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Dy. Commissioner of Income Tax Act (TDS) Versus M/s. Yash Raj Films P. Ltd.

2016 (7) TMI 694 - ITAT MUMBAI

TDS u/s 194C or 194J - payments made for supplying copies of final negative - Held that:- As per section 194J the concerned company has to provide some technical input, as stated by Assessing Officer himself in the assessment order, that print processing charges included professional work such as processing of colour negative, etc., which is not the case in such process. The system is that one master print, number of prints are taken and send to the various distributors for exhibition. Thus prin .....

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TDS needs to be deducted under section 194C. Identical view was taken by the learned CIT(A) for Assessment year 2007-08 and the addition made by the Assessing Officer under section 40(a)(ia) was deleted saying that TDS has been deducted at appropriate rate. The certificate issued under section 197 by the Department to Adlabs itself mentions that TDS has to be deducted under section 194C and the annexures also mentions the name of the present assessee. Thus we find no force in the conclusion of t .....

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ertains to considering the payment made for processing charges to Adlab for supplying copies of final negative as per the provisions of section 194C of the Income Tax Act, 1961 (hereinafter the Act) as against the provisions of section 194J of the Act without appreciating that the print processing charges includes professional work such as printing, processing, processing of colour negative, analyser of rush print, fog test etc. which are in the nature of professional services are specialized in .....

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ave considered the rival submissions and perused the material available on record. The facts in brief are that the assessee is engaged in the business of film production/ distribution. A survey action under section 133A was carried out on 28.02.2006, at the premises of the assessee to ascertain whether the assessee is complying with the provisions of Chapter XVII-B of the Act. The stand of the Assessing Officer is that the assessee did not deduct tax as per the provisions of section 194J of the .....

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.Y. 2009-10) and ₹ 28,11,345/- (A.Y. 2010-11). 4. The assessee felt aggrieved and preferred appeal before the learned CIT(A) wherein it was held that the assessee has rightly deducted TDS on the payments made to Adlabs, for supplying copies of final negative, as required under section 194C of the Act. The Revenue is in appeal before the Tribunal. 4.1 If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, materi .....

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ontractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to- (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undi .....

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sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source- (i) on the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for .....

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to in sub-section (1) shall be liable to deduct income-tax under this section. (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, 6[where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with] his Permanent Account Number, to the person pa .....

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by or under a Central, State or Provincial Act; or (d) any company; or (e) any co-operative society; or (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in fo .....

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body of individuals, if such person,- (A) does not fall under any of the preceding sub-clauses; and (B) is liable to audit of accounts under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor; (ii) "goods carriage" shall have the meaning assigned to it in the Explanation to sub-section (7) of section 44AE; (iii) "contract" shall include sub-contract; .....

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pecification of a customer by using material purchased from a person, other than such customer. Section 194J of the Act reads as under: - 194J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of- (a) fees for professional services, or (b) fees for technical services, or (ba) any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of .....

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ly, 1995; or (B) where the amount of such sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed- (i) thirty thousand rupees, in the case of fees for professional services referred to in clause (a), or (ii) thirty thousand rupees, in the case of fees for technical services referred to in clause (b), or (iii) thirty thousand rupees .....

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s or technical services is credited or paid, shall be liable to deduct income-tax under this section : Provided also that no individual or a Hindu undivided family referred to in the second proviso shall be liable to deduct income-tax on the sum by way of fees for professional services in case such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family. (2) [***] (3) [***] Explanation.-For the purposes of this section,- (a) "prof .....

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oyalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; (c) where any sum referred to in sub-section (1) is credited to any account, whether called "suspense account" or by any other name, in the books of account of the person liable to pay such sum, such crediting shall be deemed to be credit of such sum to the account of the payee and the provisions of this section shall apply accordingly. If the aforesaid provisions of the Act are .....

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DS on payments for taking prints of negative and earlier the claimed deduction was accepted by the Department in subsequent years also. The learned CIT(A) has also considered the letters dated 30.11.2009 and 17.01.2011 (para 15 of the impugned order) as per which the payments made to Adlab Films Ltd. was covered under section 194C of the Act and in the certificate name of the assessee is clearly mentioned. The decision in Distributors Pvt. Ltd. (ITAT Kolkata), Associated Cements Ltd. vs. CIT, Ja .....

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s requires tax deduction at source under section 194J. We have perused the record, factual finding recorded by the learned CIT(A) and found that there are two types of processing charges, one being negative processing and other being positive processing. Negative processing requires professional skill for which the assessee deducted tax at source as required under section 194J of the Act. Whereas positive processing means number of copies required of prints from one original which does not requi .....

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em is that one master print, number of prints are taken and send to the various distributors for exhibition. Thus printing of various prints from the master piece is known as print processing. However, as per section 194C, sub-clause 7(iv)(e) the work shall include manufacturing and supplying a product according to the requirement or specification of a customer by using material purchased from a person other than such customer. It is noted that while completing the assessment under section 143(3 .....

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on 194C and the annexures also mentions the name of the present assessee. Thus we find no force in the conclusion of the Assessing Officer. 4.2 So far as the allegation of the Assessing Officer that all work is done when processing of negative is done. It is noted that the initial master piece wherein shoots take place, is sent to the approval of the sensor Board and this masterpiece was got done/processes from Kodak Ltd. on which TDS was deducted @10%. Whereas the q question before us is positi .....

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has also not utilized the services, as has been observed by the learned Assessing Officer in the assessment order from Reliance or the extra services from Adlabs and wherever the TDS was to be deducted @10% under section 194J has been deducted and wherever it was not required it has been deducted as per section 194C @2%. This factum is further verifiable from certificate issued under section 197 to Adlabs. The definition of work under section 194C has been clearly defined which includes (a) adve .....

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