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Audit in cy no audit in py-tax deduction at source ??

CA Abhishek Singh (practice) (2105 Points)

15 November 2013

Hello everyone, one of my client/proprietorship is a production house which at present is shooting for a television serial. In PY 12-13 my client was not liable for tax audit but in current year gross receipts will exceed 1 crore/25 lacs. In the current year they deducted TDS on all the payments made ignoring the fact that in the previous year it was liable for audit. My question 1. What will be the turnover/gross receipts limit for a production house i.e 1 cr or 25 lacs 2. Is tax deduction of source warranted in the current year ? 3. Should this practice of deduction of TDS to be continued or i should advise the client not to deduct the TDS ? waiting for the views of the experts

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(Guest)

Even if he was not liable for Audit in the immediately preceding year, in my opinion, he is right in deducting TDS on payments because he reasonably expects his turnover to exceed the Audit limits. I assume that your client (production house) 1st shoots the pilot episode, once it is approved by a TV network the remaining episodes are shot. If the Intellectual property rights remain with the TV channel , the producer is paid a price. This is like selling a product.The sale price will be the turnover. If the Intellectual property rights remain with the producer and he gets airtime from the channel for a price, he airs his serial on the channel and recovers money from the advertisers.In this case, the amount received from the advertisers will be his turnover. In both cases, in my view, it is business.

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CA Abhishek Singh (practice) (2105 Points)
Replied 19 November 2013

Thanks Madhvi for your reply. I need further clarification on two points mentioned below.

1. But in my opinion TDS is applicable in the current year only if in the last year assessee was liable for tax audit. Current year turnover is irrelevant i.e. His turnover may have exceeded the prescribed limit still no TDS in current year.

2. Yes you are right. Pilot episode was approved and now my client is shooting for episodes. All intellectual property rights is with the TV channel. My client is getting payment from TV channel and along with 12.36% service tax. If you say this is sale the why service tax is collected instead VAT should be collected. Kindly clarify.