TaxTMI 
TaxTMI 
2007 (12) TMI 317
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....f borne out from the orders of the lower authorities are that the assessee is a company engaged in the business of exhibition of films. The survey under section 133A was conducted consequent to which it came to the notice of the Assessing Officer that the assessee during the financial years 2003-04 and 2004-05 paid substantial amount to distributors as share on account of supply of film prints of various films during these years. The distributors were paid certain fixed percentage of the net weekly collection from exhibition of the films, on the basis of Standard Film Renting Contract (SFRC) entered into between the assessee and the distributor. The Assessing Officer was of the opinion that the payments made to distributors were in the nature of contractual payment which attracted provisions of section 194C and required the assessee to explain as to why it should not be treated the assessee in default under section 201(1) of the Act for not deducting tax at source of these payments and charged interest under section 201(1A) of the Act for not depositing the amount deductible. Not finding favour with the submissions and explanation offered by the assessee, the Assessing Officer for ....
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....nd the bodies mentioned therein shall, at the time of credit of such sum to the account of contractor or payment thereof in cash or by issuing of cheque or draft or by any other mode whichever is earlier, deduct an amount equal to 2 per cent of such sum as income-tax on the income comprised therein. Thus the thrust of section 194C is on payments made for any work carried on by the contractor. But, in the present case the distributor has only given its film on rent to the assessee. Therefore, the payment made is for license to use the films or renting of films and is not covered under section 194C of the Act. 6. The CIT(A) re-examined this issue in the light of relevant provisions i.e., sections 194C and 194-I of the Act, Circulars issued by the CBDT and the various judgments referred to by the parties and finally arrived at a conclusion that the action of the Assessing Officer in treating the assessee in default for not deducting the tax at source under section 194C, cannot be held to be justified. He, accordingly, deleted the demand raised under section 201(1) of the Act. So far as, interest under section 201(1A) is concerned, the CIT(A) has held that the Assessing Officer has er....
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.... the exhibition of movies by the assessee based on the terms of contract falls under the provisions of section 194C. i. But, as per the submissions made by the authorized representative, the Assessing Officer has erred, in not appreciating the fact of arrangement between the exhibitors i.e., appellant and the distributor, which is as per the Standard Film Renting Contract approved by the Indian Motion Picture Distributor's Association, Bombay and the Cinematographic Exhibitor's Association of India and Theatre Owners Association, Bombay and the same is a bona fide arrangement as per which a certain fixed percentage of net weekly collection of the film is paid to the distributor i.e., the proceeds of the film exhibition are shared between the appellant and the distributor. ii. It was further contended that the Assessing Officer has not appreciated the nature of services rendered by the distributor in its proper perspective. The service that is being provided by the distributor is only restricted to supply of films and not extended to cinecasting. The Honourable Supreme Court in the case of M/s. ACC Ltd. 201 ITR 435, referred to by the Assessing Officer has decided a limited questi....
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....ar also, the exhibition of movies is not included. iv. From the above discussion and going through the views of both Assessing Officer and authorized representative, it is seen that the appellant's case does not fall either under section 194-I or under section 194C. Admittedly, the appellant filed a copy of the Standard Film Renting Contract entered into between the distributor and the appellant from which I find that the contract between the appellant and distributor is for the supply of film prints for exhibition in the cinema halls for a particular period. After the end of the stipulated period, the film prints have to be returned to the distributor and consideration paid by the exhibitor to the distributor is for license to use the films or for renting of films. Therefore, the provisions of section 194-I are not applicable in view of CBDT's Circular 736. I am not convinced with the conclusion of the Assessing Officer that if the provisions of section 194-I are not applicable, then, provisions of section 194C should be made applicable. The CBDT vide Circular No. 720 dated 30-8-1995, has clarified that each section regarding TDS under Chapter XVII, deals with particular kind of ....
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....t has been submitted the learned Assessing Officer erred in levying interest for both the years, by treating the appellant an assessee in default under section 201(1A) for not deducting the tax at source from the payments made to the distributor. The learned Assessing Officer has erred in not appreciating that the payment made by the appellant to the distributor was for supply of film prints for exhibition and not rendering any service and, therefore, not liable for deduction of tax. Without prejudice to these, the learned Assessing Officer erred in not appreciating that the company was under a bona fide belief that no tax is required to be deducted from the payments made to the distributors. The learned Assessing Officer has further erred in not correctly computing the interest under section 201(1A). 7. Since the provisions of section 201(1A) are consequential in nature, and once the demand raised as per first ground of appeal stands deleted and the appellant has been held as not in default, the interest charged stands automatically deleted. Therefore, this ground of appeal is also decided in favour of the appellant." 6A. Now the revenue has preferred an appeal and placed heavy ....