TMI Blog2017 (3) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... ing terms and conditions in the case of all these persons were same. Thus, the facts and the evidences brought before us clearly establish that there existed an employer-employee relationship between these persons and the assessee and thus, the assessee was liable to deduct TDS u/s 192 because the remuneration paid to them constituted ‘salary’. TDS u/s 194C OR 194J - expenses incurred as part of post production activities - Held that:- The impugned expenses incurred by the assessee are in the nature of post production activities. Therefore, the assessee was obliged to deduct TDS u/s 194C only and not u/s 194J. TDS u/s 194C OR 194J - nature of professional fee - DTAA - PE in India - Held that:- In the facts of the case before us, VHQ has carried out post production job. In this process, no technology or skill has been made available to the assessee. In case assessee would need similar job again, then he will have to go back to VHQ to get this job done. No replication or repetition is possible at the end of the assessee at its own. Thus, the requisite mandatory condition of ‘make available’ of technical knowledge or know-how or skill is missing in this case. Therefore, in our c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . First, we shall take up appeal for A.Y. 2005-06 in ITA No.6655/Mum/2014 filed by the assessee against the order of Commissioner of Income-tax (Appeals)-14, Mumbai [hereinafter called CIT(A)]dated 14-08-2014 for A.Y. 2005-06 on the following grounds:- 1. The Learned CIT (A) erred in upholding that the fees paid to various professionals as being liable for deduction of tax u/s 192 of the Act, though the appellant company has rightfully deducted the appropriate tax on such payments u/s 194J of the Act. 2. Alternatively and without prejudice to any other ground of appeal, the Learned CIT (A) erred in upholding that the Six professionals namely Mr.Sanjiv Chawla, Ms. Shushma Chitnis, Mr. Blesson Oommen, Mr. Amitabh Shukla, Mr. Vishal Panjabi and Mr. Rajesh Wanmali had an employeremployee relationship with the appellant company. 3. Alternatively and without prejudice to any other ground of appeal, the learned CIT (A) has erred in not appreciating that the demand of ₹ 3,73,166/- for alleged short deduction of tax (being the difference of tax deducted as between provisions of Sec 194,1 and 192 of the Act) as made by the Assessing officer is erroneous and bad in law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 and hence has erred in directing that the interest u/s201(IA) will be levied till the date of payment of taxes by the payee namely Adlabs Films Pvt. Ltd. 11. Alternatively and without prejudice to any other ground of appeal, the learned CIT (A) has erred in upholding that the payment of ₹ 8,00,96/made to Empire Audio Centre Pvt. Ltd. was fees for professional or technical services liable for deduction of tax u/s 194J, though the appellant company had concluded that the payments of contract with the party was liable for deduction u/s194C and had deducted tax thereon accordingly. 12. Alternatively and without prejudice to any other ground of appeal the learned CIT (A) has erred in upholding the demand of ₹ 28,431/- on account of payment made to empire Audio Centre Pvt Ltd. towards digital mixing work due to the difference being due to the tax deducted u/s 194C as contract for work visa-a-vis technical services as u/s 194J. 3. Grounds 1 to 4: These grounds involve identical issue wherein assessee has contested the action of the lower authorities in holding that remuneration paid to six professionals engaged by the company was liable for deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere made:- The business of the appellant company is laden with risks. The appellant company, being a film production company, is into an uncertain business. The activities of the company peak out when there is film under production and the activity level tapers off, when there are no films under production. Most of the people whose services are taken for film production are not employed on monthly basis but their services are used on a contractual basis so that in case of lull in business activities their contract can be terminated to save the cost. Such persons are hired or eased out based on the business needs of the company and therefore, they are not given employment with the company, unless the company is certain about the sustainability of the need of their respective services for the business of the company. During the year, the company has utilized the services of the following persons and fees were paid to them as per the understanding of retainership. Name of the professional Gross fees Services rendered Sanjeev Chowla 6,60,000 Production Management Services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyee and not just a matter of inference, we request Your Honour to delete the demand raised by the assessing officer treating these contractual professionals as the employees of the company. 6. During the course of hearing before us, the submissions made before the lower authorities were reiterated. It was vehemently argued by the Ld. Counsel that contract with these persons may have been termed as employment contract, but actually, these persons were acting as independent professionals. The arguments made by him have been summarized by way of a note and relevant part of the same is reproduced hereunder:- 1. The contract between the Assessee and the professionals did not constitute an employer employee relat ionship as the intent of the As ses see and the professionals was not to enter into an employer employee relationship If the company and the employee had understood the agreement in a certain way and had acted upon that agreement, it is not open to the ITO to give another interpretation. 2. The Professionals engaged were not for regular work but were engaged in capacities that require and high amount of autonomy, inherent skills and qualification. The designati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong run was not contractually provided to them. 7. In support of its claim, the Ld. Counsel placed reliance upon the following judgments:- 1. CIT vs Yashodha Super Speciality Hospital [2011] 365 ITR 256 (Anbdhra Pradesh HC) 2. ACIT vs Grant Medical Foundation [21015] 375 ITR 49 (Bom)(HC) 3. ITO VS Entertainment Network td ITA No.13512/M/2014 dated 11/1/2017 8. Per contra, the Ld. DR appearing on behalf of the Revenue vehemently supported the orders of the lower authorities. It was argued by him that it is a clear cut case of employment of these persons. The perusal of the contract entered with these persons shows that they were hired as employees of the assessee company. It was submitted that the terms of the contract shows that requisite ingredients of employer-employee relationship exist in this case. Therefore, lower authorities have rightly held it to be a case of deduction of tax u/s 192. He placed reliance upon the decision referred to by Ld. CIT(A) in his order in the case of DCIT vs Wokhardt Hospitals Ltd 139 ITD 161 (Hyd). It was lastly argued by him that cases relied upon by the Ld. Counsel have been delivered on the basis of facts of those cases which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business or finance of the company or any dealings, transactions or affairs which may come to your knowledge during the course of your employment and you shall exercise your best endeavor to prevent the publication or disclosure thereof. 2. Commitments and Dealings: You will not enter into any commitments or dealings on behalf of the company for which you have no express authority nor alter or be a party to any alteration of any principle or policy of the Company or exceed the authority or discretion vested in you without the previous sanction of the Company or those in authority over you. 3. Notices: All notices and other communications which are required to be or may be given will be in writing and will be given in person or will be mailed to you at your office e-mail address or to such other address as mutually decided. In acceptance of the above terms and conditions, please sign the duplicate copy of this letter. Yours Faithfully, For RED CHILLIES ENTERTAINMENTS PRIVATE LTD Sd/- Director I agree to accept the above terms and conditions Sd/- (SANJIV CHAWLA) Perusal of the aforesaid contract show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Ld. Counsel that there was no payment of PF, ESI, gratuity, bonus, etc. In our opinion, payment of these incentives is one of the indicators of existence of employer-employee relationship but not the conclusive or the only ingredient. It depends upon the overall financial terms entered into between the employer and employee. In the case before us, the overall remuneration of ₹ 60,000/- per month has been fixed keeping in view this factor that these incentives shall not be paid by the assessee to Shri Chawla. 14. Further, despite our specific queries, Ld. Counsel was not able to show anything contrary to the natural inference that can be drawn from the perusal of the agreement. Nothing has been shown to prove that Shri Chawla was not engaged on full time basis or he was working on part time basis with the company as an independent professional and he was free to take up other assignments. No cogent reason could be given before us as to why the designation of Production Manager was assigned if he was acting simply as an independent professional. Thus, in our considered opinion, the facts and the evidences brought before us duly establish that there existed an employerempl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on activity. Thus, TDS should be deducted u/s 194C. Similarly, the assessee has paid amount for digital mixing, which is also part of post production activities. 18. Our attention was brought on the decision of Mumbai bench of the Tribunal in the case of DCIT vs Yashraj Films Pvt Ltd 160 ITD 626 (Mum) wherein it was held that taking out a final negative of film does not involve any technical or professional service, therefore, TDS should be deducted u/s 194C. Our attention has also been brought on the following judgments wherein all post production activities have been held covered within the definition of work as provided u/s 194C:- CIT v. Prasar Bharati [2007] 292 ITR 580 (Delhi HC) - The Hon'ble Delhi High Court held that Explanation (iii) to Sec. 194C which was introduced along with Sec. 194J is very specific in its application to not only broadcasting and telecasting but also includes production of programmes for such broadcasting and telecasting. The High Court held that when there are two provisions one general and one specific, the specific one manifests the intention of the legislature and should be followed. Nitin M Panchamiya v. ACIT [2012] 50 sot 468 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the tax deductible, if any, u/s 194J amounted to ₹ 47,508/- and not ₹ 1,90,053/- as incorrectly assessed by the assessing officer. 3.The learned CIT (A) has erred in upholding that the payment of ₹ 14,59,514/- made to KBW Ltd. was liable deduction of tax U/S 194J amounting to ₹ 81,874/-; ignoring both the submissions made by the appellant company and the fact that the recipient was a.non resident to whom the provisions of Section 194J do not apply. 4. The learned CIT (A) has erred in concluding that the payment of ₹ 2,80,000/- made to Jai Mahal Palace Hotel was liable to deduction of tax U/S 1941 amounting to ₹ 61,832/-; ignoring the submissions made by the appellant company including the fact that a part of the amount was paid for food. 5. The learned CIT (A) has erred in concluding that the payment of ₹ 1,69,146/- made to Hotel Teej was liable to deduction of tax u/s 194I amounting to ₹ 37,956/-; ignoring the submissions made by the appellant company including the fact that a part of the amount was paid for food. 6.The learned CIT (A) has erred in concluding that the payment of ₹ 5,24,873/- made to Holiday Inn Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee in default u/s 201 / 201(1A) of the Act. During the course of appeal before CIT(A), the assessee submitted as under:- A payment of ₹ 8,45,838/- was made to VHQ SPTE Ltd. , which was a company located in Singapore. The said company had no permanent establishment in India. The amount was paid towards studio hire charges in Singapore for post product/on work for an advertisement film produced by the appellant company. As per the provisions of DTAA between India and Singapore,, the appellant company did not deduct any tax on the payments made to the VHQ SPTE Ltd. as it had no permanent establishment in India. In the original assessment, the assessing officer did not raise any demand on account of TDS for this payment as he was convinced from the verification of bills/ vouchers, that no tax was deductible on account of these payments. However, while completing the assessment u/s 201(1)1 201(1 A) r.w.s 263 of the Income Tax Act, 1961, the then assessing officer considered the payment to the party liable for deduction of tax u/s 194I. He mentioned that as the payment is made for processing of the film, it was liable for deduction u/s 194J attracted for such payments. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar mode of computation of income, the some should be followed, irrespective of the provisions in the Income-tax Act. Where there is no specific provision in the agreement, it is basic law, i.e., the Income-tax Act, that will govern the taxation of income. The circulars of the CBDT are binding upon the Department. Reliance placed upon CIT v. Hero Cycles Pvt. Ltd. [228 ITR 463 (SC), K.P. Varghese v. ITO 131 ITR 597 (SC) and UOl v. Azadi Bachao Andolan 263 ITR 706 (SC). 4. Hon'ble Jurisdictional High Court in the case of CIT v. Siemens Aktiongesellschaft [20091 310 ITR 320 (Born) held that where the provisions of the DTAA are more beneficial than provisions of the Act, the provisions of the DTAA would prevail. 5. For Article 12 of Singapore - India DTAA to apply, technical knowledge, experience, skill, know-how or process needs to be 'made available'. Generally speaking, technology would be considered 'made available' when the person acquiring the service is enabled to apply the technology as was also held in: Mc. Kinsey Co., Inc. (Philippines) v. ADIT 99 ITD 549 (Mumbai) ICICI Bank Ltd. v. DIT 20 SOT 453 (Mumbai) Anapharm Inc., In re 305 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90(2) of the Act, most beneficial provision shall be available to the assessee between provisions of the Act and the provisions of the DTAA. Therefore, we find that this amount was not taxable in the hands of VHQ in India. Therefore, assessee was not obliged to deduct tax at source on the payment made to VHQ. As a result, these grounds are allowed. 27. Ground 3: In this ground, it was held by the AO that amount paid by the assessee to M/s KWB, UK for providing dancers, who had rendered services in India for advertisement films used in India was taxable in India and, therefore, assessee was liable to deduct TDS u/s 194J for professional or technical services. Limited prayer of the Ld. Counsel before us is that since the payment was made for production of the programme for broadcast, therefore, TDS should have been deducted u/s 194C and not u/s 194J. 28. Per contra, Ld. DR did not make any objection to this. 29. We have gone through the orders passed by the lower authorities and find that the contention of the Ld. Counsel that amount was paid for production of a programme for broadcast is factually correct. Therefore, TDS was required to be deducted u/s 194C in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at under these circumstances, TDS will not be required to be made u/s 194I. Therefore, it is held that no TDS was required to be made in this case. As a result, these grounds are allowed and this appeal is partly allowed. 33. Now, we shall take up appeal filed by the assessee in ITA No.6656/Mum/2014 for A.Y.2006-07 against the order of CIT(A) dated 14-08- 2014 passed against the order u/s 201(1) of the Act dated 24-03-2011 on the following grounds:- 1. The Learned CIT (A) erred in upholding that the fees paid to various professionals as being liable for deduction of tax u/s 192 of the act though the appellant company has rightfully deducted the appropriate tax on such payments u/s 194J of the Act. 2. Alternatively and without prejudice to any other ground of appeal, the Learned CIT (A) erred in upholding that the Six professionals namely Mr. Sanjiv Chawla. Ms. Shushma Chitnis, Mr. Blesson Oornrnen, Mr. Amitabh Shukia, Mr. Vishal Panjabi and Mr. Rajesh Wanmali had an employer- employee relationship with the appellant company. 3. Alternatively and without prejudice to any other ground of appeal, the learned CIT (A) erred in not appreciating that the demand of S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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