M/S.MALAYALAM COMMUNICATION LTD,TRIVANDRUM vs. THE ACIT, TRIVANDRUM

Per CHANDRA POOJARI, AM:

This appeal filed by the assessee is directed against the order of the CIT(A) ,

Trivandrum dated and pertains to the assessment year 2010-11.

deduction of Rs.8,25,310/- u/s. 201(1) of the Act and the payments made in the

instant case do not fall within the ambit of section 194J of the Act, instead

section 194C of the Act would be attracted.

2.1 The assessee has filed the following additional ground:

“For that the assessee cannot be treated as an assessee in default where the payees have admitted the income and paid the tax due in their return of income.”

The assessee submitted that failure to raise the additional ground was due to

inadvertence and is not intentional. Therefore, he prayed to admit the above

additional ground.

2.2 We have heard both the parties. We find that the assessee has sufficient

and reasonable cause for failure to raise the additional ground before the

Tribunal. Hence, we admit the additional ground.

premises of the assessee on 20.07.2010 to verify whether tax had been

deducted at source against the payments made to various artists who

participated in the reality shows telecast by the assessee. It was found during

the course of survey that the assessee had deducted tax at source from the

payments made to various artists like singers, musicians etc who participated in

the reality shows as guests or judges, at 1% as per the provisions of section

194C of the Act on the ground that these payments were made as per the

agreement entered into with the artists for production of the programmes meant

for telecast by the assessee. The case of assessee was that its case falls u/s

194C and since it has rightly deducted the tax at 1%, no further action

whatsoever can be taken against them. However, the details furnished by the assessee in this regard were scrutinized and further seen that the assessee had

made the payments to the artists directly. Finding that no written agreement for

executing the contract work to produce a programme for telecast had ever been

signed by the parties concerned, the assessing authority came to the conclusion

that the payments made cannot be said to be for the work of telecasting or

producing a programme for telecasting by the assessee as contemplated under

the provisions of section 194C Thus, the assessing authority observed that the

payments have been made as remuneration for the service rendered by the

artists and therefore could well be defined as payments for providing service

which qualify for deduction of tax at source at 10% as per section 194J of the

Act.

responsible for paying any sum to any resident for carrying out any work in

pursuance of a contract between the contractor and a specified person to deduct

tax at one per cent when the payment is made to an individual or HUF and two

percent in all other cases. In terms of clause (iv)(b) of Explanation to section

194C, payment made towards a contract concerning broadcasting and

telecasting including production of programmes for such broadcasting or

telecasting would be covered by section 194C. Section 194J of the Act provides

for deduction of tax at source from fees for professional or technical services. As

ruled by the Hon'ble Delhi High Court in the case of CIT vs Delhi Transco Ltd

(380 ITR 398), professional and technical servicewss consist of services of technical nature when special skills or knowledge relating to technical field are

required for their provision, managerial services are rendered for performing

management functions and consultancy services relate to provision of advice by

someone having special qualification that allow him to do so. What constitutes

technical services cannot be understood in a rigid formulaic manner. It will vary

from industry to industry. There will have to be a specific line of enquiry for

determining what in a particular industry would constitute rendering of a

technical service.

4.1 Section 194C provides for deduction of tax at source at 1% or 2% on

payments in pursuance of a contract concerning broadcasting and telecasting

including production of programmes for such broadcasting or telecasting

whereas as per section 194J, tax is to be deducted is at 10% but on fees paid for

professional and technical services. Here is the case, the assessee claimed to

have paid a sum of Rs.1,03,01,669/- to celebrities who attended various cultural,

political and social events as guests or judges and deducted u/s 194C tax of

Rs.1,31,191/- which is at 1.27% on the said payment. But, the Assessing Officer

considered the case of the assessee as a case falling u/s 194J casting thereby

the responsibility to deduct tax at 10% on the said amount of Rs. 1,03,01,6697-.

Finding that no such tax at 10% was deducted, the Assessing Officer treated the

assessee as assessee in default for the short deduction and charged interest of

Rs.8,25,310/- u/s 201(1) as well.

4.2 The CIT(A) observed from the above that payment made towards

broadcasting and telecasting would be covered by section 194C only when the

payment is made in pursuance of a contract signed between the parties

concerned for the works relates to broadcasting and telecasting. The CIT(A)

observed that broadcasting and telecasting including production of programmes

for such broadcasting and telecasting in the instant case of assessee can be

understood with reference to payments made to certain outside producers for

programmes, film producers, advertising companies etc. This apart, the CIT(A)

observed that CBDT's Circular No.681 of 1994 dt.08.03.1994 also has made out

very clearly that the provisions of section 194C would apply to payments made

to persons who arrange advertisement, broadcasting, telecasting etc. According

to the CIT(A) though the provisions are wide enough to cover not only written

contracts but also oral contracts, the moot question to be answered is whether

the celebrities who attended the various cultural, political and social television

programmes as guests or judges can be treated as persons who arrange

advertisement, broadcasting, telecasting etc. The answer would definitely be no

and because of this, the CIT(A) was of the opinion that the provisions of section

194C was not applicable to the case of assessee. It was further seen from the

details the assessee has filed, the payments were made to some film

personalities for their presence in the show and they were just part of a

television programme. But, still they were invited to be the guest or judge of a

particular programme because of the talent they have had in a particular field and identified as famous actors, musicians, orators, singers etc. But for the talent

they have had, ordinarily they would not have been invited to be part of a

television programme and because of this specific identity, they can be treated

as individuals who offered professional and technical services to the assessee's

television channel. This apart, it is not the case of assessee that the deductees

have already brought to tax the amount which they have received from them,

paid tax and filed return as well. It is also not the case of assessee that the

individuals to whom payments were made have actually worked towards

arranging advertisement, getting sponsors, telecasting etc. As long as the above

two are responded positively, the assessee cannot have case to argue that the

provisions of section 194J won't apply to them and necessity to deduct tax at

10% also won't arise.

4.3 Section 194J read with Explanation 2 to section 9(1)(vii) of the Act

provides that the predominant purpose to fall in technical services should be the

consideration for the rendering of any managerial, technical or consultancy

services which is exactly the case of the Assessing Officer and accordingly said

that the actors, musicians, orators, singers etc have rendered technical services

being guests or judges of a particular programme. Section 44AA of the Act also

provides for film artists to be identified for the sake of technical services. As

ruled in the Hon'ble Delhi High Court decision in the case of CIT vs Delhi Transco

Ltd mentioned supra, technical services consist of services of technical nature when special skills or knowledge relating to technical field are required. In the

circumstances, the payment made to the guests and judges of television

programmes cannot be said as paid for the work of broadcasting and telecasting

including production of programmes for such broadcasting and telecasting so as

to bring the same as paid u/s 194C. It should necessarily be brought into the

ambit of section 194J since the actors, musicians, orators, singers etc are invited

to the programmes not as an individual but a persons of specialized skills. What

they have done to the assessee when they perform as guests or judges for a

television programme cannot be nothing but professional or technical services

which in turn could very well be brought under the ambit of section 194J. In the

backdrop of the decisions of the Hon'ble Delhi High Court and Hon'ble Tribunals

relied on by the assessee are totally misplaced since in the case Prasar Bharti

(292 ITR 580), payments were made to outside producers for programmes. In

the Tribunals decisions also payments were made as technical fee to the

managing director of the assessee company, channel placement charges to cable

operators and for purchase of programme to a production house. Even, the

CBDT's Circular No.4/2016/ dt.29.02.2016 is also totally misplaced since the

same is on TDS to be made on payments to production houses and not to the

individuals as in the case of assessee. Taking into account all the above, the

CIT(A) was of the considered opinion that the provisions of section 194J alone

are applicable to the assessee and thereby, the assessee ought to have deducted

the tax at 10% instead of 1.27% deducted u/s 194C. As a result, the CIT(A) held that the decision the assessing authority has taken to declare the assessee as

assessee in default and then to charge interest of Rs.8,25,310/- u/s 201(1)

doesn't require further interference.

6.. We have heard both the parties and perused the record. Section 194C(1) requires a person responsible for paying any sum to any resident for carrying out

any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and any corporation established by or under a

Central Act (which would include the assessee herein) to deduct tax at source in

the equivalent of one percent of such payment in case of advertising and two per

cent in all other cases. Explanation III to section 194C was inserted by Finance

Act, 1995, with effect from July1, 1995 which reads as under:

“Explanation III – For the purposes of this section, the expression ‘work’ shall also include –

(a) advertising; (b)broadcasting and telecasting including production of programmes for such broadcasting or telecasting; c) carriage of goods and passengers by any mode of transport other than by railways; d) catering”

Therefore, in terms of clause (b), of Explanation III to section 194C, payment made towards a contract concerning “broadcasting and telecasting” the production of programmes for such “broadcasting or telecasting” is to be covered by section 194C.

Even while the Finance Act, 1995, introduced the aforesaid Explanation to section 194C, it simultaneously inserted section 194J in the Act which entitled for deduction of tax at source at the time of payment of a fee “for professional or technical service”. The operative portion of section 194J for the present purposes read as under:

“194J – Fees for professional or technical services – (1) Any person not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of –

(a) fees for technical services, or (b) fees for technical services., .

shall, at the time of credit of such sum to the account of the payee and at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to five per cent of such sum a income-tax on income comprised therein”

Explanation to section 194J, relevant for the present purpose, reads as under:

“Explanation – For the purpose of this section – (a) ‘professional services’ means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession notified by ,the Board for the purposes of section 44AA.”

6.1 The question before us is whether on the facts and circumstances of the

present case, section 194C or 194J would be attracted. The contention of Ld. AR

is that there is difference between artist and film artist. An artist can be called a

film artist, if he/she renders his or her services pursuant to production of film.

However, an artist will not be a film artist if he/she entertains people not

involved in production of film. For this purpose, he relied on the decision of ITAT, Lucknow in the case of Jasminder Singh vs. Addl. CIT 2016 (11) TMI 956

(Lucknow). The contention of the Ld. DR is that the assessee made payment in

relation to various artists in reality show conducted by the assessee and TDS is

to be paid u/s. 194J of the Act. The case of the Revenue is that making of the

programmes in television involves utilization of professional services and that

there are several technical aspects of producing such programmes. Therefore,

the view expressed by the CIT(A) should be accepted and it is to be upheld. In

our opinion, the assessee paid remuneration to various persons in connection

with reality shows telecasted by the assessee and it was not involved in

production of any films and recipients of payments were not engaged by the

assessee in any of the activities as enumerated under section 194J of the Act.

For this purpose, it is pertinent to refer to Explanation 1 of section 194J which

reads as follows:

“194J – Fees for professional or technical services – (1) Any person not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of –

(a) fees for technical services, or (b) fees for technical services., .

shall, at the time of credit of such sum to the account of the payee and at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to five per cent of such sum a income-tax on income comprised therein”

Explanation to section 194J, relevant for the present purpose, reads as under:

“Explanation – For the purpose of this section – (a) ‘professional services’ means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession notified by ,the Board for the purposes of section 44AA.”

6.2 Correspondingly, there was a CBDT Notification No. S.O. 17(E) Dt. 12th

January, 1977. Specification of professions for purposes of sub-s. (1) of s. 44AA

which reads as under:

In exercise of the powers conferred by sub-s. (1) of s. 44AA of the IT Act, 1961 (43 of 1961), the CBDT, hereby notifies for the purposes of the said sub-section the following professions, namely:

(a) the profession of authorised representative; and (b) the profession of film artist Explanation: In this notification,—

(a) "authorised representative" means a person, who represents any other person, on payment of any fee or remuneration, before any Tribunal or authority constituted or appointed by or under any law for the time being in force, but does not include an employee of the person so represented or a person carrying on legal profession or a person carrying on the profession of accountancy;

(b) "firm artist" means any person engaged in his professional capacity in the production of a cinematograph film, whether produced by him or by any other person, as— ;

(i) an actor; (ii) a cameraman; (iii) a director, including an assistant director; (iv) a music director, including an assistant music director; (v) an art director, including an assistant art director; (vi) a dance director, including an assistant dance director; (vii) an editor; (viii) a singer; (ix) a lyricist;

(x) a story writer; (xi) a screen play writer; (xii a dialogue writer (xiii) a dress designer

6.3 Hence, the payment to the artists is not covered by 194J of the Act as the

payment is not related to production of cinematograph film. The services

rendered by the artists are not covered by professional services as defined u/s.

194J of the Act. As seen from the Explanation, services rendered by a person in

connection with production of cinematograph film should be liable to deduct TDS

u/s. 194J of the Act. A person who is engaged in production of reality show

cannot be equated with a person engaged in the production of cinematograph

film. Therefore, the persons who are engaged in production of film falls under

the realm of said Explanation to s. 194J of the Act and to that effect, the

following decisions relied on by the assessee will come to the help of the

assessee:

1) ACIT vs. M/s. Sahara One Media and Entertainment Ltd. in ITA Nos. 4548-4549&4550/Mum/2012 dated 23/10/2013 (ITAT, Mum.) wherein it was held as under:

“Deduction of TDS u/s 194J or u/s 194C - Nature of agreement - AO was of the view that the "dubbing expenses/print processing fees" and "production expenses" were in the nature of 'fees for technical services' and 'royalty' respectively, and hence the tax should have been deducted under section 194J of the Act @10%,instead of @2% deducted by the assessee under section 194C - Held that:- The assignment or vesting of copy rights etc. in the programme are incidental to the main object of the agreement or transactions in question. When a contactor produces a programme on behalf of other, it is obvious that all the rights including copy rights etc. will vest in the producer and the assigned producer/contractor will not be left with any control or right over the programme and such rights of the producer have been recognized with the said assignment clause, which is incidental to the main object of the contract. The observation of the AO that assigned producer has an absolute contract over the rights of the programme is falsified from the perusal of the different clauses of the agreement - agreement in question was an agreement to produce the programme by the assigned producer i.e., contractor on behalf of the producer i.e., assessee.

“Clause (b) to Explanation III to section 194C specifically covers activity of production of programmes whereas provisions of section 194J are general in nature - Provisions of section 194C would prevail over section 194J of Act - Section 194C clearly states that payment for production of programmes constitutes payments for 'work' under section 194C - Assessee rightly deducted TDS u/s 194C at rate of 2% on payments made to contractor - CIT(A) has rightly observed that production of programmes is nothing but combination of processes right from planning - He rightly held that dubbing charges and processing fees being a part of production of television serials and programmes, are squarely covered under ambit of specific provisions of section 194C of Act and liable to TDS at rate of 2%. - General provisions of section 194J are not attracted in this case - Findings of Ld. CIT (A) upheld - Decided against Revenue.”

(2) Kodak India (P.) Ltd. vs. DCIT (35 CCH 445) (Mum. Trib.) wherein it was held as under:

Deduction of tax at source—Fees for technical or professional services— Payment for modelling—Assessee a subsidiary company of Kodak USA, was engaged in manufacturing cameras, trading in cameras and dealing in photographic films in and out of India—Pursuant to survey u/s 133A AO noticed that assessee had entered into an agreement with Actor K to act as model for all promotional materials created by Kodak including posing for photographs or promotion of product of Kodak and had deducted TDS u/s 194C—AO held that payment made by assessee to K falls within purview of Explanation (a) to section 194J and there was short deduction of tax-CIT(A) affirmed findings of AO—Held, provisions of Explanation (a) to section 1943 and Notifications issued by Board suggest that services rendered by other notified professions for purpose of section 44AA which includes film artist as listed in rule 6F, who are engaged in production of cinematographic film, constitute "fees for professional service" for purposes of section 194J—List of film artist cannot be extended to include other category of stunt actors, although they are engaged in the production of cinematographic film—It is not that total earning of that person in lieu of services rendered which must attract provisions of section 194J—Expressions "services rendered" used in said Explanation assume significance—Taxable receipts u/s 194J are services-specific and not person specific—In instant case payments were payable for services of modelling, which is unconnected with production of cinematographic film—Impugned payments made by the assessee to K would not attract provisions of section 194]—Assessee's appeal allowed

Held: The provisions of Explanation (a) to section 194J of the Act and Notifications issued by the Board suggest that the services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or notified sports professionals or other notified professions for the purpose of section 44AA of the Act which includes the film artist as listed in the rules, who are engaged in production of cinematographic film, constitute "fees for professional service" (FPS) for the purposes of section 194] of the Act The list of film artist cannot be extended to include other category of stunt actors, although they are engaged in the production of cinematographic film. It is also the decision of the Tribunal in other case that the photographer-cameraman, who of course figure in the list of film artist, cannot be covered by the above list when such cameraman is not engaged in skills, i.e., acting skill in films, mode/ling skills for display of merchandise, singing skills, etc., and such person can make earning out of such skills. It is not that the total earning of that person in lieu of services rendered which must attract the provisions of section 1943 of the Act. The expressions "services rendered" used in the said Explanation assume significance and therefore, the taxable receipts under section 194J of the Act are services- specific and not person specific. In the instant case, the payments are payable for the services of modelling and it is unconnected with the production of cinematographic film. While "modelling" is aimed at display of merchandise, the "acting" is defined as "to act in play or film" (www.freedictionary.com), i.e., to portray a role authored by a story-writer with different purposes and objects and certainly not to displace merchandise to boost the sales of a manufacturer or a trader of the product or services. Therefore, the impugned payments made by the assessee to Matrix India on behalf of Ms. Katrina Kaif did not attract the provisions of section 194J of the Act. Accordingly, the grounds raised are allowed.” EMC vs. ITO (2010) 37 SOT 31 (Mum.), CIT v. Movies Stunt Artists Association(2006) 6 SOT 204 (Mum.), relied on.”

(3) Jasminder Singh vs. Addl. CIT (2016 (11) TMI 956 - ITAT Lucknow) wherein it was held as under:

There is a difference between an "artist/entertainer" and a "film artist". An artist/entertainer can be called a film artist, if he renders his/her services pursuant to production of film. However, an artist/entertainer will not be film artist if he entertains people not involved in production of film. The case of the revenue is not that Jasbir Jassi, Kunal Ganjawala have performed an activity while film production was going on and the assessee had made the payment, for the said activity performed by these persons. There is no doubt that Jasbir Jassi. Kunal Ganjawala and others are artists and if they perform in film as an actor or director or music director or assistant director or art director or singer or editor or lyricist or story writer or dialogue writer or as a dress designer could have attracted section 194J of the Act. It is not the case of the revenue that the assessee was producing a film and the artists were engaged in any of these activities which has been stated before. Therefore, the payment made to the artist does not fall in the ken of section 194J of the Act and so no TDS need to be deducted on this as per section 194J of the Act. It has been pointed out by the learned authorised representative that the payments made to Sonlibre International and Rhythm is not as per any contract and it was only for managing and arranging the artist for carrying out the performance. The payments has been made event wise on different dates by means of different cheques. Thus, we find that each payment made to them is an independent contract so the provisions of TDS are not attracted in the facts and circumstances of this case- Decided in favour of assessee”

6.4 Hence, it is not possible to accept the contention of the Revenue that

payments made to artists who participated in reality shows produced for

television will fall outside the realm of section 194C r.w. Explanation III of the

Act. In our opinion, it would fall under section 194C of the Act and not under

section 194J of the Act. Since the assessee deducted TDS u/s. 194C of the Act,

there is no infirmity in the action of the assessee. Being so, we are inclined to

decide the issue in favour of the assessee and against the Department.

sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Place: Kochi Dated: 8th February, 2019 GJ

Copy to: 1. M/s.Malayalam Communications Ltd., Kairali Towers, Asan Square, Palayam, Trivandrum-4695 034. 2. The Income Tax Officer(TDS), Trivandrum. 3 The Commissioner of Income-tax(Appeals), Trivandrum. 4. The Pr. Commissioner of Income-tax(TDS), Kochi. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6 Guard File. By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin