The order of the Bench was delivered by
B. Ramakotaiah, A.M.-These two appeals by assessee are against the separate orders of Ld. CIT(A)-II, Hyderabad both dated 20.11.2013 pertaining to A.Ys. 2008-09 and 2009-10. As the issues are common, these appeals are taken-up for disposal in the combined order for the sake of convenience.
ITA.No.143/Hyd/2014 :
2. Issues arising in the present appeal originated from an order passed under section 201(1) and 201(1A) of the Act. Assessee has raised seven grounds. Ground Nos. 1 and 7 are general in nature. Hence, do not require specific adjudication. In Ground Nos. 2 and 3 assessee has challenged the decision of the Ld. CIT(A) in setting aside the issue of applicability of section 201(1) in respect of payments made of Rs. 53 lakhs to Gemini Labs and Rs. 49,000 to M/s. M.M. Srilekha.
3. Briefly the facts are, assessee company is engaged in the business of production of films and T.V. serials. A survey under section 133A was conducted in the business premises of the assessee on 27.01.2009 to verify TDS compliance. On verification of the information submitted by assessee post-survey, it was found by A.O. that assessee had debited audit fees of Rs. 1,12,360, professional charges of Rs. 12,42,257 without deducting tax at source. He also noted that assessee debited expenditure for film production of Rs. 2,13,37,083 out of which assessee made TDS on payments of Rs. 1,27,26,641 but did not deduct tax at source on payments of Rs. 86,10,442 though the provisions of section 194J are clearly attracted to such payments. As alleged by the A.O., though, assessee was asked to explain why TDS was not made but there was no compliance from the assessee. Accordingly, A.O. treating the assessee as assessee in default passed an order demanding tax of Rs. 10,26,401 under section 201(1) and interest of Rs. 4,25,956 under section 201(1A) totaling to Rs. 14,52,357.
4. Being aggrieved of the order so passed, assessee preferred appeal before the Ld. CIT(A). Before the first appellate authority it was submitted by the assessee that as far as payments of Rs. 86,10,442 is concerned, they are not liable to TDS because of the very nature of expenses like boarding and lodging, costume, purchases, censor charges etc., and many of the payments were far below threshold limits prescribed for deducting TDS. Assessee also submitted the details of payments made. On the basis of submissions made by the assessee Ld. CIT(A) called for a remand report from the A.O. After receiving the remand report of the A.O. and examining assessee’s reply on such remand report, Ld. CIT(A) noted that processing charges of Rs. 53 lakh was paid to Gemini Laboratories Ltd., on which the assessee did not deduct tax. It was submitted by the assessee that tax was not deducted as Gemini Laborotories Ltd., have included the amount as their income and paid taxes thereon. Therefore, as per the ratio of the decision of Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverages Limited 293 ITR 226 no liability under section 201(1) can be fastened on the assessee. To prove this contention, assessee also submitted a certificate from a Chartered Accountant in Form 26A wherein it was stated that the payee has offered the said amount as income and paid the taxes thereon. Ld. CIT(A) after considering the submissions of the assessee and verifying the material on record observed that the certificate in Form 26A given by the Chartered Accountant is defective. Hence, cannot be relied upon. Though, she noted the fact that the return of income filed by Gemini Laboratories was also submitted before her but she nevertheless directed the A.O. to verify whether Rs. 53 lakhs was accounted for by Gemini Laboratories or not and decide accordingly. As far as payment of Rs. 49,000 to Ms. M.M. Srilekha is concerned, the Ld. CIT(A) also issued similar direction to the A.O. to verify whether the said payee has offered the said amount as income and decide it accordingly.
4.1. Learned A.R. submitted before us, though before the first appellate authority assessee has furnished all documentary evidences to show that the payments made to Gemini Laboratories are not covered by TDS provisions but Ld. CIT (A) without properly appreciating the evidences has set aside the issue to the file of A.O. Learned A.R. submitted that under the provisions of the Act, Ld. CIT (A) has no power to set aside. However, learned A.R. submitted that the A.O. may be directed to decide the issue within a stipulated time period.
5. Learned D.R. submitted before us that primary liability is on the assessee to deduct tax at the time of payment. Whether the payee offers it as income or not is not the concern of assessee as he has to comply to the statutory provisions. Therefore, in the given circumstances, the direction of the Ld. CIT (A) is appropriate.
6. We have considered the submissions of the parties and perused the materials on record. At the time of hearing both the parties agreed that the A.O. may be directed to decide the issue within a specific time period. As can be seen from the facts on record, A.O. raised the demand on the ground that the assessee has not deducted tax at source on the payments made. However, before the first appellate authority a plea was taken by the assessee that the concerned payees have offered the amounts received by them as their income of the relevant assessment year. A certificate from the Chartered Accountant was also filed certifying the aforesaid fact. The Ld. CIT(A) after considering this aspect and keeping in view the ratio laid down by the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverages Ltd., (supra), directed the A.O. to verify whether the concerned payees have offered the amount received by them as income of the relevant assessment year. In our view, the direction by the Ld. CIT(A) to verify this aspect cannot be faulted. However, we direct the A.O. to verify the income tax particulars of the concerned payees and decide the matter within a period of six months from the date of this order after affording due opportunity of being heard to the assessee. This ground is considered to be allowed for statistical purposes.
7. In Ground Nos. 4 and 5 assessee has challenged the demand raised under section 201(1) of the Act in respect of professional charges of Rs. 8,24,762 and demand raised under section 201(1A) in respect of consultancy charges of Rs. 4,17,465. Before the first appellate authority, it was submitted by the assessee that the A.O. while holding that tax was not deducted on the professional charges of Rs. 8,24,762 failed to notice that some of the payments are less than Rs. 20,000. Hence, TDS provisions are not applicable. In respect of rest of the payments tax was deducted and it forms part of the amount of Rs. 1,27,26,641. Similarly, with regard to professional charges of Rs. 4,17,765 it was submitted by the assessee that some of the payments are less than Rs. 20,000 and on the balance payments tax has been deducted and it forms part of the amount of Rs. 1,27,26,641. Ld. CIT(A), however, did not find merit in such contention of the assessee by observing that no details were submitted by the assessee.
8. Learned A.R. reiterating the submissions made before the first appellate authority submitted before us, some of the payments out of the professional charges of Rs. 8,24,062 and consultancy charges of Rs. 4,17,465 were below Rs. 20,000. Hence, no tax was deducted at source. However, on all the payments exceeding Rs. 20,000 assessee has deducted tax at source. To justify such claim, learned A.R. submitted copies of the certificates in Form No.16A issued to the payees containing the payment particulars as well as date of payment, dates of remittances into Government account with corresponding cheque numbers. Learned A.R. also submitted the details of payments which are less than Rs. 20,000. In a separate petition, learned A.R. prayed for admitting these evidences as additional evidences which were submitted in the paper book.
9. Learned D.R. on the other hand has submitted that as no evidences were produced before the A.O. or first appellate authority, assessee’s claim was not considered. However, he submitted that the evidence now produced by the assessee can be verified by the A.O.
10. We have considered the submissions of the parties and perused materials on record. It is the claim of the assessee not only before the first appellate authority but also before us that many of the payments constituting the professional charges of Rs. 8,24,762 and consultancy charges of Rs. 4,17,465 are less than Rs. 20,000. Hence, there is no requirement for deduction of tax at source. It is also the claim of the assessee that on all other payments exceeding Rs. 20,000 assessee has complied to the TDS provisions but due to some reason or other he could not produce the evidences before the A.O. or first appellate authority. In support of such claim, assessee has submitted certificates in Form No.16A containing the payment particulars, dates of remittance of TDS into the Government account, corresponding cheque numbers etc., In our view, the evidences produced by the assessee requires to be considered before deciding whether the assessee can be treated as an assessee in default for not deducting tax at source with regard to aforesaid payments. However, as assessee’s claim requires verification with reference to additional evidences which were submitted for the first time before this Forum, we consider it appropriate to remit the matter back to the file of A.O. for necessary verification and deciding the matter afresh after affording due opportunity of being heard to the assessee. Accordingly, grounds No.4 and 5 are treated as allowed for statistical purposes.
11. Ground No.6 relates to calculation of interest under section 201(1A). Learned A.R. submitted before us that the method of calculation of interest adopted by the A.O. by estimating on the basis of month-wise average payments is against the statutory provisions.
12. Learned D.R. however, supported the order of the A.O. and Ld. CIT(A).
13. We have considered the submissions of the parties and perused the materials on record. In our view, ultimately the interest under section 201(1A) is to be computed on the basis of tax demand, if any, under section 201(1) by treating the assessee as an assessee in default of the Act. As we have remitted the issue relating to applicability of TDS provisions on the payments which were subject matter of appeal in grounds No. 2 to 5, it will be premature to decide this issue at this stage. However, we direct the A.O. to compute the interest under section 201(1A) strictly in compliance with the statutory provisions. Ground No.6 is accordingly disposed of.
14. In the result, ITA.No.143/Hyd/2014 of the assessee is allowed for statistical purposes.
15. This appeal of the assessee is also concerning demand raised under section 201(1) and 201(1A). Assessee has raised 8 grounds in this appeal. Grounds No. 1 and 8 being general in nature, do not require any specific adjudication.
16. Ground No.2 with its sub-grounds is with regard to confirmation of demand of Rs. 28,01,307. Briefly the facts are, the A.O. while verifying assessee’s compliance to TDS provisions noticed that during the relevant previous year assessee has debited advertisement and publicity expenses of Rs. 28,01,307 but has not deducted tax at source. The A.O. therefore, passed order raising demand under section 201(1) and 201(1A) of the Act. Assessee challenged the demand raised before the first appellate authority. It was submitted before the Ld. CIT(A) that no tax is deductible on the payments made to advertising agencies. The Ld. CIT(A) however, did not find merit in the submissions of the assessee and she observed that the assessee has incurred the expenditure towards advertising and publicity. However, no details were submitted on the items of expenditure towards advertising and publicity either before the A.O. or during the appeal proceedings. She further noted that as per section 194(7)(iv) the definition of work includes advertising. Therefore, assessee is required to deduct tax at source on such payments. Accordingly, Ld. CIT(A) confirmed the demand of Rs. 28,01,307.
17. Learned A.R. submitted before us that assessee has engaged Siri Media P. Ltd., for advertising and publicity of the movies on behalf of the assessee. Therefore, Siri Media P. Ltd., executed work of advertising and publicity for the assessee. It was Siri Media P. Ltd., who engaged certain parties for advertising and publicity and deducted tax at source from the payments made to them. Certificates in Form No. 16A were issued by Siri Media P. Ltd., to the payees. The learned A.R. in this context referred to the ledger account of payments made to Siri Media P. Ltd., and also Form 16A issued by Siri Media P. Ltd., to the payees containing dates of deduction of TDS, remittance in Government account with cheque no. Learned A.R. submitted at the time of proceeding before the Ld. CIT(A) these evidences could not be produced because the accounting staff could not bring the fact of Siri Media P. Ltd., having effected TDS on the payments to the parties taking up the job of advertising and publicity. Learned A.R. therefore, requested for treating the evidence submitted as additional evidence.
18. Learned D.R. submitted before us that since the assessee could not furnish any details with regard to payments made, Ld. CIT(A) confirmed the demand.
19. We have considered the submissions of the parties and perused the materials on record. It is the claim of the assessee before us that assessee has not incurred the expenditure towards advertising and publicity directly but it was Siri Media P. Ltd., who is the distributor and has made the payments on behalf of the assessee. It is also the contention of the assessee that Siri Media P. Ltd., has deducted tax at source on such payments made to the payees towards advertising and publicity. In this context, he has produced before us the TDS certificates and Form 16A and has requested for treating them as additional evidence. As these evidences were not produced either before the A.O. or Ld. CIT(A) and has been submitted before us for the first time, in the interest of justice, we consider it appropriate to remit the matter back to the file of A.O. to verify assessee’s claim with reference to additional evidence produced and decide the matter, after giving due opportunity of being heard to the assessee. Ground No.2 is allowed for statistical purposes.
20. The grievance of the assessee in ground No.3 and its sub-grounds are, the Ld. CIT(A) should not have set aside the issue relating to TDS on equipment hire charges of Rs. 3,50,000/- paid to M/s. Parade instead of deciding it herself.
21. Briefly the facts are, during the relevant previous year it was noticed by the A.O. that the assessee had paid an amount of Rs. 3,50,000 towards equipment hire charges to M/s. Parade. Since the assessee had not deducted tax at source while making such payment, the A.O. raised demand under section 201(1) of the Act. Being aggrieved, assessee preferred appeal before the Ld. CIT(A). Ld. CIT(A) following the ratio laid down by the Hon’ble Supreme Court in the case of Hindustan Coco Cola Beverages Limited 293 ITR 226 directed the A.O. to verify whether the payee has offered the amount received as income in the relevant previous year and accordingly, decide the issue.
22. We have considered the submissions of the parties and perused the orders of the revenue authorities. Learned A.R. submitted before us that as the Ld. CIT(A) has no power to set aside under the provisions of the Act, the order passed is not correct. Learned A.R. submitted that Ld. CIT(A) could have got the fact of offering of income by the payee verified through the A.O. and decided the issue herself. However, learned A.R. submitted that a specific direction may be given to the A.O. to decide the issue within a fixed time limit.
23. Learned D.R. on the other hand relied on the orders of the A.O. and Ld. CIT(A).
24. We have heard the parties and perused the material available on record. There is no dispute to the fact that assessee has paid the amount of Rs. 3,50,000 towards equipment hire charges without deducting any tax. It is the claim of the assessee that the payee M/s. Parade has offered the amount received as income in the relevant previous year. Hence, as per the ratio laid down by the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverages Ltd., (supra) no demand under section 201(1) can be raised against the assessee as he cannot be termed as ‘assessee in default’. Having heard the parties, we are of the view that the Ld. CIT(A) was correct in directing the A.O. to decide the issue after verifying assessee’s claim of offering of income by the payee on the amounts received. If assessee’s claim is found to be correct, A.O. cannot treat the assessee as assessee in default as held by the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverages Ltd., (supra). Accordingly, we direct the A.O. to decide the issue within a period of six months from the date of this order by applying the ratio laid down by Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverages (supra). Ground No.3 of the assessee is allowed for statistical purposes.
25. In ground No.4 along with its sub-grounds assessee has challenged the demand raised under section 201(1) and 201(1A) on payments made totaling to Rs. 12,50,000 to M/s. Usha Kiran Movies towards location rent.
26. Briefly the facts are, the A.O. in course of proceeding noticed that assessee has paid an amount of Rs. 12,50,000 towards location rent to M/s. Usha Kiran Movies without deducting tax at source. A.O. therefore, treated assessee as assessee in default and raised demand under sections 201(1) and 201(1A) of the Act. Being aggrieved of the order passed, assessee preferred appeal before the Ld. CIT(A). Ld. CIT(A) after considering the submissions of the assessee in the context of facts and materials on record, directed the A.O. to compute TDS as per section 194I.
27. Learned A.R. submitted before us that the location rent of Rs. 12,50,000 paid to M/s. Usha Kiran Movies is on the basis of a composite contract between the parties which included supply of man power and food, lighting, other equipments, generator diesel expenses etc., on a rate contract basis for an agreed number of days. Hence, the payments come within the purview of works contract as envisaged under section 194C of the Act and the assessee has accordingly deducted tax in terms of section 194C. Learned A.R. submitted that the payments made cannot come strictly within the purview of section 194I as held by the Ld. CIT(A).
28. Learned D.R. on the other hand relied upon the orders of the Ld. CIT(A).
29. We have considered the submissions of the parties and perused the materials on record. As can be seen Ld. CIT(A) has directed the A.O. to compute TDS under section 194I by treating the location rent as income from rent. However, it is the claim of the assessee that the location rent paid to M/s. Usha Kiran Movies comprise of various other payments and in the nature of a composite contract. Hence, the provisions of section 194C would apply.
30. Having heard the parties, we are of the view that the matter requires re-consideration by the A.O. as the exact nature of payment has to be verified by examining the contract entered into between the parties. It is claimed by assessee, location rent also includes payments towards manpower and food, electricity, diesel expenses etc., Atleast these payments cannot be said to be coming within the expression ‘rent’ as defined under section 194I. Therefore, without verifying the details of payments and terms of contract, it cannot be concluded that the location rent is payment received towards lease, sub-lease, tenancy etc., as per Explanation (i) of Section 194I. As the terms of contract and details of payment are not before us, we are not in a position to decide the issue. Accordingly, we remit the matter back to the file of A.O. for deciding afresh after due opportunity of being heard to the assessee. Ground No.4 of the assessee is allowed for statistical purposes.
31. In ground No.5 and 6 along with sub-grounds assessee has challenged the decision of the Ld. CIT(A) in setting aside the issue to the file of A.O. with regard to applicability of TDS provisions on payments made by assessee to Prasad Film Laboratories of Rs. 1,00,000 and Rs. 8,15,000 to Ramanaidu Colour Laboratories respectively towards processing charges.
32. Similar issue was raised by the assessee in ground No.3 hereinabove. Following our decision, we direct the A.O. to verify the income tax particulars of the concerned payees and decide the matter within a period of six months from the date of this order keeping in view the ratio laid down by the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverages Ltd., (supra) and after affording due opportunity of being heard to the assessee. Ground Nos.5 and 6 of the assessee are allowed for statistical purposes.
33. Ground No.7 is with regard to computation of interest. Similar ground was raised by the assessee in ITA.No.143/Hyd/2014 for the A.Y. 2008-2009 decided by us in the earlier part of the order. Accordingly, we direct the A.O. to decide the issue of computation of interest under section 201(1A) following our direction contained in para 13 of the order hereinabove, after giving due opportunity of being heard to the assessee.
34. In the result, ITA.No.139/Hyd/2014 of the assessee is allowed for statistical purposes.
35. To sum-up, both the appeals are allowed for statistical purposes.
The order pronounced in the open court on 18.02.2015.