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2020 (9) TMI 1100
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....n ITA Nos. 3214 & 3215/Mum/2014 is as regards to the order of CIT(A) confirming the action of the AO in making disallowance of discount and various other expenses like discount on sale of set-top box and hardware, discount on sale of recharge coupon vouchers, disallowance of bonus or credit provided by the assessee to subscribers, disallowance of sale promotion expenses and disallowance of channel support expenses for non-deduction of TDS by invoking the provision of section 40(a)(ia) of the Act. 3. The facts and circumstances of both the years are identical as admitted by Ld. Senior Counsel for the assessee as well by Ld. CIT-DR. Hence, we will take the facts from AY 2009-10 and decide the issues raised by the assessee in this year. For this, assessee has raised the following grounds in AY 2009-10: - "1. On the facts and in the circumstances of the case and in law, the Hon'ble Commissioner of Income-tax (Appeals) -13. Mumbai [C1T(A)] erred in upholding the disallowance of discount on sale of Set-top box & hardware aggregating to Rs. 23.50,51.772 (Rs. 1338,81.648 and Rs. 10,11,70,124 respectively) under Section 40(a)(ia) of the Act. 2. On the facts and in the c....
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....nce in the order of the Mumbai Tribunal in the Appellant's own case under section 201 of the Act. 1 Disallowance of discount on sale of Set-top box & hardware aggregating to Rs. 23,50,5 1,772 (Rs. 13,38,81,648 and Rs. 10111,70,124 respectively) under section 40(a)(ia) of the Act The Mumbai Tribunal at para 34 (page 23) has specifically mentioned about the Appellant giving discount on the sale of Set-top box and recharge coupon vouchers. The Tribunal at para 39 (page 30) has held that such discount is not in the nature of commission 2 Disallowance of discount on the sale of recharge coupon vouchers of Rs. 38,80,61,901 under Section 40(a)(ia) of the Act. 3 Disallowance of bonus or credit provided by the Appellant to subscribers of Rs. 1,54,24,104 under Section 40(a)(ia) of the Act Please refer to clarification mentioned in point B below 4 Disallowance of sales promotion expenses of Rs. 1,30,37,124 under Section 40(a)(ia) of the Act. The Mumbai Tribunal at para 34 (page 23) also mentioned about the additional discount, i.e., festival/seasonal discounts to the distributors. The Tribunal at para 39 (page 30) has held that such discount is not in the natu....
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....ion 194H of the Act and accordingly, disallowance of discount given to the customers under section 40(a)(ia) of the Act is unwarranted. 6. The learned Counsel for the assessee stated that the issue is squarely covered by Tribunal's decision in ITA No. 6923 to 6926/Mum/2012 in assessee's own case for AYs 2009-10 to 2012-13 order dated 12.10.2018, wherein, while adjudicating the appeal under section 201(1) and 201(1A) of the Act, whether the assessee is liable for TDS, he stated that the Tribunal vide Para 39 has categorically held that the assessee should not be visited with the liability to deduct TDS under section 201(1) and 201(1A) of the Act. For this he referred to Para 39 and 40 of Tribunal's order as under: - "39. A cohesive reading of the above case laws particularly that of the Hon'ble Bombay High Court in the case of Piramal Healthcare Ltd. (supra), Qatar Airways (supra) and Intervet India (P.) Ltd. (supra) would show that the ld. Counsel of the assessee's plea that the assessee should not be visited with the liability to deduct TDS for non-deduction of tax at source u/s. 194H on the difference between the discounted price at which it is sold to the distrib....
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....ronted to the learned CIT DR, he could not controvert the above except filing of following case laws: - "1. CIT vs. Idea Cellular Ltd. (2020) 189 Taxman 118 (Delhi) 2. Idea Cellular Ltd. vs. ACIT (2014) 51 taxmann.com 50 (Hyderabad-Trib.) 3. Tata Teleservices Ltd. vs. DCIT (2013) 29 taxmann.com 261 (Bangalore -Trib.) 4. Bharti Cellular Ltd. vs. ACIT (2011) 12 taxmann.com 30 (Calcutta)." He also filed written note dated 14.03.2018. He submitted that the issue is covered in favour of Revenue and against assessee by the case laws of ITAT, Hon'ble High Courts and Supreme Court to support and strengthen the Department's case which are directly on the point. He referred to the following two issues first: - The first issue regarding- (1) Disallowance on discount of sale of STBs U/s. 40(a)(ia) - Rs. 38,86,45,630/- (2) Disallowance on discount of sale of RCVs U/s. 40(a)(ia) - Rs. 46,27,2 1,974/- He stated that the assessee is engaged in the business of providing Direct to Home Services (DTH). A Set Top Box (STB) at the premises of the subscribers receives television signals through broadcasters which are uplinked to th....
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.... the Assessing Officer to delete the addition towards disallowances under section 40(a)(ia) of the Act on discount of sale of STB & hardware, recharge coupon vouchers & disallowance of bonus or credit provided to subscribers, sales promotion expenses and distribution channel support expenses for failure to deduct TDS u/s 194H of the IT Act, 1961. This issue of assessee's appeal is allowed. 9. Similar is the facts in respect of this ground for AY 2010-11 in ITA No. 3215/Mum/2014 hence, in that year also the disallowance is deleted on this account. 10. The next issue in ITA No. 3214/Mum/2014 for AY 2009-10 of assessee's appeal is against the order of CIT(A) confirming the action of the AO in making disallowance of year end provisions was made by assessee in respect of expenses. For this assessee has raised the following ground No. 6: - "6. On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) erred in upholding the disallowance of the year end provisions of Rs. 56,97,54,762/- made by the Appellant in its financial statements under section 40(a)(ia) of the Act." 11. During the relevant AY 2009-10, the assessee made ad-hoc year-end provision....
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....se ofRs. 56.97,54, 762/-." It is therefore argued that the verification in the present case has already been carried out. However, considering the judicial precedents of the Gujarat High Court and the Mumbai Tribunal, the deduction for year-end provision ought to be allowed in AY 2009-10, and consequently, deduction of the same cannot be granted in the subsequent assessment year (i.e. AY 2010-11). 13. The learned DR on the other hand strongly supported the order of the CIT(A) and submitted that as per the provision of chapter XVII-B of the Act, TDS is required to be deducted either at the time of payment or at the time of credit including even a credit in the suspense account is subject to TDS. Therefore, there is no merit in the argument of the assessee is that TDS is not applicable on year end provisions. 14. We have heard both the parties, perused the materials available on record and gone through the orders of the lower authorities below including case laws relied upon by the learned counsel for the assessee. The facts borne out from record indicate that the assessee made year-end provisions in respect of sale promotion, legal and professional fees, interest and progra....
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....r AY 2010-11 in ITA No. 3215/Mum/2014 hence, the ground taken by assessee challenging disallowance of year end provisions u/s 40(a)(ia) of the Act for non-deduction of TDS is rejected. 17. The next common issue in these two appeals of assessee for AYs 2009-10 & 2010-11, is as regards disallowance of interest expenses. The issue is exactly identical in both the years. Hence, we take following ground for Assessment Year 2009-10 and decide the issue for both the years: - "Disallowance of interest expense under section 36(1)(iii) 7. On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) erred in upholding the disallowance of interest expense of Rs.1,99,51,000/- under section 36(1)(iii) of the Act." 18. Briefly stated, facts are that during the AY 2009-10 and AY 2010-11, the Assessee had Capital Work-in-progress ('WIP') of Rs. 51.87 crores and Rs. 55.09 crores respectively, which consisted of: Nature of Expenses AY 2009-10 (Rs. in crores) AY 2010-11 (Rs.in crores) Viewing cards 50.13 40.44 Other stand by equipments 1.74 14.65 Otal 51.87 55.09 The AO observed that the assessee had not all....
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....al Work-in-progress ('WIP') of Rs. 51.87 crores and Rs. 55.09 crores respectively. Further, assessee has paid huge interest expenditure on various loans. The AO has disallowed proportionate interest expenses debited to the profit and loss account by invoking proviso to section 36(1)(iii) of the Act and held that interest paid on loan availed for purchase of capital asset needs to be capitalized till such period the assessee put the asset to use. There is no doubt with regard to legal position, because interest paid on borrowed capital shall be capitalized to work in progress till such time the capital asset is put to use. But, what is to be seen is whether the assessee has borrowed any fund for acquisition of capital asset or not. In case, no borrowed fund is used for acquisition of asset then question of capitalization of interest does not arise. In this case, on perusal of facts available on record it is very clear that the assessee has not borrowed specific loan for acquiring capital asset. In fact, the assessment order is silent on this aspect. However, the AO has disallowed proportionate interest paid on other loans including loans borrowed for working capital purpose ....
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....ome and hence the disallowance was correctly made by the Assessing Officer." 22. Briefly stated, the facts are that during the year under consideration the assessee has invested in various investments which, yield exempt income. Further, the assessee has not made suo moto disallowance of expenditure incurred in relation to exempt income u/s 14A of the IT Act, 1961. The AO has disallowed interest expenses and other expenses by invoking Rule 8D(2)(ii)and (iii) on the ground that although the assessee has debited huge interest expenses and other administrative expenses, but failed to disallow expenses relatable to exempt income, by following the decision of ITAT Delhi Special Bench in the case of Champ Investment Ltd. (378 ITR 33). It is the case of the assessee that during the year under consideration it has not earned any exempt income and hence, the question of disallowance of expenses u/s 14A of the Act does not arise. 23. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. We find that this issue is squarely covered in favour of the assessee by the decision of Hon'ble Bombay High Court in the case of....