Perfect Probuild P.Ltd, New Delhi V. DCIT, Circle-76(1), New Delhi

ITA 1034/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9035 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 12-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: FARHAT KHAN
• Keywords: Non-deduction of tax; TDS
• Section: 194C; 201(1); 194J; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DLEHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO. 1034/DEL/2018 ASSESSMENT YEAR: 2011-12 PERFECT PROBUILD P. LTD., 2 ND FLOOR, VS. DCIT, CIRCLE 76(1), PLOT NO. 2, COMMERCIAL COMPLEX, NEW DELHI. DWARKA, NEW DELHI. PAN : AAECP8053H (APPELLANT) (RESPONDENT) APPELLANT BY : SH. VED JAIN, ADVOCATE RESPONDENT BY: SH. FARHAT KHAN, SR. DR DATE OF HEARING: 07/07/2021 DATE OF ORDER : 05/08/2021 ORDER PER K. NARASIMHA CHARY, J.M. AGGRIEVED BY THE ORDER DATED 20/03/20178 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-41, NEW DELHI ('LD. CIT(A)') IN THE CASE OF PERFECT PROBUILD PVT. LTD. (THE ASSESSEE) , FOR THE ASSESSMENT YEAR 2011-12, ASSESSEE PREFERRED THIS APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF CONSTRUCTION. AS SESSEE HAD A LEASE AGREEMENT WITH NOIDA AUTHORITY EXECUTED ON 04/06/20 10 WHEREBY THE ASSESSEE IS A LESSEE AND PAID LEASE RENT TO THE TUN E OF RS.81,56,567/- TO THE NOIDA AUTHORITY. ASSESSEE DID NOT DEDUCT TDS ON SUCH PAYMENT MADE 2 FOR ANNUAL LEASE RENT ON THE BASIS OF LETTER GIVEN BY THE NOIDA AUTHORITY. SO ALSO DURING THE YEAR, ASSESSEE MADE CERTAIN PAYM ENTS IN RESPECT OF ADVERTISEMENT EXPENSES TO THE TUNE OF RS.9,47,429/- AND THE ASSESSEE DEDUCTED TDS AT 2% U/S. 194C OF THE INCOME-TAX ACT, 1961 (THE ACT). 3. ASSESSEE WAS ISSUED NOTICE U/S. 201(1)/201(1A) O F THE ACT AND WAS ASKED TO SUBMIT THE DETAILS OF TDS DEDUCTED IN RESP ECT OF BOTH THESE PAYMENTS. 4. IN SO FAR AS THE LEASE RENT IS CONCERNED, ASSESS EE SUBMITTED COPY OF LEASE DEED AS WELL AS COPY OF LETTER ISSUED BY NOID A AUTHORITY FOR NON- DEDUCTION OF TAX AT SOURCE. SO ALSO, THE ASSESSEE P LEADED IN RESPECT OF ADVERTISEMENT EXPENSES THAT SUCH PAYMENT IS COVERED BY SECTION 194C AND TDS AT 2% WAS PROPER. 5. LEARNED ASSESSING OFFICER, HOWEVER, OBSERVED THA T THE ASSESSEE WAS REQUIRED TO DEDUCT TDS U/S. 194J OF THE ACT ON THE PAYMENT OF RS.81,56,567/- AND ON THAT PREMISE, CREATED A DEMAN D OF RS.8,15,656/- ON ACCOUNT OF NON-DEDUCTION OF TAX U/S. 201(1) AND RS.4,81,237/- ON ACCOUNT OF INTEREST LIABILITY IN RESPECT OF SUCH NO N-DEDUCTION U/S. 201(1A) OF THE ACT. 6. SIMILARLY, IN RESPECT OF ADVERTISEMENT EXPENSE, LEARNED ASSESSING OFFICER WAS OF THE OPINION THAT THE TDS WAS TO BE D EDUCTED AT 10% U/S. 194J, BUT NOT AT 2% U/S. 194C, INASMUCH AS THERE WA S NO CONTRACT FOR PROVIDING ADVERTISEMENT SERVICES. ON THAT ACCOUNT, HE RAISED A DEMAND OF RS.9,47,429/- U/S. 201(1) AND INTEREST AT RS. 5, 08,213/- U/S. 201(1A) OF THE ACT, PUT TOGETHER AT RS.14,55,642/- FOR SHORT D EDUCTION OF TDS ON PAYMENT OF ADVERTISEMENT EXPENSES. 3 7. WHEN THE ASSESSEE PREFERRED APPEAL, LEARNED CIT( A) GAVE RELIEF TO THE ASSESSEE IN PART BY DIRECTING THE DELETION OF T HE DEMAND ON ACCOUNT OF NON-DEDUCTION OF TAX BASING ON THE DECISION OF H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RAJESH PROJECTS (INDIA) L TD. VS. CIT (2017) 78 TAXMANN.COM 263 (DELHI). LEARNED CIT(A), HOWEVER, C ONFIRMED THE INTEREST LIABILITY U/S. 201(1A) HOLDING THAT EVEN I F THE ASSESSEE IS NOT TO BE TREATED AS ASSESSEE IN DEFAULT, IT DOES NOT ABSOLVE THE ASSESSEE FROM INTEREST LIABILITY U/S. 201(1A) OF THE ACT AND DIRE CTED THE LEARNED ASSESSING OFFICER TO RE-COMPUTE THE INTEREST UPTO T HE DATE OF FILING THE RETURN OF THE DEDUCTEE. LEARNED CIT(A), HOWEVER, CO NFIRMED THE ACTION OF THE ASSESSING OFFICER IN RAISING THE DEMAND FOR RS. 14,55,642/- U/S. 201(1) AND 201(1A) OF THE ACT IN RESPECT OF ADVERTISEMENT EXPENSES FOR NOT DEDUCTING TDS AT 10% U/S. 194J OF THE ACT. AGGRIEV ED BY THIS ACTION OF THE LD. CIT(A), ASSESSEE PREFERRED THIS APPEAL. 8. IN SO FAR AS THE LEASE RENT PAYMENT IS CONCERNED , FACTS ARE NOT IN DISPUTE. BY PLACING RELIANCE ON THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF RAJESH PROJECTS (INDIA) LTD. ( SUPRA), LEARNED CIT(A) RIGHTLY HELD THAT THE ASSESSEE IS NOT LIABLE TO BE TREATED AS AN ASSESSEE IN DEFAULT, AS THE ASSESSEE WAS PREVENTED FROM DEDUCTI NG TDS BY NOIDA AUTHORITY BY ISSUE OF LETTER AND IF THE AMOUNT OF L EASE RENT IS ACCOUNTED FOR BY THE NOIDA AUTHORITY IN VIEW OF FIRST PROVISO TO SECTION 201(1), THE SAID FACT WAS TO BE VERIFIED AND THE DEMAND TO THE TUNE OF RS.8,15,656/- HAS TO BE DELETED. SINCE THE REVENUE DOES NOT DISPU TE THE CORRECTNESS OF THIS FINDING, WHAT REMAINS TO BE CONSIDERED BY US I N THIS APPEAL IS THE INTEREST LIABILITY U/S. 201(1A) AND THE FINDING OF THE AUTHORITY BELOW THAT 4 EVEN IF THE ASSESSEE IS NOT TO BE TREATED AS AN ASS ESSEE IN DEFAULT, IT DOES NOT ABSOLVE THE ASSESSEE FROM INTEREST LIABILITY U/ S. 201(1A) OF THE ACT. 9. LEARNED AR PLACES RELIANCE ON THE DECISION IN TH E CASE OF PRATEEK BUILDTECH (INDIA) PVT. LTD. V. ACIT, 2020(3) TMI 22 4-ITAT DELHI AND M/S. SKYTECH CONSTRUCTION PVT. LTD. VS. ITO(TDS)- 2019 ( 12) TMI 601-ITAT DELHI AND SUBMITTED THAT THE ISSUE IS NO LONGER RES INTEGRA AND IN THE ABOVE TWO DECISIONS, THE TRIBUNAL NOTICED THE DIRECTIONS OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RAJESH PRO JECTS (SUPRA) TO THE EFFECT THAT GNOIDA WAS ENSURED THAT THE REIMBURSEME NT IS MADE TO COMPENSATE THE PETITIONERS EXCESS PAYMENTS; THE IN COME TAX AUTHORITIES SHALL NOT PURSUE ANY COERCIVE METHODS FOR RECOVERY OF THE AMOUNTS, PENALTY, ONCE THE BASIC LIABILITY (WITH INTEREST TO BE PAID BY GNOIDA) IS SATISFIED AND DECIDED THE ISSUE IN FAVOUR OF THE AS SESSEE. LEARNED DR PLACES RELIANCE ON THE FINDINGS OF THE AUTHORITIES BELOW. 10. IN PRATEEK BUILDTECH (SUPRA), A COORDINATE BENC H OF THIS TRIBUNAL HELD THAT WHEN ONCE THE BASIC LIABILITY OF REIMBURS EMENT BY GNOIDA IS MADE, THE AUTHORITY SHALL NOT PURSUE ANY COERCIVE M ETHOD. SAME IS THE FINDING IN M/S. SKYTECH CONSTRUCTION (SUPRA). FACTS INVOLVED IN THESE TWO CASES ARE SIMILAR TO THE FACTS INVOLVED IN THE CASE ON HAND. SINCE THE ISSUE IS COVERED BY THE VIEW TAKEN BY COORDINATE BENCHES IN TWO MATTERS, WHILE RESPECTFULLY FOLLOWING THE SAME, WE RESTORE THE ISS UE TO THE LEARNED ASSESSING OFFICER WITH THE DIRECTION TO VERIFY WHET HER THE NOIDA HAS PAYMENTS OF THE BASIC TDS LIABILITY ALONG WITH THE INTEREST; THAT THE ASSESSEE SHALL COOPERATE AND PROVIDE RELEVANT INFOR MATION REQUIRED BY THE ASSESSING OFFICER AND IF AFTER VERIFICATION, IT IS FOUND THAT THE BASIC TDS LIABILITY AND INTEREST THEREON HAS ALREADY BEEN PAID BY THE NOIDA, 5 THEN NO SUCH LIABILITY SHALL BE RAISED ON THE ASSES SEE. WITH THESE OBSERVATIONS, WE ALLOW GROUND NO. 3 FOR STATISTICAL PURPOSES. 11. NOW COMING TO THE ADVERTISEMENT EXPENSES, A REA DING OF SECTION 194C WITH EXPLANATION (IV) THEREOF MAKES IT CLEAR T HAT ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT FOR CARRYING OUT THE WORK OF ADVERTISING, BROADCASTING AND TELECASTING SHALL DEDUCT AN AMOUNT EQUIVALENT TO 1% WHERE THE PAYMENT IS BEING MADE TO AN INDIVIDUAL AND AT 2% IN OTHER CASES. LEARNED ASSESSING OFFICER WAS OF THE VIEW THAT THE PROVISIONS OF SECTION 194J ARE APPLICABLE BECAUSE T HERE IS NO CONTRACT BETWEEN THE ASSESSEE AND THE ADVERTISING AGENCY IN THIS CASE AND THEREFORE, SUCH PAYMENTS HAVE TO BE TREATED AS PAYM ENTS BY WAY OF FEE FOR PROFESSIONAL SERVICES. 12. IT COULD BE SEEN THAT THE WORD ADVERTISING HA S BEEN CLARIFIED BY CBDT IN CIRCULAR NO. 714 DATED 03/08/1995 WHILE STA TING THAT ACCORDING TO THE AMENDED PROVISIONS, TAX HAS TO BE DEDUCTED @ 1% IN CASE OF ADVERTISING AND AT 2% IN OTHER CASES. IT IS FURTHER STATED IN CIRCULAR NO. 714 THAT FEE FOR PROFESSIONAL OR TECHNICAL SERVICES TO BE FORMED U/S. 194J WOULD MEAN THE SERVICES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON LEGAL, MEDICAL, ENGINEERING OR THE PROFESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR ADV ERTISING OR SUCH ACTIVITY AS IS NOTIFIED BY THE BOARD FOR THE PURPOSE OF SECT ION 44AA OR SECTION 194J. THIS CIRCULAR MAKES IT CLEAR THAT THE TAX WIL L BE DEDUCTED AT SOURCE U/S. 194J FROM THE PAYMENTS MADE FOR PROFESSIONAL S ERVICES, WHEN ADVERTISING AGENCY MAKES PAYMENT FOR PROFESSIONAL S ERVICES TO A FILM ARTIST SUCH AS AN ACTOR, A CAMERAMAN, A DIRECTOR ET C., IN WHICH CASE THE TAX WILL BE DEDUCTED AT 5%. 6 13. FURTHER CIRCULAR NO. 4 CLARIFIES THE DISTINCTIO N BETWEEN THE PAYMENTS BY A PERSON TO THE ADVERTISING AGENCY AND THE PAYMENTS MADE BY ADVERTISING AGENCY TO THE TELEVISION CHANNEL OR NEWSPAPER COMPANY ETC. A READING OF CIRCULAR NO. 714 AND 4 MAKES IT A MPLY CLEAR THAT WHEN A PERSON MAKES A PAYMENT TO ADVERTISING AGENCY, SUCH PAYMENTS ARE COVERED BY SECTION 194C WHEREAS IF THE ADVERTISING AGENCY MAKES ANY PAYMENT TO A FILM ARTIST SUCH AS AN ACTOR, A CAMERA MAN, A DIRECTOR ETC., IT WOULD BE COVERED BY SECTION 194J. THIS DISTINCTION IS BASED ON THE FACT THAT WHEN THE ADVERTISING AGENCY MAKES SUCH PAYMENT S TO A FILM ARTIST, THE INTELLECTUAL PROPERTY IN THE CONTENTS WILL BE A CQUIRED BY THE ADVERTISING AGENCY AND THE SERVICES SECURED ARE ONL Y BROADCAST AND TELECAST AND NOTHING MORE. 14. FURTHER, A CONTRACT NEED NOT ALWAYS BE IN WRITI NG AND COULD BE IMPLIED ALSO. IN THE CIRCUMSTANCES, WE FIND THAT TH E PAYMENT MADE BY THE ASSESSEE FOR ADVERTISEMENT IN CONNECTION WITH THEIR BUSINESS FALLS WITHIN THE AMBIT OF SECTION 194C AND NOT SECTION 194J. GRO UND NOS. 2 & 4 ARE, ACCORDINGLY, ALLOWED. LEARNED ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION. 15. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 5 TH DAY OF AUGUST, 2021. SD/- SD/- ( R.K. PANDA) (K. NARSIMHA CHA RY) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 05/08/2021 AKS