TMI Blog2015 (11) TMI 1448X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case the second party (the assessee) is not the user of the cinema hall/plant and machinery, moreover no, payment was made by the second party i.e. assessee . therefore we hold that the payment of 65 lacs were not in the nature of rent within the meaning of section 194-I of the Act and the said provision is not attracted . Thus the payment is not required to be made by the assessee (second party) to the first party, rather it was other way round i.e. the first party/ M/s. Show Time Entertainment Pvt. Ltd was required to make the payment to the second party/ assessee in case of excess collection. In fact, the assessee did not have any control over the funds as the funds were collected and managed ,by selling of tickets by the first party i.e. M/s. Show Time Entertainment Pvt. Ltd. and no money was being paid by the second party / Assessee to the first party / M/s. Show Time Entertainment Pvt. Ltd. Thus the provisions relating to the tax deduction at source do not come cannot come into play. Assured and guaranteed return by the assessee was given to the cinema owner in case of exhibiting of films by the cinema owner. There is no letting out of the cinema hall, plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Miscellaneous Application No. 43/JP/2014 dated 15.12.2014 praying to recall the order passed on 30.09.2014 and restore the appeal stating that due to closure of the Office of the Chartered Accountants, the assessee did not receive the notice of hearing which prevented the assessee for nonappearance.In support of above, the assessee has filed affidavit duly notarized. Considering the circumstances stated above, the order in ITA No. 240/JP/2012 dated 30.09.2014 was recalled and restored the appeal to its original stage vide order passed in M.A. No. 43/JP/2014 dated 12.06.2015. 1. Brief facts of the case are that the assessee firm is engaged in the business of purchase and sales of shares and is also engaged in films business. The assessee has filed the return of income on 31.07.2007 declaring NIL income. However, subsequently the case was selected for compulsory scrutiny and notice under section 143(2) was issued to the assessee on 08.09.2008. Further, a notice u/s 143(2) was issued on 19.09.2008 which was served on the assessee on 24.09.2008. In response to the notice, the ld. A/R of the assessee attended the hearing and filed written submission, produced books of account whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed any tax on the payment made towards the rent to M/s. Show Time Entertainment Pvt. Ltd. for ₹ 65,00,000/-, you are requested to show cause why not the expenses claimed of ₹ 65,00,000/- be not disallowed and added to your income as per the provisions of section 40(a)(in accordance with) of the I.T. Act. 3. The assessee has filed reply and thereafter, the AO had held that the assessee was required to deduct the TDS on the amount of ₹ 65,00,000/- under section 194-I of the IT Act and on account of failure on the part of the assessee to deduct the TDS, the expenses of ₹ 65,00,000/- were disallowed. For the purpose of convenience, we are reproducing herein the operative portion of the order as under :- The submission of the assessee regarding non deduction of tax on the payment of ₹ 65,00,000/- to M/s. Showtime Entertainment Pvt. Ltd. is also not acceptable. Board s Circular No. 736 dated 13.12.1996 is not applicable in this case because in the present case the film distributor i.e. the assessee has taken the entire cinema hall for a fixed period of 2 months i.e. from 01.04.2006 to 30.05.2006 for a fixed amount of ₹ 65,00,000/-. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the above CBDT Circular, I find that the AO is justified in disallowing the above payment, for non compliance of TDS provisions, as the payment made in this regard was found as a fixed payment in nature for using the cinema hall for the fixed period and not an arrangement of sharing of the proceed of film exhibition, as claimed by the appellant. It is also noted that the above payment was required to be made, irrespective of the actual collection of the film exhibition, as enumerated in the relevant agreement. Thus, in my considered view, the provision/clarification as given in the above mentioned CBDT Circular is not applicable in the present case, as the same is only dealt with the revenue sharing model of film exhibition and not the rent type of payment as found in the present case. In view of the above factual position, it is felt that the AO has correctly treated the same as a rent payment made to the film exhibitor, hence covered u/s 194-I of the Act. Accordingly, it is held that the disallowance of claim of ₹ 65 lacs, towards the hiring the cinema hall, is justified u/s 40(a)(ia) of the Act, for non deduction of TDS thereon, u/s 194-I of the Act. Consequently this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as submitted that he relies upon the orders passed by the AO/CIT (A). 8. Before we examine the issue, it will be prudent to reproduce the terms and conditions of the agreement :- This agreement is entered on 01.04.2006 between M/s. Showtime Entertainment Pvt. Ltd having registered office at 4, Ziledar House, Kachcha Bandha, Amer Road, Jaipur engaged in exhibition of films at their cinema called SPACE-1, 2, 3 at City Plaza, Bani Park, Jaipur hereinafter called as party of 1st part and M/s. Ajit Company of Second Part, at Jaipur. 1. The part of first part (Showtime Entertainment Pvt. Ltd.) hereby agreed to grant to party of Second part the playing time of two months at their above cinema i.e. SPACE-1,2,3 at City Plaza, Jaipur from 01.04.2006 to 30.05.2006. 2. That party of Second part agreed to pay to party of 1st part guaranteed fixed gross collection of ₹ 65,00,000/- (Rs. Sixty five lac only) for the above period against aforesaid playing time granted to them. 3. That all the pictures during the period to be screened in SPACE-1, 2, 3 will be booked by M/s. Showtime Entertainment Pvt. Ltd. with the consultation of second party. 4. That all the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name and all contracts and dealings with the distributors will be done by 1st party only. 14. All other terms and conditions will be as usual in trade. 15. Both the parties have signed this agreement in confirmation of above 01.04.2006 at Jaipur. 9. The terms and conditions of the agreement are required to be examined along with other attending circumstances for the purposes of deciding the true nature of the agreement . The intention of the parties will be reflected from the terms and conditions of the agreement and also from their conduct. The reading of the agreement and the attending circumstances clearly show : A) The dominant intention of the parties of the agreement was to conduct the business and not of letting out of the building, fixtures and furniture. In the agreement, the possession of the cinema hall remains with M/s. Show Time Entertainment Pvt. Ltd. B) Under the agreement The first party namely M/s. Show Time Entertainment Pvt. Ltd , was be responsible for publicity and all publicity expenses were borne by the first party / M/s. Show Time Entertainment Pvt. Ltd and the second party was not responsible for the same. C) The maintenance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 194-I of the Act and the said provision is not attracted . 12. Even otherwise, clause 5 of the agreement clearly shows that the sum in terms of gross collection if it is more than ₹ 65,00,000/- during the above period, was to be paid by the first party to the second party. Clause 5 of the agreement reads as under :- 5. That any sum in terms of Gross collection which is more than ₹ 65,00,000/- during above period will be paid by 1st part to IInd part while any deficit will be paid by IInd part to 1st Party. 13. Thus the payment is not required to be made by the assessee (second party) to the first party, rather it was other way round i.e. the first party/ M/s. Show Time Entertainment Pvt. Ltd was required to make the payment to the second party/ assessee in case of excess collection . For the purpose of section 194-I, what is sine qua non is the assessee should be responsible for paying to a resident any income by way of rent. In the present case the assessee is neither responsible for making any payment to the first party i.e. M/s. Show Time Entertainment Pvt. Ltd. nor any payment was made by the assessee to the first party. It will be useful to mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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