - Income TaxTDS u/s 192 or 194J - remuneration paid to six professionals engaged by the company - Held that - Nothing has been shown to prove that Shri Chawla was not engaged on full time basis or he was working on part time basis with the company as an independent professional and he was free to take up other assignments. No cogent reason could be given before us as to why the designation of Production Manager was assigned if he was acting simply as an independent professional. Thus, in our considered opinion, the facts and the evidences brought before us duly establish that there existed an employeremployee relationship between the assessee company and Shri Chawla. Similarly in the case of other persons, it is noted that all the terms and conditions are identical. Ms. Sushma Chitnis designated as Executive Assistant to the Chairman , Shri Blesson Oomen has been designated as Manager Cum Accounts & Finance , Shri Amitabh Shukla designated as Avid Incharge , Shri Vishal Punjabi designated as Production Executive , and Shri Rajesh Wanmali designated as Production Assistant . The remaining terms and conditions in the case of all these persons were same. Thus, the facts and the evidences brought before us clearly establish that there existed an employer-employee relationship between these persons and the assessee and thus, the assessee was liable to deduct TDS u/s 192 because the remuneration paid to them constituted salary . TDS u/s 194C OR 194J - expenses incurred as part of post production activities - Held that - The impugned expenses incurred by the assessee are in the nature of post production activities. Therefore, the assessee was obliged to deduct TDS u/s 194C only and not u/s 194J. TDS u/s 194C OR 194J - nature of professional fee - DTAA - PE in India - Held that - In the facts of the case before us, VHQ has carried out post production job. In this process, no technology or skill has been made available to the assessee. In case assessee would need similar job again, then he will have to go back to VHQ to get this job done. No replication or repetition is possible at the end of the assessee at its own. Thus, the requisite mandatory condition of make available of technical knowledge or know-how or skill is missing in this case. Therefore, in our considered opinion, this amount cannot e brought to tax as FTS under India-Singapore DTAA. The judgments relied upon by the Ld. Counsel in his submissions have taken similar view. It is also noted that as per provisions of section 90(2) of the Act, most beneficial provision shall be available to the assessee between provisions of the Act and the provisions of the DTAA. Therefore, we find that this amount was not taxable in the hands of VHQ in India. Therefore, assessee was not obliged to deduct tax at source on the payment made to VHQ. As a result, these grounds are allowed. TDS u/s 194C or 194J - amount paid by the assessee to M/s KWB, UK for providing dancers, who had rendered services in India for advertisement films used in India - Held that - the contention of the Ld. Counsel that amount was paid for production of a programme for broadcast is factually correct. Therefore, TDS was required to be deducted u/s 194C in view of the specific provision contained in section 194C in this regard. Therefore, it is held that TDS should have been deducted u/s 194C and not u/s 194J. TDS u/s 194I - non-deduction of tax at source on the hotel expenses - Held that - As on the basis of bills of hotels and other evidences. It is noted that nothing has been brought before us to show that assessee had entered into any prior contract with the hotels for any specific room or rooms for any specific rates or rooms for any specific period. The rooms were hired on as and when available basis at the regular tariff rates subject to the discounts as agreed at the time of booking of rooms. Under these circumstances, the assessee deserves to be given the benefit of the circular issued by the Board providing that under these circumstances, TDS will not be required to be made u/s 194I. Therefore, it is held that no TDS was required to be made in this case.
Issues Involved:
1. Deduction of tax on fees paid to professionals under Section 192 vs. 194J. 2. Employer-employee relationship determination. 3. Short deduction of tax and interest under Section 201(1A). 4. Deduction of tax on payments to a manager for premises use under Section 194I. 5. Deduction of tax on processing charges for Adlabs Films Pvt. Ltd. under Section 194J. 6. Applicability of Section 194J vs. 194C for various post-production activities. 7. Deduction of tax on payments to non-resident entities under DTAA provisions. 8. Deduction of tax on hotel expenses under Section 194I. Detailed Analysis: 1. Deduction of Tax on Fees Paid to Professionals Under Section 192 vs. 194J: The assessee contested the lower authorities' decision that remuneration paid to six professionals was liable for deduction of tax at source under Section 192, arguing instead for Section 194J. The Tribunal analyzed the service contracts and found that the terms indicated an employer-employee relationship, such as fixed monthly remuneration, provision of perks like company cars and mobile phones, and daily attendance requirements. Consequently, it upheld the lower authorities' decision to deduct tax under Section 192, rejecting the assessee’s claim. 2. Employer-Employee Relationship Determination: The Tribunal reviewed the contracts and determined that the relationship between the assessee and the professionals was that of employer-employee. This was based on the nature of the duties assigned, the fixed remuneration, and the provision of perks, among other factors. The Tribunal found that the professionals were not independent contractors but employees, thus requiring tax deduction under Section 192. 3. Short Deduction of Tax and Interest Under Section 201(1A): The Tribunal upheld the lower authorities' decision regarding the shortfall in TDS and the applicability of interest under Section 201(1A). It emphasized that the professionals were employees, and thus the shortfall in TDS was correctly calculated under Section 192. 4. Deduction of Tax on Payments to a Manager for Premises Use Under Section 194I: Grounds 5 and 6, which involved the deduction of tax on payments to a manager for premises use, were not pressed by the assessee and were dismissed. 5. Deduction of Tax on Processing Charges for Adlabs Films Pvt. Ltd. Under Section 194J: The Tribunal found that the processing charges paid to Adlabs Films Pvt. Ltd. were part of post-production activities and should be covered under Section 194C rather than Section 194J. It cited several judgments supporting the view that post-production activities fall under Section 194C. Thus, the Tribunal allowed the assessee's appeal on this issue. 6. Applicability of Section 194J vs. 194C for Various Post-Production Activities: The Tribunal ruled that post-production activities, including digital mixing and processing charges, should be treated as work contracts under Section 194C. It referenced several judgments supporting this interpretation and allowed the assessee's appeal, concluding that TDS should be deducted under Section 194C. 7. Deduction of Tax on Payments to Non-Resident Entities Under DTAA Provisions: The Tribunal addressed payments to VHQ Singapore and KBW Ltd., UK. For VHQ Singapore, it found that the services rendered did not involve making available technical knowledge, thus not qualifying as Fees for Technical Services under the India-Singapore DTAA. Consequently, the payment was not taxable in India, and no TDS was required. For KBW Ltd., the Tribunal agreed that the payment was for production of a program for broadcast, requiring TDS under Section 194C, not Section 194J. 8. Deduction of Tax on Hotel Expenses Under Section 194I: The Tribunal reviewed the hotel expenses incurred during shooting and found that the rooms were hired on an as-and-when-available basis without any prior contract for specific rates or periods. It relied on a CBDT circular clarifying that such arrangements do not require TDS under Section 194I. Therefore, it held that no TDS was required for these expenses. Conclusion: The Tribunal partly allowed the appeals, directing the AO to follow its findings and apply the relevant sections accordingly. The judgments emphasized the importance of the nature of contracts and the specific provisions of the Income Tax Act and DTAA in determining the applicability of TDS.
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