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Income Tax Officer (TDS) And Others Versus M/s Aishwarya Art Creations Pvt Ltd And Others

Acquiring satellite rights of films - whether are in the nature of 'royalty' as defined u/s. 9(1) Explanation (2) of the Income Tax Act thereby requiring deduction of tax at source in terms with Section 194J - Held that:- The ratio laid down in case of K.Bhagyalakshmi Vs. DCIT [2013 (12) TMI 1215 - MADRAS HIGH COURT] clearly applies to the facts of the case of assessee wherein held The transfer deed clearly states that the transfer in favour of the assessee is for a perpetual period of 99 years .....

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"Royalty" as defined under clause (v) to Explanation (2) of Section 9(1) of the Act. 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. - Decided in favour of assessee.

Penalty u/s. 271 .....

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hri Chaitanya Kumar, AR ORDER Per B Ramakotaiah , A.M. In the aforesaid appeals, assessee and Department are in appeal. Assessee is aggrieved on the decision of the Commissioner of Income Tax (Appeals)-II, Hyderabad dated 30-01-2013, wherein Ld.CIT(A) deferred from the predecessor and upheld the amounts paid by assessee for acquiring 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 .....

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tion paid corresponding to the turnover made with Gemini TV was not available, Assessing Officer (AO) estimated the purchase consideration by applying GP rate of 11.5 declared by MD of the company in his individual status. This worked out to ₹ 26.61 Crores and AO considered this amount as 'royalty' towards purchase of satellite rights paid to various purchasers/satellite right holders and since no TDS we made from the said payments, treated assessee as assessee in default as per th .....

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ld the order of CIT(A) given in that year. The order of ITAT is as under: "8. Before taking a decision on the issue, let us examine the relevant facts of the case. As can be seen, from the assessment order, though AO has not given absolutely any reason why, he considers that provisions of section 194J of the Act is attracted to the payments made by assessee to the producers towards assignment of satellite rights, but, from the tenor of the order passed by AO, it can be inferred that, accord .....

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n 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 t .....

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ial, commercial or scientific knowledge, experience or skill ; [(iva) the use or right to use any industrial, commercial or scientific equipment10a but not including the amounts referred to in section 44BB;] (v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, 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 consid .....

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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 cinematographi .....

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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. In that view of the matter, the payments are outside the purview of section 194J of the Act. Hence, 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. 10. It will be worth mentio .....

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h Court, is as under: "16. In the preceding paragraphs, we have made an elaborate reference to the nature of transaction 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 a .....

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e sample transfer deed and there is a transfer of copy right in favour of the assessee. 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. Therefore, the agreement in the case on hand, is beyond the period of 60 years, for which the copy right would .....

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