TaxTMI 
TaxTMI 
2019 (7) TMI 16
X X X X Extracts X X X X
X X X X Extracts X X X X
....common order. 2. The grounds of appeal raised by assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") in ITA no. 852/Mum/2016 for AY 2010-11, read as under:- "1. Business promotion expenses : Rs. 3,35,198/- 1.1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the learned AO who disallowed 20% of the expenditure incurred on business promotion for want of supporting evidence on an adhoc basis without any cogent reason. 1.2. Without prejudice to the above, it is submitted that the disallowance made by the learned CIT(A) upholding the action of the learned AO is excessive and without basis. 2. Disallowance under section 14A : Rs. 62,16,426/- 2.1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the learned AO's action of applying the provisions of Rule 8D of the Income Tax Rules, 1962 ("the Rules") while making a disallowance under section 14A of the Act to arrive at the assessed income for the relevant financial year. 2.2. It is submitted that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,797/- computed by the Appellant for MAT Liability. It is respectfully submitted that Section 14A cannot be imported into while computing the book profit u/s. 115JB because clause (f) of Explanation to Section 115JB of the Act refers to the amount debited to the Profit and Loss Account which can be added back to the book profit while computing book profit u/s. 115JB of the Act. 4. Depreciation on software expenses disallowed in Assessment Year 2007-08 4.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not directing the learned AO to grant depreciation on software expenses amounting to Rs. 15,720/- being expenses capitalized in A.Y. 2007-08. 5. Credit for Tax deducted at source 5.1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not directing the learned AO to grant credit for taxes deducted at source of Rs. 1,75,228/-. 6. Grant of interest u/s, 244A 6.1. On the facts and circumstances of the case and in law, the learned CIT(A) erred in not directing the learned AO to grant interest u/s. 244A of the Act as per Law till the date of recei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ringing in an asset of enduring nature. 5) On the facts and in circumstances of the case and in law, whether the Ld. CIT(A) was justified in deleting the disallowance made on account of excess commission paid to M/s. Bennet Coleman and Company Ltd. (BCCL), ignoring the fact that the said concern is a parent company of the assessee and the transaction is not at arm's length. 6) On the facts and circumstances of the case and in law, where the disallowance u/s. 36(1)(iii) was made on the basis of ratio laid down by the CIT(A) in assessee's own case for AY 2009-10, whether the CIT(A) was justified in deleting the same by relying on the ITAT's decision in assessee's own case for earlier AY 2006-07 & AY 2007-08 without appreciating that the Hon'ble Supreme Court in the case of S.A. Builders Ltd, vs. CIT(Appeals) (2007) 288 ITR 1 (SC), had specifically held that there can be no continuing presumption as to utilization for a non-business purpose, and the facts of each year have to be considered separately. 7) On the facts and circumstances of the case and in law, where the disallowance u/s. 36(1)(iii) was made on the basis of ratio laid down by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The commission is payable by assessee to the Advertising Agency. The AO observed that the commission payable to the Advertising Agency is appropriated from the Gross Advertising Revenue. The AO observed that after deducting commission due to them the advertisement agency remits net advertising revenue to the assessee. The AO observed that provisions of Section 194H of the 1961 Act is clearly applicable on the said payments even if commission is retained by agent/consignee without actual payment from the consignor/principal, and it would be deemed to be "constructive payment‟ which is subject to deduction of income-tax at source u/s 194H of the 1961 Act. The AO referred to Circular no. 619 issued by CBDT on 04.12.1991. The assessee was asked by AO during assessment proceedings to explain why the said amount of advertisement commission be not disallowed by invoking provisions of Section 40(a)(ia) read with Section 194H of the 1961 Act, for not deducting of income-tax at source on these advertising commission paid by assessee to advertising agencies. 4.4 The assessee on its part submitted that the deduction of 15% in invoice by advertisement agency is not commission paid to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....anagement and execution of the assessee. The agency cannot independently perform release of advertisement without the full fledged involvement and intervention of the broadcaster. This necessarily means that it is a Principal to Agent relationship. The pricing factor of broadcasting the advertisements is predominantly dictated by the broadcaster. It is in this sense of the matter that the advertising agency cannot independently negotiate the price with the intending advertisers. All the decisions relating to broadcasting of advertisements are taken by the broadcaster including refusal to broadcast. The advertising agency has no control in regard hereto. 2. The advertisement has to comply with guidelines, norms and procedures set by MIB, TRAI, and PCI which are dictated only on the broadcaster. It is the duty of the broadcaster to advertise adult ads in the late night slot and not in the prime time slot. Therefore, the broadcaster is not mechanically telecasting the advertisement but only after vetting by it. 3. The agency cannot sell the Free Commercial Time (FCT) to any person whatsoever, which is also dictated by the broadcaster. This is evident from the invoice....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t matches etc. and the business nexus of these expenses could not be proved by the assessee, which led the AO to make additions to the income of the assessee to the tune of Rs. 3,35,198/-, vide assessment order dated 28.03.2013 passed by the AO u/s 143(3) of the 1961 Act. 6. The next addition to the income as was made by the AO in an assessment order pertained to website creation expenses incurred by the assessee to the tune of Rs. 3,87,047/- which was held by the AO to be capital expenditure which the assessee ought to have capitalised in its Books of Accounts. The AO after holding that these website creation expenses are capital in nature however allowed depreciation on these website expenditure @ 60% while the balance amount of Rs. 1,54,819/- was disallowed and added to the income of the assessee by the AO, vide assessment order dated 28.03.2013 passed by the AO u/s 143(3) of the 1961 Act. 7. The next addition as was made by the AO to the income of the assessee in its assessment order pertains to commission @ 5% of the business generated by and through Bennett Coleman & Company Limited (hereinafter called "the BCCL") in favour of the assessee. it was observed by the AO tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....CCL." The assessee explained that with the above remarks, the AO restricted commission to 50% in AY 2009-10 which is unjustified. 7.3 The AO after considering the submissions of the assessee was of the view that there is an intense competition in the advertisement industry wherein competitors are charging margin of 1.5% to 2% and hence margin of 5% paid by the assessee to BCCL is excessive. The AO was of the view that given the fact that BCCL is investing in the clients for obtaining business, a commission of 2.5% of the business procured through BCCL would be sufficient compensation to BCCL for its services. The AO also noted that BCCL is a parent company and provisions of Section 40A(2)(b) of the 1961 Act are also attractive and hence disallowance of Rs. 3,79,779/- being 50% of the commission paid to BCCL was affirmed by the AO, vide assessment order dated 28.03.2013 passed by the AO u/s 143(3) of the 1961 Act. 8. The next additions as was made by the AO to the income of the assessee related to disallowance of expenses incurred in relation to earning of an exempt income, to the tune of Rs. 62,16,426/- by invocation of provisions of Section 14A of the 1961 Act read with R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the assessee. The AO noted that the investment profile of the assessee has undergone change during the year and administrative expenses and management time cost was incurred by the assessee for earning exempt income. The AO passed an assessment order dated 28.03.2013 u/s 143(3) of the 1961 Act to make additions to the income of the assessee by disallowing expenses of Rs. 62,16,426/- u/s 14A read with Rule 8D(2)(ii) and (iii) of the 1962 Rules purported to be incurred for earning of an exempt income. 9. The next ground on which additions to the income of the assessee was made by the AO vide assessment order dated 28.03.2013 passed by the AO u/s 143(3) of the 1961 Act, pertained to interest expense of Rs. 4,67,94,141/-, which was debited by the assessee in its P&L account. The assessee was asked by the AO to explain utilisation of the fund for which interest expenses were incurred. The assessee submitted that it is operating FM Radio Broadcasting Station through the Brand "Radio Mirchi" in 32 Indian cities and has setup FM Radio Broadcasting Station in 25 Indian cities. The assessee explained before the AO during assessment proceedings that in order to make its requirements tow....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ering submissions of the assessee was pleased to delete the additions as were made by the AO, vide appellate order dated 16.11.2015 passed by learned CIT(A), by holding as under:- "2.3 I have considered the findings of the AO as well as rival submission of the AR. I have also considered the facts and material on record. The dispute before me is whether the amount shown as 15% trade discount is discount or commission and whether tax is required to be deducted u/s 194H of the I.T. Act. The distinction between commission and discount is subtle and sometimes the words are interchanged. Therefore, before deciding the issue it is very important to understand the meaning of two words :- Commission has been defined in dictionary as under:- i. Commission" is percentage or allowance to factor or agent for transacting business for another ii. "Commission" is compensation paid to another for service rendered in the handling of another's business or property and based proportionately upon the amount or value thereof" iii. "Compensation is paid for work measured by results achieved. iv. "Commission" generally denotes the compensation whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; Agency Discount Credit 70,043 Subtotal 3,96,913 Service tax 40.882 Net due 437,795 Invoice raised by Lintas India Pvt. Ltd. to Bajaj Electricals Ltd. Invoice No.1016004942 dated 12.05.2010 Reimbursement of Broadcasting Charges 396.913 Service Tax 40,882 Total Broadcasting Charges - Reimbursement 4,37,795 Media Agency Commission @ 3% 14,009 Service Tax 1,443 Grand Total 453,247 Thus from above it is clear that the advertising agency is raising the bill to the advertiser on net amount charged by the appellant i.e. Rs. 3,96,913/- and charging separate commission from the advertiser. No commission is charged from the appellant by the advertising agency nor the appellant has given the advertising agency, any commission on purchase/sale of airtime. Therefore, no amount is transacted between the appellant and advertising agency which partakes the character of commission. Hence the stipulation of section 194H is not satisfied. Section 194H talks about the payment to a recipient which is the income by way of c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation of the term it has definite signification and is understood as an allowance for service or labour in discharging certain duties such for instance of an agent, factor, broker or any other person who manages the affairs or undertakes to do some work or renders some service to another. Rebate, on the other hand, is a remission or a payment back and of the nature of a deduction from the gross amount. " The Hon'ble High Court has also considered the decision of the Hon'ble Apex Court in the case of M/s.Coromandel Fertilizers Ltd vs. Union of India reported in 17 ELT 607 wherein the Hon'ble Apex Court has applied the aforesaid principles and observed that; 'The trader discounts given to the dealers by the manufacturer were held to be liable to be deducted from the price charged to the dealers for the purpose of arriving at the excisable value of the goods; but the commissions given to the agents were held to be not deductible from the price for the purpose of arriving at the excisable value of the goods. " It is clear from the various decisions as considered, by the Hon'ble Gujarat High Court that a discount is given from the gross price and i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cts of the Kerala High Court's decision has been clearly distinguished by the Appellants vide their submissions which is summarised below: S No Nature of arrangement Prasar Bharti & Advertising Agencies ENIL & Advertisement Agencies 1 Appointment of Advertisement Agencies Agents are appointed by Prasar Bharti Agencies are appointed by Advertiser. ENIL has no role in the appointment of Agencies 2 Canvassing of Advertisements Canvassed through Agents Canvassed by sale team of ENIL 3 TDS Clause Specific clause that tax shall be deductible at source on payment of trade discount No such clause in the Terms and Conditions issued by ENIL to the Agency 4 Rendering of Service Agents render service to Prasar Bharati Agency render service to Advertiser 5 Control Agents are controlled by Prasar Bharti Agents are controlled by Advertisers. 6 Entry passed for the transaction Prasar Bharti passes entry for Rs. 100 received from the advertiser and then accounts for Rs. 15 as commission paid to Advertising Agency ENIL accounts for Rs. 85/- as income received from the Agency. Rs. 15 is not accounted as expe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dence on record to show that the advertising agencies were agent of the appellant directly or indirectly and they have received any remuneration from the appellant to sell their airtime. The discount given by the appellant was as per prevailing industry practice which the appellant was giving to any person who was buying airtime from them i.e. direct advertisers or the advertising agency It is also a fact that the revenue authorities have accepted the practice of broadcasters for several years and have not disputed the same. 2.9 The above issue has also been decided in favour of the appellant by the CIT (Appeals) - 14 while disposing off the Company's Appeal for the Assessment Years 2011-12 & 2012-13 against the Order of the ITO(OSD)(TDS)-1(2), Mumbai. In view of the aforesaid discussion and considering the legal and factual matrix of the case. I am of the considered opinion that the appellant is not required to make TDS thus following the above referred to decisions. The Assessing Officer is directed to delete the disallowance of Rs. 27,43,52,361 /-." 10.3 With respect to second issue of disallowance of 20% of the business promotion expenses which stood added to in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on record. I find that website is needed for running day to day business and requires constant updating. Therefore, the benefit obtained by the appellant cannot be said that it has accrual in the capital field. The AR has rightly relied on the case of lndianvisit.com (P) Limited (176 Taxman 164) in which it was held that expenditure incurred on website has to be regarded as revenue expenditure. Similar views were also held in the case of Polyplex Corporation Ltd [176 Taxman 56] wherein it was held that business expenses incurred for development of website to promote business activities, and display information and product is allowable as revenue expenditure. The AR further relied in the case of Edelweiss Capital Limited, wherein the tribunal held that the expenditure incurred on website could not have been viewed as capital expenditure because the website is put up for purpose of day to day running of the business. Similar view was also in the case of M/s. R.R. Kabel Ltd's. The Addl. CIT wherein the expenditure relating to webhosting charges is regarded of revenue in nature. It is, further seen that this ground has been decided in favour by my predecessor white disposing off the Ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed CIT(A) was pleased to dismiss the grounds raised by the assessee and confirmed the additions as were made by the AO u/s. 14A of the 1961 Act r.w.r 8D(2)(ii) and (iii) of the 1962 Rules, by holding as under vide appellate order dated 16.11.2015 passed by learned CIT(A):- "6.3 I have considered the issue. It is seen that this ground has been decided against the appellant by my predecessor while disposing off the Appellant's Appeal for the Assessment Year 2009-10 vide Order No.CIT(A)-3/Addl.CIT11(1)/IT-274/11-12 dated 31 December 2012 is as under :- "I have considered the fact. It is seen that the Appellant has made investment in exempt income being equity shares in the subsidiary companies and investment in the mutual funds. Therefore, the claim of the appellant that no expenditure has been incurred for earning dividend income cannot be accepted as it is impossible to earn substantial exempt income without incurring any expenses. This view is also fortified by decision in the case of Citicorp Finance (India) Ltd. [2007] 108 ITD 471 (Mum) wherein it was held that "it is difficult to accept the hypothesis that one can earn substantial dividend income without in....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../Addl.CIT-11(1)/IT-274/11-12 dated 31.12.2012 and adjudicated the issue against the assessee by dismissing appeal of the assessee. 10.7. The next ground raised by assessee before learned CIT(A) was with respect to disallowance of proportionate interest expenses to the tune of Rs. 80 lacs disallowed by the AO and added to the income of the assessee, by following the decision of Ld. CIT(A) for the AY 2009-10. The learned CIT(A) while adjudicating appeal for the impugned AY 2010-11 under consideration observed that this issue also came up in AY 2006-07 and 2007-08 in assessee‟s own case which was adjudicated by Mumbai-tribunal vide ITA no. 3114/Mum/2011 and ITA no. 1063/Mum/2011 vide orders dated 26.12.2012 in favour of the assessee, wherein additions as were made by the AO which were partly confirmed by learned CIT(A) were deleted by Mumbai-tribunal. The learned CIT(A) by Respectfully following the appellate orders passed by Mumbai-tribunal for AY 2006-07 and 2007-08 in assessee‟s own case, allowed the appeal of the assessee vide appellate order dated 16.11.2015 passed by learned CIT(A), by holding as under:- "7.3 I have gone through the submissions of the App....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Act shall apply to every assessee being a company, save as otherwise provided in the said section. In this context, Circular No. 14 of 2001 has also been issued by the CBDT as per which companies covered by the provisions of section 115JB are liable to pay advance tax and consequently, section 234B and 234C of the Act are applicable. The Hon'ble Supreme Court in the case of JCIT Vs. Rolta India Ltd. (2011) 330 ITR 470(SC) has ruled that section 115J is a special provision. It is clear from reading section 115J and 115JB that the question whether a company which is liable to pay tax under either provisions does not receive importance because specific provisions are made in the section saying that all other provisions of the Act so apply to MAT copy under Section 115(A) and 115JB(5). Respectfully following the proposition declared by the Hon'ble Supreme Court in the case of JCIT Vs. Rolta India Limited and in view of the fact that there is no exclusion of Section 115JB in the statutory disallowance of expenses to earn exempt income under section 14A of the Act r.w.r. 8D of I.T. Rules. 1962, it is held that statutory disallowance under section 14A r.w.r.8D of I.T. Rules, 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in by the authorities below while adjudicating this issue. The learned counsel for the assessee has explained before the Bench that all other issues which arose in these cross appeals are covered by the decision of the Mumbai-tribunal in assessee‟s own case for earlier years except disallowance of website creation charges which is a new issue which is so far not adjudicated by tribunal in assessee‟s own case. The assessee has also prepared and filed a chart of various issues which are emanating in these cross appeals and details as to the how these issue‟s are covered by tribunal decision in assessee‟s own case. The said chart is placed in file. The assessee has made statement before us that no exempt income was received by the assessee during the previous year relevant to the impugned assessment year. The assessee has also filed earlier years appellate orders passed by Mumbai-tribunal in cross appeals in assessee‟s own case in ITA no. 181 & 238/Mum/2012 for AY 2008-09 and Mumbai-tribunal decision in ITA No. 1864 & 1910/Mum/2013 for AY 2009-10 respectively, vide common orders dated 04.10.2017. The assessee has also filed before the Bench, decision of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....made by advertiser to the advertising agency on which income-tax is deducted at source u/s 194C by advertiser while making payment to advertising agency. The advertising agency in turn make payments to assessee after retaining their commission @15% and net revenue is received by assessee after retention of agency commission by the advertising agency on advertisements procured by them from advertisers. The assessee did not deducted income-tax at source on these advertising agency commission retained by advertising agency. The said net revenue from advertisement after adjusting of advertising agency commission is accounted for by the assessee in its books of accounts and Profit and Loss Account. Thus, the assessee has not claimed advertising agency commission expenses as separate expenses in its books of accounts and in P&L account prepared by it. This issue came up before tribunal for AY 2011-12 and 2012-13 in assessee‟s own case and we have observed that the tribunal in assessee‟s own case vide common order dated 11.01.2017 in ITA No. 1352/Mum/2014 and 5227/Mum/2014 for AY 2011-12 and 2012-13 respectively has adjudicated this issue in favour of the assessee wherein the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....artment, on the other hand, has taken the stand in some cases that since the advertising agencies act on behalf of the media companies for procuring advertisements, the margin retained by the former amounts to constructive payment of commission and, accordingly, TDS under section 194H is attracted. 4. The issue has been examined by the Allahabad High Court in the case of Jagran Prakashan Ltd and Delhi High Court in the matter of Living Media Limited and it was held in both the cases that the relationship between the media company and the advertising agency is that of a 'principal to principal' and, therefore, not liable for TDS under section 194H. The SLPs filed by the Department in the matter of Living Media Ltd. and Jagran Prakashan Ltd have been dismissed by the Supreme Court vide order dated 11.12.2009 and order dated 05.05.2014, respectively. Though these decisions are in respect of print media, the ratio is also applicable to electronic media/ television advertising as the broad nature of the activities involved is similar. 5. In view of the above, it is hereby clarified that no TDS is attracted on payments made by television channels/ newspaper comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-2003 and 2003-2004 and restored the order dated 04.03.2005 passed by the Commissioner of Income Tax(Appeals)-II, Thiruvananthapuram and the order dated 22.09.2003 passed by the Assessing Officer. 4. In order to appreciate the issue involved in these appeals, it is necessary to set out the facts hereinbelow. 5. The appellant is known as "Prasar Bharati Doordarshan Kendra". It functions under the Ministry of Information and Broadcasting, Government of India. The dispute in this case relates to the appellant's Regional Branch at Trivandrum. 6. The appellant, in the course of their business activities, which include the running of the TV channel called "Doordarshan", has been regularly telecasting advertisements of several consumer companies. 7. With a view to have a better regulation of the practice of advertising and to secure the best advertising services for the advertisers, the appellant entered into an agreement with several advertising agencies (Annexure-P-12). 8. In terms of the agreement, the advertising agency (hereinafter referred to as "the Agency") was required to make an application to th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was of the view that the provisions of Section 194H of the Act are applicable to the payments made by the appellant to the Agencies because the payments were made in the nature of "commission" as defined in Explanation appended to Section 194H of the Act. The AO held that the appellant, therefore, committed default thereby attracting the rigor of Section 201(1) of the Act because they failed to deduct the "tax at source" from the amount paid to various advertising agencies during the Assessment Years in question as provided under Section 194A of the Act. 13. On quantification, the AO found that during the Assessment Year 2002-2003, the appellant had paid a sum of Rs. 2,56,75,165/- towards the commission to the Agencies and on this sum, they were required to deduct tax amount to Rs. 16,34,283/- and a sum of Rs. 3,80,611/- towards interest for delayed payment under Section 201(1-A) of the Act and during the Assessment Year 2003-2004, the appellant had paid a sum of Rs. 2,29,65,922/- towards the commission to the Agencies and on this sum, they were required to deduct tax amounting to Rs. 11,15,944/- and a sum of Rs. 1,54,050/- towards interest for delayed payment under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the agreement, learned counsel tried to point out that the Agencies, in terms of the agreement, purchased the air time from the appellant and then sold it in the market for advertisement to their customer after retaining 15% commission given to them by the appellant. It was, therefore, his submission that such transaction cannot be regarded as being between the principal and agent and nor the payment can be regarded as having been made by way of commission so as to attract the rigor of Section 194H and Section 201 of the Act. 22. Learned counsel also submitted that by mistake some other format of the agreement was placed by the appellant before the High Court and, therefore, the appellant suffered adverse order in question (see averments made in Paras 4 and 5 of the application seeking permission to file additional documents at page 134/135). Learned counsel then took us to the relevant provisions of the proper agreement filed in this Court as Annexure P-12 and contended that having regard to the nature of the agreement and its terms, the submission urged deserves acceptance. 23. In reply, learned counsel for the respondent (Revenue) supported the i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on relating to any asset, valuable article or thing, not being securities; (ii) the expression "professional services" means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by the Board for the purposes of section 44AA; (iii) the expression "securities" shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (iv) where any income is credited to any account, whether called "suspense account' or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.' 26. The aforementioned Section was inserted in the Act with effect from 01.06.2001 by replacing the earlier Section 194H. This Section deals with the payment of "commission or brokerage". 27. It provides that any person o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o ambiguity in any clause and no complaint was made to this effect by the appellant; Third, the terms of the agreement indicate that both the parties intended that the amount paid by the appellant to the agencies should be paid by way of "commission" and it was for this reason, the parties used the expression "commission" in the agreement; Fourth, keeping in view the tenure and the nature of transaction, it is clear that the appellant was paying 15% to the agencies by way of "commission" but not under any other head; Fifth, the transaction in question did not show that the relationship between the appellant and the accredited agencies was principal to principal rather it was principal and Agent; Sixth, it was also clear that payment of 15% was being made by the appellant to the agencies after collecting money from them and it was for securing more advertisements for them and to earn more business from the advertisement agencies; Seventh, there was a clause in the agreement that the tax shall be deducted at source on payment of trade discount; and lastly, the definition of expression "commission" in the Explanation appended to Section 194H being an inclusive definition giving wide m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oordarshan provided 15% discount on the basis of which it was contended that no deduction at source was required. The Tribunal held that there was no liability for deduction of tax at source under Section 194H which judgment was reversed by the Kerala High Court. From the facts of the aforesaid case, it is clear that Doordarshan had appointed agents i.e. advertising agencies and there was agreement entered between them. In the aforesaid circumstances, 15% advertisement charges collected and remitted was held to be in the form of commission payable to the agent by Doordarshan. There was explicit agreement between the agency and the Doordarshan where both understood that payment made to the agency was liable to tax deduction. It is useful to quote the following observations of the judgment of Kerala High Court:- * * &nb....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in their capacity as Principal of the agent. It is pertinent to note that commission or brokerage defined under explanation (i) to Section 194H has a wide meaning and it covers any payment received or receivable directly or indirectly by a person acting on behalf of another person for services rendered. In this case, no one can doubt that 15% commission paid to advertising agencies by the Doordarshan is for canvassing advertisements on behalf of the respondent. So much so, the payment of 15%, by whatever name called, whether discount or commission, falls within the definition of "commission" as defined under Explanation (i) to Section 194H of the Act. * * * *&nb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....kably proved that the payment was being made by the appellant (assessee) to the agencies by way of "commission". In our view, therefore, the decision of the Allahabad High Court is of no help to the case of the appellant for taking a different view. 38. In the light of the foregoing discussion, we concur with the reasoning and the conclusion arrived at by the High Court and find no merit in these appeals. The appeals thus fail and are accordingly dismissed. 12.4 This decision of Hon‟ble Supreme Court in the case of Director, Prasar Bharati(supra) was rendered 3rd April, 2018 and Hon‟ble Supreme Court has held that applicability of provisions of Section 194H of the 1961 Act will depend upon facts and circumstances of each case and hence it was held that there is a need to evaluate the factual matrix of each case before applying provisions of Section 194H of the 1961 Act to advertising agency commissions paid by Media/Broadcasting companies including evaluating commercial terms and conditions of the contract existing between and inter-se all the relevant parties to this process of advertisement in Media/Broadcasting companies. The Hon‟ble Supreme ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lowing the judicial precedents as cited in its appellate order allowed the said expenses as Revenue Expenses in its entirety.We have heard both the parties. The assessee has relied upon decisions of Hon‟ble Delhi High Court in the case of CIT v. Indian Visit.com Private Limited (2009) 176 Taxman 0164(Del. HC). We do not find any fault with the decision of Ld. CIT(A) as in catena of judgments, a consistent view have been taken by Hon‟ble Courts/tribunal wherein website development expenses were held to be revenue expenditure. The Hon‟ble Dellhi High Court in the case of Indian Visit.com Private Limited(supra) had held website development charges to be Revenue Expenses u/s 37(1) of the 1961 Act, by holding as under: "7. Considered in the light of these principles enunciated by the Supreme Court, it is clear that just because a particular expenditure may result in an enduring benefit would not make such an expenditure of a capital nature. What is to be seen is what is the real intent and purpose of the expenditure and as to whether there is any accretion to the fixed capital of the assessee. In the case of expenditure on a website, there is no change ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3;s own case in ITA no. 181 & 238/Mum/2012 and ITA no. 1864 & 1910/Mum/2013 for AY 2008-09 and 2009-10 respectively vide common order dated 04.10.2017, wherein tribunal decided this issue for AY 2008-09 and 2009-10 in assesse‟s own case in favour of the assessee by holding as under:- "35. On appraisal of the above said finding, We noticed that the CIT(A) has examined the payment from every angle and found that the commission was not paid in higher side. No distinguishable material was produced. The commission @ 5% was paid to BCCL. The range of commission in such type of business varies from 5% to 20%. It does not seems justifiable in view of the law settled in Upper India Publishing House P. Ltd. Vs. CIT (1979) 117 ITR 569(SC), CIT Vs. V.S. Dempo & Co. (P.) Ltd. (2011) 336 ITR 209 (Bom), CIT Vs. Raman Boards Ltd. (2013) 355 ITR 305 (Karnataka), CIT Vs. Modi Revlon (P.) Ltd. (2012) 210 taxman 161 (Delhi) (MAG) & CIT(A) in own case for A.Y. 2010-11 dated 16.11.2015. In view of the facts and circumstances of the case and relying upon the law relied by the assessee we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... no disallowance is required in view of the provision u/s 36(1)(iii) of the Act. It is also argued that the case of the assessee is fully covered by the order dated 26.12.2012 passed by the Hon'ble ITAT in the assessee's own case for the A.Y. 2006-07 & 2007-08. The investment was made on account of commercial expediency and sufficient interest free funds were available. The Ld. Representative of the assessee also placed reliance upon the law settled in S.A. Builders Ltd. Vs. CIT (2007) 288 ITR 1 (SC). It is also argued that the capital and reserves were substantially higher than investments which was to the tune of Rs. 47.66 crores where as capital & reserves were Rs. 262.92 crores. The investment in the subsidiary company was 35.03 crores which has been shown at page 7 of the paper book. The Ld. Representative of the assessee also placed reliance upon the case in CIT Vs. Reliance Utilities & Power Ltd (2009) 313 ITR 340 (Bom). It is also argued that the cash flow statement was having closing balance to the tune of Rs. 12,08,89,847/- and if the subsidiary company be considered to the tune of Rs. 35,02,50,000/- then the closing balance would be Rs. 47,11,39,847/- and no loan was giv....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for the year. The total cash inflow is at Rs. 49,666.15 lakhs. Excluding the short term borrowings and its repayment (Rs. 177 lakhs) from both the sides; the same having been re-paid during the year itself in full, as well as netting the movement of funds in 'investments' (on their purchase and sale during the year), as well as the financing cost, the same would be as under:- A. Source of funds: Rs. In Lakhs Remarks A Cash in flow from operating activities 2,283.55 B Proceeds from fresh issue of shares 20,025.87/- C Proceeds from long term borrowings 3,500.00 25,809.42 B Utilization of funds: Rs. In Lakhs Remarks A Purchase of fixed assets 21,672.22 B Increase in investment 2326.80 C Loans and investment in subsidiary 760.00 D Preoperative expenses 811.04 25,570.06 C Surplus 239.36 (A-B) D Financing cost (net of interest 2.05L) 259.20 (259.25-2.05) E Shortfall @ 17.84 (D-C) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....requirements and for setting up radio stations. The contract with Govt. of India is only a business contract as far as assessee-company is concerned. Even assuming a default on its part, which though it contests in a court of law, the interest obligation, even as stated by the first appellate authority, is only a contractual default or liability. There is no question or case of any infraction or breach of any law. In fact, it is not even clear if the same arises under the terms of the contract or is as per the directions of the hon'ble court. It would thus be a little consequence even if some borrowed capital was utilized (for a given period) to pay the same, being only a business purpose, as is a payment of license fee itself. The payment, in any case, is compensatory in character. The Revenue's only case, rather, could be that interest, corresponding to the period for which the radio stations were not operative and under installation, be capitalized, as itself done by the assessee for a part of interest paid during the year. No case for a disallowance would arise unless the Revenue shows the payment to be not for business purpose or for any infraction of law, in which case the en....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2007-08 in ITA. No.3114/M/2011, 3115/M/2011 & 1863/M/2011 dated 26.12.2012. Therefore, we set aside the finding of the CIT(A) on this issue and allowed the claim of the assessee on this issue." 15.2 We have observed from audited financial statements filed by the Assessee that assessee has its own interest free funds available with it comprising of share capital of Rs. 47.67 crores (Rs. 47.67 crores as at 31.03.2009) and Reserves & Surplus to the tune of Rs. 283.82 crores(Rs. 265.95 crores as at 31.03.2009) as at 31.03.2010, aggregating to Rs. 331.49 crores as at 31.03.2010(Rs. 313.62 crores as at 31.03.2009), while the investments are to the tune of Rs. 40.02 crore as at 31st March 2010 and Rs. 39.03 crores as at 31.03.2009. The investments/loans to subsidiary namely "Times Innovative Media Limited‟ and "Alternate Brand Solutions Limited‟ to the tune of Rs. 10 crores were considered for disallowance of interest expenses u/s 36(1)(iii) of the 1961 Act. Thus, as can be seen from above the interest free own funds available with the assessee were higher than investments/loans made by the assessee and in the absence of any specific findings that interest bearing borrowed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee and additions were sustained by learned CIT(A). We have observed that Mumbai-tribunal in assessee‟s own case in ITA no. 181 & 238/Mum/2012 and 1864 & 1910/Mum/2013 for AY 2008-09 and 2009-10 respectively, vide common order dated 04.10.2017 has held that an adhoc disallowances of Business Promotion expenses are not warranted, by holding as under:- "8. Under this issue the assessee has challenged the ad hoc disallowance to the extent of 10% of the Business Promotion Expenses to the tune of Rs. 3,14,292/. The Ld. Representative of the assessee has argued that the assessee has given the detail of the Business Promotion Expenses which lies at page no. 62 of the paper book and also submitted the copy of Tax Audit Report which lies at page no. 37 to 59 of the paper book. The AO disallowed the 20% of the Business Promotion Expenses without any basis and the CIT(A) has restricted the disallowance to the extent of 10% of the Business Promotion expenses just on estimation basis which is wrong against law and fact, therefore, the said expenses are liable to be allowed in the interest of justice. It is also argued that the appellant has paid the fringe benefits Tax on the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Expenses had been made on adhoc basis. Thus, we donot find any reason to deviate from the aforesaid decision of ITAT, Mumbai in assessee‟s own case for AY 2008-09 and 2009-10,, which we Respectfully follow. The decision of Hon‟ble Supreme Court in the case of Radhasoami Satsang(supra) is relevant. Thus, ground number 1 of the assessee‟s appeal is allowed. We order deletion of the said disallowance of 20% of Business Promotion Expenses. The assessee succeeds on this ground. We order accordingly. 18. The next issue raised by assessee in its appeal filed with tribunal vide ground number 2 concerns itself with disallowance of expenditure of Rs. 62,16,426/- by authorities below purported to be incurred in relation to earning of an exempt income by invoking provisions of Section. 14A of the 1961 Act read with Rule 8D(2)(ii) and 8D(2)(iii) of the 1962 Rules. Both the authorities below had confirmed and sustained the aforesaid disallowances. Statement has been made by Ld. Counsel for the assessee before the Bench that there is no exempt income earned by the assessee during the previous year relevant to the impugned assessment year. It is also claimed before the Bench ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hile computing disallowance of expenditure incurred in relation to earning of an exempt income by invoking provisions of Section 14A, does not hold merit as the issue is no more res-integra keeping in view decision of Hon‟ble Supreme Court in the case of Maxopp Investment Limited v. CIT reported in (2018) 402 ITR 640(SC) and hence this contention of the assessee stood rejected. We have observed that the assessee has claimed that no exempt income was earned by the assessee during the impugned assessment year and hence in view of decision(s) of Hon‟ble Delhi High Court in the case of Cheminvest Ltd. v. CIT reported in (2015) 378 ITR 33(Delhi) and in the case Joint Investments Private Ltd. v. CIT reported in (2015) 372 ITR 694(Delhi) as well as decision of Hon‟ble Bombay High Court in the case of The PCIT v. Ballarpur Industries Ltd. in ITA No. 51 of 2016 vide judgment dated 13.10.2016, we are of the view that no disallowance of expenditure purported to be incurred for earning of an exempt income be made u/s 14A of the 1961 Act in view of the claim that no exempt income being earned by the assessee. However, this claim of the assessee that it did not earn any exempt ....