ACIT, CHENNAI V. Ganapathy Media P Ltd., CHENNAI

ITA 1022/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96018 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 06-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: V S JAYAKUMAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO.1022/MDS/2015 ( / ASSESSMENT YEAR: 2010-11) ASSISTANT COMMISSIONER OF INCOME TAX, NCC-20, CHENNAI-34. VS M/S.GANAPATHY MEDIA P.LTD. 3/6, MGR SALAI, VIJAYARAGHAVAPURAM, CHENNAI-600 093. PAN:AACCG8594M ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : DR. B.NISCHAL, JCIT /RESPONDENT BY : MR. V.S.JAYAKUMAR, ADVOCATE /DATE OF HEARING : 21 ST JULY, 2015 /DATE OF PRONOUNCEMENT : 11 TH SEPTEMBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-14, C HENNAI DATED 24.02.2015 FOR THE ASSESSMENT YEAR 2010-11. THE ONLY GRIEVANCE OF THE REVENUE IN ITS APPEAL IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE ADDITION MADE UNDER SECTION 40(A)(IA) OF THE ACT TO WARDS NON- DEDUCTION OF TDS UNDER SECTION 194J OF THE ACT IN R ESPECT OF PAYMENT FOR PURCHASE OF SATELLITE RIGHTS. 2. COUNSEL FOR THE ASSESSEE SUBMITS THAT AN IDENTIC AL ISSUE HAS BEEN CONSIDERED BY THE CO-ORDINATE BENCH IN THE 2 ITA NO.1022/MDS/2015 ASSESSEES CASE FOR THE IMMEDIATELY PRECEDING ASSES SMENT YEAR IN ITA NO.1286/MDS/2013 DATED 19.06.2015 WHER EIN THE TRIBUNAL SUSTAINED THE ORDER OF THE COMMISSIONE R OF INCOME TAX (APPEALS) IN DELETING THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT IN RESPECT OF PA YMENT MADE FOR PURCHASE OF SATELLITE RIGHTS. 3. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER O F THE ASSESSING OFFICER. 4. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSME NT DISALLOWED ` 60,50,000/- UNDER SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TDS UNDER SECTION 194J OF THE ACT IN RESPECT OF AMOUNTS PAID FOR PURCHASE OF SATELLITE R IGHTS. THE ASSESSEE CONTENDED THAT PURCHASE OF FILM RIGHTS IS NOT COVERED UNDER SECTION 194J OF THE ACT. IT IS CONTEN DED THAT THE TERM ROYALTY HAS BEEN DEFINED UNDER SECTION 9 (1)(VI) OF THE ACT AND AS PER WHICH TRANSFER OF RIGHTS INCLUD ING FILMS OR VIDEO TAPES FOR USE IN CONNECTION WITH TELEVISION O R TAPES FOR USE COME UNDER THE PURVIEW OF SECTION 194J OF THE A CT BUT NOT CONSIDERATION FOR SALE, DISTRIBUTION OR EXHIBI TION OF 3 ITA NO.1022/MDS/2015 CINEMATOGRAPH FILMS. THE ASSESSEE CLAIMED BEFORE T HE ASSESSING OFFICER THAT IT IS IN THE BUSINESS OF BUY ING AND SELLING OF SATELLITE RIGHTS AND THEREFORE PROVISION S OF SECTION 194J OF THE ACT HAVE NO APPLICATION. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND DELETED THE DISALLO WANCE MADE. WE FIND THAT AN IDENTICAL ISSUE HAS COME UP B EFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER ASS ESSMENT YEAR I.E. 2009-10 WHEREIN THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE OBSERVING AS UNDER:- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER 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 MER E ASSIGNMENT OF RIGHT OR IT IS A PURCHASE OF THE FEAT URE 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 T AX UNDER SECTION 194 OF THE ACT. WE HAVE CAREFULLY GONE THR OUGH THE SO-CALLED ASSIGNMENT AGREEMENT DATED 15.07.2008. A S RIGHTLY SUBMITTED BY THE LD. D.R., THE PARTIES TO T HE AGREEMENT WERE DESCRIBED AS ASSIGNOR AND ASSIGNE E AND NOT AS VENDOR AND PURCHASER. THE AGREEMENT SHOWS T HAT AN EXCLUSIVE RIGHT FOR BROADCASTING THE FILMS THROUGH SATELLITE TELEVISION WAS GIVEN TO THE ASSESSEE FOR 99 YEARS. IN FACT THE RIGHT GIVEN TO THE ASSESSEE IS DESCRIBED IN THE SCH EDULE TO THE SAID AGREEMENT WHICH READS AS FOLLOWS:- RIGHTS : EXCLUSIVE COPYRIGHT FOR BROADCASTING OUR FILM THROUGH ANY SATELLITE TELEVIS ION BROADCASTING RIGHTS MEAN RIGHTS TO USE SATELLITES I N EXTRA TERRESTRIAL ORBIT TO BEAM DOWN A MICROWAVE SIGNAL TO SATELLITE ANTENNAS, DIRECT BROADCASTING, POINT TO POINT BROADCASTING AND ANY OTHER TELEVISION 4 ITA NO.1022/MDS/2015 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 . 6. 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 2 8(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 RIG HT TO TELECAST A FILM FOR A DEFINITE PERIOD, THEREFORE, W HAT WAS PAID WAS ROYALTY. THEREFORE, TAX HAS TO BE DEDUCTED UND ER THE PROVISIONS OF SECTION 194 OF THE ACT. WE HAVE GONE THROUGH THE DECISION OF THIS BENCH OF THE TRIBUNAL IN SHRI BALAJI COMMUNICATIONS (SUPRA). THE CASE BEFORE THIS TRIBU NAL WAS THAT THE ASSESSEE IS ENGAGED IN PURCHASE AND SALE O F RIGHT OF SATELLITE MOVIES. HOWEVER, THE ASSESSING OFFICER F OUND THAT THE AGREEMENT ENTERED BETWEEN THE PARTIES IS ONLY F OR ASSIGNMENT OF RIGHT TO THE ASSESSEE AND NOT SALE OF FEATURE FILM. THE RIGHT ASSIGNED TO THE ASSESSEE IS ONLY 2 0 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, T HE CIT(APPEALS) FOUND THAT THE ASSIGNMENT AGREEMENT WA S NOTHING BUT PURCHASE AGREEMENT WHEREBY THE ASSESSEE PURCHASED EXCLUSIVE OWNERSHIP OF SATELLITE COPYRIGH T BY VIRTUE OF PURCHASE. THOUGH THE ASSESSEE WAS DESCRIBED IN THE AGREEMENT AS ASSIGNEE, IN FACT, THE ASSESSEE IS O NLY 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 A LL OR ANY OF THE RIGHTS IN RESPECT OF ANY COPYRIGHT, INCLUDING C OPYRIGHT FOR FILMS AND VIDEO TAPES USED IN CONNECTION WITH TELEV ISION OR TAPES, WILL FALL WITHIN THE DEFINITION OF ROYALTY . WHAT IS EXCLUDED IS CONSIDERATION FOR SALE, DISTRIBUTION AN D EXHIBITION OF CINEMATOGRAPHIC FILMS. THE TRIBUNAL CAME TO A C ONCLUSION THAT THE ASSESSEE DID NOT PURCHASE FEATURE FILMS AS SUCH THROUGH THE TRANSACTIONS. THE ASSESSEE HAD ONLY RE CEIVED RIGHT FOR SATELLITE BROADCASTING. THE TRIBUNAL CAM E TO A CONCLUSION THAT AS LONG AS THE TRANSFER OF RIGHT RE LATES TO COPYRIGHT OF A FILM, WHICH IS USED IN CONNECTION WI TH TELEVISION OR TAPES, THE CONSIDERATION PAID WOULD BE ROYALTY O NLY. 5 ITA NO.1022/MDS/2015 ACCORDINGLY, THE ASSESSEE WAS DUTY BOUND TO DEDUCT TAX UNDER SECTION 194J OF THE ACT. 7. WE HAVE ALSO GONE THROUGH THE JUDGMENT OF MADRAS HIGH COURT IN K. BHAGYALAKSHMI V. DCIT (2014) 265 C TR (MAD) 545. IN THE CASE BEFORE THE MADRAS HIGH COUR T, THE ASSESSEE WAS IN THE BUSINESS OF SALE AND PURCHASE O F TELEVISION RIGHT FOR FILMS. THE ASSESSEE OBTAINED SATELLITE RIGHT AND ALL OTHER RIGHTS PERTAINING TO TELUGU FEA TURE 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 PERIO D WOULD COME WITHIN THE MEANING OF ROYALTY, THEREFORE, THE ASS ESSEE HAS TO DEDUCT TAX UNDER SECTION 194J OF THE ACT. THE T RIBUNAL BY PLACING RELIANCE IN ITS EARLIER ORDER IN K. BHAGYAL AKSHMI (SUPRA), FOUND THAT WHAT WAS TRANSFERRED TO THE ASS ESSEE IS ONLY A RIGHT OF TELECAST FOR A FIXED PERIOD. THERE FORE, IT IS NOT A CASE OF PURCHASE AND SALE OF THE FILM. HENCE, TH E PAYMENT MADE BY THE ASSESSEE WOULD FALL WITHIN THE DEFINITI ON OF ROYALTY. ON THOSE FACTS, THE HIGH COURT AFTER RE FERRING TO AGREEMENT BETWEEN THE PARTIES, FOUND THAT THE EXCLU SIVE RIGHT, INCLUDING THEATRICAL AND COMMERCIAL RIGHTS O F DISTRIBUTION, EXHIBITION AND EXPLOITATION WAS GIVEN TO THE ASSESSEE. THE HIGH COURT FURTHER FOUND THAT THE TO TAL CONSIDERATION PAID BY THE ASSESSEE IS FOR ASSIGNMEN T OF EXCLUSIVE RIGHT, INCLUDING THEATRICAL, COMMERCIAL, DISTRIBUTION, EXHIBITION, SHALL FOR FIVE YEARS FROM THE DATE OF F IRST RELEASE OF THE FILM. APART FROM THAT, THE WORLD SATELLITE RIG HTS, SATELLITE BROADCASTING SERVICE, SATELLITE TELEVISION BROADCAS TING SERVICE, AND COPYRIGHTS ALSO STOOD TRANSFERRED IN F AVOUR OF THE ASSESSEE. SUCH TRANSFER WAS WITHOUT ANY RESTRICTIO N OF GEOGRAPHICAL AREA FOR A PERIOD OF 99 YEARS FROM THE DATE OF THE TRANSFER DEED. THE MADRAS HIGH COURT FURTHER F OUND THAT THOUGH THE AGREEMENT SPEAKS OF PERPETUAL TRANSFER F OR A PERIOD OF 99 YEARS, THE COPYRIGHT OF THE FILM UNDER SECTION 26 OF THE COPY RIGHT ACT, 1957, SHALL SUBSIST FOR A PE RIOD OF 60 YEARS FROM THE BEGINNING OF THE CALENDAR YEAR NEXT FOLLOWING THE YEAR IN WHICH THE FILM WAS PUBLISHED. THEREFOR E, THE AGREEMENT IN THE CASE ON HAND IS BEYOND THE PERIOD OF 60 YEARS FOR WHICH THE COPYRIGHT WOULD BE VALID. THER EFORE, THE AGREEMENT BETWEEN THE PARTIES WOULD BE TREATED ONLY AS A SALE. REFERRING TO THE DECISION OF THIS TRIBUNAL I N THE CASE OF SHRI BALAJI COMMUNICATIONS (SUPRA), THE RIGHT IN TH AT CASE WAS TRANSFER ONLY FOR A PERIOD OF 20 TO 25 YEARS AN D NOT OF PERMANENT NATURE. THEREFORE, THE HIGH COURT FOUND THAT THE DECISION IS CLEARLY DISTINGUISHABLE. ULTIMATELY, T HE HIGH COURT FOUND THAT THE TRANSFER IN FAVOUR OF THE ASSESSEE F OR A PERIOD 99 YEARS IS SALE, THEREFORE, IT WAS EXCLUDED FROM T HE DEFINITION OF ROYALTY. IN THIS CASE ALSO, AS WE HAVE EXTRACTE D ABOVE 6 ITA NO.1022/MDS/2015 FROM THE SCHEDULE, THE RIGHT TRANSFERRED TO THE ASS ESSEE IS TO TELECAST THE FEATURE FILM IN EXTRA TERRESTRIAL AREA S FOR A PERPETUAL PERIOD OF 99 YEARS. AS FOUND BY THE HIGH COURT, THE COPYRIGHT SUBSISTS ONLY FOR A PERIOD OF 60 YEAR S. THEREFORE, THE RIGHT GIVEN TO THE ASSESSEE BEYOND T HE PERIOD OF 60 YEARS HAS TO BE TREATED AS SALE OF THE RIGHT FOR CINEMATOGRAPHIC FILM. HENCE, THIS TRIBUNAL IS OF T HE CONSIDERED OPINION THAT THE DECISION OF THIS TRIBUN AL IN SHRI BALAJI COMMUNICATIONS (SUPRA) MAY NOT BE APPLICABLE TO THE FACTS OF THE CASE. THIS TRIBUNAL IS OF THE CONSIDE RED 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. 8. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(APPEALS). BY FOL LOWING THE JUDGMENT OF MADRAS HIGH COURT IN K. BHAGYALAKSHMI ( SUPRA) AND FOR THE REASON STATED THEREIN, WE UPHOLD THE OR DER OF THE LOWER AUTHORITY. 5. RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPH OLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) A ND DISMISS THE APPEAL OF THE REVENUE. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH SEPTEMBER, 2015. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 11 TH SEPTEMBER, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .