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TMI Blog2015 (7) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... ing satellite rights of films as in the nature of 'royalty' as defined u/s. 9(1) Explanation (2) of the Income Tax Act [Act], thereby requiring deduction of tax at source in terms with Section 194J. The other two appeals are by Revenue cancelling the penalty u/s. 271C by the CIT(A). 2. Briefly stated facts are, assessee is a company involved in the business of broadcasting and telecasting. Assessee was doing the business of selling the satellite rights for telecast mainly with Sun Network and as per the information filed by the Gemini TV of Sun Network, assessee made a turnover of Rs. 30.07 Crores during the FY.2008-09. Since the purchase consideration paid corresponding to the turnover made with Gemini TV was not available, Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct is applicable requiring assessee to deduct tax at source on such payment of royalty. In this context, it will be appropriate to look into the relevant statutory provisions. Section 194J of the Act, enjoins upon any person not being an individual 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he activities referred in sub-clause (i) to (v). It is further evident from the aforesaid provision that payments made by assessee can only be classified within clause (v) of the Explanation 2 to section 9(1). On careful reading 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 plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction entered into by the assessee with the third parties. The sample transfer deed, clearly states that the transfer in favour of the assessee is for a perpetual period of 99 years. The party, who executed the agreement 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 transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of assessee. In the aforesaid view of the matter, we have no hesitation in holding that the payments made by assessee not being in the nature of royalty, the provisions of section 194J will not apply. Consequentially, order passed u/s 201(1) and 201(1A) will have no legs to stand. Accordingly, we uphold the order of ld. CIT(A) and dismiss ground raised by revenue. 4. Respectfully following the same, since the issue is already decided in favour of assessee, we set aside the order of CIT(A) and uphold assessee's contentions. In the result, appeal of the assessee is allowed. 5. Other two appeals are consequential appeals in the sense that AO levied penalty u/s. 271C for not deducting tax. Ld.CIT(A) following the decision of CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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