Sum paid for copyright in a film for a term more than that stipulated in Copyright Act excludes it from term 'royalty'

Facts:

a) The assessee was carrying on business in the purchase and sale of Telugu films.  She had entered into an agreement for purchase of film rights and such rights were given for a period of 99 years;

b) During assessment, the Assessing Officer (‘AO’) made additions on account of non-deduction of tax by assessee under Section 194J on the payments made for transfer of such rights;

c) The AO made such addition on the ground that it was 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";

d) On appeal, the CIT(A) reversed the finding of AO. Further, the Tribunal upheld the disallowance made by AO. Aggrieved-assessee filed the instant appeal.

The High Court held in favour of assessee as under:

1) In terms of section 26 of the Copy Right Act, 1957, in the case of cinematographic film, copy right shall subsist until 60 years;

2) Therefore, as the agreement was for more than 60 years (period for which copyright is valid), it could only be treated as sale and would fall within the exclusion from definition of royalty "sale, distribution or exhibition of cinematography film" in clause (v) to Explanation (2) to section 9(1);

3) Therefore, the CIT(A) was justified in holding in favour of assessee and treating such transfer as sales - Mrs. K. Bhagyalakshmi v. Dy. CIT (2013) 40 taxman 350 (Madras)