“1.The ld. CIT(A) has erred in confirming that the world right controller agreement, by which money were advanced being money recoverable in cash or against rights being sold, is a contractual agreement being work contract and section 194C is applicable and has thus erred in confirming that appellant was liable to deduct tax as per section 194C and hence deemed to be an assessee in default under section 201(1) of the Income-tax Act, 1061.

2.The ld. CIT(A) has erred in confirming that assessee has committed a default under section 201(1) and 201(1A) and section 200 of the Income-tax Act and liable for payment of interest under section 201(1A) of the Income-tax Act 1961.

3.The appellant have leave to add, alter or renew above several grounds of appeal before or at time of hearing.”

2. Briefly stated, relevant facts of the case are that the assessee is a company engaged in the business of production, distribution, exhibition of films, film financing and equipment hire, etc. Survey action under section 133A was conducted at the premises of the assessee on 27-8-2003 and a statement of Sri Navin Golcha, Finance Manager of the company was recorded. The information collected during the survey and post-survey periods revealed that the assessee made certain payments of advances to M/s. Kapoor and Kaushik Entertainment (P.) Ltd. (KKEPL) without making requisite TDS and the same in violation of the provisions of section 194C of the Income-tax Act. Accordingly, the proceedings under section 201(1) and 201(1A) of the Act were initiated by issue of a show-cause notice dated 14-12-2005. Briefly, as per the Assessing Officer, the assessee made total payments of Rs. 13.25 crores among the financial years 2000-01 to 2002-03 to KKEPL and in addition, the assessee also incurred the expenditure of Rs. 64,71,855 on behalf of KKEPL in pursuance of a contractual agreement dated 2-8-2000 and the same is for carrying out of the work of production of a film named “Badhai Ho Badhai” without making the TDS as per the provisions of section 194C. Out of the above payments, an amount of Rs. 2,72,85,852, 8,11,57,073 and 2,40,57,075 plus 64,26,555 relates to the assessment year 2001-02, 2002-03, and 2003-04 respectively and therefore, the assessee is defaulted under the provisions of sections 201(1) and 201(1A) of the Act.

3. In response to the above, the assessee replied vide the letter dated 3-1-2006. Briefly stated, the assessee’s submissions include that: (a) KKEPL approached for the advance of Rs. 12 crores for the production of the picture named ‘Badhai Ho Badhai’; (b) there is an agreement conferring various rights to the assessee-the financier, which are basically the safeguards for recovery of the above advances, recoverable either in cash or in kind or for value to be received; (c) the books of account and the entries therein confirms the above transactions; (d) assessee also incurred certain expenses additionally relating to the film on behalf of the KKEPL amounting to Rs. 64,71,855 during the period relevant to the assessment years 2003-04 and 2004-05 and the total payments works out to Rs. 13,89,71,855 in place of aforesaid payment of Rs. 13.25 crores. (e) Out of the above advances, so far, the assessee recovered only to the tune of Rs. 10,31,39,599 by way of (i) percentage based