2014 (1) TMI 250 - AT - Income Tax

Tribunal Decision on Tax Disallowances: Key Points & Reconsideration

M/s USHODAYA ENTERPRISES LTD Versus DEPUTY COMMISSIONER OF INCOME TAX

The Tribunal partly allowed the assessee's appeal and dismissed the revenue's appeal. The Assessing Officer's disallowance under S.40a(ia) for ... Disallowance made u/s 40a(ia) of the Act – Non-deduction of TDS on cost of television programmes – Applicability of section 194C of the Act – Held that:- Following ASSTT COMMISSIONER OF INCOME TAX Versus M/s USHODAYA ENTERPRISES PVT LTD [2012 (7) TMI 120 - ITAT HYDERABAD] - Expenses towards revenue shares are towards the agreed cost for production of TV serials/programmes - the assessee is associating itself with the producers for getting the programmes telecasted and thereby the assessee gets as source for generating advertisement revenue – thus, the assessee is making payments to various agencies on revenue sharing basis from the income generated through advertisements by way of telecasting the serials or programmes produced by the agencies - The mode of payment is nothing but a payment for contract of work and is squarely covered by explanation III to section 194C which says ‘work’ shall include programmes for such broadcasting or telecasting – Thus, the nature of payments fall within the purview of section 194C – the claim of the assessee is accepted and the order of the CIT(A) set aside – the matter s remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Disallowance of prior period expenses – Held that:- Inasmuch as if an amount of Rs.2,11,34,759 out of total amount of Rs.2,38,85,000 was already offered to tax in the earlier years, the prior period adjustment made in that behalf by the assessee, on account of the concerned parties declining to make the payments due to discrepancies in the billing, the same should be allowed as deduction as bad debts – the order of the CIT(A) set aside and the Assessing Officer is directed to restrict the disallowance made – Decided partly in favour of Assessee. Applicability of Rate of depreciation to accessories of computer – Assessee claimed it to be 60% but revenue restricted at 15% - Held that:- Following Asstt. Commissioner of Income-tax, Circle 16(2), Hyderabad Versus Ushodaya Enterprises Ltd. [2012 (10) TMI 472 - ITAT HYDERABAD] – the order of the CIT(A) upheld in accepting the claim of the assessee for depreciation on computer accessories and peripherals at 60% - Decided against Revenue. Issues Involved:1. Disallowance under S.40a(ia) of the Act for non-deduction of TDS on television program costs.2. Disallowance of prior period expenses.3. Computation of book profit under S.115JB of the Act.4. Disallowance of commission payments under S.40(a)(ia) of the Act.5. Rate of depreciation applicable to computer accessories.Issue 1: Disallowance under S.40a(ia) of the Act for non-deduction of TDS on television program costs:The Assessing Officer treated the assessee as a defaulter under S.201(1) r.w.s. 194 C for not deducting TDS on television program costs paid to various parties. The CIT(A) upheld the disallowance. The assessee argued that the payments were not for production but for telecasting programs, thus TDS provisions were not applicable. The Tribunal referenced previous decisions, upholding the CIT(A)'s order, stating that the payments fell within the purview of S.194C. However, due to a pending High Court decision, the matter was restored to the Assessing Officer for reconsideration.Issue 2: Disallowance of prior period expenses:The Assessing Officer disallowed prior period expenses of Rs.2,38,85,000, stating they did not pertain to the year under appeal. The CIT(A) upheld this disallowance. The assessee argued that excess billing rectifications should be allowed as bad debts if related income was offered to tax in earlier years. The Tribunal partially allowed the assessee's appeal, directing the Assessing Officer to restrict the disallowance.Issue 3: Computation of book profit under S.115JB of the Act:The grievance regarding the computation of book profit under S.115JB became infructuous due to the decision on prior period expenses.Issue 4: Disallowance of commission payments under S.40(a)(ia) of the Act:The Tribunal upheld the CIT(A)'s order on disallowance of commission payments due to non-compliance with TDS provisions. The Tribunal followed previous decisions in the assessee's favor for earlier years, finding no infirmity in the CIT(A)'s order.Issue 5: Rate of depreciation applicable to computer accessories:The Assessing Officer applied a 15% depreciation rate to computer accessories, contrary to the assessee's claim of 60%. The Tribunal, following previous decisions, upheld the CIT(A)'s acceptance of the 60% depreciation rate, deciding in favor of the assessee.In conclusion, the assessee's appeal was partly allowed, while the revenue's appeal was dismissed. The Tribunal pronounced the order on 10/5/2013.