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Tax heat on TV production firms

mumbai Updated: Oct 13, 2010 01:47 IST
Manish Pachouly

Endemol, the makers of Bigg Boss 4, and Colors, the channel airing the show, find themselves in yet another controversy. They are being investigated by the Income-Tax (I-T) Department for alleged violation of tax deducted at source (TDS) laws.

Earlier, Endemol and Colors were targeted by the Shiv Sena for having Pakistani artists on the show.

The I-T Department conducted a survey — essentially an examination of documents — at Endemol. On finding indications of TDS violations, an I-T officer said on condition of anonymity as he is not authorised to speak to the media, the department summoned officials of Viacom 18, which owns Colors.

In the survey at Endemol’s Andheri office, the I-T officer said, “we found that the firm was deducting TDS at the rate of only 2% against the prescribed 10%.”

The officials found, he said, that in the current and last financial year Viacom paid Endemol Rs 120 crore for producing programmes.

While making the payment, the officer said, Viacom too deducted TDS at the rate of 2%, that is, Rs 2.4 crore. “Viacom should have deducted TDS at the rate of 10%, which is around Rs 12 crore,” the officer said.

The officer said Viacom classified Endemol as a ‘contractor’, to whom a TDS rate of 2% applies. “However, Endemol falls under the ‘professional’ category, where a rate of 10% is applicable,” the officer added.

A spokesperson for Endemol said the I-T inquiry was a routine one. “We cooperated fully,” he added.

A Viacom 18 spokesperson said: “We have not received any TDS inquiry. We deduct TDS as per the law.”

I-T officers also conducted a survey at the Andheri office of Shreya Creations, a film and TV serial production house. Authorities found that while the firm had in the last three years deducted Rs 3.5 crore as TDS while paying professional fees, salaries and commissions, it did not deposit the amount with the I-T Department. TDS deductions of each month must be deposited with the department by the 7th of the next month.

Sheel Kumar, owner of Shreya Creations, denied knowledge of the survey. “Talk to the accounts department,” he said.

TDS authorities also conducted a survey at the office of Prime Focus, a post-production services company.

The department suspected that Prime Focus had an employer-employee relationship with a few people but classified them as professionals and deducted lesser TDS. The TDS rate for employees is 33%, but 10% for professionals.

An official spokesperson for Prime Focus said the I-T inquiry was a routine one.
(Inputs from Rachana Dubey)