2021 (5) TMI 911 - AT - Income Tax

TDS u/s 194J - TDS on royalty - payment of minimum guarantee royalty paid by the assessee was outside of the royalty to sub section (vi) of Section 9(1) - HELD THAT - We find that CIT(A) while deleting the addition has noted that AO was unable to show as to under which of the clause (v) to Explanation 2 to Section 9(1)(vi) of the Act the payment of royalty for the purpose of Section 194J of the Act was covered and the payment of minimum guarantee royalty paid by the assessee was outside of the royalty to sub section (vi) of Section 9(1) and therefore the provisions of Section 194J were not applicable. We further find that on identical issue in assessee s own case for A.Y. 2011-12 2020 (6) TMI 264 - ITAT DELHI . Before us, Revenue has not pointed any fallacy in the findings of CIT(A) nor has pointed to any distinguishing feature in the facts of the case for the year under consideration and that of AY 2011-12. Revenue has also not placed any material on record to demonstrate that the order of the co-ordinate Bench of the Tribunal in Assessee s own case for AY 2011-12 has been setaside/stayed/orverruled by higher judicial forum. In such a situation, we find no reason to interfere with the order of CIT(A). We therefore dismiss the ground of the Revenue. Additions u/s 69A - HELD THAT - We find that CIT(A) while deleting the addition has given a finding that the AO has made addition merely on the basis of suspicion without having any material against the assessee. He has further given a finding that entire has been received by the assessee, recorded in the Books of account and therefore no addition u/s 69A can be made merely because the receipt was disclosed of in each two different account. No material has been placed by the Revenue to point out any fallacy in the findings of CIT(A). We therefore find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed.

Summary

Issues Involved:
1. Deletion of addition of ?6 crore by CIT(A) under Section 40(a)(ia) of the IT Act.
2. Deletion of addition of ?20 lakh by CIT(A) under Section 69A of the IT Act.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ?6 Crore by CIT(A):

The primary issue concerns the deletion of an addition of ?6 crore by the Commissioner of Income Tax (Appeals) [CIT(A)]. The Assessing Officer (AO) had disallowed this amount under Section 40(a)(ia) of the Income Tax Act, 1961, on the grounds that the assessee had not deducted tax at source (TDS) on the payment of Minimum Guarantee Royalty. The AO argued that this payment fell under the definition of 'royalty' as per Explanation 2 to Section 9(1)(vi) and thus required TDS under Section 194J. The AO's view was that the payment for the transfer of rights in respect of any copyright, including films, constituted 'royalty'.

The CIT(A) disagreed, noting that the AO failed to specify under which clause of Explanation 2 to Section 9(1)(vi) the payment fell. The CIT(A) also referenced the Mumbai Tribunal decision in Asiavision Home Entertainment (P.) Ltd. vs. ACIT, which held that payments for the distribution of cinematographic films do not qualify as 'royalty' and are not subject to TDS under Section 194J. The CIT(A) concluded that the payment made by the assessee did not fall within the definition of 'royalty' and thus did not attract the provisions of Section 40(a)(ia).

The Tribunal upheld the CIT(A)'s decision, noting that the Revenue had not provided any new evidence or arguments to counter the CIT(A)'s findings. The Tribunal also referenced its own earlier decision in the assessee's case for the Assessment Year 2011-12, which had similarly dismissed the Revenue's appeal on this issue.

2. Deletion of Addition of ?20 Lakh by CIT(A):

The second issue involves the deletion of an addition of ?20 lakh made by the AO under Section 69A of the Act. The AO noted a discrepancy in the assessee's accounts, where Form 26AS showed a receipt of ?40 lakh from M/s. Eagle Home Entertainments Pvt. Ltd., but the assessee's books only recorded ?20 lakh. The AO treated the unrecorded ?20 lakh as unexplained money under Section 69A.

The assessee explained that the ?20 lakh discrepancy was due to an outstanding amount from M/s. Jordan Electronics, which had merged with M/s. Eagle Home Entertainments Pvt. Ltd. The assessee argued that the ?20 lakh was recorded in the books under M/s. Jordan Electronics, and thus the entire ?40 lakh was accounted for.

The CIT(A) accepted the assessee's explanation, noting that the AO had not conducted any direct enquiries to verify the merger or the authenticity of the declaration from M/s. Eagle Home Entertainments Pvt. Ltd. The CIT(A) found that the entire ?40 lakh was recorded in the assessee's books, albeit under two different accounts, and thus no addition under Section 69A was warranted.

The Tribunal upheld the CIT(A)'s decision, stating that the Revenue had not provided any material evidence to counter the CIT(A)'s findings. The Tribunal found no reason to interfere with the CIT(A)'s order and dismissed the Revenue's appeal.

Conclusion:

In conclusion, the Tribunal dismissed the Revenue's appeal on both grounds. The deletion of the ?6 crore addition was upheld as the payment did not qualify as 'royalty' under Section 194J, and the deletion of the ?20 lakh addition was upheld as the entire amount was accounted for in the assessee's books. The Tribunal found no errors in the CIT(A)'s findings and thus affirmed the CIT(A)'s order in full.