M/s.Calicut University central co-op stores Ltd, Malappuram V. ITO, Tirur

ITA 666/COCH/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7257 (ITAT-COCHIN)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 31-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: C B M WARRIER
• Section: 139

Judgement Text

1 ITA NO. 666-668/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI CHANDRA PO OJARI (AM) I.T.A NO. 666 TO 668/COCH/2013 (ASSESSMENT YEARS 2007-08 TO 2009-10) M/S CALICUT UNIVERSITY CENTRAL VS ITO, WD.3 CO-OP. STORES LTD TIRUR THENHIPALAM, MALAPPURAM PAN : AAAAC9617L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI CBM WARRIER RESPONDENT BY : SHRI M ANIL KUMAR, CIT DATE OF HEARING : 17-07-2014 DATE OF PRONOUNCEMENT : 28-08-2014 O R D E R PER N.R.S. GANESAN (JM) ALL THE THREE APPEALS OF THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE CIT(A), KOZHIKODE DATED 03-08-2013 FOR THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-10. SIN CE COMMON ISSUE ARISES FOR CONSIDERATION WE HEARD ALL THE APPEALS T OGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE U/S 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX U/S 194J OF THE ACT. 2 ITA NO. 666-668/COCH/2013 3. SHRI CBM WARRIER, THE LD.REPRESENTATIVE FOR THE ASSSSEE SUBMITTED THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED ITSELF IN PRINTING AND PUBLICATION OF BOOKS FOR THE STUDENTS. ACCORDING T O THE LD.REPRESENTATIVE, THE ASSESSING OFFICER FOUND THAT WHAT WAS PAID BY T HE ASSESSEE TO THE AUTHORS OF THE BOOK IS ROYALTY AND, THEREFORE, THE ASSESSEE HAS TO DEDUCT TAX U/S 194J. REFERRING TO PROVISIONS OF SECTION 194J OF THE ACT, THE LD.REPRESENTATIVE SUBMITTED THAT EXPLANATION (BA) T O SECTION 194J CLEARLY SAYS THAT THE TERM ROYALTY SHALL HAVE THE SAME ME ANING AS IN EXPLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9. REFERRING TO SECTION 9, MORE PARTICULARLY, SUB SECTION (1) OF CLAUSE (VI) OF EXP LANATION 2, THE LD.REPRESENTATIVE SUBMITTED THAT THE AMOUNT PAID BY THE ASSESSEE TO THE AUTHOR OF THE BOOKS WOULD NOT FALL WITHIN THE DEFIN ITION OF ROYALTY, THEREFORE, THE ASSESSEE IS NOT EXPECTED TO DEDUCT TAX U/S 194J OF THE ACT. MOREOVER, THE RECIPIENT AUTHORS ARE EXEMPTED FROM PAYMENT OF TAX U/S 80QQB. THE LD.REPRESENTATIVE PLACED HIS RELIANCE ON THE DECISI ON OF THE MUMBAI BENCH IN MAJESTIC PRAKASHAN, MUMBAI VS ACIT IN ITA NO.274 4/M/ 2010 ORDER DATED 29-06-2012, COPY OF WHICH IS FILED BY THE LD. REPRESENTATIVE FOR THE ASSESSEE AND SUBMITTED THAT SECTION 9(1)(VI) DOES N OT APPLY TO PUBLICATION OF BOOKS. THE MUMBAI BENCH OF THIS TRIBUNAL FOUND THAT THE LITERARY WORK OF THE AUTHORS WERE NOT USED FOR THE TELEVISION OR RADIO BROADCASTING AND THE PROVISIONS OF SECTION 9(1)(VI) WOULD APPLY ONLY IN RESPECT OF TRANSFER OF RIGHT TO TELEVISION OR RADIO BROADCASTING. THEREFO RE, THE MUMBAI BENCH 3 ITA NO. 666-668/COCH/2013 FOUND THAT THE PROVISIONS OF SECTION 194J ARE NOT A PPLICABLE. IN VIEW OF THE ABOVE, ACCORDING TO THE LD.REPRESENTATIVE, THE ASSE SSEE IS NOT EXPECTED TO DEDUCT TAX AT SOURCE. 4. ON THE CONTRARY, SHRI M. ANIL KUMAR, THE LD.DR S UBMITTED THAT ADMITTEDLY, THE ASSESSEE PAID EXCEEDING RS.20,000 W ITHOUT DEDUCTING TAX TO THE AUTHORS OF THE BOOK. THE ASSESSEE HAS ALSO PAID ROYALTY. PAYMENT OF ROYALTY IN RESPECT OF ANY COPYRIGHT, LITERARY, A RTISTIC OR SCIENTIFIC WORK WOULD FALL WITHIN THE DEFINITION OF ROYALTY AS DE FINED IN SECTION 9(1)(VI) OF THE ACT. THEREFORE, ACCORDING TO THE LD.DR, THE CI T(A) HAS RIGHTLY CONFIRMED THE ADDITION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NO T IN DISPUTE THAT THE ASSESSEE PAID EXCEEDING RS.20,000 TO THE AUTHORS OF THE BOOK WITHOUT DEDUCTING TAX. THE BUSINESS OF THE ASSESSEE IS PRI NTING AND PUBLICATION OF BOOKS FOR THE STUDENTS. 6. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 9(1)(VI) WHICH READS AS FOLLOWS: 4 ITA NO. 666-668/COCH/2013 9(1) THE FOLLOWING INCOMES SHALL BE DEEMED TO ACCR UE OR ARISE IN INDIA:- (I) TO (V) XXXXXXXXXXXXXXX (VI) INCOME BY WAY OF ROYALTY PAYABLE BY (A) THE GOVERNMENT; OR (B) BY A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE ROYALTY IS PAYABLE IN RESPECT OF ANY RIGHT, PROPERT Y OR INFORMATION USED OR SERVICES UTILIZED FOR THE PURPO SES OF A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERS ON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARN ING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA; OR (C) A PERSON WHO IS A NON-RESIDENT, WHERE THE ROYAL TY IS PAYABLE IN RESPECT OF NAY RIGHT, PROPERTY OR INFORMATION USED OR SERVICES UTILIZED FOR THE PURPO SES OF A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERS ON IN INDIA OR FOR THE PURPOSES OF MAKING OR EARNING A NY INCOME FROM ANY SOURCE IN INDIA: PROVIDED THAT NOTHING CONTAINED IN THIS CLAUSE SHALL APPLY IN RELATION TO SO MUCH OF THE INCOME BY WAY O F ROYALTY AS CONSISTS OF LUMP SUM CONSIDERATION FOR T HE TRANSFER OUTSIDE INDIA OF, OR THE IMPARTING OF INFO RMATION OUTSIDE INDIA IN RESPECT OF, ANY DATA, DOCUMENTATIO N, DRAWING OR SPECIFICATION RELATING TO ANY PATENT, IN VENTION, MODEL, DESIGN SECRET FORMULA OR PROCESS OR TRADE MA RK OR SIMILAR PROPERTY, IF SUCH INCOME IS PAYABLE IN PURSUANCE OF AN AGREEMENT MADE BEFORE THE 1 ST DAY OF APRIL, 1976, AND THE AGREEMENT IS APPROVED BY THE CENTRAL GOVERNMENT: 5 ITA NO. 666-668/COCH/2013 PROVIDED FURTHER THAT NOTHING CONTAINED IN THIS CLAUSE SHALL APPLY IN RELATION TO SO MUCH OF THE INCOME BY WAY OF ROYALTY AS CONSISTS OF LUMP SUM PAYMENT MADE BY A PERSON, WHO IS A RESIDENT, FOR THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RES PECT OF COMPUTER SOFTWARE SUPPLIED BY A NON-RESIDENT MANUFACTURER ALONG WITH A COMPUTER OR COMPUTER-BASE D EQUIPMENT UNDER ANY SCHEME APPROVED UNDER THE POLICY ON COMPUTER SOFTWARE EXPORT, SOFTWARE DEVELOPMENT AND TRAINING, 1986 OF THE GOVERNMENT OF INDIA. EXPLANATION 1.- FOR THE PURPOSES OF THE FIRST PROVI SO, AN AGREEMENT MADE ON OR AFTER THE 1 ST DAY OF APRIL, 1976, SHALL BE DEEMED TO HAVE BEEN MADE BEFORE THAT DATE IF THE AGREEMENT IS MADE IN ACCORDANCE WITH PROPOSALS APPROVED BY THE CENTRAL GOVERNMENT BEFORE THAT DATE ; SO, HOWEVER, THAT, WHERE THE RECIPIENT OF THE INCOM E BY WAY OF ROYALTY IS A FOREIGN COMPANY, THE AGREEMENT SHALL NOT BE DEEMED TO HAVE BEEN MADE BEFORE THAT DATE UNLESS, BEFORE THE EXPIRY OF THE TIME ALLOWED UNDER SUB-SECTION (1) OR SUB-SECTION (2) OF SECTION 139 (WHETHER FIXED ORIGINALLY OR ON EXTENSION) FOR FURN ISHING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR COMMENCING ON THE 1 ST DAY OF APRIL, 1977, OR THE ASSESSMENT YEAR IN RESPECT OF WHICH SUCH INCOME FIR ST BECOMES CHARGEABLE TO TAX UNDER THIS ACT, WHICHEVER ASSESSMENT YEAR IS LATER, THE COMPANY EXERCISES AN OPTION BY FURNISHING A DECLARATION IN WRITING TO TH E ASSESSING OFFICER (SUCH OPTION BEING FINAL FOR THAT 6 ITA NO. 666-668/COCH/2013 ASSESSMENT YEAR AND FOR EVERY SUBSEQUENT ASSESSMENT YEAR) THAT THE AGREEMENT MAY BE REGARDED AS AN AGREEMENT MADE BEFORE THE 1 ST DAY OF APRIL, 1976. EXPLANATION 2.-FOR THE PURPOSES OF THIS CLAUSE, RO YALTY MEANS CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION BUT EXCLUDING ANY CONSIDERATION WHICH WOULD BE THE INCOME OF THE RECIPIENT CHARGEABLE UND ER THE HEAD CAPITAL GAINS FOR- (I) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING TH E GRANTING OF A LICENCE) IN RESPECT OF A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (II) THE IMPARTING OF ANY INFORMATION CONCERNING TH E WORKING OF, OR THE USE OF, A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (III) THE USE OF ANY PATENT, INVENTION, MODEL, DESI GN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (IV) THE IMPARTING OF ANY INFORMATION CONCERNING TECHNICAL INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL; (IVA) THE USE OR RIGHT TO USE ANY INDUSTRIAL, COMME RCIAL OR SCIENTIFIC EQUIPMENT BUT NOT INCLUDING THE AMOUN TS REFERRED IN SECTION 44BB; (V) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING FILMS OR VIDEO TAPES FOR USE IN 7 ITA NO. 666-668/COCH/2013 CONNECTION WITH TELEVISION OR TAPES FOR USE IN CONNECTION WITH RADIO BROADCASTING, BUT NOT INCLUDING CONSIDERATION FOR THE SALE, DISTRIBUTION OR EXHIBITION OF CINEMATOGRAPHIC FILMS ; OR (VI) THE RENDERING OF ANY SERVICES IN CONNECTION WI TH THE ACTIVITIES REFERRED TO IN SUB-CLAUSES (I) TO (I V), (IVA) AND (V). EXPLANATION 3. - FOR THE PURPOSES OF THIS CLAUSE, COMPUTER SOFTWARE MEANS ANY COMPUTER PROGRAMME RECORDED ON ANY DISC, TAPE, PERFORATED MEDIA OR OTH ER INFORMATION STORAGE DEVICE AND INCLUDES ANY SUCH PROGRAMME OR ANY CUSTOMIZED ELECTRONIC DATA; 7. ADMITTEDLY, THE RECIPIENT OF THE AMOUNT BEING TH E LITERARY WORK, THE PAYMENT MADE BY THE ASSESSEE SHALL BE IN RESPECT OF ANY COPYRIGHT OR THE LITERARY WORK TRANSFERRED TO THE ASSESSEE. EXPLANA TION 2(V) CLEARLY SAYS THAT TRANSFER OF ALL OR ANY RIGHTS IN RESPECT OF CO PYRIGHT, LITERARY, ETC. SHALL BE TREATED AS ROYALTY. SINCE ADMITTEDLY, THE PAYMENT WAS MADE FOR COPYRIGHT OR THE LITERARY WORK OF THE AUTHORS FOR THE PURPOSE OF PRINTING AND PUBLICATION FOR THE USE OF THE STUDENTS, THIS TRIBU NAL IS OF THE CONSIDERED OPINION THAT THE PAYMENT HAS TO BE TREATED AS ROYAL TY. THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF MAJESTIC PRAK ASHAN (SUPRA) FOUND THAT THE LITERARY WORK WAS NOT USED FOR RADIO BROADCASTI NG AND HENCE THE PAYMENT MADE BY THE ASSESSEE CANNOT BE TREATED AS R OYALTY WITHIN THE 8 ITA NO. 666-668/COCH/2013 MEANING OF EXPLANATION 2(V) TO SECTION 9(1)(VI) OF THE ACT. ACCORDINGLY, THE MUMBAI BENCH OF THIS TRIBUNAL FOUND THAT THE ASSES SEE WAS NOT EXPECTED TO DEDUCT TAX U/S 194J OF THE ACT; HENCE, THERE IS NO QUESTION OF ANY DISALLOWANCE U/S 40(A)(IA) OF THE ACT. 8. WE FIND THAT IN EXPLANATION 2(V) TO SECTION 9(1) (VI) OF THE ACT AFTER THE WORDS COPYRIGHT AND LITERARY THE LEGISLATURE US ES PUNCTUATION MARK COMA (,). IT IS WELL SETTLED PRINCIPLES OF LAW THAT WHI LE INTERPRETING TAXATION STATUTES THE PUNCTUATION MARKS CANNOT BE IGNORED. THE USE OF COMA AFTER THE WORDS COPYRIGHT, LITERARY, ARTISTIC OR S CIENTIFIC WORK CLEARLY SHOWS THAT THE LEGISLATURE INTENDED TO TREAT THE WORDS C OPYRIGHT, LITERARY INDEPENDENT OF ARTISTIC OR SCIENTIFIC WORK. IN RE SPECT OF ARTISTIC OR SCIENTIFIC WORK, THE LEGISLATURE INTENDED TO INCLUDE FILMS OR VIDEO TAPE FOR USE IN CONNECTION WITH TELEVISION OR RADIO BROADCASTING. SINCE THE LEGISLATURE USES COMA (,) IN BETWEEN COPYRIGHT LITERARY BOT H THE WORDS HAVE TO BE TREATED INDEPENDENTLY AND SEPARATELY; HENCE, IT MAY NOT HAVE ANY CONNECTION WITH TELEVISION OR RADIO BROADCASTING. THIS DISTINCTION OR USE OF COMA IN BETWEEN THE WORDS COPYRIGHT LITERARY WA S NOT CONSIDERED BY THE MUMBAI BENCH OF THIS TRIBUNAL IN MAJESTIC PRAKASHAN (SUPRA), THEREFORE, IT MAY NOT BE APPLICABLE TO THE FACTS OF THIS CASE. I N THE CASE BEFORE US, THE PAYMENT WAS ADMITTEDLY MADE FOR COPYRIGHT / LITERAR Y WORK; HENCE IT HAS TO BE CONSIDERED AS ROYALTY. HENCE, THE ASSESSEE IS L IABLE FOR DEDUCTING TAX 9 ITA NO. 666-668/COCH/2013 U/S 194J OF THE ACT. FAILURE TO DO SO, THE PROVISI ONS OF SECTION 40(A)(IA) WOULD COME INTO OPERATION. 9. IN VIEW OF THE ABOVE DISCUSSION, THIS TRIBUNAL D O NOT FIND ANY INFIRMITY IN THE ORDERS OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME ARE CONFIRMED. 10. IN THE RESULT, ALL THE THREE APPEALS OF THE ASS ESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS _____AU GUST, 2014. (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : AUGUST, 2014 PK/- COPY TO: 1. M/S CALICUT UNIVERSITY CENTRAL CO-OP. STORES LTD , THENHIPALAM, MALAPPURAM 2. ITO, WD.3, TIRUR 3. THE COMMISSIONER OF INCOME-TAX, KOZHIKODE 4. THE COMMISSIONER OF INCOME-TAX(A), KOZHIKODE 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH