2025 (11) TMI 281 - AT - Income Tax

Composing and DTP payments are contract printing services, not 'technical services' under explanation to s.194J; 2% TDS under s.194C upheld

ITAT KOLKATA - AT held that payments for composing and DTP work made by a publishing-assesse are contract payments for printing-related services and do ... TDS u/s 194C or 194J - payments made for composing charges - assessee is engaged in the business of publishing of books mainly education books and sale thereof - HELD THAT:- For the purpose of composing and DTP work of the assessee company, it had entered into a contract with Publishing Services Pvt. Ltd. for typing and DTP jobs on behalf of the assessee, for which manuscripts were provided by the assessee company. The assessee company has entered into an agreement with the said publisher dated 16.09.2011. We have perused the agreement entered into with the publisher/ recipient and also Provisions of Section 194J of the Act and 194C of the Act and found that the printing services are not technical services within the definition as provided in the explanation to Section 194J of the Act. Therefore, the assessee has correctly deducted the tax at source at the rate of 2% from the contractual payments made to Publishing Services Pvt. ltd. Direct the ld. AO to delete the demand raised on account of short deduction of tax at source as the assessee is covered under Section 194C of the Act so far as the deduction of TDS is concerned and not u/s 194J. Accordingly, the appeal of the assessee is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether payments made to a publishing/printing agency for composing, typing and DTP work (with manuscripts supplied by the payer) fall within the scope of 'fees for professional or technical services' under Section 194J or are payments for 'contractual work' under Section 194C for withholding tax purposes. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Characterisation of composing/typing/DTP payments: applicability of Section 194J vs Section 194C Legal framework: Section 194J requires deduction of tax at source on fees for professional or technical services; Section 194C deals with payments to contractors for carrying out any work (including supply of labour for carrying out any work). The Explanation to Section 194J distinguishes printing services from technical services for the purpose of that provision. Precedent treatment: No specific judicial precedents are cited or relied upon in the order; the Tribunal decided the issue on statutory construction and factual matrix presented in the record. Interpretation and reasoning: The Tribunal examined the contractual arrangement and facts: the assessee/payer is in the business of publishing educational books; manuscripts were provided by the payer to the publisher/recipient; the agreement dated 16.09.2011 engaged the recipient for typing and DTP jobs (composing services) on behalf of the payer. The Tribunal construed the nature of services rendered as non-technical/printing services within the meaning of the Explanation to Section 194J. Given that the work consisted of composing/typing/DTP performed pursuant to a contract and using manuscripts supplied by the payer, the Tribunal treated the payments as consideration for contractual work rather than fees for technical/professional services. Consequently, the lower authorities' characterization of the payments as liable to withholding under Section 194J (at 10%) was found to be incorrect; the payer's deduction under Section 194C (at 2%) was held to be appropriate. Ratio vs. Obiter: Ratio - The Tribunal conclusively held that payments for composing/typing/DTP (with manuscripts supplied by the payer) are not 'technical services' under Section 194J and are chargeable under Section 194C; orders of the authorities treating such payments as falling under Section 194J must be set aside. Obiter - The order contains no extended discussion of borderline situations where additional elements of technical skill or professional judgment might convert such services into services under Section 194J; such scenarios remain unaddressed in the reasoning. Conclusions: The Court/Tribunal allowed the appeals, directed deletion of the demand raised for short deduction under Section 194J, and held that tax was properly deducted under Section 194C. This holding was applied mutatis mutandis to multiple, factually similar assessment years/appeals. Cross-reference The Tribunal's conclusion on Issue 1 was applied uniformly to all related appeals arising from the same fact pattern; no separate or dissenting opinions were recorded.