Tribunal Rules on Withholding Tax: Modeling vs. Professional Services

The Tribunal ruled in favor of the assessee on the requirement of withholding tax under section 194J for payments made to Matrix India on behalf of Ms. R.K. Kaif, stating that modeling services provided by Ms. Kaif did not qualify as professional services under section 194J. Regarding TDS deduction on payments made to Custom House Agents, the Tribunal directed the AO to verify compliance and decide accordingly. For the supply of cameras by Hical Magnetic Private Limited, TDS under section 194C was upheld, while TDS deduction on supply of batteries by Power Cell Batteries India Ltd. was deemed unnecessary based on a contract for sale.

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Issues Involved:

1. Requirement of withholding tax under section 194J for payments made to Matrix India on behalf of Ms. R.K. Kaif.
2. TDS deduction on payments made to Custom House Agents (CHAs) for clearing charges and reimbursement of expenses.
3. TDS deduction on supply of cameras by Hical Magnetic Private Limited, treated as a works contract.
4. TDS deduction on supply of batteries by Power Cell Batteries India Ltd.

Issue-wise Detailed Analysis:

1. Requirement of withholding tax under section 194J for payments made to Matrix India on behalf of Ms. R.K. Kaif:

The Tribunal found that the issue was already settled in favor of the assessee in the assessee's own case for Assessment Year 2009–10, where it was concluded that the TDS officer was incorrect in holding that tax was required to be deducted at 11.33%. The Tribunal determined that the payments made to Matrix India on behalf of Ms. Katrina Kaif did not attract the provisions of section 194J. It was clarified that modeling services provided by Ms. Kaif were not connected with the production of a cinematographic film, and hence, did not qualify as professional services under section 194J. The Tribunal emphasized that the nature of services rendered (modeling) did not fall under the specified professions requiring TDS under section 194J.

2. TDS deduction on payments made to Custom House Agents (CHAs) for clearing charges and reimbursement of expenses:

The appellant made two types of payments to CHAs: clearing charges and reimbursement of expenses. The appellant deducted tax under section 194H for clearing charges but did not deduct tax for reimbursements. The AO held that tax should have been deducted under section 194C for reimbursements as well. The CIT(A) ruled that no TDS was required for reimbursements, but upheld the AO's decision regarding short deduction for clearing charges. The Tribunal referred to its previous decision for Assessment Year 2009–10, which stated that payments made through an agent to third parties for services provided to the assessee should attract TDS. The Tribunal directed the AO to verify if the clearing house agents had filed returns and paid taxes, and to decide accordingly.

3. TDS deduction on supply of cameras by Hical Magnetic Private Limited, treated as a works contract:

The Tribunal noted that the issue was previously decided against the assessee for Assessment Year 2009–10. The tripartite agreement indicated that the assessee supplied tools and moulds to the supplier for job work, and Hical Magnetic Pvt. Ltd. assembled the cameras using these parts. The arrangement was deemed a job work contract, with Hical receiving labor charges and a margin per camera. The Tribunal upheld that TDS under section 194C applied to the labor charges and margin paid to Hical.

4. TDS deduction on supply of batteries by Power Cell Batteries India Ltd.:

The Tribunal found that this issue was resolved in favor of the assessee in the previous order for Assessment Year 2009–10. The agreement for the supply of batteries was considered a contract for sale, not a job work agreement. The Tribunal followed the jurisdictional High Court's decision in CIT vs. Glenmark Pharmaceuticals Ltd., which supported that TDS was not applicable to such contracts for sale.

Conclusion:

The Tribunal's order addressed each issue based on precedent and detailed analysis. The appeals were partly allowed, with specific directions for factual verification and adherence to previous rulings. The order was pronounced in open court on 04/11/2019.

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