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TMI Blog2017 (3) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... ntile system of Accounting and had made adhoc provision of Rs. 20,00,000/- , on matching principle to match costs with revenue on a prudent basis, towards amount to be paid to certain artistes which was based on the revenue to be earned by exploitation of the film Bheja Fry. Since the amount was not fully ascertained and crystallized, same was not subjected to TDS. In the return of income the same was added back since TDS was not deducted. The payment was not made till 31st March, 2014 and in the accounts for the year ended 31st March, 2014 the company has reversed the liability. Therefore the same was never subject to TDS as the liability was not crystallized. The non-payment thereof justifies the fact of non-crystallisation of the liability as of 31st March, 2008. 3. The AO erred in charging interest of Rs. 74,160/- u/s 201(1A) of the Act on TDS amount of Rs. 2,06,000/- which was not payable by the appellant company. 4. Each of the above grounds is without prejudice to one another. 5. The appellant craves leave to add, to alter, vary or cancel any of the above grounds of appeal." 2. Briefly stated, the facts of the case to the extent relevant to the present appeal are tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried the matter in appeal before the CIT(A). The CIT(A) being of the view that as there was nothing available on record from where it could be gathered as to whether the assessee had made payments to the artists in the subsequent years, and as to whether tax was deducted at source in the subsequent years when the payments were made to the concerned artists, therefore concluded that it could not be treated as a mere provision de hore. It was further observed by the CIT(A) that if it would had been a mere provision as claimed by the assessee, the same would have been written off by the assessee in the subsequent year. It was thus in the backdrop of the aforesaid observations thus held by the CIT(A) that amount of Rs. 20,00,000/- was a liability of the assessee, and the assessee by duly acknowledging its failure to deduct tax at source on the said amount, had thus for the said reason disallowed the same u/s 40(a)(ia) in its return of income, as a result of which it could safely be concluded that the assessee had acknowledged both its liability towards deduction of tax at source, as well as failure to effect compliance to the same. The CIT(A) thus in the backdrop of the aforesaid f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or primary liability. Thus in the backdrop of the aforesaid settled position of law, we are of the considered view that now when in the case of the present assessee the amounts to be paid to the artists had not been ascertained and was a subject matter of negotiations and under consideration, therefore it could safely be concluded that neither the artists, i.e payees qua the amounts to be paid were identifiable, nor the amounts to be paid stood crystallized, therefore in the absence of any identifiable payee or the quantification of the duly ascertained amount of the liability, the provisions of TDS could not have been made applicable. Thus to be brief and explicit, we are of the considered view that if no income is attributable to the payee, there is no liability to deduct tax at source in the hands of the tax deductor. That our aforesaid observations stands fortified by the Judgment of the Hon'ble Karnataka High Court and an order of a coordinate bench of the ITAT, Mumbai, as under:- (i).Karnataka Power Transmission Corporation Ltd. Vs. DCIT (TDS) (2016) 383 ITR 59 (Kar) Held: "We have examined the applicability of section 194A of the Act to the present case. Section 194A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come and tax deduction at source mechanism provides for method to recover such tax liability. Therefore, this tax deduction at source liability is a sort of substitutionary liability. Section 191 further makes this position clear when it lays down that in a situation TDS mechanism is not provided for a particular type of income or when the tax has not been deducted at source in accordance with the provisions of Chapter XVII, income tax shall be payable by assessee directly. This provision, thus, shows that tax deduction liability is a vicarious liability and the principal liability is of the person who is taxable in respect of such income. Section 199 makes it even more clear by laying down that the credit for taxes deducted at source can only be given to the person from whose income the taxes are so deducted. Therefore, when tax deductor cannot ascertain beneficiaries of a credit, the tax deduction mechanism cannot be put into service. Section 202 lays down that tax deduction at source provisions are without any prejudice to any other mode of recovery from assessee, which again points out to the tax deduction liability being vicarious liability in nature. Section 203(1) then lays ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the regular return bonds being transferable on simple endorsement and delivery and the relevant registration date being a date subsequent to the closure of books of account, assessee could not have ascertained the payees at the point of time when the provision for "interest accrued but not due" was made. Accordingly, no tax was required to be deducted at source in respect of the provision for interest payable made by assessee which reflected provision for interest accrued but not due" in a situation where the ultimate recipient of such 'interest accrued but not due' could not have been ascertained at the point of time when the provision was made. Assessee had duly deducted the tax source at the time of payment i.e. on 9.6.1994 and there was no loss of revenue as such. Therefore, assessee did not have any liability to deduct tax at source in respect of provision for interest accrued but not due in respect of regular return bonds, made on 31.3. 1994. When there was no obligation to deduct tax at source, there could not be any question of levy of penalty or interest." 6. We have given a thoughtful consideration to the facts of the case and are of the considered view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payees amounts to nothing less than professional and managerial services and fall within the ambit of technical services u/s 194J of the Act. (iii). On the fact and circumstances of the case and in law, the Ld. CIT(A) has erred in not confirming the order passed by the AO u/s 201(1)/201(1A) of the Act in respect of the amount of short deduction of tax and consequential interst, resulting from the action of the assessee in deducting tax at lower rate u/s 194C instead of section 194J of the Act. 2. Appellant craves to leave to amend or alter or add any ground a new ground which may be necessary at the time of the hearing of the case or thereafter. 3. The order of the Ld. CIT(A) being erroneous be set aside and the Ld. A.O's order be restored." 2. Briefly stated, the facts leading to the issue under consideration are that that the assessee is engaged in the business of celebrity endorsement, events promotion & management, production of telefilms, ad films and promotion of motion pictures. That during the year survey action u/s. 133A of the Income-tax act, 1961 (for short 'Act') was conducted at the premises of the assessee. During the course of the survey proceedings and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the lower authorities as well as the material available on record. We are of the considered view that in the backdrop of the conceded fact that the assessee had made payments to 6 parties for production of complete films, we have been called upon to adjudicate as to whether the payments so made were liable for deduction of tax at source under Sec. 194C or would fall within the scope and gamut of Sec. 194J of the 'Act'. 6. We find that the CIT(A) while disposing of the appeal had followed the judgment of the Hon'ble Delhi High Court in the case of Prasar Bharti Broadcasting (supra), and an order of a coordinate bench of the ITAT, Mumbai, in the case of Nitinin M. Panchamiya Vs. ACIT (ITA No. 3874/Mum/2009, as well as was persuaded to adopt the view of his predecessor who had allowed the appeals of the assessee involving the same issue for A.Y(s). 2006-07 & 2007-08, and had allowed the appeal of the assessee by observing as under:- "I have considered the averments made in the impugned order and also the written and oral submissions of the learned A.R of the appellant and also the judicial pronouncements and order of the learned CIT(A)-14, Mumbai relied upon by the learned A.R. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the backdrop of the fact that though the legislature had vide the Finance Act, 1995, therein specifically earmarked a separate statutory provision in the form of Sec. 194J to regulate the obligation of an assessee to deduct tax at source in respect of fess for professional and technical services, however interestingly we find that the legislature in all its wisdom had simultaneously broadened the scope and gamut of Sec. 194C and had brought 'production of programmes for such broadcasting or telecasting' within the sweep of Sec. 194C. The aforesaid specific earmarking of the 'production of programmes for such broadcasting or telecasting' in the body of Sec. 194C, in light of the aforesaid legal juxtaposition can thus safely be concluded to have been carried out with a purposive intent of making the same as an exclusive subject matter of Sec. 194C. We are of the considered view that the very insertion of the 'Explanation III' to Sec. 194C by the Finance Act, 1995, alongwith a simultaneous insertion of Sec. 194J, can safely be held to be a conscious, purposive and intentional act on the part of the legislature, in order to avoid any doubt or debate as regards the statutory pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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