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15927 Points
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Sharing of proceeds of film exhibition:
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Section 194C is not applicable
Sharing of proceeds of film distribution between a film exhibitor and film distributor would not attract provisions of sec. 194C since a distributor who has acquired rights of the distribution of the films in particular area only gets his share and no work is carried by him for which the payment is made.
- Sunsel Drive-in-Cinema (P.) Ltd. vs. ITO, (TDS) [2006] 5 SOT 64 (Ahd.)
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Section 194J not applicable
For section 194J, 'royalty' shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9.
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Clause (v) of the said explanation says that,
"royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for “the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films.”
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Section 194I is also not applicable
In respect of sharing of the proceeds of film exhibition between a film distributor and a film exhibitor owning a cinema theatre, the provisions of section 194-I are not attracted, because (i) the exhibitor does not let out the cinema hall to the distributor, (ii) generally the share of the exhibitor is on account of composite services, and (iii) the distributor does not take cinema building on lease or sub-lease or tenancy or under any agreement of similar nature - Circular No. 736, dated 13-2-1996.
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Therefore, not liable to deduct TDS.
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Also as per CAG Report No. 36 of 2010-11 for the period ended March 2010, performance audit of taxation of assessees engaged in the film and television industry, same view has been followed that TDS provisions are not applicable on sharing of proceed from film exhibition between film producers/distributors and a film exhibitor owning cinema theatre/multiplexes. CAG had recommended to broaden the TDS provisions. [Source Link]
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