2015 (9) TMI 1105 - AT - Income Tax

TDS u/s 194J - satellite right transferred in favor of assessee for a period 99 - Disallowance u/s 40(a)(ia) - mere satellite right without permanently transferring the right to the assessee for a particular period, is subject to deduction of TDS under Section 194J as per revenue - Held that - The transfer in favour of the assessee for a period 99 years is sale, therefore, it was excluded from the definition of royalty. In this case also, as we have extracted above from the Schedule, the right transferred to the assessee is to telecast the feature film in extra terrestrial areas for a perpetual period of 99 years. As found by the High Court, the copyright subsists only for a period of 60 years. Therefore, the right given to the assessee beyond the period of 60 years has to be treated as sale of the right for cinematographic film. Hence, this Tribunal is of the considered opinion that the decision of this Tribunal in Shri Balaji Communications (2013 (2) TMI 373 - ITAT CHENNAI) may not be applicable to the facts of the case. This Tribunal is of the considered opinion that the judgment of Madras High Court in the case of K. Bhagyalakshmi (2013 (12) TMI 1215 - MADRAS HIGH COURT) would be squarely applicable wherein held that the findings of the First Appellate Authority was perfectly justified in holding that the transfer in favour of the assessee as sale and therefore, excluded from the definition of Royalty as defined under clause (v) to Explanation (2) of Section 9(1) of the Act - Decided in favour of assessee.

Summary

Issues:
Disallowance under Section 40(a)(ia) of the Income-tax Act, 1961.

Analysis:
The appeal and cross-objection were directed against the order of the Commissioner of Income Tax (Appeals)-VI, Chennai, regarding the disallowance of a specific amount under Section 40(a)(ia) of the Income-tax Act, 1961. The main contention revolved around whether the right to telecast cinematographic films through satellite constituted a purchase of films or merely an assignment of rights. The Revenue argued that tax should be deducted under Section 194 of the Act, while the assessee claimed it was a purchase price paid to the film owner.

The Departmental Representative contended that the assessee did not deduct tax on the purchase of copyrights of a film, as the agreement was for assignment and not sale. They argued that the right granted to the assessee was for satellite exhibition only, making it subject to TDS under Section 194J. The Revenue relied on previous tribunal decisions to support their stance.

Conversely, the counsel for the assessee argued that the agreement was for assigning satellite rights for telecasting films, not subject to Section 194J. They claimed the assessee was engaged in buying and selling satellite rights of feature films as a trader. The counsel emphasized that the right given to the assessee was for 99 years, constituting a sale of films rather than a mere assignment.

The Tribunal analyzed the agreement and relevant legal provisions. They noted that the agreement described the parties as "assignor" and "assignee," granting exclusive broadcasting rights to the assessee for 99 years. The Tribunal referred to previous cases and the definition of "royalty" under the Act to determine whether tax deduction was warranted. They compared the facts of the case to a judgment of the Madras High Court, which found that a transfer of rights for 99 years constituted a sale and not royalty, thus exempt from tax deduction under Section 194J.

Ultimately, the Tribunal upheld the order of the lower authority based on the interpretation of the agreement and the application of relevant legal principles. The cross-objection filed by the assessee was dismissed, and both the appeal of the Revenue and the cross-objection were dismissed accordingly.