TaxTMI 
TaxTMI 
2015 (11) TMI 1448
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.... which clearly state that provisions of Sec. 194-I are not attracted where there is sharing of proceeds of film exhibition between a film distributor and a film exhibitor, since the distributor does not take cinema building on lease or sub lease or tenancy or under any agreement of similar nature. Earlier, the appeal filed by the assessee was fixed for hearing on 30.09.2014 but on this date none attended on behalf of the assessee. Therefore, the appeal was dismissed in limine as pronounced in the open court. Against this order of the Tribunal, the assessee has filed Miscellaneous Application No. 43/JP/2014 dated 15.12.2014 praying to recall the order passed on 30.09.2014 and restore the appeal stating that due to closure of the Office of the Chartered Accountants, the assessee did not receive the notice of hearing which prevented the assessee for nonappearance.In support of above, the assessee has filed affidavit duly notarized. Considering the circumstances stated above, the order in ITA No. 240/JP/2012 dated 30.09.2014 was recalled and restored the appeal to its original stage vide order passed in M.A. No. 43/JP/2014 dated 12.06.2015. 1. Brief facts of the case are that the ass....
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....me period of 2 months i.e. from 01.04.2006 to 31.05.2006. This guaranteed payment to the owners of the Cinema Hall for a particular period of time for having right of playing movies in their Cinema under the condition that no other party will be entitled to use the Cinema Hall for this period, definitely falls under the definition of rent as defined in the provisions of section 194-I of the I.T. Act and as per the provisions of this section you have to deduct income tax as per the rate prescribed therein. Since, you have not deducted any tax on the payment made towards the rent to M/s. Show Time Entertainment Pvt. Ltd. for Rs. 65,00,000/-, you are requested to show cause why not the expenses claimed of Rs. 65,00,000/- be not disallowed and added to your income as per the provisions of section 40(a)(in accordance with) of the I.T. Act." 3. The assessee has filed reply and thereafter, the AO had held that the assessee was required to deduct the TDS on the amount of Rs. 65,00,000/- under section 194-I of the IT Act and on account of failure on the part of the assessee to deduct the TDS, the expenses of Rs. 65,00,000/- were disallowed. For the purpose of convenience, we are reproducin....
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....xhibition between the assessee (as film distributor) and the film exhibitor owning the cinema theatre, therefore, does not amount to rent payment and the provisions of Sec. 194-I are not applicable on such payments. The ld. AR heavily depended upon the clarification given in this regard, in the circular No. 736 dated 13.02.1996 of the CBDT. Considering the totality of the facts and circumstances and also the provisions of the agreement under consideration and also the contents of the above CBDT Circular, I find that the AO is justified in disallowing the above payment, for non compliance of TDS provisions, as the payment made in this regard was found as a fixed payment in nature for using the cinema hall for the fixed period and not an arrangement of sharing of the proceed of film exhibition, as claimed by the appellant. It is also noted that the above payment was required to be made, irrespective of the actual collection of the film exhibition, as enumerated in the relevant agreement. Thus, in my considered view, the provision/clarification as given in the above mentioned CBDT Circular is not applicable in the present case, as the same is only dealt with the revenue sharing model....
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....hibition and M/s. Show Time Entertainment Pvt. Ltd. had made the payment to it. further ld. Counsel for the assessee also relied upon the Board's Circular No. 1294 wherein the Board has clarified that the provisions of section 194-I of the IT Act to the sharing of proceedings of film between film distributors and film exhibitor owning a cinema theatre, are not attracted to such payment. 7. The ld. D/R for the Revenue has supported the order of the AO and has submitted that he relies upon the orders passed by the AO/CIT (A). 8. Before we examine the issue, it will be prudent to reproduce the terms and conditions of the agreement :- "This agreement is entered on 01.04.2006 between M/s. Showtime Entertainment Pvt. Ltd having registered office at 4, Ziledar House, Kachcha Bandha, Amer Road, Jaipur engaged in exhibition of films at their cinema called SPACE-1, 2, 3 at City Plaza, Bani Park, Jaipur hereinafter called as party of 1st part and M/s. Ajit & Company of Second Part, at Jaipur. 1. The part of first part (Showtime Entertainment Pvt. Ltd.) hereby agreed to grant to party of Second part the playing time of two months at their above cinema i.e. SPACE-1,2,3 at City Plaza, Jaipur....
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....aintain the cinema in good condition. 12. That 1st party will be fully entitled to terminate this agreement by giving notice of 3 days to another party in case of any violation and IInd party will not raise any objection to it. 13. That keeping in view the rules and regulations of the CCCA (Association of distributors & Exhibitors) the membership of the cinema is in the name of 1st party's name and all contracts and dealings with the distributors will be done by 1st party only. 14. All other terms and conditions will be as usual in trade. 15. Both the parties have signed this agreement in confirmation of above 01.04.2006 at Jaipur." 9. The terms and conditions of the agreement are required to be examined along with other attending circumstances for the purposes of deciding the true nature of the agreement . The intention of the parties will be reflected from the terms and conditions of the agreement and also from their conduct. The reading of the agreement and the attending circumstances clearly show : A) The dominant intention of the parties of the agreement was to conduct the business and not of letting out of the building, fixtures and furniture. In the agreement, the p....
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....he user of land , building etc to the owner/landlord of the land , building etc. In the present case the second party (the assessee) is not the user of the cinema hall/plant and machinery, moreover no, payment was made by the second party i.e. assessee . therefore we hold that the payment of 65 lacs were not in the nature of rent within the meaning of section 194-I of the Act and the said provision is not attracted . 12. Even otherwise, clause 5 of the agreement clearly shows that the sum in terms of gross collection if it is more than Rs. 65,00,000/- during the above period, was to be paid by the first party to the second party. Clause 5 of the agreement reads as under :- "5. That any sum in terms of Gross collection which is more than Rs. 65,00,000/- during above period will be paid by 1st part to IInd part while any deficit will be paid by IInd part to 1st Party." 13. Thus the payment is not required to be made by the assessee (second party) to the first party, rather it was other way round i.e. the first party/ M/s. Show Time Entertainment Pvt. Ltd was required to make the payment to the second party/ assessee in case of excess collection . For the purpose of section 194-I, ....