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2015 (8) TMI 1154 - AT - Income TaxTDS liability - purchase of telecast rights from the film producers - whether is not in the nature of royalty payment and therefore not liable for TDS u/s 194J - Held that - What the assessee has paid to the producers is consideration towards acquisition of satellite rights over the films for a period of 99 years, which is also irrevocable. This finding of fact recorded by the ld CIT (A) has not been controverted by the ld DR by bringing any evidence on record. Thus, once it is established that the assessee has acquired an irrevocable right over the exhibition of films for a period of 99 years, it cannot be said that payments made for acquiring such rights is in the nature of royalty. Rather it is a consideration paid towards outright purchase of feature films to be exhibited through Television. Payments made by assessee towards acquiring satellite rights of films are not royalty , hence provisions of section 194J would not apply. In the aforesaid view of the matter, we uphold the order of ld CIT (A) by dismissing the grounds raised by the Department. See Mrs. K. Bhagyalakshmi Versus The Deputy Commissioner of Income Tax 2013 (12) TMI 1215 - MADRAS HIGH COURT - Decided in favour of assessee.
Issues Involved:
1. Whether the payments made by the assessee for purchasing telecast rights from film producers constitute 'royalty' and thus require tax deduction at source under Section 194J of the Income Tax Act. 2. Whether the transaction of acquiring telecast rights from film distributors is a purchase transaction or an assignment of rights. Issue-wise Detailed Analysis: 1. Nature of Payments for Telecast Rights: The primary issue is whether the payments made by the assessee for purchasing satellite telecasting rights of films are considered 'royalty' under Section 194J of the Income Tax Act, thus necessitating tax deduction at source. The facts reveal that the assessee, the Managing Director of M/s. Aishwarya Art Creations (P) Ltd., did not deduct tax at source on payments made to producers for satellite rights of films amounting to Rs. 14,14,53,471 for A.Y 2008-09 and Rs. 3,26,72,500 for A.Y 2009-10. The Assessing Officer (AO) deemed these payments as 'royalty' and initiated proceedings under Section 201 of the Act, raising a demand and levying interest for non-deduction of tax at source. 2. Classification of Transaction: The assessee contended that the transactions were outright purchase/sale transactions and not royalty payments, citing the decision of the Hon'ble Madras High Court in Smt. K. Bhagyalakshmi vs. DCIT (97 DTR 377). The CIT (A) accepted this argument, stating that the payments were for the purchase of satellite rights for 99 years, which are irrevocable, and thus do not constitute royalty. The CIT (A) referenced the Cinematograph Act, 1952, and common understanding of 'royalty' to support this conclusion. Appellate Tribunal's Analysis: The Tribunal reviewed the orders and submissions. It found that the payments made by the assessee were for acquiring irrevocable satellite rights for 99 years, which do not fall under the definition of 'royalty' as per Section 194J. The Tribunal noted that the Department did not provide evidence to counter the CIT (A)'s findings. The Tribunal referred to the Madras High Court's judgment in Smt. K. Bhagyalakshmi vs. DCIT, which held that payments for perpetual satellite rights are not royalty but consideration for outright sale, distribution, or exhibition of cinematographic films, thus falling outside the purview of Section 194J. Conclusion: The Tribunal upheld the CIT (A)'s decision, stating that the payments made by the assessee for acquiring satellite rights are not 'royalty' and therefore do not attract the provisions of Section 194J. Consequently, the orders under Section 201(1) and 201(1A) for non-deduction of tax at source were dismissed. The Department's appeals were dismissed, and the CIT (A)'s order was upheld. Final Judgment: Both appeals by the Department were dismissed, and the Tribunal pronounced the order in the Open Court on 5th August 2015.
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