TMI Blog2009 (12) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act the payment of royalty falls so as to bring it into the definition of royalty - Appeal is allowed - ITA No. 3300/Mum/07 - - - Dated:- 7-12-2009 - R.V. EASWAR SR. VICE PRESIDENT J. R.K. PANDA ACCOUNTANT MEMBER J. Appellant by: Shri Deepak Tralshawala Respondent by: Shri Vikram Gaur ORDER Per : R K Panda: This appeal filed by the assessee is directed against the order dated 29th January, 2007 of the CIT(A)-XI, Mumbai relating to assessment year 2003-04. 2. At the time of hearing the learned counsel for the assessee did not press grounds of appeal Nos. 2, 3 and 4 for which the learned DR has no objection. Accordingly these grounds are dismissed as not pressed. 3. Grounds of appeal No. 1 by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, out of the payment made of fees the same is clarified as expenses for the year as per sale. The above payment is not per se Royalty as defined in the Act as defined in explanation 2 to section 9(1)(vi). In the said definition it states that transfer of all or any right (including the granting of a License) in respect of any copyright literacy, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for sale, distribution or exhibition of cinematographic films. 5. In support of the above contention the assessee also enclosed the copy of the agreement between the assessee company and Mr. Vinod Mohindra, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission filed during the assessment hearing has made a reference to sec. 9 (explanation 2) to state that it was not a case of payment of royalty per se . That means, it is otherwise a royalty. Further, the copies of agreement filed during assessment proceedings did not clear the matter. At the appeal hearing stage, the contentions made at the assessment stage were repeated. Under such facts and circumstances, I find that the appellant has itself claimed royalty payment. Late on, it backtracked on such claim without proper explanation. Under the facts and circumstances, the AO was left with no option other than to make the addition. At the appeal hearing stage also no material has been brought on record to controvert the findings of the AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ored back to the file of the Assessing Officer for fresh adjudication. 9. The learned counsel for the assessee, in his rejoinder, submitted that the copy of the agreement was filed before the Assessing Officer during the course of assessment proceedings. Therefore, it can be fairly presumed that he has gone through the same. Even now also it is not contradicted as to how the assessee falls under the TDS provisions. 10. We have considered the rival submissions made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We find there is no dispute to the fact that the assessee as per the licence agreement with Mr. Vinod Mohindra, Chairman, VDC has paid royalty of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eo CDs, Royalties shall equal the greater of twenty-five per cent (25%) of Gross Receipts of ONE U.S. DOLLAR (US$ 1.00) per Video CD sold; and (ii) For Rental and/or Sell-Through distribution of double-disc Video CDs, Royalties shall equal the greater of thirty per cent (30%) of Gross Receipts, or ONE U.S. DOLLAR and THIRTY CENTS (US$ 1.30) per Video CD sold. 12. We find as per Explanation to section 40(a) royalty shall have the same meaning as in Explanation 2 to clause (vi) of subsection (1) of section 9 of the Act. We find Explanation 2 to clause (vi) of subsection (1) of section 9 reads as under: (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though royalty has been paid as per the agreement, however, such royalty is outside the definition of royalty as per Explanation 2 to sub clause (vi) of sub-section (1) of section 9 and therefore, provisions of section 40(a) are not applicable. Further the copy of the agreement was already furnished before the Assessing Officer during the course of assessment proceedings. We, therefore, do not find any merit in the submission of the learned DR that the Assessing Officer or the CIT(A) have not gone through the agreement properly. In this view of the matter, we hold that the payment of royalty made by the assessee is out side the purview of section 40(a) of the Income-tax Act, 1961, and therefore, no TDS is required to be made from such roy ..... X X X X Extracts X X X X X X X X Extracts X X X X
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