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2017 (2) TMI 1412 - AT - Income TaxTDS u/s 195 - non-deduction of tax at source in respect of the payments made outside India to non-resident film producers for distribution of their films in India - addition u/s 201(1) and u/s 201(1A) - assessee has purchased rights to exhibit the cinematographic films in various mediums for a certain period of time - whether payments made to non-resident film producers is royalty under section 9(1)(vi) ? whether payments made towards rights for exhibition and telecasting of cinematographic films in different platforms like television and satellite broadcasting did not constitute payments for sale, distribution, exhibition of cinematographic films? - HELD THAT:- The law has expressly excluded consideration paid for exhibition of cinematographic films from the ambit of section 9(1)(vi). Further, irrespective of the medium in which the cinematographic films have been exhibited, the same only constitutes “exhibition of cinematographic films”. Hence, the consideration paid by the assessee to the non-residents does not fall within the ambit of “royalty” u/s. 9(1)(vi) of the Act. We find that section 90(2) of the Income tax Act which states that either the provisions of the Income tax Act or the DTAA, whichever is more beneficial to an assessee, would be applicable to the assessee. Further, CBDT Circular No.728 dated 30.10.1995 clarifies that tax should be deducted at source as per the provisions of the Act or DTAA whichever is more beneficial to the assessee. Since the provisions of the Act are beneficial to the assessee, the same would apply and consequently the sums are not chargeable to tax in India and do not warrant deduction of tax at source u/s 195 of the Act. Hon’ble Supreme Court in the case of GE India Technology Cen. (P) Ltd vs CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] had held that TDS obligation would arise on the assessee only when the sum is chargeable to tax in India u/s 4, 5 & 9 of the Act. We hold that the assessee in the instant case cannot be treated as assessee in default u/s 201(1) of the Act and consequently the interest u/s 201(1A) of the Act could not be levied on the assessee. Accordingly, the grounds raised by the assessee are allowed.
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