By Geeta Jani, Dhishat B. Mehta, Chartered Accountants
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Section 9(1)(vii), 194C of I T Act; CBDT’s Circular No. 715, dated 08-08-1995 – services by non-resident for production of programmes for the purpose of broadcasting and telecasting are ‘work’ u/s. 194C and hence, income received would be business income, which in absence of PE in India, would not be taxable
Facts
The applicant was engaged in the business of production of television programmes for broadcasting and telecasting. Inter alia, the applicant produced a reality show (“the show”) for which the shooting took place in Argentina. For the purpose of the show, it engaged an Argentinian company for providing line production services in Argentina.
The issue raised by the applicant before the AAR was: whether the amount paid to the Argentinian company would constitute Fees for Technical Services [u/s 9(1)(vii)] or Royalty [u/s. 9(1)(vi)] or business income [u/s 9(1)(i)] and at what rate tax should be withheld from the payments?
Held
• The agreement with the Argentinian company is for composite services (mainly comprising technical crew, production crew and technical equipment) for a limited period of time and neither equipment nor local technical crew is separately provided.
• In CIT vs. Prasar Bharati, [2007] 158 Taxman 470 (Delhi) it was held that broadcasting and telecasting, including production of programmes for such broadcasting and telecasting, do not fall under the provision of section 194J as they are specifically covered by definition of ‘work’ in section 194C.
• CBDT’s circular No.715 dated 08-08-1995 states that payments made to advertising agencies for production of programmes which are to be broadcasted/telecasted would be subject to withholding tax u/s. 194C.
• Since the payments made by the applicant to the Argentinian company were for production of programmes for the purpose of broadcasting and telecasting, the services rendered would be specifically characterised as ‘work’ u/s. 194C.
• If a particular item is specifically characterized in a particular section of the Act, it will override the provision in the general section. Since the services are characterised as ‘contact work’ u/s. 194C, the income received would be necessarily treated as business income and not FTS.
• In absence of PE of the Argentinian company in India, its income would not be taxable in India.
