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2014 (12) TMI 1015 - AT - Income TaxRequirement to deduct tax on payments made for acquiring satellite rights - Whether payments made by assessee for acquiring satellite rights of films is in the nature of royalty as defined u/s 9(1) Explanation 2 thereby requiring deduction of tax at source in terms with section 194J – Held that:- The payment made by assessee to the producers for acquiring satellite rights is towards outright sale, distribution or exhibition of cinematographic films, which are specifically excluded under clause (v) of Explanation 2 from being is treated as consideration paid towards royalty - the payments are outside the purview of section 194J of the Act - assessee cannot be fastened with liability u/s 201(1) and 201(1A) for having defaulted in deducting tax at source in terms of section 194J. Relying upon Mrs. K. Bhagyalakshmi Versus The Deputy Commissioner of Income Tax [2013 (12) TMI 1215 - MADRAS HIGH COURT] wherein it has been held that payments being towards sale, distribution or exhibition of cinematographic films would fall outside the scope of royalty as defined under Explanation 2 of section 9(1) - Though the agreement speaks of perpetual transfer for a period of 99 years, in terms of Section 26 of the Copy Right Act, 1957, in the case of cinematographic film, copy right shall subsist until 60 years from the beginning of the calendar year next following the year in which the film is published - the agreement is beyond the period of 60 years, for which the copy right would be valid, the document could only be treated as one of sale – thus, the order of the FAA is upheld being rightly of the view that the transfer in favour of the assessee as sale and therefore, excluded from the definition of "Royalty" as defined under clause (v) to Explanation (2) of Section 9(1) of the Act - the payments made by assessee not being in the nature of royalty, the provisions of section 194J will not apply – Decided against revenue.
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