IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED : 03.12.2013

CORAM

THE HON'BLE MRS.JUSTICE CHITRA VENKATARAMAN

AND

THE HON'BLE MR.JUSTICE T.S.SIVAGNANAM

TAX CASE (APPEAL) No.748 of 2013

and

M.P.No.1 of 2013

Mrs.K.Bhagyalakshmi

.. Appellant

vs

The Deputy Commissioner of Income Tax

Media Circle-I, Chennai

.. Respondent

Tax Case Appeal filed under Section 260A of the Income Tax Act,

1961 as against the order dated 30.09.2013 passed by the Income Tax

Appellate Tribunal, Chennai Bench "D" in ITA No.1289/Mds/2013 for the

assessment year 2009-2010 preferred against the order of the

Commissioner of Income - Tax (Appeals)VI Chennai dated 27.12.2012 in

ITA NO.229/11-12 for the assessment year 2009-10 against the

assessment order of Deputy Commissioner of Income-Tax, media Circle-

I, Chennai dated 29.12.11 in P.A.No./GIR NO.AGWPB1355R

For Appellant

: Mr.Suhrith Parthasarathy

For Respondent

: Mr.S.Swaminathan

Standing Counsel for Income

Tax Department

JUDGMENT

(ORDER OF THE COURT WAS MADE BY T.S.SIVAGNANAM,J.,)

This appeal by the assessee is directed against the order passed

by the Income Tax Appellate Tribunal, Chennai "D" Bench dated

30.09.2013 in ITA No.1289/Mds/13 for the assessment year 2009-2010.

2. The assessee is a person carrying on business in the purchase

and sale of Telugu films. The assessee filed return of income for

the assessment year 2009-2010 on 29.09.2009 admitting a total income

of Rs.33,10,829/-. The case was selected for scrutiny and a notice

under Section 143(2)of the Income Tax Act, 1961 [The Act] was issued

on 24.08.2010. The assessment proceedings were completed under

Section 143(3) of the Act and the order of assessment dated

29.12.2011 was passed. The Assessing Officer made various additions,

viz., (a) an addition of Rs.52,884/- as disallowance under Section

https://hcservices.ecourts.gov.in/hcservices/

69C of the Act; (b) an addition of Rs.4,00,000/- on the advance

received, which was treated as income; (c) disallowance of

Rs.8,268/- under Section 14A r/w Rule 8D of the Income Tax Rules,

1962; (d) disallowance of Rs.7,16,15,000/- for non-deduction of TDS

under Section194J of the Act and (e) an addition of Rs.40,07,949/- on

the basis of a disallowance of loan credit. Accordingly, the total

income of the assessee was assessed at Rs.7,93,94,930/- and the total

demand was calculated at Rs.2,75,87,552/-.

3. The assessee preferred appeal to the Commissioner of Income

Tax (Appeals). The First Appellate Authority by order dated

27.12.2012 allowed the appeal in part by deleting the addition made

under Section 69C of the Act and also reversed the finding of the

Assessing Officer, which made a disallowance of Rs.7,16,15,000/- for

non-deduction of TDS under Section 194J of the Act by invoking

Section 40(a)(ia) of the Act. The Assessing Officer disallowed the

said deduction of TDS under Section 194J of the Act on the ground

that the purchase of film rights fell under the term "Royalty" and

that the agreement entered into between the assessee with respect to

purchase of film rights was termed as an assignment agreement and the

assignee of the satellite rights and the person who transferred such

rights was the assignor and such rights were given for a period of

99 years. Therefore, the Assessing Officer had concluded that it is

not a sale but a mere grant of satellite right in the movie produced

by the assignor and the payments made for transfer of such rights

fall within the meaning of "Royalty". The First Appellate Authority

while reversing the finding given by the Assessing Officer held that

the payments made by the assessee could not be termed as 'Royalty' as

they are not covered by Explanation 2 to Clause (vi) of Section 9(1)

of the Act and the payment were covered by Section 28 of the Act as

trading expenses and there was no scope for invoking Section 40(a)

(ia) of the Act and therefore the First Appellate Auth