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[2019] 71 ITR 332 (Ahd. – Trib.) ITO vs. Eyelex Films Pvt. Ltd. ITA No.: 1808 (Ahd.) of 2017 & 388
(Ahd.) of 2018 A.Ys.: 2013-14 and 2014-15 Date of order: 7th March, 2019;
Section 194J, section 40(a)(ia) – Payment
made by film exhibitor to distributor is neither royalty nor FTS and is not
covered by section 194J and, consequently, does not attract disallowance u/s
40(a)(ia)
FACTS
The assessee was an exhibitor of films. It
purchased cinematographic films from the distributors for exhibition in cinema
houses. The revenue earned from box office collections was shared with the
distributors as a consideration for purchase of films. The assessee had not
deducted tax at source on the said payments under the belief that the payment
does not fall under any of the provisions mandating TDS. However, the AO
categorised the said payments as royalty u/s 194J and, in turn, disallowed the
said payments u/s 40(a)(ia).
Aggrieved, the assessee preferred an appeal
to the CIT(A) who allowed the appeal. In turn, the aggrieved Revenue filed an
appeal before the Tribunal.
HELD
The Tribunal discussed the observations made
by the CIT(A) and concurred with its view which was as under:
Section 194J defines royalty in Explanation
2 to section 9(1)(vi). As per the said definition, the consideration for sale /
distribution or exhibition of cinematographic films has been excluded. The
payment made by the appellant could not be included under the definition of
royalty u/s 9 of the Act, and therefore the provisions of section 194J were not
applicable. Payments made by the assessee to the distributors were nothing but
the procurement charges, meaning purchases of the rights of exhibition for a
certain period as per the terms and conditions of the contract.
The CIT(A) had even discussed the
applicability of section 194C as well as section 9(1)(vii) of the Act and concluded that even section 194C was not applicable as the impugned
payment was not for carrying out any work.
