[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