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TMI Blog2016 (5) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... the aircraft, KAL had done a 'work' for the assessee. KAL provided magazines to its guest passengers as part of its effort for creating a five star in-flight experience for its customers. Thus, increase in the advertisement revenue cannot be said to have occurred directly as a result of any 'work' done by KAL for on behalf of the assessee. Further, no such 'work' could have been recognized or merged in any tangible or quantifiable terms. Thus, without any hesitation, we can say that the impugned payment made by the assessee to KAL on account of sharing of incremental advertisement revenue shall not fall within the provisions of section 194C. - Decided in favour of assessee. TDS u/s 195 - payment for for procuring images and figures to be published in assessee's magazines in India - Held that:- To be included in the definition of 'royalty', the payment should be made for use of a copyright of the items. Even if we presume, although denied by the assessee, that photograph will fall in any one or more of the items mentioned in the above said definition, even, then it is mandatory on the part of the revenue before applying these provision to show that the payment was for use of 'cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 2,53,47,173/- made u/s 40(a) (ia) in respect of payment made to Kingfisher Airlines Ltd. 1.1 The Ld. CIT(A) further erred in overlooking the fact that there is service contract and advertisement sharing is part of the contract. 4. The solitary issue raised by the Revenue is challenging the action of Ld. CIT(A) in deleting the disallowance made by the AO u/s 40(a)(ia) of the Act for non deduction of tax at by the assessee in respect of the payment made by it to M/s. Kingfisher Airlines Ltd. 4.1 The brief facts are that during the year the assessee was engaged in the business of publishing of magazines. It paid an aggregate amount of ₹ 2,53,47,173/- to Kingfisher Airlines Ltd. (hereinafter called as KAL) on account of share of KAL in the advertisement income earned by the assessee for advertisements published in the magazines of the assessee. 4.2 According to Assessing Officer, the assessee ought to have deducted tax at source which has not been done and therefore the expenditure was disallowed u/s 40(a) (ia) of the Income-tax Act. The background facts of the case noted in the assessment order are that as stated above the assessee was in the line of publishin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. DR also relied upon the judgment of Hon'ble Delhi Bench of ITAT in the case of ITO v. Bhasin Motors India P. Ltd. 16 SOT 319. 4.6. Per contra, Ld. Counsel of the assessee vehemently relied upon the order of the Ld. CIT(A) and reiterated most of the arguments as were made by the assessee before the First Appellate Authority. It was argued by him that in the scheme of the agreement, the payment made to KAL out of incremental advertisement revenue was nothing but sharing of Revenue on which TDS was not liable to be deducted. He further argued that payment made to KAL was not for carrying out any work as is contemplated in section 194C of the Act, and that the magazines published by the assessee were purchased by KAL and used by the latter as an in-house magazine on its flights. As per Ld. Counsel, the impugned amount was reimbursed as share of KAL and was not on account of any work done by KAL or any advertisement done by it. He emphasized on the fact that no work was done by KAL for the assessee, rather KAL had purchased magazines from the assessee and just placed them on the back of the seat in the aircraft. The advertisement revenue increased at its own and no ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Kingfisher Airlines the advertisement receipts of appellant are bound to go up. In such a situation Kingfisher demanding a share in incremental advertisement receipts of appellant is perfectly justified. It cannot be considered compensation at all. It would just be sharing of advertisement revenue because Kingfisher Airlines is purchasing magazines from appellant in bulk for a specific use of aviation customers. There is no service contract here as envisaged by Assessing Officer. It is a kind of joint effort where an existing magazine which was in its declining phase is being revived for the benefit of both the concerned parties. The goodwill of Kingfisher, the name itself, the brand of the airline, is bound to attract the advertising world and yield increasing revenues to the publisher, the appellant. In terms of the agreement appellant is only getting 50% of the additional advertisement revenue, over and above a specified amount. This amounts to sharing of revenue and nothing else. The various case laws relied upon by Learned Counsel of appellant also suggests that in an agreement of the nature under consideration, this will amount to sharing of revenue on which tax is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39; for and on behalf of the payee, and thus, the facts of the said case are clearly distinguishable. 4.9 It is also noted by us that during the course of the course of assessment proceedings for assessment year 2009 10, the assessing officer raised query on the similar issue, in response, the assessee filed detailed reply along with copy of the agreement with KAL. The assessing officer considered the reply of the assessee, but did not make any disallowance in the assessment order passed under section 143 (3) dt 24.11.2011. Thus, the assessing officer himself has taken a view that no tax was required to be deducted on the said amount paid by the assessee. Under these circumstances, we find that taking a contrary view by the AO in the year under consideration was unjustified. 4.10 Thus, keeping in view all the fact and circumstances of the case, we find that findings of Ld. CIT(A) are in accordance with law and facts, and therefore these are upheld. 5. As a result, the appeal filed by the Revenue is dismissed. Now we shall take up Cross Objections of the assessee: 6. The assessee has raised following grounds in its Cross Objections: The Learned Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction. It was further submitted that payees were the owners of the photographs and images, and they uploaded these pictures on their website. The assessee was given user name and password to have access on these photographs and download them to be published in the magazines. It was submitted that for each downloading of the photographs the assessee was required to make separate payment. Thus, the download of the photographs and images was for a limited use and restricted purposes. He drew our attention on Double Taxation Avoidance Agreement with Singapore and UK and also drew our attention on the provisions of the Act to show that these payments did not fall within the definition of term royalty and therefore no TDS was required to deduct and therefore, the disallowance made by the AO was incorrect on law and facts. 7.3 Per Contra, the Ld. DR has also argued the case in detail. It was submitted by her that photographs would come within the definition of artistic work. She read before us provisions of section 9(1)(vi) explanation-2(v) to contend that the impugned payments would fall within the definition of royalty as provided in the above said provisions of the Act. Finally, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entities become owners of such photographs. It has been analysed and held by Ld. CIT(A) on the basis of agreement and other terms of conditions that what has been given to the assessee its only the right to use a particular photograph, and right is limited to publication of the photographs in assessee's own magazine. The Ld. CIT(A) has further stated that a limited right has been given to the assessee in lieu of a payment. It has been concluded by the Ld. CIT(A) that foreign party did not sell the 'photo', and therefore it cannot be classified a business transactions, since the ownership of the photographs has not been transferred to the assessee. 7.6. Ld. CIT(A) further holds that such limited rights given for the limited purpose shall fall within the definition of royalty in terms of Article 12 of DTAA with Singapore. It is further held by him that Article 13 of DTAA with UK is identical wherein the term royalty has similar definition as given in DTAA with Singapore. We do not find ourselves in complete agreement with the views of Ld. CIT(A). It is settled law and we need not debate much upon a settled principle that as per section 90(2) of the Act, out of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the same. 7.9 It is further brought to our notice that in the assessment year 2009-10 also payments were made to these very parties namely M/s Getty Images and M/s Famous-Pictures Features Agency, for downloading of photos. But no disallowance has been made by the assessing officer in the assessment order passed under section 143 (3) dated 24.11.2011. 7.10 The case law relied upon by the Ld. DR would not be applicable on the facts of this case. It is noted that terms of the agreement in the case of Agence France Press (supra) were different. In that case, full rights were transferred. The assessee was free to use the downloaded news and other news items in any manner and was allowed to make further circulation of the same. In the given facts of the said case it was held that there was transfer of copyright, and therefore, relevant provisions of the Act and Indo-France treaty were attracted. The facts are distinguishable in the case before us. 7.11 In view of the discussion made by us, we find that the impugned payments were not liable for deduction of tax at source and therefore, the disallowance made by the AO is deleted. 8. In the result, the Cross Objection fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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