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2013 (2) TMI 373 - AT - Income TaxTDS u/s 194J - Disallowance u/s 40(a)(ia) - assessee, engaged in purchase and sale of rights in satellite and movies - as per AO agreements were only for assignment of rights and not for sale of right to assessee therefore there was no sale of rights to the assessee, thus Section 194J was applicable since payments were in the nature of royalty - CIT (Appeals) deleted the addition - Held that:- Section 194J of the Act clearly mentions that it is incumbent on a person making payments for professional service, technical service and royalty, to deduct tax at source. Thus, the consideration for transfer of all or any rights in respect of any copyright, including copyright for films and video tapes, used in connection with television or tapes, would fall within the definition of "royalty". What is excluded are consideration for sale, distribution and exhibition of cinematographic films. What the assessee paid here was not consideration for sale, distribution or exhibition of cinematographic films. Assessee did not purchase the cinematographic films as such through the transactions. Assessee had only received right for satellite broadcasting. The definition also does not say that it would apply only if the rights are considered only for a definite period. Even if the transfer of rights is perpetual or even if the transfer is only a part of the rights, as long as transfer is of any right relatable to a copyright of a film or video tape, which is to be used in connection with television or tapes, the consideration paid would be royalty only. Thus, the impugned transaction, would fall within the definition of "royalty". Thus the payments made would fall within the definition of "royalty" and the assessee was duty bound under Section 194J to deduct tax at source on the payments effected. Such deduction having not been made, rigours of Section 40(a)(ia) stood attracted. The additional ground raised by the assessee that the rigours of Section 40(a)(ia) are attracted only on amounts standing payable at the end of the relevant previous year, is justified in view of the decision of Special Bench of this Tribunal in the case of Merilyn Shipping & Transports v. Addl. CIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] - allow appeal of the Revenue, but at the same time, remit the issue back to the file of the A.O. for applying Section 40(a)(ia) in the view of Merilyn Shipping & Transport's case (supra).
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