‘Bigg Boss’ not to withhold tax from sum paid to NR assisting in production of programme; AAR refers to Sec. 194C

Services rendered by NR for production of programmes for purpose of broadcasting and telecasting shall be specifically characterized as ‘work’ for the purpose of section 194C. Consequently, income therefrom would be treated as ‘business income’ and not as ‘Fees for Technical Service’.

Facts:

a) The applicant, Endemol India (P) Ltd. (EIPL) starting its operation with production of reality shows Bigg Boss and Fear Factor, was engaged in the business of providing and distributing television programmes. It produced a reality show (‘the show’) for which the shooting took place in Argentina.

b) For the purpose of that show it engaged Endemol Argentina SA (Endemol) for providing line production services in Argentina.

c) It approached the AAR to determine whether the amount paid to Endemol would constitute Fees for Technical Services or Royalty?

The Authority held in favour of the Applicant as under:

1) The Delhi High Court in the case of CIT v. Prasar Bharati (Broadcasting Corporation of India), (2007) 158 Taxman 470 (Delhi) 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 of the Act;

2) CBDT’s Circular No. 715, dated 08-08-1995 stated that payments made to advertising agencies for production of programmes, which are to be broadcasted/telecasted, would be subject to withholding tax under section 194C of the Act;

3) Since the payments made by the applicant to Endemol were for production of programmes for the purpose of broadcasting and telecasting, the services rendered by such non-resident would be specifically characterized as ‘work’ for the purpose of section 194C;

4) If the services were characterized as ‘contact work’ under section 194C of the Act, then the income received would be necessarily treated as business income. In absence of PE of non-resident in India, the income of the non-resident company was not taxable in India;

5) In that case it would not be appropriate to treat the item, i.e., services for production of programmes for telecasting as ‘Fees for Technical Services’ under the provision of section 9(1)(vii) of the Act - Endemol India (P.) Ltd., In re (2013) 40 taxman 340 (AAR - New Delhi)