2017 (1) TMI 955 - AT - Income Tax

TDS u/s 194C OR 194J - short deduction of tds - Held that - Where TDS has been deducted by the deductor in most bona file manner as applicable and no revenue leakage has been pointed out then the deductor should not be penalized for any unintended short fall in deduction of TDS so long as the payees are income tax assessee and they have included the impugned payments as part of their income offered to tax. In the case before us the admitted case of the assessee is that all the payees are properly identified and duly assessed with the income tax department. Ld. CIT(A) has already followed this view and accordingly directed the AO to verify these facts and exonerated the assessee from the liability of short fall under such cases. Under these circumstances we uphold the view taken by in this regard by Ld. CIT(A) and direct the AO to exercise his powers under the law to make requisite verification with the payees. If the payee is assessed with the tax department and has filed its income tax return then liability on account of short deduction of TDS would not be recovered from the assessee. The assessee shall extend requisite cooperation to the AO by submitting complete particulars of the payees containing name address PAN No. and copies of invoices. - Decided in favour of assessee for statistical purposes. Payment for utilizing services of production houses - Held that - Payments made to the production houses towards cost of production of film/advertisement were nothing but contract payments made by the assessee company in pursuance of the purchase orders and therefore these would fall within the purview of provisions of section 194C and not u/s 194J of the Act. Payment for AMC services - Held that - These payments are within the purview of provisions of section 194C of the Act. We find that order of the Ld. CIT(A) is based upon proper reasoning and analysis of facts. Therefore we do not find any justification to interfere in the finding of Ld. CIT(A). Treating payments made towards car parking charges as rent under Section 194I instead of contract payment covered under Section 194C - Held that - During the course of hearing before us detailed arguments have been made by the Ld. Counsel. It has also been submitted that AO had not worked out the liability after verifying the facts from the payees. Under these circumstances we send these issues back to the file of the AO to make direct verification with the payee with the same directions as were given while disposing Ground No 1 of the CO. If need arises the assessee would be free to take all the legal and factual issues with regard to its liability to deduct tax u/s 194C and not u/s 194I.These grounds may be treated as allowed for statistical purposes.

Summary

Issues Involved:
1. Short deduction of TDS and interest on payments for production charges and AMC charges.
2. Classification of payments towards dubbing, editing, and royalty as fees for technical services.
3. Classification of car parking charges as rent or as a contractual payment.
4. Applicability of Section 201(1) and 201(1A) regarding assessee in default.

Detailed Analysis:

1. Short Deduction of TDS and Interest on Payments for Production Charges and AMC Charges:
The Revenue contested the deletion of additions related to short deduction of TDS and interest on payments for production charges and AMC charges, arguing these should fall under Section 194J. The CIT(A) ruled that TDS on production charges and AMC charges should be deducted under Section 194C, not 194J. The Tribunal upheld the CIT(A)'s decision, noting that payments made to production houses and for AMC services are covered under Section 194C, as these are contractual payments. The Tribunal referenced the judgment in CIT v. Prasar Bharti, which supports that production of broadcasting and telecasting programs falls under Section 194C.

2. Classification of Payments Towards Dubbing, Editing, and Royalty as Fees for Technical Services:
The assessee's Cross Objection challenged the CIT(A)'s decision to treat payments for dubbing, editing, and royalty as fees for technical services under Section 194J. The Tribunal agreed with the CIT(A) that these payments warrant deduction under Section 194J due to their technical nature. However, it allowed the assessee to provide evidence that the payees have paid tax on these amounts, potentially exonerating the assessee from being treated as in default under Section 201.

3. Classification of Car Parking Charges as Rent or Contractual Payment:
The assessee also contested the classification of car parking charges as rent under Section 194I instead of a contractual payment under Section 194C. The CIT(A) upheld the AO's classification but allowed relief if the payees had paid tax on these amounts. The Tribunal remanded the issue back to the AO for verification of the payees' tax payments, instructing that if the payees have paid the tax, the assessee should not be held liable for short deduction under Section 194I.

4. Applicability of Section 201(1) and 201(1A) Regarding Assessee in Default:
The assessee argued that it should not be considered in default under Section 201(1) if the payees have paid the taxes on the payments received. The CIT(A) and subsequently the Tribunal agreed, referencing the Supreme Court's decision in Hindustan Coca Cola Beverages Pvt. Ltd. v. CIT and the Allahabad High Court's judgment in Jagran Prakashan Ltd. v. DCIT. The Tribunal directed the AO to verify if the payees have included the payments in their tax returns and paid the due taxes. If verified, the assessee would not be liable for the shortfall in TDS deduction.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's Cross Objection for statistical purposes, directing the AO to verify the tax payments by the payees. The Tribunal upheld the CIT(A)'s decisions on the classification of payments under Sections 194C and 194J, and the applicability of Section 201, emphasizing that no tax should be recovered from the assessee if the payees have duly paid their taxes.