2007 (12) TMI 317 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of section 194C on payments made to film distributors.
2. Applicability of section 194-I on payments made to film distributors.
3. Validity of demand raised u/s 201(1) and interest charged u/s 201(1A).

Summary:

1. Applicability of section 194C on payments made to film distributors:
The primary issue was whether the payments made by the assessee to film distributors for the supply of film prints fall under the definition of "any work" u/s 194C of the Income-tax Act. The Assessing Officer argued that these payments were contractual and thus attracted the provisions of section 194C, requiring tax deduction at source. However, the CIT(A) and the Tribunal concluded that the payments were for the license to use the films or renting of films, not for carrying out any work. The Tribunal noted, "the agreement between the assessee and the distributor was not executed to perform/carry out a particular work," and thus, section 194C was not applicable.

2. Applicability of section 194-I on payments made to film distributors:
The assessee contended that the payments made were not covered under section 194-I, which pertains to rent for the use of land, building, etc. The CIT(A) and the Tribunal agreed, referencing Circular No. 736 issued by the CBDT, which clarified that section 194-I does not apply to the sharing of proceeds from film exhibitions between distributors and exhibitors. The Tribunal stated, "It cannot be invoked to the present facts and it has been clarified by the Board Circular No. 736 dated 13-2-1996."

3. Validity of demand raised u/s 201(1) and interest charged u/s 201(1A):
The CIT(A) deleted the demand raised u/s 201(1) and the interest charged u/s 201(1A), concluding that the assessee was under a bona fide belief that no tax was required to be deducted. The Tribunal upheld this decision, noting that since the primary demand was deleted, the consequential interest also stood deleted. The Tribunal confirmed, "We, therefore, find no infirmity in the Order of the CIT(A) who has rightly adjudicated the issue."

Conclusion:
The Tribunal dismissed the revenue's appeals, confirming that neither section 194C nor section 194-I applied to the payments made by the assessee to the film distributors. Consequently, the demand and interest raised u/s 201(1) and 201(1A) were also deleted.