Payments to Singer Performer in Hotel liable for TDS u/s 194C as contractual not professional u/s 194J
In a recent judgment, ITAT, New Delhi has ruled that payment made to a singer group for performing in the restaurant of a hotel can not be characterised as professional payments liable for TDS u/s 194J but qualify as contractual payments u/s 194C only. The ITAT held that as per Rule 6(F)(2) a singer, in order to be qualified as professional should be `engaged in his professional capacity in the production of a cinematograph film’
Case Details:
ITA Nos. 4791 & 4792/Del/2011 Assessment Year : 2006-07 ITA Nos.4793 & 4794/Del/2011 Assessment Year : 2007-08
C.J. International Hotels Ltd vs. Addl.CIT
Date of Order: 10/03/2016
Important Excerpts from ITAT Judgment:
PAYMENTS TO TWO PARTIES – TDS U/S 194J OR 194C ?
6.1. Now, we take up the next issue raised by the assessee in its appeals against the payments made to M/s Divya Ahuja for the financial years 2005-06 and 2006-07, on which it deducted tax at source u/s 194C, but, the ld. CIT(A) sustained the action of the AO(TDS) in requiring deduction of tax at source u/s 194J of the Act and consequential interest thereon.
6.2. M/s Divya Ahuja is a Gazal group consisting of one male singer, one female singer and three instrumentalists. We have gone through the Agreement dated 1.8.2008 for rendition of Gazals between M/s Divya Ahuja Gazal Group and the assessee. The ld. AR submitted that similar Agreements prevailed for the years in question, which contention was not controverted by the ld. DR. We have gone through this Agreement, a copy of which is available at page 2 onwards of the paper book. Clause 2 of the Agreement sets out obligations of M/s Divya Ahuja to render and perform Gazals during the week at ‘Pakwan Restaurant’ of the assessee at the timings given by the hotel. Clause 2.6 of the Agreement provides that: ‘Gazal group agrees to allow the hotel to use Gazal group’s name, photographs in primary activities, amplify the performances and play the same throughout the premises of the Hotel.’ There is a fixed sum payable by the assessee to Gazal group as compensation for performing at the Pakwan Restaurant. Under such circumstances, the question arises as to whether the payment made to Gazal group requires deduction of tax at source u/s 194J of the Act, as has been held by the authorities below.
6.3. Section 194J requires deduction of tax at source from ‘fees for professional or technical services.’ Sub-section (1) of section 194J provides that : `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 professional services, or (b) fees for technical services or …. (c) royalty, or… shall, …… deduct an amount equal to ten per cent of such sum as income-tax on income comprised therein’. The term ‘professional services’ as used in clause (a) of section 194J(1) has been defined in the Explanation as under :
`(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 as is notified by the Board for the purposes of section 44AA or of this section;’
6.4. On going through the prescription of ‘fees for professional services’, it emerges that the definition given in clause (a) of the Explanation is exhaustive and not inclusive. It is manifest that payment to Gazal group cannot be considered as a quid pro quo for rendering services in the carrying on of any legal, medical, engineering or architectural profession or profession of accountancy or technical consultancy or interior decoration or advertising. What remains for consideration is the last part of the definition of ‘Professional services’ being: ‘such other profession as is notified by the Board for the purposes of section 44AA or of this section.’ Section 44AA discusses about ‘any other profession as is notified by the Board in the official Gazette.’ Rule 6F of the Income-tax Rules, 1962 covers, inter alia, ‘film artist’, which term has been defined in clause (c) of the Explanation to Rule 6F(2) as under:-
“(c) “film 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; and
(xiii) a dress designer.”
6.5. A perusal of the definition of ‘film artist’ given in Rule 6F divulges that it refers to any person who is engaged in his professional capacity in the production of a cinematograph film whether or not produced by him in the capacity of an actor; a cameraman; a director, including an assistant director; a music director, including an assistant music director; an editor etc. also including `a singer’. No doubt `a singer’ is also included within the definition of a ‘film artist’ but, the condition precedent for such inclusion is that such a singer should be `engaged in his professional capacity in the production of a cinematograph film’. Unless `a singer’ is so `engaged in his professional capacity in the production of a cinematograph film’ whether or not produced by him, he cannot be considered as a ‘film artist’ for the purposes of Rule 6F and, in turn, section 194J of the Act.
6.6. While analyzing the Agreement between the assessee and Gazal group, we have noticed that there is no production of any cinematograph film during the performance by the Gazal group, which is simply a live event and can be amplified throughout the premises of the hotel. There is no clause in the Agreement which permits the assessee-hotel to shoot the performance given by the Gazal group and use it for any performance thereafter. Since Gazal group is giving simplicitor live performance, which is not even captured, what to talk of resulting into any production of cinematograph film, we hold that it cannot be considered to have rendered any ‘Professional services’ requiring deduction of tax at source u/s 194J of the Act from the payments made by the assessee to them. We, therefore, overturn the view taken by the authorities below in this regard and hold that the provisions of section 194J are not applicable. Ex conseqenti, the deduction of tax at source u/s 194C is in order. The assessee succeeds.
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