Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “D” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY&
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER: Both, the appeal of the Revenue and cross-objection of the assessee are directed against the very same order of 24.12.2012. We heard both the appeal and the cross-objection together and disposing of the same by this common order. The only issue arises for consideration is with regard to disallowance of `17,60,79,987/- under Section 40(a)(ia) of the Income-tax Act, 1961 (in short 'the Act').
Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that the assessee purchased copyrights of film for an amount of `22,01,25,000/-. However, no tax was deducted either under Section 194C or under Section 194J of the Act. According to the Ld. D.R., the assessee claimed that the term “royalty” does not include consideration paid for sale, distribution or exhibition of cinematographic film. According to the Ld. D.R., the assessee’s further claim was that it was in the business of buying and selling of satellite rights of the feature films. On verification, the Assessing Officer found that the so-called agreement of assignment is not an agreement to purchase. The Ld. D.R. further submitted that the assessee was described in the agreement as “assignee” and not as “buyer”. The assessee was given the rights for a period of 99 years. Therefore, it is not a sale. According to the Ld. D.R., it is only granting satellite rights for the movie produced by the the assessee only gets a specific right for satellite exhibition.
Therefore, the judgment of Karnataka High Court in Samsung Electronics Co. Ltd. & Others [2011] 16 taxmann.com 141 is applicable.
The Ld. D.R. further submitted that a mere satellite right without permanently transferring the right to the assessee for a particular period, is subject to deduction of TDS under Section 194J of the Act. Therefore, the CIT(Appeals) is not justified in allowing the claim of the assessee. The Ld. D.R. has also placed his reliance on the decision of this Bench of the Tribunal in ACIT v. Shri Balaji Communications (2013) 140 ITD 687.
On the contrary, Sh. Sandeep Bagmar. R., the Ld.counsel for the assessee, submitted that the assessee was assigned the right of telecasting the films through satellite for a specific period.
Referring to the copy of the agreement dated 15.07.2008, the Ld.counsel submitted that the assessee has approached the assignor only for assigning of satellite right of the film. Therefore, according to the Ld. counsel, what was given to the assessee is only a right to telecast the feature film for the satellite media. Hence the provisions of Section 194J of the Act is not applicable. The purchase and sale of satellite right of feature films as a trader for consideration. The satellite right was given to the assessee for 99 years. According to the Ld. counsel, the life of any film is less than 99 years. Therefore, when the exclusive right of exhibition is given to the assessee, it amounts to sale of films. Therefore, there is no question of deduction of tax under Section 194J of the Act.
We have considered the rival submissions on either side and perused the relevant material on record. The only issue arises for consideration is whether the right to telecast the cinematographic film through satellite is a mere assignment of right or it is a purchase of the feature films. The assessee claims that it amounts to purchase of films since the satellite right was given to the assessee for 99 years. However, the Revenue claims that it is only an assignment, therefore, the assessee has to deduct tax under Section 194 of the Act. We have carefully gone through the so- called assignment agreement dated 15.07.2008. As rightly submitted by the Ld. D.R., the parties to the agreement were described as “assignor” and “assignee” and not as vendor and purchaser. The agreement shows that an exclusive right for broadcasting the films through satellite television was given to the described in the Schedule to the said agreement which reads as follows:-
“RIGHTS : Exclusive copyright for broadcasting our Film through any Satellite Television Broadcasting Rights mean Rights to use Satellites in extra terrestrial orbit to beam down a microwave signal to Satellite antennas, Direct Broadcasting, Point to point broadcasting and any other Television Systems and rebroadcast in any territory of entire India along with it foot print wherever the Channel is beamed without restriction of geographical area for a perpetual period of 99 (Ninety Nine) years.”
Whenever a payment was made by way of fees for professional service or fees for technical service or remuneration fees or commission to a Director of a company or respectively or any sum referred to in Section 28(va) of the Act, deduction has to be made at 10% of the sum as income-tax. In this case, the assessee claims that it is neither a fee nor a royalty. The assessee claims that it is only a purchase price paid to the owner of the film.
However, the Revenue claims that what was given to the assessee is a right to telecast a film for a definite period, therefore, what was paid was royalty. Therefore, tax has to be deducted under the provisions of Section 194 of the Act. We have gone through the decision of this Bench of the Tribunal in Shri Balaji Communications engaged in purchase and sale of right of satellite movies. However, the Assessing Officer found that the agreement entered between the parties is only for assignment of right to the assessee and not sale of feature film. The right assigned to the assessee is only 20 to 25 years. Therefore, the Assessing Officer found that what was paid by the assessee is in the nature of royalty. Hence, there was no sale as claimed by the assessee. However, the CIT(Appeals) found that the assignment agreement was nothing but purchase agreement whereby the assessee purchased exclusive ownership of satellite copyright by virtue of purchase. Though the assessee was described in the agreement as “assignee”, in fact, the assessee is only a purchaser. Referring to Explanation 5 to Section 9(1)(vi) of the Act, the Commissioner came to a conclusion that the assessee is not liable to deduct tax under Section 194J of the Act. On further appeal before this Tribunal by the Revenue, this Tribunal found that the transfer of all or any of the rights in respect of any copyright, including copyright for films and video tapes used in connection with television or tapes, will fall within the definition of “royalty”. What is excluded is consideration for sale, distribution and exhibition of cinematographic films. The Tribunal came to a conclusion that the assessee did not purchase feature films as such through the broadcasting. The Tribunal came to a conclusion that as long as the transfer of right relates to copyright of a film, which is used in connection with television or tapes, the consideration paid would be royalty only. Accordingly, the assessee was duty bound to deduct tax under Section 194J of the Act.
We have also gone through the judgment of Madras High Court in K. Bhagyalakshmi v. DCIT (2014) 265 CTR (Mad) 545. In the case before the Madras High Court, the assessee was in the business of sale and purchase of television right for films. The assessee obtained satellite right and all other rights pertaining to Telugu feature films. The assessee before the High Court was given right of telecast for 99 years. The Assessing Officer found that the assignment of right for the film for definite period would come within the meaning of “royalty”, therefore, the assessee has to deduct tax under Section 194J of the Act. The Tribunal by placing reliance in its earlier order in K. Bhagyalakshmi (supra), found that what was transferred to the assessee is only a right of telecast for a fixed period. Therefore, it is not a case of purchase and sale of the film. Hence, the payment made by the assessee would fall within the definition of “royalty”. On those facts, the High Court after right, including theatrical and commercial rights of distribution, exhibition and exploitation was given to the assessee. The High Court further found that the total consideration paid by the assessee is for assignment of exclusive right, including theatrical, commercial, distribution, exhibition, shall for five years from the date of first release of the film. Apart from that, the World Satellite Rights, Satellite Broadcasting Service, Satellite television broadcasting service, and copyrights also stood transferred in favour of the assessee. Such transfer was without any restriction of geographical area for a period of 99 years from the date of the transfer deed.
The Madras High Court further found that though the agreement speaks of perpetual transfer for a period of 99 years, the copyright of the film under Section 26 of the Copy Right Act, 1957, shall subsist for a period of 60 years from the beginning of the calendar year next following the year in which the film was published.
Therefore, the agreement in the case on hand is beyond the period of 60 years for which the copyright would be valid. Therefore, the agreement between the parties would be treated only as a sale.
Referring to the decision of this Tribunal in the case of Shri Balaji Communications (supra), the right in that case was transfer only for a period of 20 to 25 years and not of permanent nature. Therefore, Ultimately, the High Court found 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 (supra) 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 (supra) would be squarely applicable.
This view of the Madras High Court is also followed by a subsequent Division Bench of Madras High Court in 252 ITR 310.
In view of the above, this Tribunal do not find any infirmity in the order of the CIT(Appeals). By following the judgment of Madras High Court in K. Bhagyalakshmi (supra) and for the reason stated therein, we uphold the order of the lower authority.
The cross-objection filed by the assessee is only in support of the order of the CIT(Appeals), therefore, becomes infructuous.
In the result, both, the appeal of the Revenue and cross- objection filed by the assessee are dismissed.
Order pronounced on 19th June, 2015 at Chennai.