[2013] 33 taxmann.com 496 (Article)
A model can't be an actor - ITAT reaffirms it but in context of section 194J
Introduction
1. The scope of rule 6F with reference to section 44AA(3) of the Income-tax Act, 1961, which defines a "film artist" and includes an actor, has been analyzed so as to consider the possibility of including the services of a stunt artist and a model, who is engaged in the promotion of products, etc., for the purpose of sections
44AA and 194J to make it liable for tax deduction at the rate prescribed under section 194J. A few of the relevant judgments have been referred to.
Facts of the case of Kodak India (P.) Ltd. v. Dy. CIT [2013] 32 taxmann.com 88 (Mum. - Trib.)
2. The assessee, a subsidiary company of Kodak, Rochester (USA), was engaged in the business of manufacturing and trading of cameras and dealing in photographic films in and outside India. The Assessing Officer found the assessee to be non-compliant of provisions of TDS as prescribed by the Income-tax Act, 1961, by way of making shorter deduction of TDS on payment made to Katrina Kaif ("Katrina"), a film actor, for acting as a model for the promotional material created by Kodak, including posing for photographs or promotion of products of Kodak. According to the A.O., such payment made to Katrina was well within the ambit of Explanation (a) to section 194J of the Act as against the treatment given by the assessee resulting in tax deduction at a lower rate under section 194C of the Act. Accordingly, demand was raised by the A.O. The assessee, therefore, preferred an appeal before the CIT(A). However, the CIT(A), found himself in agreement with the opinion formed by the A.O. and, thus, affirmed the order of the latter.
AR's arguments before the ITAT
3. The Ld. Counsel for the assessee informed about the tripartite agreement that was entered into between the assessee, Katrina and Matrix Entertainment Consultant Pvt. Ltd. ("Matrix India"), which was working for Katrina. Further, it was stated that according to the agreement, the consideration for the services to be provided by Katrina, i.e., acting as model for all promotional materials created by Kodak was payable to Matrix India and was subject to TDS on behalf of Katrina. Explanation (a)to section 194J, which defines the meaning of "Professional Services", was also stated as not covering the services of a model. In addition, notification of the CBDT, issued with regard to section 44AA mentioning the list of professionals included the services of a film artist. Moreover, the meaning of a film artist was also given in another notification to mean any person engaged in professional capacity in the production of cinematography film whether produced by him or other person as an actor, cameraman, director including assistant director, music director including assistant music director, dance director including assistant dance director, an editor, a singer, a lyricist, a story writer, a screenplay writer, a dialogue writer and a dress designer. Above all, notification, dated August 21, 2008, which was issued for the purpose of section 194J, Explanation (a) of the Act expressly provided that modelling was not a profession for this purpose.
4. Cases referred to by AR
4.1 Dy. CIT v. Movies Stunt Artists Association [2006] 6 SOT 204 (Mum.) - In this case it was observed that stunt artist was not included in the Notification issued for the purpose of section 44AA. Also the Board was never prevented or restrained to include a stunt artist along with others who were engaged in their professional capacity in the production of a cinematographic film. Thus, neither a stunt artist is covered by the notification nor it is provided anywhere that an actor shall include a stunt artist. So, it is very unlikely to treat a stunt artist as a person covered therein. Accordingly, it was held that a stunt artist is not an actor so as to be treated as a professional.
4.2 EMC v. ITO [2010] 37 SOT 31 (Mum.) - In this case related to the event management services, it was ruled by the Tribunal thatwhen photography and artwork are done otherwise and not in relation to the production of cinematographic film, such services shall come within the purview of section 194C only and not under section 194J of the Act.
4.3 CIT v. Vijaya Bank [2006] 285 ITR 97/[2005] 149 Taxman 674 (Kar.) - This case was referred to substantiate that when the definition of a word begins with the word "means", such definition is exhaustive in nature and, therefore, the meaning which is provided therein only will have to be considered and no other meaning can be assigned to it.
Based on above judicial precedents AR contended that when the notification as well as the definition of the professional services provided by the Explanation to section 194J, use the expression "means", no other meaning can be assigned or added to them.
DR's arguments before the ITAT
5. The Ld. DR, argued that as modelling is a part of acting, the services provided by a model are to be treated at par with the services rendered by an actor. When an actor is engaged in rendering "Professional Services" and is covered by the purview of section 194J and is liable to TDS the services of a model should also fall within the boundaries of the same section.
5.1 Cases that ought to have been referred by DR - As far as the reliance placed by the AR in the case of Movies Stunt Artists Association (supra) is concerned, the DR could have defended the same to some extent by referring to the judgment given in the case of Seaford Court Estates Ltd. v. Asher[1949] 2 All E.R. 155 which supported the fact that the Legislature must be given the effect to in its intent. Moreover, to achieve this objective, many times it becomes necessary to go beyond the literal meaning of the provisions of an Act or statute and the question of interpretation gains much more importance in those cases. To be more precise, in such cases the intention of the Legislature or statute and facts and circumstances of the case are to be considered thoroughly, keeping a close eye on the literal meaning of the concerned provision, to avoid any kind of misunderstanding and the possibility of going in an absolute wrong direction. The relevant extract of the said judgment is reproduced below:
"The English language is not an instrument of mathematical precision. Our literature would be much poorer if it were. This is where the draftsmen of Acts of Parliament have often been unfairly criticised. A judge, believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have been guilty of some or other ambiguity. It would certainly save the judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament, and he must do this not only from the language of the statute, but also from a consideration of the social conditions which gave rise to it and of the mischief which it was passed to remedy, and then he must supplement the written word so as to give 'force and life' to the intention of the Legislature. ... A judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out? He must then do so as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases."
Detailed analysis of the case
6. The entire case is based on the question of law, namely, whether the services rendered by a model are to be treated as professional services to attract the provisions of section 194J of the Act? The said section, which is meant for requiring tax deduction in case of fee for professional services, technical services, royalty and any sum referred to in clause (va) of section 28, provides an Explanation (a) also to define the meaning of "Professional Services". For the sake of ready reference, the Explanation is reproduced below:
(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."
The definition is exhaustive in nature but with the power to notify more professions for the purpose of section 44AA and which once notified shall be covered by section 194J also, as it provides for the deduction of tax on fee paid for rendering professional services. Further, rule 6F with regard to section 44AA(3) which provides for the meaning of a "film artist" is also reproduced below:
"'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."
It would not be out of place to mention that a film artist is also notified as a professional. It is apparent that an actor engaged in his professional capacity in the production of a cinematographic film, whether produced by him or by any other person, is a professional and, therefore, the payments made to such an actor are covered by section 194J of the Act. To be more precise, only those actors who are engaged in the production of a cinematographic film are to be treated as professionals and other actors shall continue to be outside the purview of section 194J for their services, even though they are engaged in their professional capacity for a desired task which is other than the production of a cinematographic film. Hence, until and unless services are rendered in connection with the production of a cinematographic film, the services rendered by an actor shall not be treated as professional services for the limited purpose of section 194J, but shall fall within the ambit of section 194C.
Conclusion
7. In view of the above discussion, it was to be concluded that the list of film artist, being exhaustive, cannot be extended to include the others, for example, stunt artists, etc., although they are engaged in the production of a cinematographic film. Furthermore, it was also to be made clear that the taxable receipts under section 194J are service specific and not person specific, meaning thereby only those receipts are taxable under section 194J which are earned by a person for rendering services that are connected with the production of a cinematographic film and not all services that are rendered by him. In other words, receipts of one single person may be liable under section 194C as well as under section 194J and the nature of services rendered shall be the sole basis for deciding the charging section. As in the instant case, the services given were not connected with the eligible event, i.e., production of a cinematographic film but only with modelling, the assessee was required to deduct TDS as prescribed under section 194C only, resulting in allowing the appeal of the assessee.
In the opinion of the author, the view formed in the case of Seaford Court Estates Ltd. (supra)is not applicable in the case of a notification but only in the case of the Legislature and acts where the chances of not providing for a particular case or situation are on the higher side and that too unintentionally, i.e., even after the intention to cover a particular situation or case within the purview of the Act. However, in the case of a Notification, the concerned area in respect of which a notification is being issued, is much smaller when compared with an Act as a whole. Therefore, the DR would not have been justified in placing the reliance on, the said case, although the same might have sounded worth further arguments.
GAURAV PAHUJA
CA
A model can't be an actor - ITAT reaffirms it but in context of section 194J
Introduction
1. The scope of rule 6F with reference to section 44AA(3) of the Income-tax Act, 1961, which defines a "film artist" and includes an actor, has been analyzed so as to consider the possibility of including the services of a stunt artist and a model, who is engaged in the promotion of products, etc., for the purpose of sections
44AA and 194J to make it liable for tax deduction at the rate prescribed under section 194J. A few of the relevant judgments have been referred to.
Facts of the case of Kodak India (P.) Ltd. v. Dy. CIT [2013] 32 taxmann.com 88 (Mum. - Trib.)
2. The assessee, a subsidiary company of Kodak, Rochester (USA), was engaged in the business of manufacturing and trading of cameras and dealing in photographic films in and outside India. The Assessing Officer found the assessee to be non-compliant of provisions of TDS as prescribed by the Income-tax Act, 1961, by way of making shorter deduction of TDS on payment made to Katrina Kaif ("Katrina"), a film actor, for acting as a model for the promotional material created by Kodak, including posing for photographs or promotion of products of Kodak. According to the A.O., such payment made to Katrina was well within the ambit of Explanation (a) to section 194J of the Act as against the treatment given by the assessee resulting in tax deduction at a lower rate under section 194C of the Act. Accordingly, demand was raised by the A.O. The assessee, therefore, preferred an appeal before the CIT(A). However, the CIT(A), found himself in agreement with the opinion formed by the A.O. and, thus, affirmed the order of the latter.
AR's arguments before the ITAT
3. The Ld. Counsel for the assessee informed about the tripartite agreement that was entered into between the assessee, Katrina and Matrix Entertainment Consultant Pvt. Ltd. ("Matrix India"), which was working for Katrina. Further, it was stated that according to the agreement, the consideration for the services to be provided by Katrina, i.e., acting as model for all promotional materials created by Kodak was payable to Matrix India and was subject to TDS on behalf of Katrina. Explanation (a)to section 194J, which defines the meaning of "Professional Services", was also stated as not covering the services of a model. In addition, notification of the CBDT, issued with regard to section 44AA mentioning the list of professionals included the services of a film artist. Moreover, the meaning of a film artist was also given in another notification to mean any person engaged in professional capacity in the production of cinematography film whether produced by him or other person as an actor, cameraman, director including assistant director, music director including assistant music director, dance director including assistant dance director, an editor, a singer, a lyricist, a story writer, a screenplay writer, a dialogue writer and a dress designer. Above all, notification, dated August 21, 2008, which was issued for the purpose of section 194J, Explanation (a) of the Act expressly provided that modelling was not a profession for this purpose.
4. Cases referred to by AR
4.1 Dy. CIT v. Movies Stunt Artists Association [2006] 6 SOT 204 (Mum.) - In this case it was observed that stunt artist was not included in the Notification issued for the purpose of section 44AA. Also the Board was never prevented or restrained to include a stunt artist along with others who were engaged in their professional capacity in the production of a cinematographic film. Thus, neither a stunt artist is covered by the notification nor it is provided anywhere that an actor shall include a stunt artist. So, it is very unlikely to treat a stunt artist as a person covered therein. Accordingly, it was held that a stunt artist is not an actor so as to be treated as a professional.
4.2 EMC v. ITO [2010] 37 SOT 31 (Mum.) - In this case related to the event management services, it was ruled by the Tribunal thatwhen photography and artwork are done otherwise and not in relation to the production of cinematographic film, such services shall come within the purview of section 194C only and not under section 194J of the Act.
4.3 CIT v. Vijaya Bank [2006] 285 ITR 97/[2005] 149 Taxman 674 (Kar.) - This case was referred to substantiate that when the definition of a word begins with the word "means", such definition is exhaustive in nature and, therefore, the meaning which is provided therein only will have to be considered and no other meaning can be assigned to it.
Based on above judicial precedents AR contended that when the notification as well as the definition of the professional services provided by the Explanation to section 194J, use the expression "means", no other meaning can be assigned or added to them.
DR's arguments before the ITAT
5. The Ld. DR, argued that as modelling is a part of acting, the services provided by a model are to be treated at par with the services rendered by an actor. When an actor is engaged in rendering "Professional Services" and is covered by the purview of section 194J and is liable to TDS the services of a model should also fall within the boundaries of the same section.
5.1 Cases that ought to have been referred by DR - As far as the reliance placed by the AR in the case of Movies Stunt Artists Association (supra) is concerned, the DR could have defended the same to some extent by referring to the judgment given in the case of Seaford Court Estates Ltd. v. Asher[1949] 2 All E.R. 155 which supported the fact that the Legislature must be given the effect to in its intent. Moreover, to achieve this objective, many times it becomes necessary to go beyond the literal meaning of the provisions of an Act or statute and the question of interpretation gains much more importance in those cases. To be more precise, in such cases the intention of the Legislature or statute and facts and circumstances of the case are to be considered thoroughly, keeping a close eye on the literal meaning of the concerned provision, to avoid any kind of misunderstanding and the possibility of going in an absolute wrong direction. The relevant extract of the said judgment is reproduced below:
"The English language is not an instrument of mathematical precision. Our literature would be much poorer if it were. This is where the draftsmen of Acts of Parliament have often been unfairly criticised. A judge, believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have been guilty of some or other ambiguity. It would certainly save the judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament, and he must do this not only from the language of the statute, but also from a consideration of the social conditions which gave rise to it and of the mischief which it was passed to remedy, and then he must supplement the written word so as to give 'force and life' to the intention of the Legislature. ... A judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out? He must then do so as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases."
Detailed analysis of the case
6. The entire case is based on the question of law, namely, whether the services rendered by a model are to be treated as professional services to attract the provisions of section 194J of the Act? The said section, which is meant for requiring tax deduction in case of fee for professional services, technical services, royalty and any sum referred to in clause (va) of section 28, provides an Explanation (a) also to define the meaning of "Professional Services". For the sake of ready reference, the Explanation is reproduced below:
(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."
The definition is exhaustive in nature but with the power to notify more professions for the purpose of section 44AA and which once notified shall be covered by section 194J also, as it provides for the deduction of tax on fee paid for rendering professional services. Further, rule 6F with regard to section 44AA(3) which provides for the meaning of a "film artist" is also reproduced below:
"'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."
It would not be out of place to mention that a film artist is also notified as a professional. It is apparent that an actor engaged in his professional capacity in the production of a cinematographic film, whether produced by him or by any other person, is a professional and, therefore, the payments made to such an actor are covered by section 194J of the Act. To be more precise, only those actors who are engaged in the production of a cinematographic film are to be treated as professionals and other actors shall continue to be outside the purview of section 194J for their services, even though they are engaged in their professional capacity for a desired task which is other than the production of a cinematographic film. Hence, until and unless services are rendered in connection with the production of a cinematographic film, the services rendered by an actor shall not be treated as professional services for the limited purpose of section 194J, but shall fall within the ambit of section 194C.
Conclusion
7. In view of the above discussion, it was to be concluded that the list of film artist, being exhaustive, cannot be extended to include the others, for example, stunt artists, etc., although they are engaged in the production of a cinematographic film. Furthermore, it was also to be made clear that the taxable receipts under section 194J are service specific and not person specific, meaning thereby only those receipts are taxable under section 194J which are earned by a person for rendering services that are connected with the production of a cinematographic film and not all services that are rendered by him. In other words, receipts of one single person may be liable under section 194C as well as under section 194J and the nature of services rendered shall be the sole basis for deciding the charging section. As in the instant case, the services given were not connected with the eligible event, i.e., production of a cinematographic film but only with modelling, the assessee was required to deduct TDS as prescribed under section 194C only, resulting in allowing the appeal of the assessee.
In the opinion of the author, the view formed in the case of Seaford Court Estates Ltd. (supra)is not applicable in the case of a notification but only in the case of the Legislature and acts where the chances of not providing for a particular case or situation are on the higher side and that too unintentionally, i.e., even after the intention to cover a particular situation or case within the purview of the Act. However, in the case of a Notification, the concerned area in respect of which a notification is being issued, is much smaller when compared with an Act as a whole. Therefore, the DR would not have been justified in placing the reliance on, the said case, although the same might have sounded worth further arguments.
GAURAV PAHUJA
CA
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