2013 (9) TMI 1045 - AT - Income Tax

Additions/dis-allowances for non deduction of TDS u/s. 194J - Held that - The assessee was liable to deduct Tax at source u/s. 194J for the payments made for acquiring rights of the films - such payments fall within the definition of royalty - In our considered opinion the case of the assessee is squarely covered by the decision of the Tribunal in the case of M/s. Shri Balaji Communications 2013 (2) TMI 373 - ITAT CHENNAI - Decided against the Assessee Credit of TDS - Held that - the credit for tax deducted at source shall be given in the year in which the receipts against which the tax is deducted at source are assessed to tax - Thus assessee is entitled to claim credit of the TDS in the year in which the assessee accounts for the income - Decided against the Assessee

Summary

Issues Involved:
1. Disallowance under Section 40(a)(ia) for non-deduction of TDS.
2. Addition towards unexplained loan credits.
3. Credit for TDS.

Detailed Analysis:

1. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS:
The Revenue contended that the CIT(Appeals) erred in deleting the disallowance of Rs. 7,16,15,000/- under Section 40(a)(ia) for payments made for the assignment of World Negative Rights and Satellite rights. The Revenue argued that such payments are in the nature of royalty, and the assessee was liable to deduct TDS under Section 194J. The assessee failed to deduct TDS, thus attracting disallowance under Section 40(a)(ia). The Revenue supported its contention with the decision of the Tribunal in the case of ACIT Vs. M/s. Shri Balaji Communications, where similar payments were considered royalty.

On the other hand, the assessee argued that the payments were for the outright purchase of rights for 99 years, which does not fall under the definition of royalty as per Explanation 2 to Section 9(1)(vi). The assessee distinguished its case from M/s. Shri Balaji Communications, where the rights were transferred for 20-25 years and not permanently.

The Tribunal, after examining the Deed of Transfer, noted that the rights transferred were not absolute, with some rights effective after five years and restrictions on broadcasting through the National Network. It concluded that the case is covered by the decision in M/s. Shri Balaji Communications, treating the payments as royalty. Thus, the Tribunal allowed the Revenue's appeal on this ground.

2. Addition Towards Unexplained Loan Credits:
The Revenue challenged the deletion of the addition of Rs. 27.22 Lakhs towards unexplained loan credits. The Revenue argued that the assessee failed to substantiate the claim. However, the assessee contended that the credits were from chit fund accounts with M/s. Durga Finance and M/s. Mahalakshmi Finance, which were carried forward from earlier years. The CIT(Appeals) observed that these balances were from previous years and the assessee made payments by cheque to the chit fund companies.

The Tribunal agreed with the CIT(Appeals) that the balances could not be added in the current year and dismissed the Revenue's appeal on this ground.

3. Credit for TDS:
The Revenue contended that the CIT(Appeals) erred in granting credit for TDS of Rs. 23.67 Lakhs for receipts of Rs. 3.41 Crores, which were not admitted as income by the assessee during the year. According to Section 199 read with Rule 37BA, credit for TDS should be given in the year the receipts are assessed to tax.

The Tribunal agreed with the Revenue, stating that the assessee is entitled to claim credit for TDS in the year the income of Rs. 3.41 Crores is accounted for. Thus, the Tribunal allowed the Revenue's appeal on this ground.

Conclusion:
The Tribunal partly allowed the appeal of the Revenue and the cross-objections of the assessee. The disallowance under Section 40(a)(ia) was upheld, the addition towards unexplained loan credits was dismissed, and the credit for TDS was allowed in the year the income is assessed to tax.