INCOME TAX ACT, 1961

Section 194C

Tax deduction at source - Under section 194C - Payment to film distributor towards its share for screening films -

Assessee-company was engaged in activity of exhibiting films. It made payment under the head 'Distributor Hire Charges”. AO was under the impression that that the said payment was in the nature of contractual obligation therefore viewed that the assessee was liable for deduction of tax at source under section 194C. Since the assessee failed to deduct the tax at source, the AO held that the expenditure was not allowable as provided under section 40(a)(ia). AO also observed that the payment was either rental payment or the contract payment, thus the provisions of deduction of tax at source were applicable on both the events. Assessee contended that the said payment was neither contractual payment nor was the rent payment and it was sharing of revenue for exhibiting the films between the distributor and the theatre owner. Held: Assessee was exhibiting films and making payments to distributor, and it could not be held as rental payment because in the case of rent, the assessee ought to have received the payment, but in instant case, the assessee was making the payment to film distributor. Similarly, the assessee was screening the films being the theatre owner, and it could not be held that the same was contract payment. Therefore, the AO had not made out the case of either contractual payment or rental payment for holding that it would attract TDS. Hence, the disallowance made under section 40(a)(ia) would not be sustainable.

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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