ASST. COMMISSIONER OF INCOME-TAX Vs. AISHWARAYA ARTS CREATIONS P. LTD.
INCOME TAX APPELLATE TRIBUNAL
Asst. Commissioner Of Income -Tax
Aishwaraya Arts Creations P. Ltd.
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Saktijit Dey, Member (J) -
(1.) IN the aforesaid appeal, department has called upon us to decide whether payments made by assessee for acquiring satellite rights of films is in the nature of royalty as defined u/s. 9(1) Explanation 2 thereby requiring deduction of tax at source in terms with section 194J.
(2.) BRIEFLY the facts are, assessee is a company. During survey u/s. 133A conducted on 22/07/2009 to verify TDS compliance by assessee, it was found that assessee during FY 2007 -08 corresponding to AY 2008 -09 had made payments for acquiring satellite rights assigned by various producers in favour of assessee. AO, therefore, issued a show cause notice to assessee requiring him to furnish details of the tax deducted, if any, on the amounts paid towards assignment/purchase of satellite rights for broadcasting or telecasting. AO found that during the year assessee had made payment of Rs. 1,55,00,000 to different producers, which are in the nature of royalty as defined under Explanation 2 to clause (vi) of section 9(1) thereby attracting the provisions of section 194J. Though, assessee responded to the show cause notice issued by AO by furnishing all the details and explaining that the payments made cannot be treated as royalty so as to attract provisions of section 194J, AO, however, rejecting all the explanations of assessee ultimately passed an order purportedly u/s. 201(1) & 201(1A) of the Act, raising tax demand at Rs. 11,12,400 u/s. 201(1) and interest of Rs. 2,73,876 u/s. 201(1A). Being aggrieved of the assessment order so passed, assessee preferred appeal before ld. CIT(A). In course of hearing of appeal before ld. CIT(A), assessee made elaborate submissions objecting to the demand raised. It was submitted by assessee that as payments made by assessee is for sale, distribution, or exhibition of cinematographic films, it will not come within the term 'royalty' as defined u/s. 9(1) clause (v) of Explanation 2.
(3.) LD . CIT(A) after considering the submissions of assessee in the context of facts and materials on record, found the order passed u/s. 201(1) and 201(1A) to be unsustainable and accordingly, allowed appeal of assessee. The observations made by ld. CIT(A) is extracted hereunder for the sake of convenience:
"The assessment order and the submissions of the appellant have been considered carefully. Though the AO quoted the provisions of the sections 194J and of the IT Act in the assessment order, he did not give any reasons/explanation as to how the payments under consideration fall under the above said sections. In fact on page 3 of the assessment order, the AO has discussed as to why he did not consider certain loans for the purpose of section 194 but he has not made any comment or observations as to how the payments made towards purchase of satellite rights amounts to royalty u/s. 9 so as to attract the provisions of section 194J. Since the levy of tax and interest u/s. 201(1) and 201(1A) is not substantiated with any cogent or even any reasons, I am afraid, the same cannot survive and therefore the appeal is allowed.";
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