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TMI Blog2019 (3) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... ical and based on similar facts. Accordingly, both the appeals have been heard together and are being disposed of by this common order. 4. We shall take note of facts and issue involved in ITA No. 1808/Ahd/2017 concerning AY 2014-15 for adjudication purposes for the sake of convenience. ITA No. 1808/Ahd/2017 - AY 2014-15 5. The grounds of appeal raised by the assessee read as under: "1. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 4,76,26,714/- u/s. 40(a)(ia) of the IT Act on account of non deduction of TDS." 6. When the matter was called for hearing, the learned DR for the Revenue relied upon the observations made by the AO and contended that the payments made by the assessee to the distributors are in the nature of royalty. The assessee having failed to deduct tax at source under s.194J of the Act, the AO has rightly disallowed the expenses of Rs. 4,76,27,714/- by invoking Section 40(a)(ia) of the Act. 7. The learned AR for the assessee, on the other hand, broadly reiterated the facts placed before the CIT(A) and relied upon the decision drawn by the CIT(A). The learned AR for the assessee in furtherance referred to the judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence was made to sample invoices raised by the Distributors, namely, Rose Valley Films Pvt. Ltd. and UTV Software Communication Ltd. to demonstrate the sharing of the revenue between the assessee and Distributors out of gross revenue collected from exhibition of the Film. 8.1 We have perused the order of the CIT(A) taking note of the relevant facts and applicable law in great length while concluding the issue. It will be apt to reproduce the relevant operative para of the order of the CIT(A) in this regard: "3.3 I have carefully considered the facts of the case, assessment order and submission of the appellant. The AO has made the disallowance of Rs. 4,76,27,714/- towards the payment made by the appellant for purchase of the films from the distributors invoking the provisions of Section 40(a)(ia) of the Act stating that the appellant has not made the TDS on the aforesaid payments and hence it has violated the provisions of Section 194J of the Act. The AO observed that the aforesaid payments were in the nature of royalty for acquiring rights in the intellectual property of the produce through the distributors. 3.4. On the other side, the appellant has submitted that it was mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efinition of royalty u/s.9 of the Act and therefore the provisions of Section 194J are not applicable. The appellant has also submitted that the TDS survey in the year 2013 has also token place at his premises and no such defaults for these type of payments have been observed by the TDS Survey party and they were satisfied with the explanations given by the appellant. 3.6. Having considered the facts and submissions, it has been noticed that mainly the appellant has the business of exhibition of cinematographic films by procuring the same from the distributor. In consideration of such procurements, the appellant has different modules for payments towards revenue sharing such as lumpsum payment, weekly basis payments, percentage in box office collections etc. All these payments are nothing but the procurement charges meaning thereby purchases of the rights of exhibition for o certain period as per the terms and conditions of the contract. Thus, the same has been debited in the books of account under the head of film distribution share expenses in the profit and loss account. It has also been noticed that the AO has alleged of invoking the provisions of Section 194J of the Act whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of "work" also the exhibition of films does not fall. It was vehemently contended by the learned DR that the above definition of "work" is only inclusive definition and therefore, even if the distribution of film is not mentioned in the definition, the same be covered by the definition. We are unable to agree with this contention of the learned DR because the Legislature has included the word 'broadcasting" and "telecasting" and production of programmes. If the Legislature wanted to include the distribution of film they could have included the same along with broadcasting and telecasting. We find that similar view is token by the SMC Bench of ITAT in the case of Essem Entertainment (PJ Ltd. (supra) and also by the ITAT, Ahmedabad Bench "C" in the case of City Gold Entertainment (P.) Ltd. [supra) wherein it is held as under:- "8. We have considered the submissions of Ld. DR in the light of material available on record. There is no material on record to raise any doubt about the facts mentioned in the order of the CIT(A). Therefore, we proceed on the basis that the findings of the learned CIT[A) on facts are undisputed. Main basis for the Assessing Officer for holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The following observation of the Hon'ble Gujarat High Court from the decision in the case of All Gujarat Federation of Tax Consultants v. CBDT (supra) (Page Nos. 292-293) support this view. 'In our conclusion, we are further strengthened by the fact that the Legislature intended to make a separate provision for bringing the service contract and professional service within the purview of the provision relating to tax deduction at source, by the Finance Bill, 1987 which has been quoted above. Once again the Finance Bill, 1995, a similar insertion has been proposed. Had the service rendered by the professionals like, Advocates, chartered accountants, engineers, physicians, architects etc. already been within the scope and ambit of section 194C, the Legislature would not have resorted to this exercise. It cannot be assumed that the Legislature uses or indulges in on exercise for bringing something by way of surplus. Likewise, it may be noticed that the profession/business of advertising, broadcasting and telecasting including production of programmes for such broadcasting or telecasting, carriage of goods by railway etc. which are being now been designed to be inserted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals are allowed." 3.9.1. Similarly, the Honourable ITAT SMC Bench, Ahmedabad in the case of ACIT Vs. Essem Entertainment Pvt. Ltd. in IT Appeal No.3731 & 3732 of 2004 has hold the similar views. 3.9.2. In another judgment of the Hon'ble Gujarat High Court in the case of CIT(A) Vs. City Gold Entertainment Ltd. in ITA No.236 of 2006 dtd. 28,11.2014 has held that exhibition of films are not covered under the definition of work under Explanation to Section 194C of the Act. 3.10. Having considered the facts and submission, it is apparent that the procurement charges paid by the appellant to the film distributors does not attract the TDS provisions as alleged by the AO and therefore invoking the provisions of Section 40(a)(ia) of I.T. Act is not justified and the disallowance made by the AO is deleted. The ground of appeal is accordingly allowed." 8.2 A perusal of the order of the CIT(A) would show that assessee is in the exhibition of films procured from distributors on revenue sharing basis. The Revenue shared by the assessee with the distributor to exhibit the cinematographic film is outside the scope of expression 'royalty' under Clause (v) to Explanation 2 to Se ..... 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