TMI Blog2014 (12) TMI 1015X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any, on the amounts paid towards assignment /purchase of satellite rights for broadcasting or telecasting. AO found that during the year assessee had made payment of ₹ 1,55,00,000 to different producers, which are in the nature of royalty as defined under Explanation 2 to clause (vi) of section 9(1) thereby attracting the provisions of section 194J. Though, assessee responded to the show cause notice issued by AO by furnishing all the details and explaining that the payments made cannot be treated as royalty so as to attract provisions of section 194J, AO, however, rejecting all the explanations of assessee ultimately passed an order purportedly u/s 201(1) 201(1A) of the Act, raising tax demand at ₹ 11,12,400 u/s 201(1) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantiated with any cogent or even any reasons, I am afraid, the same cannot survive and therefore the appeal is allowed. 5. Being aggrieved of the aforesaid order, the department is before us. 6. We have considered the submissions of the parties and perused the orders of revenue authorities as well as other materials on record. Ld. DR justifying the order of AO, submitted that as amounts paid by assessee for acquiring the satellite rights of films is in the nature of royalty as defined in explanation 2(v) of section 9(1), provisions of section 194J of the Act, is attracted to such payments. 7. The ld. AR, on the other hand, submitted that AO has overlooked a part of the provisions contained under clause (v) to Explanation 2 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividual or a hindu undivided family to deduct tax at source on certain payments, one of them being royalty, to a resident. Clause (ba) of Explanation to section 194J(1) defines royalty, by referring to the meaning given in clause (vi) of Explanation 2 to section 9(1). For ready reference, Explanation 2 of section 9(1) is extracted hereunder: Explanation 2. For the purposes of this clause, royalty means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head Capital gains ) for (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eading of the said clause (v), it becomes clear that though consideration paid towards transfer of all or any rights in respect of copy right, literal, artistic or technical work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but, it specifically excludes consideration received for sale, distribution or exhibition of cinematographic films. On a perusal of assignment agreement between assessee and producers of film, a sample copy of which is placed at page 3 of paper book, it becomes clear that right over the films have been assigned in favour of assessee perpetually for a period of 99 years without any restriction of geographical area. It is further evident that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in favour of the assessee was desirous of disposing World Negative Rights, Satellite Television Rights and all other rights pertaining to the picture and the assessee enjoys the exclusive status, as the World Negative rights including theatrical rights owner. The assessee was also entitled to assign the said rights, which was transferred in their favour. Further the agreement was irrevocable and shall remain in force for a period of 99 years. In such a factual situation the nature of transaction, being a perpetual transfer for a period of 99 years, would undoubtedly fall within the scope of sale. 17. We have seen the various conditions contained in the sample transfer deed and there is a transfer of copy right in favour of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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