2017 (2) TMI 599 - AT - Income Tax

Tribunal partially allows appeal, disallows certain charges, remands Artist Expenses for verification

The appeal was partly allowed by the Tribunal. Disallowances under Studio Hire Charges, Instrument Hire Charges, and Assistant Fees were deleted. The ... TDS u/s 194C or 194J or 194I - addition made on account of studio hire charges u/sec 40(a)(ia) - submissions of the Assessee in explanation to the payment on account of Studio Hire Charges that it is a practice of a Music Director to call musician at the hired studios for recording from different parties and sources as per his requirement and planning to play under his instruction - Held that:- A music director having no set up to record music at his home and he has to arrange everything required by hire on rent and no contractual agreement is required for hiring the studios and musical instruments. Further the assesse submitted that the studios would charge the hire charges for using the studios setup on hourly basis and provides their studios room with furniture and equipment on rent to the music directors and pleaded the question of TDS deduction under section 194C does not arise. We find force in the submissions of the Ld.AR in this regard. The impugned addition as made by the AO is admittedly below the prescribed monetary limit as required u/section 194I of the Act, therefore, we hold that the addition made for violation of Section 194C is not maintainable and as such it is deleted, accordingly, ground no-3 is allowed. TDS liability on Instrument Hire Charges - Held that:- The assessee was an individual and the AO made disallowance for not deducting tax in respect of payments made towards labour and advertisement charges and the Coordinate Bench held the said disallowance is not maintainable in view of the order dt:11-03-2011 of Tribunal in the case of Smt.Keya Seth. [2011 (3) TMI 1135 - ITAT KOLKATA]. We find that the said Coordinate Bench discussed the relevant provisions of Section 194C(1) and 2 as existed in A.Y’s.2006-07 and 2007-08 together with the Circular No-3/2008 dated 12-03-2008 in detail and held that the Assessee being an Individual is under no obligation to deduct tax and provisions under section 194C(1) is not applicable to A.Y’s.2006-07 and 2007-08 for an individual. In the present case, the year under consideration is 2006-07, therefore, we find that the facts and the law laid down by the Coordinate Bench supra is applicable to the issue on hand. Thus, we hold that the disallowance as made for violation of section 194C and the addition therein by invoking Section 40(a)(ia) of the Act is not maintainable - Decided in favour of assessee Payments to Artists - addition made thereon for violation U/Section 194C of the Act by invoking Section 40(a)(ia) - Held that:- If the concerned payee(s) has taken into account the relevant sum as received from Assessee for computing income in their returns of income furnished u/s. 139 of the Act and has paid tax due on the income declared in such return, We, therefore, set aside the impugned order of CIT(A) to the extent confirming the disallowance made by the AO u/s. 40(a)(ia) and restore the matter to the file of the AO for deciding the same afresh in the light of the submissions of the assessee. The assessee shall be at liberty to file requisite evidences, if any, to substantiate its claim. This ground of assessee’s appeal is allowed for statistical purpose. Assistant Fees - non deduction of TDS - Held that:- It is observed from the assessment order that the AO did not specify the charging section as required to be made any disallowance under the Act, but, however, mentioned the only the chapter VIIB of the Finance Act where the deduction at source commences to start from section 192. As rightly pointed by the Ld.AR in the absence of any charging section the disallowance thereon is not permissible. Ld.AR argued that the disallowance cannot be under sections 192, 194C and 194J of the Act as no such evidence brought on record to show that the said Assistant is an employee or carrying out any work under contract or rendered any professional or technical services to the Assessee as required under said charging sections. Therefore, we find force in the arguments of the Ld.AR and we hold that the addition made account of payment to Assistant to an extent of ₹ 29,700/- in the absence of any evidence is not maintainable - Decided in favour of assessee Issues Involved:1. Violation of principles of natural justice.2. Disallowance of Studio Hire Charges under Section 40(a)(ia) of the IT Act.3. Disallowance of Instrument Hire Charges under Section 40(a)(ia) of the IT Act.4. Disallowance of Artist Expenses under Section 40(a)(ia) of the IT Act.5. Disallowance of Assistant Fees under Section 40(a)(ia) of the IT Act.6. Computation of interest under Sections 234A/B/C/D of the IT Act.7. Permission to produce additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules 1963.Detailed Analysis:1. Violation of Principles of Natural Justice:The appellant contended that the appellate order was passed in violation of the principles of natural justice and without giving a proper opportunity for a hearing. The Tribunal noted that the CIT-A had given multiple opportunities to the assessee to appear and present his case. Despite these opportunities, the assessee failed to comply, leading to the dismissal of the appeal by the CIT-A. Therefore, the Tribunal found no merit in the claim of violation of natural justice.2. Disallowance of Studio Hire Charges:The AO disallowed Rs. 87,388 on account of Studio Hire Charges, invoking Section 40(a)(ia) for non-compliance with Section 194J, which mandates TDS for technical services. The assessee argued that the payments were below the prescribed limit under Section 194I and thus did not attract TDS under Section 194C. The Tribunal found that the payments were indeed below the monetary limit and held that the addition made for violation of Section 194C was not maintainable. Consequently, the disallowance was deleted.3. Disallowance of Instrument Hire Charges:The AO disallowed Rs. 1,13,700 under Instrument Hire Charges, applying Section 194C. The assessee argued that the provisions of Section 194C were not applicable as the payments were below the limit and the amendment making individuals liable for TDS came into effect only from 01-06-2007. The Tribunal, referring to the Coordinate Bench's decision in a similar case, held that the provisions of Section 194C were not applicable for the assessment year 2006-07. Therefore, the disallowance was deleted.4. Disallowance of Artist Expenses:The AO disallowed Rs. 1,06,780 under Artist Expenses for non-deduction of TDS. The assessee requested the AO to verify if the artists had included these payments in their income tax returns. The Tribunal referred to the Delhi High Court's decision in Ansal Landmark Township (P) Ltd., which held that if the payees had declared the payments in their returns, the assessee should not be treated as in default. The Tribunal remanded the matter to the AO to verify this and decide accordingly.5. Disallowance of Assistant Fees:The AO disallowed Rs. 29,700 under Assistant Fees without specifying the charging section. The Tribunal noted that the AO did not provide evidence to show that the assistant was an employee or provided services under a contract. In the absence of any specific charging section, the disallowance was not permissible. Therefore, the Tribunal deleted the addition.6. Computation of Interest:The assessee contended that the interest computed under Sections 234A/B/C/D was overcharged and wrongly calculated. The Tribunal did not find it necessary to adjudicate this ground separately as the primary issues were resolved in favor of the assessee.7. Permission to Produce Additional Evidence:The Tribunal did not find it necessary to adjudicate this ground separately as the primary issues were resolved in favor of the assessee.Conclusion:The appeal of the assessee was partly allowed. The Tribunal deleted the disallowances made under Studio Hire Charges, Instrument Hire Charges, and Assistant Fees. The issue of Artist Expenses was remanded to the AO for verification. The grounds related to the violation of natural justice and computation of interest were dismissed. The permission to produce additional evidence was deemed unnecessary.