2015 (2) TMI 986 - AT - Income Tax

ITAT upholds CIT(A)'s orders, rules in favor of assessee on TDS issues

DCIT (TDS) -3 (1), Mumbai Versus Zee Entertainment Enterprises Ltd.

The ITAT dismissed the department's appeals in five cases, upholding the CIT(A)'s orders. The ITAT ruled in favor of the assessee on various issues, ... Deduction of TAS for purchase of programmes - Demands u/s 201/201(1A) - assessee was either deducting TAS at a lower rate or was not deducting any TAS at all on various payments being made by the assessee - carriage fee /placement fee paid by the assessee to various cable operators/MSO/DTH service providers- whether the service provided was work within the meaning of section 1940 and not technical service u/s 194J? - Held that:- CIT(A) has applied the provisions of the Act, before coming to a conclusion, that u/s 194C 'work includes production of programmes'. We find that similar issue was contested before the Hon’ble Delhi High Court in the case of CIT vs Prasar Bharti, reported in (2006 (11) TMI 159 - DELHI High Court ) and followed by ACIT(TDS) vs Sahara One Media & Entertainment Ltd. [2014 (4) TMI 113 - ITAT MUMBAI ] wherein it was held that payment to assigned producer for production of programme specifically falls within the ambit of clause (b) to Explanation III to section 194C of the Act, whereas, the provisions of section 194J of the Act are general in nature and therefore, provisions of section 194C would prevail over section 194J. - Decided against revenue. Deduction of TAS on Event Management Charges - On the payment made to the event manager, the assessee deducted TAS u/s 194C, but according to the AO, the assessee should have deducted TAS u/s 194J - Held that:- Department is heavily relying on the Notification issued by the Board No. 88/2008/F. No. 275/43/2008 dated 21.08.2008, according to which it prescribes that TDS on fee for event management is to be u/s 194J. But this Notification in our opinion shall be prospective and shall not cover the payments made prior to the issue of Notification, as it does not bear any retrospective character. We, therefore, sustain the order of the CIT(A) that the 'event management fees' paid by the appellant to its event managers cannot be held to be in the nature of ….for technical services' in the current year. Since the Appellant has already deducted TDS under section 194C of the Act, the AO is directed not to consider the Appellant to be an assessee in default under Section 201(1) of the Act as there is no short deduction by the Appellant. - Decided in favour of assessee. TDS on Equipment Hire Charges - Held that:- CIT(A) has applied the provisions of the Act and have delved on the same. We also find that the AO termed the payment made for hire charges as FTS, which the CIT(A) has categorically demolished. We find that similar issue was dealt with by the coordinate Bench at Mumbai in the case of ACIT (TDS) vs Sahara One Media & Entertainment Ltd., [2014 (4) TMI 113 - ITAT MUMBAI] wherein it was held that payment made by assessee under a contract, which is a part of production of programme, TDS is required to be deducted u/s 194C. No mistake in the order of the CIT(A), which we sustain on the issue, thereby rejecting the ground as raised by the department.- Decided in favour of assessee. TDS on reimbursement of commission expenses - CIT(A) deleted the tax charged on the assessee. - Held that:- In the instant case, the assessee had only made good the payments made by Zee Turner Ltd., which it had paid on behalf of the assessee. Hence there was no profit element involved in those payments, being 'reimbursements' made by the assessee to Zee Turner Limited. In the proceedings before the revenue authorities, the assessee was able to demonstrate the different characters of payments made by it. The payments, where Zee Turner Limited paid its taxes, the assessee was under no obligation and/or became defaulter u/s 201(1). We find ourselves benefitted by the decision of Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverages [2007 (8) TMI 12 - SUPREME COURT OF INDIA ], wherein it was held that where the deductee/recipient has already paid taxes on amount received from deductor, the department cannot recover the tax on the same amount, as that would result in double taxation. - Decided in favour of assessee. short deduction of TAS - Held that:- As the assessee submitted the details and proofs of payment of tax and interest no short deduction proved. CIT(A)correctly deleted the demand as raised by the AO. - Decided in favour of assessee. Payment of commission to non-executive/independent directors - AO came to the conclusion that these directors were actually employees of the company and were paid salary, which was shown as commission to avoid withholding tax - Held that:- AO went on wrong track and did not consider the provisions/expressions used in the relevant section, i.e. 194J. Since the CIT(A) has applied the right law, we are inclined to sustain the order of the CIT(A)held that these directors did not have any employer - employee relationship and nor did they receive any pecuniary benefits. Payment of commission to them, itself, could not be categorised as salary, consequentially reject the ground as raised by the department. - Decided in favour of assessee. Issues Involved:1. Deduction of TDS on Carriage/Placement Fee.2. Deduction of TDS for Purchase of Programs.3. Deduction of TDS on Event Management Charges.4. Deduction of TDS on Equipment Hire Charges.5. Deduction of TDS on Reimbursement of Commission Expenses.6. Short Deduction of TDS as per Tax Audit Report.7. Deduction of TDS on Commission Paid to Directors.Detailed Analysis:1. Deduction of TDS on Carriage/Placement Fee:The department argued that the carriage/placement fee paid to cable operators/MSO/DTH service providers should be treated as technical services under Section 194J of the Income Tax Act, 1961, due to human intervention and application of mind. The CIT(A) and ITAT held that these payments are for broadcasting and telecasting work, falling under Section 194C, and thus subject to TDS at 2%. The ITAT endorsed this view, citing the ITAT Mumbai decision in ACIT(TDS) vs UTV Entertainment Television Ltd., where similar payments were held to fall under Section 194C.2. Deduction of TDS for Purchase of Programs:The AO contended that payments made by the assessee for purchasing programs should be treated as fees for technical services under Section 194J, due to the involvement of professional artists and technicians. The CIT(A) disagreed, stating that these payments are for the production of TV programs, which falls under the definition of 'work' in Section 194C. The ITAT upheld this view, referencing the Delhi High Court decision in CIT vs Prasar Bharti, which held that payments for producing TV programs fall under Section 194C.3. Deduction of TDS on Event Management Charges:The AO held that TDS on event management charges should be deducted under Section 194J as fees for technical services. The CIT(A) and ITAT disagreed, stating that event management services are simple work contracts and should be subject to TDS under Section 194C. The ITAT noted that the CBDT notification No. 88/2008, which prescribes TDS under Section 194J for event management fees, is prospective and not applicable to payments made prior to its issuance.4. Deduction of TDS on Equipment Hire Charges:The AO argued that equipment hire charges should be treated as fees for technical services under Section 194J. The CIT(A) and ITAT held that these charges fall under Section 194C as they involve hiring equipment along with operating staff, which is part of a work contract. The ITAT referenced the ITAT Mumbai decision in ACIT (TDS) vs Sahara One Media & Entertainment Ltd., which held that payments for equipment hire in the production of programs fall under Section 194C.5. Deduction of TDS on Reimbursement of Commission Expenses:The AO considered the reimbursement of dealer commission to Zee Turner Ltd. as commission under Section 194H. The CIT(A) and ITAT held that these payments are reimbursements and not income, and hence not subject to TDS under Section 194H. The ITAT cited the Supreme Court decision in Hindustan Coca Cola Beverages, which held that TDS is not required if the recipient has already paid taxes on the amount.6. Short Deduction of TDS as per Tax Audit Report:The AO claimed that the assessee had committed a breach by short deduction of TDS as per the Tax Audit Report. The CIT(A) noted that the assessee had provided details and proofs of payment of TDS, and hence, the provisions of Section 201(1)/201(A) could not be attracted. The ITAT upheld this view, finding no infirmity in the CIT(A)'s order.7. Deduction of TDS on Commission Paid to Directors:The AO treated the commission paid to non-executive/independent directors as salary, subject to TDS under Section 194J. The CIT(A) and ITAT held that these directors did not have an employer-employee relationship with the assessee, and the commission paid to them could not be categorized as salary. The ITAT noted that the amendment to Section 194J applies to Managing Directors/Whole Time Directors, not to non-executive/independent directors.Conclusion:In all five appeals (ITA Nos. 3931 to 3935/Mum/2013), the ITAT dismissed the department's appeals, upholding the CIT(A)'s orders on all issues. The ITAT found that the CIT(A) had correctly applied the provisions of the Income Tax Act, and there was no short deduction of TDS by the assessee.