Itxa/1338/2014 Of Commissioner Of Income Tax-11 v. Leela Ghosh

Sbw IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1338 OF 2014 Commissioner of Income Tax-11VersusMs Leela Ghosh ..Appellant ..Respondent ........... Mr. Suresh Kumar for the Appellant. ........... CORAM: M. S. SANKLECHA & A. K. MENON, JJ. DATE : 10[th] JANUARY, 2017 P.C. 1.This Appeal under Section 260-A of the Income Tax Act, 1961 (the Act) challenges the order dated 19[th] February, 2014 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order is in respect of Assessment Year 2007-08. 2. This appeal raises the following question of law for our consideration :- “(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the assessee rightly deducted tax under Section 194C? (ii)Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the short deduction of tax does not attract disallowance under Section 40(a)(ia) of the Act?” 3.Regarding question no.(i):- (a)The respondent-assessee is engaged in the business of sound recording, dubbing and other ancillary post production activities for movies and serials at her own sound recording studio. At times, for certain specialized jobs, she has to take assistance/aid of other recording/dubbing studios which have necessary equipments for the specialized jobs. The respondent-assessee does not in any way herself use the equipments of the outsourced studios for the specialized job. According to the respondent-assessee the above activity was in the nature of a contract and the tax deducted at source would be at 2% under Section 194C of the Act. The Assessing Officer did not accept the respondent-assessee's contention and held that Section 194I was applicable and in the absence of deduction of tax at source disallowed expenditure under Section 40(a)(ia) of the Act. (b)In appeal, the CIT(A) held that the activity of outsourcing of specialized jobs to the other studios done by the respondent-assessee was in the nature of contract. Therefore the tax deducted at source would be under Section 194C of the Act. Thus the appeal of the respondent- assessee was allowed. (c)Being aggrieved the Revenue filed an appeal to the Tribunal. The Tribunal by the impugned order held that the activity of specialized jobs done at the outsourced studios would be in the nature of payment for job work/contract and the respondent would be obliged to deduct tax under Section 194C as has been done. Thus dismissing the Revenue's appeal. (d)The grievance of the Revenue is that the studios to which the work is outsourced for the use of equipments in the studios would be in the nature of rent for the equipments used to carry out the specialized outsourced activity. Therefore the tax has to be deducted at source under Section 194I of the Act. (e)We find that both CIT(A) as well as the Tribunal have recorded a finding of fact that the specialized job which is outsourced to other studios is carried out by the personnel of those studios. The respondent-assessee or her team is not allowed to work with the machine/equipments in the other studios for the specialized activity. This itself would establish that the respondent-assessee has no access to the machinery/equipments for the specialized jobs. Therefore it cannot be said to have hired or taken on rent the machines/equipments for Section 194I of the Act to apply. (f)In the above view, the concurrent findings of fact rendered by the CIT(A) and the Tribunal, no substantial question of law arises as it is not shown to be perverse in any manner. Thus not entertained. 4.Regarding question no.(ii):- (f)In the above view, the concurrent findings of fact rendered by the CIT(A) and the Tribunal, no substantial question of law arises as it is not shown to be perverse in any manner. Thus not entertained. 4.Regarding question no.(ii):- (a)This question now becomes academic in view of the fact that in response to question no.(i) framed herein above, the view of the Tribunal that the payments made by the respondent-assessee to other studios (outsourced studios) for doing a specialized job is in the nature of a contract and falls under Section 194C of the Act for the purposes of tax deduction at source. In the above view, there is no short deduction of tax thus there is no occasion to examine and consider the question of the consequence of short deduction of tax, if any. Thus not entertained. 5.Accordingly, the appeal is dismissed. No order as to costs. (A. K. MENON, J.) (M. S. SANKLECHA, J.)