TMI Blog2019 (3) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Rs. ORDER PER PRADIP KUMAR KEDIA - AM: The captioned appeals have been filed at the instance of the Revenue against the respective orders of the Commissioner of Income Tax (Appeals)-2, Ahmedabad ( CIT(A) in short), dated 04.05.2017 02.11.2017 arising in the respective assessment orders dated 13.12.2016 22.03.2016 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AYs 2014 2015 2013-14. 2. As claimed on behalf of the Revenue, the facts are similar and common issues are involved in both assessment years and therefore both the appeals were heard together and disposed of by common order. 3. The controversy involved in both the assessment years is identical and based on similar facts. Accordingly, both the appeals have been heard together and are being disposed of by this common order. 4. We shall take note of facts and issue involved in ITA No. 1808/Ahd/2017 concerning AY 2014-15 for adjudication purposes for the sake of convenience. ITA No. 1808/Ahd/2017 - AY 2014-15 5. The grounds of appeal raised by the assessee read as under: 1. The Ld. CIT(A) has erred in law and on facts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essional or technical services within the ambit of Section 194j of the Act. Section 194J of the Act inter alia includes royalty for the purposes of deduction of tax at source. It is the case of the assessee that the revenue sharing expenses incurred by the assessee in the nature of royalty is not covered within the sweep of Section 194J of the Act in view of the specific exclusion provided for consideration for the sale, distribution or exhibition of cinematographic film. Thus, the payment in respect of exhibition films is specifically excluded under s.194J of the Act. It is thus the case of the assessee that provisions of Section 40(a)(ia) of the Act does not get triggered in the absence of any obligation to deduct TDS under s.194J of the Act. On facts a reference was made to sample invoices raised by the Distributors, namely, Rose Valley Films Pvt. Ltd. and UTV Software Communication Ltd. to demonstrate the sharing of the revenue between the assessee and Distributors out of gross revenue collected from exhibition of the Film. 8.1 We have perused the order of the CIT(A) taking note of the relevant facts and applicable law in great length while concluding the issue. It will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 194C is also not applicable in view of the judgment of Hon'ble Mumbai High Court in the case of M/s.Shringar Cinemas Pvt. Ltd. and others. Even the provisions of Section 1941 are also not applicable in view of the Circular No,736 dtd. 13.2.1996 which has been reproduced by the appellant in its written submission reproduced above. 3.5. Now with regard to the provisions of Section 194J of the Act, fhe royalty is defined u/s.9 of the Act and as per the said section the consideration for sale /distribution or exhibition of cinematographic films has been excluded from the definition of royalty. This has been specifically mentioned in sub-clause [vj of Section 9 of I.T. Act. From the above definition the payment made by the appellant cannot be included under the definition of royalty u/s.9 of the Act and therefore the provisions of Section 194J are not applicable. The appellant has also submitted that the TDS survey in the year 2013 has also token place at his premises and no such defaults for these type of payments have been observed by the TDS Survey party and they were satisfied with the explanations given by the appellant. 3.6. Having considered the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case under consideration before us the assessee is exhibiting the films in the cinema owned by it. The receipt from the exhibition of films is shared between the assessee and the Distributor on the terms agreed between them. Therefore, the question is whether the amount collected by the assessee on exhibition of films and part of which is shared with the Distributor, is covered within the ambit of definition of contract for carrying out any work . In our opinion, there is no work carried out by the Distributor. The Distributor is getting his share because he has acquired rights of the distribution of the films in particular area. No work is carried out by the Distributor for which the payment is made. Moreover, Explanation (iii) to section 194C defines the word work . In such definition of work also the exhibition of films does not fall. It was vehemently contended by the learned DR that the above definition of work is only inclusive definition and therefore, even if the distribution of film is not mentioned in the definition, the same be covered by the definition. We are unable to agree with this contention of the learned DR because the Legislature has included ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion will remain that whether such activity falls under the Explanation III to section 194C. The Explanation 111 reads as under: ' Explanation III. -For the purposes of this section, the expression work shall also include- (a )advertising; (b)broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c)carriage of goods and passengers by any mode of transport other than by railways; (d)catering.' 9. The abovementioned Explanation has been inserted by the Finance Act, 1994 w.e.f 1-7-1995. The exhibition of film in theatre is not an activity expressly covered by the Explanation 111. Anything which is not expressly covered under the category of work cannot be regarded as work by extended meaning of work as described in section 194C of the Act. The following observation of the Hon'ble Gujarat High Court from the decision in the case of All Gujarat Federation of Tax Consultants v. CBDT (supra) (Page Nos. 292-293) support this view. 'In our conclusion, we are further strengthened by the fact that the Legislature intended to make a separate provision for bringing the service contract and pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 201(1) and 201(1A). 7. In these appeals the only common ground raised by the assessee is against the levy of penalty under section 271(1)(c)-C amounting to ₹ 1,93,160, ₹ 1,23,100 and ₹ 1,19,254 for Assessment years 2002-03, 2003-04 and 2004-05 respectively. The Assessing Officer has levied the penalty for failure of the assessee to deduct the tax on the payment to Distributor. While considering the assessee's appeals against the orders under section 201, we have already held that the assessee was not required to deduct the tax on the payment of Distributor's share by the assessee. Since we have already cancelled the orders of Assessing Officer under section 201 (1)/201(1A), the penalty based upon such order cannot be sustained. The same are also cancelled. 8. In the result, the assessee's appeals are allowed. 3.9.1. Similarly, the Honourable ITAT SMC Bench, Ahmedabad in the case of ACIT Vs. Essem Entertainment Pvt. Ltd. in IT Appeal No.3731 3732 of 2004 has hold the similar views. 3.9.2. In another judgment of the Hon'ble Gujarat High Court in the case of CIT(A) Vs. City Gold Entertainment Ltd. in ITA No.23 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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