Tuesday, April 9, 2013

Sec. 194J not attracted on payments made to film actors for modeling as it isn’t connected with acting in film

Payments for modeling services made to a film actor are not connected with production of cinematograph film. Therefore, sec. 194J not attracted on payments made to film actor for modeling services

In the instant case, the following issue came for consideration of Mumbai ITAT:

Whether payments made to actor-model for rendering modeling services are outside the scope of section 194J of the Act?

The Tribunal held in favour of assessee as under:

1) Professional services include profession notified under section 44AA, which defines film artist, to mean, inter alia, any person engaged in his professional capacity in the production of cinematograph film as an actor;

2) Total earning of a film actor for services rendered by him isn’t liable to tax deduction under sec. 194J. The payments attracting TDS under 194J are services specific and not person specific;

3) Modeling is display of merchandise. Acting  on the other hand, means,  to act in play or film i.e. to portray a role authored by a story-writer with different purposes and objects and not to display merchandise to boost sales of a  manufacturer/trader of products or services; and

4) Therefore, as modeling payments have nothing to do with acting in a cinematograph film, no TDS liability attracts under section 194J on payments made to a film actor for modeling services - Kodak India (P.) Ltd. v. Dy.CIT [2013] 32 taxmann.com 88 (Mumbai - Trib.)

Cremation services are covered in negative list

Cremation services provided by a crematorium operated by any assessee, including a local authority, are covered under negative list under section 66D(q)

In the instant case, the assessee, a charitable association, was operating a crematorium in the town of Halle. It made an application to the Department, seeking information as to the tax reference number under which the last notice of tax assessment was issued to Lutherstadt Eisleben, a local authority, which also operated a crematorium. The Department denied any such information. So, the moot question that arose for consideration of Court was:

Whether a private taxable person which is in competition with a body governed by public law may rely on the second sub-paragraph of Article 4(5) of the Sixth Directive in order to assert that its rights have been infringed upon by the treatment of that body as a non-taxable person or when under taxed?

European Court of Justice held as under

1) Second sub-paragraph of Article 4(5) of the Sixth Directive is intended to ensure compliance with the principle of neutrality of the tax, which, in particular, precludes treating similar supplies of services, which are in competition with each other, differently for VAT purposes;

2) That provision contains derogation from the rule of treatment of bodies governed by public law as non-taxable persons in respect of the activities or transactions engaged in by them as public authorities, where such treatment would lead to significant distortions of competition;

3) Consequently, if the exemption of the economic activity in question from VAT was to give rise to distortions of competition within the meaning of the second sub-paragraph of Article 4(5) of the Sixth Directive, the operation of a crematorium by Lutherstadt Eisleben would be taxable by virtue of same provision;

4) It is for the national Court to determine whether there are economic circumstances which justify, in particular case, an exception to the rule of the treatment of bodies governed by public law as non-taxable persons;

5) Consequently, a private person who is in competition with a body governed by public law and alleges that that body is, in respect of the activities in which it engages in as a public authority, treated as a non-taxable person for VAT purposes or is under taxed is entitled to rely, before the national court, on the basis of second sub-paragraph of Article 4(5) of the Sixth Directive in proceedings, such as the main proceedings, between a private person and the national tax authorities -FINANZAMT EISLEBEN VS. FEUERBESTATTUNGSVEREIN HALLE EV [2013] 30 TAXMANN.COM 226 (ECJ) 

Soul and substance of ‘charity’ is missing in IPL matches; Registration of TN Cricket Association revoked

Soul and substance of ‘charity’ is missing in IPL matches; Registration of TN Cricket Association revoked

IPL is commercial venture to maximize revenues from cricket. Registration of cricket associations conducting IPL matches are liable to be cancelled under section 12AA(3) by invoking the first proviso to section 2(15)

In the instant case, the following issues came for consideration of Chennai ITAT:

a) Whether IPL matches come within conceptual definition of charity vis-a-vis activity of general public utility under section 2(15)?

b) Whether registration of Tamil Nadu Cricket Association conducting IPL matches could be cancelled under section 12AA?

The Tribunal held in favour of revenue as under:

1) The phrase “Advancement of an object of general public utility” used in  the inclusive definition of ‘charitable purpose’  under section 2(15) cannot be divorced from the inherent concept of ‘charitable purpose’;

2) The soul and substance of ‘charity’ is activity carried on by kind and sympathetic people for the help of those in need. None of the activities of an assessee can be considered as charitable purpose if it is devoid of soul and substance of charity;

3) IPL matches are commercial ventures. Nothing ‘charitable’ is there in conducting IPL matches as the soul and substance of charity is missing. Cost of tickets is very high, laymen cannot buy them;

4) Cricket associations are oriented towards maximizing revenue from high ticket prices and advertisements. Free tickets aren’t provided to so-called slum dogs and other poor people to watch IPL.  Instead these are issued to VIPs and dignitaries;

5) IPL teams are owned by different sponsors including industrial houses and film stars. They select players on auction basis and quote highest price for the best players. Capital invested by owners of teams is redeemed by advertisement revenue;

6) By no stretch of imagination IPL matches can be called as activities of public utility carried on by assessee. IPL cricket matches, celebrity cricket matches (involving film stars) do not have any element of public utility. They are either after fame or money;

7) IPL matches are further garnished by cheer girls and fanfare. These are marketing strategies by which cricket associations are trying to sell the game of cricket at the highest amount that could be collected;

8) Thus, registration of Tamil  Nadu Cricket Association was cancelled as IPL matches do not come within the ambit of inclusive definition of charitable purpose under section 2(15) - Tamil Nadu Cricket Association v. DIT(Exemptions) [2013] 32 taxmann.com 50 (Chennai - Trib.)