Payments made by 'Yash Raj Films' for making copies of film negative weren't technical services

Facts:

a) Assessee-company (i.e. Yash Raj Films) made payments to Adlab for making copies of prints for the films.

b) Assessing Officer (AO) noticed that the assessee had not made deducted TDS as per the provision of section 194J in respect of payments made to Adlabs Ltd.

c) Assessee's stand was that the work performed by Ablab did not involve any technical or professional services, therefore payments were covered under section 194C.

d) On appeal, CIT(A) granted relief to the assessee. Aggrieved by the order of CIT, revenue filed appeal before Tribunal.

Tribunal held in favour of assessee as under:

1) The contract was made for taking out multiple prints of the final negative which was given to Adlab. Such jobs or work contracts of making several prints of the same final negative did not involve any technical or professional services.

2) In view of above facts, CIT (A) was justified in holding that assessee has rightly deducted TDS on the payments made to Adlabs, for supplying copies of final negative as per the provisions of section 194C. - [2016] 73 taxmann.com 73 (Mumbai - Trib.)

Payment made to Automobile dealers for servicing of vehicles under warranty would attract sec. 194C TDS

Facts:

1) The assessee-company, manufacturing and selling vehicles, was charging customers for services in nature of repair and maintenance of vehicles to be undertaken on reaching different milestones.

2) Under manufacturer-dealer contract, assessee's authorised dealers were obliged to provide such services to vehicles that satisfied conditions of warranty (qua services), against service coupons issued by assessee to customers.

3) The assessee allowed payment/credit to authorised dealers on presentation of service coupons received by them from vehicle owners on providing services. The Assessing Officer disallowed such payments made to dealers for non-deduction of tax at source under section 194C.

The ITAT held as under:

Roaming facility doesn’t require human intervention; roaming charges paid by Telecos aren’t ‘FTS’

The provision of roaming services do not require any human intervention and accordingly, cannot be construed as technical services. Thus, payment of roaming charges by telephone operator does not fall under the ambit of TDS provisions under section 194J.

The disputed issue was:

Whether sum paid by telecom operator towards roaming facility provided by other telecom operators would be liable to TDS either under section 194J or section 194C or section 194-I?

The Tribunal held as under:

a)    Human intervention is required only for installation, setting up, repairing, servicing, maintenance, capacity augmentation of the network. When one of the subscribers in the assessee's circle travels to the jurisdiction of another circle, the call gets connected automatically without any human intervention and it is for this, the roaming charges is paid by the assessee to the Visiting Operator for providing this service. Hence payment of roaming charges cannot be construed as technical services, thus, it does not fall under the ambit of TDS provisions u/s 194J.

b)    The word 'work' in section 194C referred to and comprehends only the activities of workman. It is the physical force which has comprehended in the word 'work'. Since the payment of roaming charges does not require any human intervention. Hence, the provisions of section 194C are not applicable to the impugned issue.

c)  The assessee cannot be said to have used the equipment which is involved in providing the roaming facility. The assessee collects the roaming charges from its subscriber and passes it on to the other service provider. Therefore, the payment of roaming charges by the assessee to other service provider cannot be considered as rent within the meaning of section 194I of the Act. - Vodafone East Ltd. v. Ad. CIT [2015] 61 taxmann.com 263 (Kolkata - Trib.)

Landing and parking charges for Aircrafts are not for ‘use of land’; attract Sec. 194C TDS

Landing and parking charges payable by Airlines in respect of aircrafts are not for the ‘use of land’ per se but the charges are in respect of number of facilities provided by the Airport Authority of India. Thus, landing and parking charges payable by Airlines would attract TDS under Section 194C and not under Section 194-I.

     Facts:

a)  The issue disputed in the instant case was as to whether landing and parking charges paid by Airlines would attract TDS under Section 194-I or under Section 194C of the income-tax Act (‘the Act’)?

b)  The High Court of Delhi in case of CIT v. Japan Airlines Co. Ltd. [2009] 180 Taxman 188 (Delhi) has held that landing and parking charges would attract TDS under Section 194-I of the Act.

c)  However, the Madras High Court in case of CIT v. Singapore Airlines Ltd. [2012] 24 taxmann.com 200 (Madras) has taken a contrary view that landing and parking charges would attract TDS under Section 194C. The two judgments are in conflict with each other.It has to be determined as to which judgment should be allowed to hold the field?

The Supreme Court held as under:

1)    In the instant case, the Airlines are allowed to land and take-off their Aircrafts at Indira Gandhi International Airport (‘IGIA’) for which landing fee is charged. Likewise, they are allowed to park their Aircrafts at IGIA for which parking fee is charged. It is done under an agreement and/or arrangement with the Airport Authority of India (‘AAI’). The moot question is as to whether landing and take-off facilities on the one hand and parking facility on the other hand, would mean ‘use of land’.

2)    In the opinion of the Delhi High Court (Supra) “when the wheels of an aircraft coming into an airport touch the surface of the airfield, use of the land of the airport immediately begins”. Similarly, for parking the aircraft in that airport, there is use of the land. This is the basic, rather, the only reason given by the Delhi High Court in support of its conclusion that landing and parking charges would attract TDS under Section 194-I.

3)    The Madras High Court (Supra) examined the issue keeping wider perspective in mind thereby encompassing the utilization of the airport providing the facility of landing and take-off of the airplanes and also parking facility. After taken into consideration these aspects, the Madras High Court came to the conclusion that the facility was not of ‘use of land’ per se but the charges for landing and taking-off these airlines were in respect of number of facilities provided by the AAI which were to be necessarily provided in compliance with the various international protocol. The charges, therefore, were not for land usage or area allotted simpliciter. These were the charges for various services provided.

4)    We are convinced that the charges fixed by the AAI for landing and taking-off services as well as for parking of aircrafts were not for the ‘use of land’. That would be too simplistic an approach, ignoring other relevant details which would amply demonstrate that these charges were for services and facilities offered in connection with the aircraft operation at the airport. These services included providing of air traffic services, safety services, aeronautical communication facilities, installation and maintenance of navigational aids and meteorological services at the airport.

5)    Thus, paymentsfor landing and parking charges wereliable for TDS under Section 194C and not under Section 194-I of the Act.The view taken by the Madras High Court (Supra) was correct view and the judgment of the Delhi High Court (Supra)was to be over-ruled. -Japan Airlines Co. Ltd. v. CIT [2015] 60 taxmann.com 71 (SC)

Perpetual transfer of satellite rights of a film for 99 years is a sale; excluded from definition of ‘royalty’

Transfer of satellite right to assessee under an agreement for a period of 99 years is a sale and, therefore, excluded from definition of 'royalty' under clause (5) of Explanation 2 to section 9(1)(vi).

Facts:

a) The assessee was dealings in film satellite rights by taking them on assignment basis and reassigning to channels.

b) He did not deduct tax at source on purchase of copyright of film as he was of the view that such purchase was neither covered under section 194J nor under section 194C. However, the Assessing Officer held that the payments debited as purchase warranted TDS under section 194J and worked out disallowance under section 40(a)(ia).

c) The CIT(A) allowed the appeal of assessee by holding that the consideration paid did not attract section 194J.

d) On appeal, the Tribunal held that the payments made would fall within the definition of 'royalty' and as the assessee had failed to deduct tax under Section 194J rigour of section 40(a)(i) stood attracted. The aggrieved assessee filed the instant appeal.

The High Court held in favour of assessee as under:

1) Perusal of the facts and circumstances of the instant case and case of Mrs. K. Bhagyalakshmi v Dy.CIT [2013] 40 taxmann.com 350 (Madras) would show that the substantial question of law raised were the one and same in both the cases.

2) The earlier division bench of this court in case of Mrs. K. Bhagyalakshmi (supra) after considering the perpetual transfer of rights for a period of 99 years [in terms of Section 26 of Copy Right Act and also the definition under clause (5) to Explanation 2 to section 9(1)] held that it was a sale and, therefore, excludible from definition of royalty.

3) Following the decision rendered in the case of Mrs. K. Bagyalakshmi (supra) it was to be held that transfer of satellite right to assessee under an agreement for a period of 99 years would be a sale and excludible from definition of 'royalty'. Therefore, the Tribunal had erred in concluding that the payment made by the assessee was royalty and not sale. - S.P.Alaguvel v. DY. CIT [2014] 52 taxmann.com 231 (Madras)