Asstt. CIT v. Shri Balaji Communications

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The Tax PublishersITA No. 1744 (Mds) of 2011, CO. No. 166 (Mds) of 2011 2013 TaxPub(DT) 0668 (Chen-Trib) : (2013) 140 ITD 0687 INCOME TAX ACT, 1961 --Income deemed to accrue or arise in India--Under section 9(vi) Royalty--Assessee was engaged in purchase and sale of rights in satellite and movies. Assessee had debited in its account a sum of Rs. 25,71,19,000 for purchasing satellite rights of films and programs. Assessing officer was of the opinion that said agreements were only for assignment of rights and not for sale of right to assessee. The rights were only for 20 to 25 years and were not of permanent nature. Therefore, there was no sale of rights to the assessee. As per assessing officer, section 194J was applicable since payments were in the nature of royalty. Assessee argued that the assignment agreements were nothing but purchase agreements whereby it purchased such rights. *Held:* Assessee did not purchase the cinematographic films as such through the transactions, rather it had only received right for satellite broadcasting. Thus, the impugned transaction, would fall within the definition of 'royalty'. In such a situation assessee was duty bound under section 194J to deduct tax at source on the payments effected. Income Tax Act, 1961 Section 9 INCOME TAX ACT, 1961 --Business disallowance under section 40(a)(ia)--Amount paid vis-a-vis payable--Assessee, engaged in purchase and sale of rights in satellite and movies, had debited in its account a sum of Rs. 25,71,19,000 for purchasing satellite rights of films and programs. Assessing officer disallowed the claim on the ground that assessee had paid the said sum without deducting tax at source as required under section 194J, which called for application of section 40(a)(ia). Assessee contended that the payments were in the nature of direct cost and section 40(a)(ia) could not be applied. Further, assessee contended that section 40(a)(ia) would apply only on amounts standing payable at the end of relevant previous year and not on the amounts paid during the relevant year. *Held:* Section 40 which starts with non-obstante clause 'Notwithstanding anything to the contrary in sections 30 to 38....', would not mean that said section is not applicable on a deduction claimed under section 28, especially when books were not rejected. However, additional ground raised by assessee that the rigours of section 40(a)(ia) are attracted only on amounts standing payable at the end of the relevant previous year, is justified in view of decision of special Bench of this Tribunal in case of Marilyn Shipping & Transports v. Addl CIT (2012) 136 ITD 23 (vishaka)(SB). Income Tax Act, 1961 Section 40(a)(ia) In the ITAT, Chennai c Bench SUBSCRIBE FOR FULL CONTENT

The Tax PublishersITA No. 1744 (Mds) of 2011, CO. No. 166 (Mds) of 2011
2013 TaxPub(DT) 0668 (Chen-Trib) : (2013) 140 ITD 0687

INCOME TAX ACT, 1961

--Income deemed to accrue or arise in India--Under section 9(vi) Royalty--Assessee was engaged in purchase and sale of rights in satellite and movies. Assessee had debited in its account a sum of Rs. 25,71,19,000 for purchasing satellite rights of films and programs. Assessing officer was of the opinion that said agreements were only for assignment of rights and not for sale of right to assessee. The rights were only for 20 to 25 years and were not of permanent nature. Therefore, there was no sale of rights to the assessee. As per assessing officer, section 194J was applicable since payments were in the nature of royalty. Assessee argued that the assignment agreements were nothing but purchase agreements whereby it purchased such rights. Held: Assessee did not purchase the cinematographic films as such through the transactions, rather it had only received right for satellite broadcasting. Thus, the impugned transaction, would fall within the definition of 'royalty'. In such a situation assessee was duty bound under section 194J to deduct tax at source on the payments effected.

Income Tax Act, 1961 Section 9

INCOME TAX ACT, 1961

--Business disallowance under section 40(a)(ia)--Amount paid vis-a-vis payable--Assessee, engaged in purchase and sale of rights in satellite and movies, had debited in its account a sum of Rs. 25,71,19,000 for purchasing satellite rights of films and programs. Assessing officer disallowed the claim on the ground that assessee had paid the said sum without deducting tax at source as required under section 194J, which called for application of section 40(a)(ia). Assessee contended that the payments were in the nature of direct cost and section 40(a)(ia) could not be applied. Further, assessee contended that section 40(a)(ia) would apply only on amounts standing payable at the end of relevant previous year and not on the amounts paid during the relevant year. Held: Section 40 which starts with non-obstante clause 'Notwithstanding anything to the contrary in sections 30 to 38....', would not mean that said section is not applicable on a deduction claimed under section 28, especially when books were not rejected. However, additional ground raised by assessee that the rigours of section 40(a)(ia) are attracted only on amounts standing payable at the end of the relevant previous year, is justified in view of decision of special Bench of this Tribunal in case of Marilyn Shipping & Transports v. Addl CIT (2012) 136 ITD 23 (vishaka)(SB).

Income Tax Act, 1961 Section 40(a)(ia)

In the ITAT, Chennai c Bench