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Commissioner Of Income-Tax, Delhi-Xvii v. Prasar Bharti (Broadcasting Corpn. Of India) .
Factual and Procedural Background
Six appeals were filed by the Commissioner of Income Tax under Section 260A of the Income Tax Act, 1961, challenging a common order dated 21.4.2006 of the Income Tax Appellate Tribunal (ITAT), Delhi Bench, which had allowed appeals (ITA Nos. 3786 to 3791.Del/2005) filed by the respondent, Prasar Bharti (Broadcasting Corporation of India). The ITAT order had also allowed another appeal of the respondent (TDS No. 166.Del/2003 for Assessment Years 1995-1996 to 2001-2002), but no appeal appears to have been filed in respect of that matter.
The respondent is described in the memorandum of appeal as a government body controlling and managing Doordarshan channels. Because the respondent is a government body, the appellant was required to obtain permission from the Committee on Disputes (COD) to litigate, per the Supreme Court decision in Oil & Natural Gas Commission v. Collector of Central Excise (1994). The memorandum did not state whether such permission had been obtained; counsel for the appellant indicated he would seek instructions, but the Court declined to grant an adjournment and proceeded.
On the merits, the respondent (assessee) had been making payments to outside television programme producers for "commissioned" programmes and had deducted tax at source under Section 194C of the Act, treating those payments as contract payments. The Revenue contended that television programme producers should be treated as rendering professional/technical services and that tax should have been deducted under Section 194J. The Assistant Commissioner of Income Tax (ACIT) issued an order on 29.11.2002 under Sections 201/201(1A) holding the assessee liable as an assessee in default for short deduction (including interest) amounting to Rs. 6.40 crores. The Commissioner of Income Tax (Appeals) dismissed the assessee's appeal, but the ITAT allowed the assessee's appeals in the impugned order which gave rise to the present appeals by the Commissioner.
Legal Issues Presented
- Whether payments made to television programme producers for production of programmes for broadcasting or telecasting are subject to tax deduction at source under Section 194C (contractual "work" as expanded by Explanation III) or under Section 194J (fees for professional or technical services).
- Whether these appeals involve any substantial question of law.
Arguments of the Parties
Appellant / Revenue's Arguments
- The production of television programmes involves the utilisation of professional and technical services; several technical aspects of production attract Explanation (a) to Section 194J (definition of "professional services").
- Accordingly, payments to programme producers should be treated as fees for professional/technical services and subjected to TDS under Section 194J (at a higher rate), as the ACIT and the CIT(A) held.
- Procedural point: because the respondent is a government body, permission from the Committee on Disputes (COD) was required to litigate; the memorandum did not state whether such permission was obtained.
Respondent / Assessee's Arguments
- The respondent treated payments to outside producers as contract payments and deducted tax at source under Section 194C.
- Explanation III to Section 194C (inserted by the Finance Act, 1995, effective 1.7.1995) explicitly includes "broadcasting and telecasting including production of programmes for such broadcasting or telecasting" within the meaning of "work", and therefore such payments fall squarely within Section 194C.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Oil & Natural Gas Commission v. Collector Of Central Excise, (1994) 116 CTR (SC) 643 | Requirement that a government body obtain permission from the Committee on Disputes (COD) to litigate. | The memorandum of appeal did not state whether COD permission had been obtained; the Court noted the requirement but, because it was not inclined to entertain the appeals, did not grant an adjournment for the appellant to obtain instructions on that point. |
Court's Reasoning and Analysis
The core factual-legal question was whether Section 194C or Section 194J applied to payments for television programme production. The Court examined the statutory scheme introduced by the Finance Act, 1995, which (1) inserted Explanation III to Section 194C to expressly include "broadcasting and telecasting including production of programmes for such broadcasting or telecasting" within "work", and (2) simultaneously inserted Section 194J providing for deduction on payment of fees for professional or technical services.
The Court accepted the ITAT's reasoning that where, on the same date, a specific provision (Explanation III to Section 194C) is introduced to cover an activity and a separate, more general provision (Section 194J) is also introduced, the specific provision should be given effect to as reflecting the Legislature's intention. Applying that principle, the Court concluded that payments for production of television programmes fall within the specific scope of Section 194C (by virtue of Explanation III) and that Revenue could not properly resort to the more general language of Section 194J to tax those payments as fees for professional/technical services.
The Court considered the Revenue's contention that production involves professional or technical services (per the explanation to Section 194J) but rejected it on the basis that the specific inclusion in Explanation III of Section 194C precludes treating the same payments under the general provision. The Court found no infirmity in the ITAT's view and affirmed the ITAT's decision.
Holding and Implications
APPEALS DISMISSED
Holding: The Court affirmed the ITAT's decision that payments made for production of programmes for broadcasting or telecasting fall within Section 194C (Explanation III) and not under Section 194J, and therefore dismissed the appeals. The Court also held that these appeals do not involve any substantial question of law. The appeals were dismissed with no order as to costs.
Implications: The direct effect is that the ITAT's view is upheld and the assessee's treatment of such payments under Section 194C is sustained for the matters before the Court. The opinion does not discuss broader implications beyond the immediate effect on the parties and states that the appeals do not raise any substantial question of law.
2. These six appeals by the Commissioner of Income Tax, under Section 260A of the Income Tax Act, 1961 (‘Act’) are directed against the common order dated 21.4.2006 passed by the Income Tax Appellate Tribunal (‘ITAT’), Delhi Bench allowing the appeals (ITA Nos. 3786 to 3791.Del/2005) filed by the respondent, Prasar Bharti (Broadcasting Corporation of India). While the impugned order dated 21.4.2006 also allowed another appeal of the respondent being TDS No. 166.Del/2003 (for the Assessment Years 1995-1996 to 2001-2002), no appeal appears to have been filed in respect of the said matter.
3. At the outset we notice that in the memorandum of appeal it is stated that the respondent ‘is a Government body which controls and manages various Doordarshan Channels.’ The appellant is, therefore, required to obtain permission from the Committee on Disputes (COD) to litigate, in terms of the judgment of the Hon'ble Supreme Court in Oil and Oil & Natural Gas Commission v. Collector Of Central Excise, (1994) 116 CTR (SC) 643. The memorandum of appeal does not state whether such permission has been applied for and obtained. Mr. Jolly, learned Counsel for the appellant, submits that he will have to seek instructions in this regard. However, since we are not inclined to entertain these appeals, we do not think it necessary to grant an adjournment for this purpose.
4. The respondent assessee was making certain payments to outside producers for programmes under ‘commissioned category’ for which the assessee had been deducting tax at source under Section 194C, by treating them as contract payments. The stand of the Revenue was that television programme producers should be treated as professional/technical persons and that payments made to them should be subjected to deduction of tax at source under Section 194J of the Act. The rate of deduction of tax at source under Section 194C is 2 per cent under, whereas under Section 194J it is 5 per cent. An order was made by the Assistant Commissioner of Income Tax (ACIT) on 29.11.2002 under Sections 201/201(1A) of the Act holding that the assessee is liable to be treated as an assessee in default and that the short deduction including interest for the relevant financial years worked out to Rs. 6.40 crores. The assessee's appeal was dismissed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The appeals preferred thereafter by the assessee were allowed by the ITAT by the impugned order.
5. 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 per cent of such payment in case of advertising and two per cent in all other cases.
6. By the Finance Act, 1995, with effect from 1.7.1995, Explanation III was inserted in Section 194C 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.”
7. Therefore, in terms of Clause (b) of Explanation III to Section 194C payment made towards a contract concerning ‘broadcasting and telecasting include production of programmes for such broadcasting or telecasting’ would be covered by Section 194C.
8. Even while Finance Act, 1995 introduced the aforesaid Explanation III to Section 194C, it simultaneously inserted Section 194(J) in the Act which provided 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 relevant for the present purpose reads as under:
“Fees for professional or technical services.—
194J. (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 professional services, or
(b) fees for technical services, shall, at the time of credit of such sum to the account of the payee or 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 as income-tax on income comprised therein.”
9. The explanation to Section 194J, relevant for the present purpose, reads as under:
“Explanation.—For the purposes 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 as is notified by the Board for the purposes of Section 44AA or of this section.”
10. The question before the ITAT, therefore, was whether on the facts of the present case, the Section 194C or 194J would be attracted. The ITAT has, and in our view correctly, held that once there is a specific provision introduced by way of an Explanation to Section 194(C), to bring within its ambit the contractual work concerning ‘broadcasting and telecasting’, the Revenue cannot resort to Section 194J which is in more general terms.
11. Mr. R.D Jolly, the learned Counsel for the appellant submits that the making of the programmes for television involves the utilisation of professional services and that there are several technical aspects of producing such programmes which will attract the explanation (a) to Section 194J. He, therefore, submits that the view expressed by the ACIT and CIT(A) should be accepted and that of the ITAT, which holds to the contrary rejected.
12. We are unable to agree with this submission. We observe that Explanation HI, which was introduced simultaneously with Section 194J, is very specific in its application to not only broadcasting and telecasting but also include ‘production of programmes for such broadcasting and telecasting’. If, on the same date, two provisions are introduced in the Act, one specific to the activity sought to be taxed and the other in more general terms, resort must be had to the specific provision which manifests the intention of the Legislature. It is not, therefore, possible to accept the contention of the Revenue that programmes produced for television, including ‘commissioned programmes’, will fall outside the realm of Section 194C Explanation III of the Act. We find no infirmity in the view taken by the ITAT which we hereby affirm.
13. In this view of the matter we hold that these appeals do not involve any substantial question of law. The appeals are accordingly dismissed with no order as to costs.
Appeals dismissed.
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