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2016 (3) TMI 539 - ITAT DELHI

2016 (3) TMI 539 - ITAT DELHI - TMI - TDS U/S 194J - initiation of proceedings u/s 201(1)/(1A) - Held that:- We hold that payment made to M/s Glow Show Stage Events requires deduction of tax u/s 194J of the Act. There will be no liability of the payer u/s 201(1) to the extent of the payee including the amount received in its total income and paying tax thereon. However, liability towards interest u/s 201(1A) will still be there from the date on which such tax was deductible to the date of furnis .....

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T] such tips have been held 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 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 .....

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ngh, 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 based on similar grounds and common facts, we are, therefore, proceeding to dispose them off by this consolidated order for the sake of convenience. 2. Briefly stated, the facts of the case are that the asses .....

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ct of certain payments. In a common order dated 30.3.2011 passed by the Addl. Commissioner of Incometax, Range 49, New Delhi [hereinafter also called the AO(TDS) ] u/s 201(1)/(1A) of the Act for four years, it was observed that the assessee made payments to four parties including M/s Divya Ahuja and M/s Glow Show Stage Events. The assessee was found to have deducted tax at source on payments made to these two parties u/s 194C of the Act. The AO opined that the tax ought to have been withheld on .....

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was treated in default for the short deduction of tax at source in respect of the payments made to these two deductees as well. The ld. CIT(A) allowed relief in respect of the alleged short deduction of tax at source in respect of payment made to these two parties. Albeit, the Revenue has preferred appeals against the impugned order, but, the decision of the ld. CIT(A) on this aspect has not been assailed. 3. In addition, the assessee was also found to have paid Tips to its employees during the .....

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EALS 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 resp .....

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in some of the separate appeals is less than ₹ 10 lac per appeal, the same should be dismissed in view of the latest circular issued by the CBDT mandating nonfiling/ withdrawal of appeals filed by the Revenue with tax effect of less than ₹ 10 lac. On a specific query, it was candidly admitted that the tax effect on the consolidated appeals of the Revenue for each year is more than ₹ 10 lac. In support of the contention that separate appeals should have been filed, the ld. AR re .....

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tting that in certain cases there may be the only levy of interest under section 201(1A) de hors any liability u/s 201(1) because of the deductee including the amount received from the deductor in his total income. 4.3. The primary question which arises for our consideration is as to whether separate appeals are required to be filed against the order u/s 201(1) [Quantum] and 201(1A) [Interest]. In this regard, we find that section 246A deals with appealable orders before Commissioner (Appeals). .....

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by the CIT(A) against the order u/s 201 [covering order passed by the AO(TDS) under sub-section (1) and also (1A)] falls u/s 250(6) of the Act. It means that the AO(TDS) is required to pass a common order u/s 201 covering sub-sections (1) and (1A) and accordingly, CIT(A) 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 whic .....

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rder 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 to how such a requirement .....

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a precedent value of having a ratio decidendi by the Tribunal requiring separate filing of appeals against liability u/s 201(1) and interest u/s 201(1A). We, therefore, jettison this contention urged on behalf of the assessee. It is ergo held that two original consolidated appeals filed by the Revenue for both the years in respect of defaults u/s 201(1) and 201(1A) are sufficient to protect the interest of the Department and the four separate appeals filed subsequently are infructuous. In view o .....

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from the end of the financial year 205-06 and, hence, barred by limitation. In support of this contention, he relied on the judgment of the Hon ble jurisdictional High Court passed in the assessee s own case (copy placed on record) and also CIT vs. Hutchison Essar Telecom Ltd. (2010) 323 ITR 230 (Del). Our attention was also drawn towards an order passed by the Tribunal in assessee s own case for the financial year 2000-01 to 2002-03 (in ITA No.5204/Del/2011) in which a view favourable to the as .....

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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 .....

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t the period of four years has to be reckoned from the end of the relevant financial year. 5.4. Coming to the second question as to whether such period of four years should be recognized for the purposes of initiation of proceedings u/s 201(1)/(1A) or for passing of the order, we find the contention of the ld. AR for applying it to the passing of order, unacceptable. Not only the Tribunal in the assessee s own case, but the Hon ble jurisdictional High Court has also held that such period is only .....

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f order u/s 201 vis-à-vis the period of limitation of four years. In view of the direct judgments of the Hon ble Delhi High Court including one rendered in the assessee s own case, we are of the considered opinion that it is the initiation of proceedings u/s 201, which has been related with a period of four years from the end of the relevant financial year. Turning to the facts of the instant case, we find that though order u/s 201 was passed by the AO on 30.3.2011, but the proceedings we .....

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2006-07, on which it deducted tax at source u/s 194C, but, the ld. CIT(A) sustained the action of the AO(TDS) in requiring deduction of tax at source u/s 194J of the Act and consequential interest thereon. 6.2. M/s Divya Ahuja is a Gazal group consisting of one male singer, one female singer and three instrumentalists. We have gone through the Agreement dated 1.8.2008 for rendition of Gazals between M/s Divya Ahuja Gazal Group and the assessee. The ld. AR submitted that similar Agreements preva .....

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y 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 se .....

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in the Explanation as under : (a) "professional services" means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section; 6.4. On going through the prescription of fees for professional services , it emerges that the definition giv .....

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the purposes of section 44AA or of this section. Section 44AA discusses about any other profession as is notified by the Board in the official Gazette. Rule 6F of the Income-tax Rules, 1962 covers, inter alia, film artist , which term has been defined in clause (c) of the Explanation to Rule 6F(2) as under:- (c) "film artist'' means any person engaged in his professional capacity in the production of a cinematograph fi lm whether produced by him or by any other person, as- (i) an a .....

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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 capa .....

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vent 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 performance given by the Gazal group and use it for any performance thereafter. Since Gazal group is giving simplicitor live performance, which is not even captured, what to talk of resulting into any production of cinematograph film, we hold that it cannot be considered to have rendered any Professional services requiring deduction of tax at source u/ .....

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(TDS) has discussed the nature of this payment on page 2 of his order by noticing that this agency was hired as a Consultant for promoting F&B (Food & Beverages) outlet of the assessee providing services like Advisory services for product upgrade, entertainment, consultancy, sourcing entertainment from worldwide. Such payment was held to be falling within the ambit of Professional or consultancy services. That is how, section 194J was applied treating the assessee in default u/s 201(1) .....

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greement provides that M/s Glow Show Stage Events ( Consultant ) are specialized in promotional and event hotel activities and are willing to handle the enhancement of the brand value of the assessee s F&B outlet. Clause 2 provides that the Consultant has agreed to render services of promoting the F&B outlet LE BELVEDERE Restaurant by providing following services to the hotel:- a. Provide Advisory services in terms of the product offering and any upgrades that may happen from time to tim .....

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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 asses .....

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ential outcome and necessarily flow from the main service of providing Entertainment consultancy . It is pertinent to note that payment for performance by the actual entertainers and their stay arrangements is the sole responsibility of the assessee-hotel and M/s Glow Show Stage Events has nothing to do with it as it is simply concerned with their fixed monthly fee, which is not dependent on the successful sourcing of a particular entertainment from worldwide resources. It is further palpable th .....

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the provisions of section 194C were applicable, is hereby repelled as sans merit. 7.4. The next plank of the arguments of the ld. AR was that even if payment to M/s Glow Show Stage Events was considered as covered u/s 194J, the assessee still could not be treated in default because the receipts from the assessee were included by the payee in its total income. 7.5. In this regard, we find that the Hon ble Supreme Court in the case of Hindustan Coca Cola Beverages Ltd. VS. CIT (2007) 293 ITR 226 .....

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n accordance with the provisions of this Chapter on the sum paid/credited to a resident shall not be deemed 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 Co .....

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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 received from the assessee in its total income, but there is no evidence whatsoever available in this regard. Accepting the contention of the ld. AR, we give an opportunity to the assessee to lead ev .....

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s interest u/s 201(1A) notwithstanding the obliteration of demand u/s 201(1) of the Act. Their Lordships in para 10 of this judgment have categorically upheld the liability of the assessee towards interest by relying on Circular No. 275/201/95-IT(B), dt. 29th Jan., 1997 issued by the CBDT, declaring that this will not alter the liability to charge interest under s. 201(1A) of the Act till the date of payment of taxes by the deductee. It is further observed that proviso to sub-section (1A) of sec .....

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viso reaffirms the liability of the assessee towards interest irrespective of the deletion of liability u/s 201(1) on the reason of payee including receipts from the person responsible in his income. 7.7. To sum up, we hold that payment made to M/s Glow Show Stage Events requires deduction of tax u/s 194J of the Act. There will be no liability of the payer u/s 201(1) to the extent of the payee including the amount received in its total income and paying tax thereon. However, liability towards in .....

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m 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 henc .....

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rt captioned as CIT vs. ITC Ltd. (2011) 338 ITR 598 (Del), which also include the assessee as one of the respondents. The Revenue is aggrieved against the relief allowed in the first appeal on this issue. 8.2. We have heard the rival submissions and perused the relevant material on record. There is no dispute on the fact that the amount in question represents tips added in the customer bills and in turn given to staff on regular interval on point basis. Insofar as the obligation of deduction of .....

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h, the employer hardly has any role and it may not be even knowing the amount of tips collected by the employees. That would rightly be out of the purview of responsibility of the employer under s. 192 of the Act. But, however, when the tips are charged to the bill either by way of fixed percentage of amount, say 10 per cent or so on the total bill, or where no percentage was specified and amount is indicated by the customer on the bill as a tip, the same goes into the receipt of the employer an .....

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of the employer in deducting tax at source on such tips u/s 192 of the Act. At this juncture, we consider it expedient to discuss the judgment dt. 25th March, 2009 delivered by the Hon ble Apex Court in CIT VS. Eli Lilly & Company (India) (P) Ltd. (2009) 312 ITR 225 (SC). In this 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 .....

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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 restricted for t .....

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ds the interest liability u/s 201(1A), their Lordships held that : the AO shall examine and find out whether interest has been paid/recovered for the period between the date on which tax was deductible till the date on which the tax was actually paid. If, in any case, interest accrues for the aforestated period and if it is not paid then the adjudicating authority shall take steps to recover interest for the aforestated period under s. 201(1A) . The last part taken up was on the scope of penalty .....

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deduct tax at source. From the above discussion it transpires that the liability to deduct tax at source u/s 192 has been sustained, the failure of which attracts consequences u/s 201(1)/(1A) subject to the employees including the amount in their total income and paying due tax thereon and also the period of default. It was only on the question of penalty u/s 271C, that their Lordships deleted the penalty on the ground of bona fide belief of the assessee. 8.4. Now we take up the judgment of the .....

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e 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 .....

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reasoning, one cannot make them liable for levy of penalty as envisaged under s. 201. 8.5. However, levy of interest under s. 201(1A) has been held by the Hon ble High Court to be mandatory and accordingly the same was sustained by holding that the same is neither treated as penalty nor the said provision has been included in section 273B to make reasonableness of the cause for the failure to deduct. It was, therefore, held that : There is, therefore, no question of waiver of such interest on th .....

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