These six appeals by the assessee are directed against the orders of the CIT(A) for Assessment years 2002-03,2003-04 and 2004-05. They are being disposed of by this common order for the sake of convenience.
In all these three appeals the assessee has raised several grounds.
However, they are all against the order of the assessing officer under section 201 treating the assessee to be in default under section 201(1) for its failure to deduct the tax from the payment to Distributor and the interest charged under section 201(1A). The amount of TDS under section 201 (1) and interest under section 201(1A) in respective years are as under :- At the time of hearing before us, the learned counsel for the assessee argued at length. His arguments can be summarized as under (i) That the assessee has given on hire the cinema on weekly basis to the Distributor and therefore, the assessee has not made any payment but on the other hand, the assessee has received the amount for hiring of cinema. That the consideration for hiring of the cinema was on the basis of sharing of the receipt with the Distributor. Therefore, when no payment is made by the assessee, the question of deduction of any tax by the assessee does not arise. (ii) That the agreement for the distribution of cinema was not in the nature of work contract as envisaged by section 194C of the Act and therefore, the assessee is not liable to deduct the tax in support of this contention he relied upon the decision of the ITAT, Ahmedabad Bench "C" in the case of ITO v.City Gold Entertainment (P) Ltd. (ITA Nos. 3745 to 3747 (Ahd) of 2004) and ITAT SMC Bench in the case of Asstt. CIT v. Essem Entertainment (P) Ltd. (IT Appeal Nos.
The learned Departmental Representative on the other hand, relied upon the orders of the authorities below and he submitted that the assessee is exhibiting films and collecting the receipt of exhibition of films.
Part of the receipt collected by the assessee is paid to the Distributor and therefore, the assessee was liable to deduct the tax on such payment made to the Distributor. The assessee is not correct in his contention that no amount was paid by the assessee to the Distributor but on the other hand, the assessee received the money from hiring of the cinema. In fact the assessee collected the money from exhibition of films and part of which was paid to the Distributor. He, therefore, submitted that the assessing officer rightly held that the assessee was liable to deduct the tax at source on the payment to the Distributor.
We have carefully considered the arguments of both the sides and perused the material placed before us. Section 194C and Explanation III thereto read us under :- "194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and- (c) any corporation established by or under a Central, State or Provincial Act; or (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or (i) any University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956); or shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to- Explanation III.-For the purposes of this section, the expression "work" shall also include- (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; From the above, it is clear that section 194C would be applicable if any person is making payment of any sum to any resident for carrying out any work. In the case under consideration before us the assessee is exhibiting the films in the cinema owned by it. The receipt from the exhibition of films is shared between the assessee and the Distributor on the terms agreed between them. Therefore, the question is whether the amount collected by the assessee on exhibition of films and part of which is shared with the Distributor, is covered within the ambit of definition of "contract for carrying out any work". In our opinion, there is no work carried out by the Distributor. The Distributor is getting his share because he has acquired rights of the distribution of the films in particular area. No work is carried out by the Distributor for which the payment is made.
Moreover, Explanation (iii) to section 194C defines the word "work". In such definition of "work" also the exhibition of films does not fall.
it was vehemently contended by the learned Departmental Representative that the above definition of .work" is only inclusive definition and therefore, even if the distribution of film is not mentioned in the definition, the same be covered by the definition. We are unable to agree with this contention of the learned Departmental Representative because the Legislature has included the word 'broadcasting" and "telecasting" and production of programmes. If the Legislature wanted to include the distribution of film they could have included the same along with broadcasting and telecasting. We find that similar view is taken by the SMC Bench of ITAT in the case of Essem Entertainment (P) Ltd. (supra) and also by the ITAT, Ahmedabad Bench "C" in the case of City Gold Entertainment (P.) Ltd. (supra) wherein it is held as under -- "8. We have considered the submissions of Ld. Departmental Representative in the light of material available on record. There is no material on record to raise any doubt about the facts mentioned in the order of the CIT(A) . Therefore, we proceed on the basis that the findings of the learned CIT(A) on facts are undisputed. Main basis for the assessing officer for holding that the assessee was liable to deduct at source under section 194C of the Act is the decision of the Hon'ble Supreme Courtin the case of ACC Ltd.(supra) and also Circular No. 681 of CBDT. We found that the Hon'ble jurisdictional High Court in the case of All Gujarat Federation of Tax Consultants v. CBDT (supra) has considered the decision of the Hon'ble Supreme Court in the case of ACC Ltd. (supra) as well as Circular No. 68 1. After considering the decision of the Hon'ble Supreme Court Their Lordships have quashed the Circular No. 681 issued by the CBDT. Therefore, the assessing officer was wrong in taking cognizance of circular which was purported to be given by the CBDT in accordance with the decision of Hon'ble Supreme Court in the case of Appellate Asstt. Commissioner Ltd The ratio of the decision of the Hon'ble jurisdictional High Court in the case of All Gujarat Federation of Tax Consultants v. CBDT (supra) is that the intendment for professional services or service simplicitor which do not involve contract for carrying out any work itself or a contract for a labour for carrying out such services are not within the purview of section 194C of the Act as it existed at the relevant time. As mentioned earlier, the activity carried on by the assessee is exhibition of film in its theatre which has been supplied by the distributor. The said activity cannot fall within the category of "work" within the ambit of section 194C, as per the decision of jurisdictional High Court in the case of All Gujarat Federation of Tax Consultants v. CBDT (supra). Now the question will remain that whether such activity falls under the Explanation III to section 194C. The Explanation 171 reads as under: 'Explanation III.-For the purposes of this section, the expression "work" shall also include- (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; 9. The abovementioned Explanation has been inserted by the Finance Act, 1994 w.e.f 1-7-1995. The exhibition of film in theatre is not an activity expressly covered by the Explanation III. Anything which is not expressly covered under the category of work cannot be regarded as "work" by extended meaning of work as described in section 194C of the Act. The following observation of the Hon'ble Gujarat High Court from the decision in the case of All Gujarat Federation of Tax Consultants v. CBDT (supra) (Page Nos. 292-293) support this view.' 'In our conclusion, we are further strengthened by the fact that the Legislature intended to make a separate provision for bringing the service contract and professional service within the purview of the provision relating to tax deduction at source, by the Finance Bill, 1987 which has been quoted above. Once again the Finance Bill, 1995, a similar insertion has been proposed. Had the service rendered by the professionals like, Advocates, chartered accountants, engineers, physicians, architects etc. already been within the scope and ambit of section 194C, the Legislature would not have resorted to this exercise.
It cannot be assumed that the Legislature uses or indulges in on exercise for bringing something by way of surplus. Likewise, it may be noticed that the profession/ business of advertising, broadcasting and telecasting including production of programmes for such broadcasting or telecasting, carriage of goods by railway etc. which are being now been designed to be inserted to be given effect with effect from July 1, 1995. In view of this clear intention of including being effective from a prospective date, it is clearly by indicate of the fact that the proposed amendment is not brought by way of clarification of any existing professions but is intended to bring substantial change in the existing provision. We may not be taken to have construed the existing provision with the aid of the proposed amendment, but we have referred to them only by way of strengthening the conclusion to which we have arrived independently of it.' 10. Therefore, there is no possibility of any assumption that Legislature uses or indulges in exercise for bringing something by way of surplus. The activity mentioned in the Explanation III only can be considered to be as a "work" within the extended meaning of "work". The exhibition of film in the theatre has not been described in the above Explanation, therefore also, there is no case of the revenue, by which it can be held that the assessee was required to deduct tax at source from the payments made by it to the distributor of films. In view of above discussion on facts and laws, we find no merits in the appeals filed by the department and the same are dismissed.
We entirely agree with the above finding of the Tribunal, Ahmedabad Bench "C". No contrary decision is brought to our knowledge. In view of above, we hold that the assessee was not required to deduct TDS on sharing of receipt from the exhibition of films with the Distributor.
Accordingly, we quash the orders passed under section 201(1) and 201(IA).
In these appeals the only common ground raised by the assessee is against the levy of penalty under section 271(1)(c)-C amounting to Rs. 1,93,160, Rs. 1,23, 100 and Rs. 1, 19,254 for assessment years 2002-03, 2003-04 and 2004-05 respectively. The assessing officer has levied the penalty for failure of the assessee to deduct the tax on the payment to Distributor. While considering the assessee's appeals against the orders under section 201, we have already held that the assessee was not required to deduct the tax on the payment -of Distributor's share by the assessee. Since we have already cancelled the orders of assessing officer under section 201(1)/201(1A), the penalty based upon such order cannot be sustained. The same are also cancelled.