TMI Blog2016 (3) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - ITA Nos. 4791 & 4792/Del/2011, ITA Nos.4793 & 4794/Del/2011, ITA Nos.21 & 25/Del/2015, ITA Nos.22 & 26/Del/2015, ITA Nos.5347/Del/2011, ITA No.5349 /Del/2011 - - - Dated:- 10-3-2016 - Shri R. S. Syal, AM And Shri A. T. Varkey, JM For the Petitioner : Shri Tarandeep Singh, CA For the Respondent : Ms Susan D. George, Sr. DR ORDER Per R. S. Syal, AM This batch containing four appeals by the assessee and six by the Revenue relating to Financial years 2005-06 and 2006- 07 arise out of the common order passed by the CIT(A) on 2.9.2011. Since these appeals are base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at source u/s 192 of the Act on such tips, the AO treated the assessee in default. Interest under section 201(1A) of the Act was also levied. The ld. CIT(A) overturned the order of the AO (TDS) qua payment of tips to the employees. Both the sides are in appeal on their respective stands. COMBINED OR SEPARATE APPEALS AGAINST ORDER U/S 201(1) / (1A) FOR ONE YEAR ? 4.1. The Revenue initially filed two appeals, one for each year, against the order of the ld. CIT(A) against the relief in first appeal. During the course of hearing on an earlier occasion, the ld. AR argued before the Bench that the Revenue ought to have filed separate appeals against the order u/s 201(1) and 201(1A) for each year. The Revenue filed separate appeals stating to be `on the advice of the Bench' for quantum and interest in respect of each of the years with accompanying letter for condonation of delay. That is how, there are three appeals by the Department for each of the years, namely, one original consolidated appeal by the Revenue under both the sub-sections of section 201 and then separate appeals for quantum and interest. 4.2. The ld. AR argued that separate appeals filed by the Revenue for qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also obliged to pass one common order u/s 250(6) covering the liability of the assessee under both the sub-sections of section 201. Section 253 deals with appeals to the appellate tribunal. This section lists the orders which can be appealed before the tribunal. Subsections (1) and (2) respectively authorize any assessee or the Department to file appeal before the tribunal against the orders passed under specific sections. In both the sub-sections of section 253, there is a mention of an appeal against the order passed by the CIT u/s 250, which obviously refers to a common appellate order passed against order under subsections (1) and (1A) of section 201 of the Act. This shows that the law requires passing of one order by the AO(TDS) u/s 201, then one appeal against such order before the CIT(A); and then one appeal against the order of CIT(A) u/s 250 before the tribunal. The ld. AR could not draw our attention towards any provision in the Act, mandating the filing of separate appeals either before the CIT(A) or the tribunal against the order covering defaults under sub-section (1) and sub-section (1A) of section 201. In the absence of any such provision, we fail to appreciate as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Hon ble jurisdictional High Court is to be reckoned from the end of the financial year or the relevant assessment year? And second is whether such limitation is for initiation of proceedings u/s 201(1)/(1A) or for passing of the order. 5.3. As regards the first question, we find that the Tribunal has recorded on page 3 of its order passed in the assessee s own case (in ITA No.5204/Del/2011) that the proceedings cannot be initiated after four years from the end of the assessment year. The Hon ble Delhi High Court in assessee s own case has also held that a period of four years is relevant. There is not much discussion as to whether such period of four years should be counted from the end of the relevant financial year or the relevant Assessment year. However, we find that the Hon ble jurisdictional High Court in Hutchison Essar (supra), and some other cases has categorically held that the period of four years is from the end of the financial year or three years from the end of the relevant assessment year. When we consider the judgments of the Hon ble jurisdictional High Court on this point, it clearly emerges that the period of four years has to be reckoned from the end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. AR submitted that similar Agreements prevailed for the years in question, which contention was not controverted by the ld. DR. We have gone through this Agreement, a copy of which is available at page 2 onwards of the paper book. Clause 2 of the Agreement sets out obligations of M/s Divya Ahuja to render and perform Gazals during the week at Pakwan Restaurant of the assessee at the timings given by the hotel. Clause 2.6 of the Agreement provides that: Gazal group agrees to allow the hotel to use Gazal group s name, photographs in primary activities, amplify the performances and play the same throughout the premises of the Hotel. There is a fixed sum payable by the assessee to Gazal group as compensation for performing at the Pakwan Restaurant. Under such circumstances, the question arises as to whether the payment made to Gazal group requires deduction of tax at source u/s 194J of the Act, as has been held by the authorities below. 6.3. Section 194J requires deduction of tax at source from fees for professional or technical services. Sub-section (1) of section 194J provides that : `Any person, not being an individual or a Hindu undivided family, who is responsible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6F divulges that it refers to any person who is engaged in his professional capacity in the production of a cinematograph film whether or not produced by him in the capacity of an actor; a cameraman; a director, including an assistant director; a music director, including an assistant music director; an editor etc. also including `a singer . No doubt `a singer is also included within the definition of a film artist but, the condition precedent for such inclusion is that such a singer should be `engaged in his professional capacity in the production of a cinematograph film . Unless `a singer is so `engaged in his professional capacity in the production of a cinematograph film whether or not produced by him, he cannot be considered as a film artist for the purposes of Rule 6F and, in turn, section 194J of the Act. 6.6. While analyzing the Agreement between the assessee and Gazal group, we have noticed that there is no production of any cinematograph film during the performance by the Gazal group, which is simply a live event and can be amplified throughout the premises of the hotel. There is no clause in the Agreement which permits the assessee-hotel to shoot the performanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EDERE RESTAURANT. c. Sourcing entertainment from worldwide resources d. Overseas travel for the sourcing of entertainment. e. Coordinating the visa and travel arrangements of the artists between the hotel and the artists prior to their arrival in the country. f. Ensuring that the artists are punctual and maintains the schedule of the performance. g. Coordinating with the Director of Food Beverage and the Chief Operating Officer of the Hotel in ensuring that the right entertainment is provided for the right venue. 7.3. Clause 3 of the Agreement provides that in consideration to the services rendered by the Consultant, the hotel shall pay a consolidated amount of ₹ 1 lac per month to the Consultant subject to TDS. A cursory glance at the nature of services provided by the Consultant, namely, M/s Glow Show Stage Events, discerns that they shall provide Advisory services and Entertainment consultancy for the restaurant of the assessee. Sub-clauses (c) to (f) of Clause 2 are in the nature of sourcing entertainment from worldwide resources by overseeing their travel arrangements etc. The larger duty of M/s Glow Show Stage Events is to rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emed to be an assessee in default in respect of such tax if such resident (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect. In view of the judgment in Hindustan Coca Cola Beverages Pvt. Ltd. (supra), we hold in principle that if deductee has included amount received from the deductor in his total income, then, there can be no obligation u/s 201(1) on the person responsible. But, in such circumstances, it is always obligatory on the part of the deductor to lead evidence showing that the deductee has included the amount received from him in his total income and paid tax due thereon. This responsibility falls on the assessee who is obliged to show it to the satisfaction of the Department that the deductee included the amount received from him in his total income. Reverting to the facts of the instant case, we find that though there is a contention raised on behalf of the assessee that the deductee, namely, M/s Glow Show Stage Events, included an amount re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in default u/s 201(1). TDS ON TIPS TO EMPLOYEES 8.1. The solitary grievance of the Revenue in its appeals for both the years under consideration is against the direction of the ld. CIT(A) in holding that the assessee should not be treated in default u/s 201(1) for non-deduction of tax at source from tips made to employees and consequently no interest be charged under sub-section (1A). The facts apropos this issue are that the assessee was found to have added some tips from its customers in the bills and the same were given to employees without deducting any tax at source, apart from certain tips given directly by the customers to the staff. The AO held that tips included in the bills were in the nature of Salaries to the employees covered u/s 17(1)(iv) read with section 17(3)(ii) and hence deduction of tax at source was required u/s 192 of the Act. He determined such liability u/s 201(1) for both the years in question and also worked out the amount of interest under sub-section (1A). The ld. CIT(A) upheld the view point of the AO(TDS) on this issue, but allowed relief under sub-sections (1)/(1A) of section 201 by treating such default as a bona fide belief of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the issue for consideration was about the home salary/special allowance(s) paid abroad to expatriate employees by the foreign company, particularly when no work stood performed for the foreign company and the total remuneration was paid only on account of services rendered in India during the period in question. The Hon ble Supreme Court held that Sec. 192(1) has to be read with s. 9(1)(ii) and the Explanation thereto and thus the assessee was duty-bound to deduct tax at source under s. 192(1). Their Lordships bifurcated the decision part in four compartments and gave separate decision on each of them. The second part was on the scope of section 192(1). Here it was held that : `In such a case the tax-deductor-assessee was statutorily obliged to deduct tax under s. 192(1) of the 1961 Act . The third part was on the scope of s. 201(1) and s. 201(1A). In this regard, it was held that the object underlying s. 201(1) is to recover tax. In the case of short deduction, the object is to recover the shortfall. As far as the period of default is concerned, the period starts from the date of deductibility till the date of actual payment of tax. Therefore, the levy of interest has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and (1A). We have discussed supra that such tips have been held by the Hon ble High Court 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 bona fide belief be given to the assessees. Following is the relevant extraction from the judgment : - Since the taxes were to be deducted from the amounts, which were the dues of the employees, no dishonest intentions could be attributed to the assessees. Thus, while reiterating the conclusion that the receipts of the tips constitute income of the recipients and is chargeable under the head Salary under s. 15 and that it was obligatory upon the assessees to deduct taxes at source from such payments under s. 192, in the given circumstances, the benefit of bona fide belief to the assessees can be given for the periods upto the assessment years in question. In the given circumstances, the cause of non-deduction of taxes as submitted appears to be sufficient being adequate, reliable and sound. Based on this reasoning, one cannot make them liable for levy of penalty as envisage ..... X X X X Extracts X X X X X X X X Extracts X X X X
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