M/s.Malayalam Communication Ltd, Trivandrum V. The ACIT, Trivandrum

ITA 110/COCH/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8460 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 05-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2016
• Court: TRIBUNAL
• Department Lawyers: SHANTAM BOSE
• Assessee Lawyers: T BANUSEKAR
• Keywords: Business income; Depreciation; Principle of natural justice; Non-deduction of tax; Unabsorbed depreciation
• Section: 143(3); 201(1)

Judgement Text

ITA NOS.110&111/COCH/2016 1 , , , , IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN . . , ., !' !' !' !' BEFORE S/SHRI B. P. JAIN, AM & GEORGE GEORGE K., JM # # # # ./ I.TA NOS.110 & 111/COCH/2016 ( $ % /ASSESSMENT YEARS : 2008-09 & 2010-11) M/S. MALAYALAM COMMUNICATION LTD., KAIRALI TOWERS, ASAN SQUARE, PALAYAM, TRIVANDRUM-695 034. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), TRIVANDRUM. ( &' &' &' &' /ASSESSEE APPELLANT) VS ( ( (( () ) ) ) &' &'&' &' /REVENUE -RESPONDENT) & . . # ./PAN NO. AACCM0065G &' * + /ASSESSEE BY SHRI T.BANUSEKAR, CA () &' * + /REVENUE BY SHRI SHANTAM BOSE, CIT(DR) ,- * ./ / DATE OF HEARING 05/07/2016 0 % * ./ /DATE OF PRONOUNCEMENT 11/07/2016 1 1 1 1 /ORDER PER BENCH: THESE TWO APPEALS OF THE ASSESSEE ARISE FROM THE CO NSOLIDATED ORDER OF THE LD. CIT(A), TRIVANDURM DATED 04/01/2016 FOR THE ASS ESSMENT YEARS 2008-09 AND 2010-11. ITA NOS.110&111/COCH/2016 2 2. SINCE THE ISSUES IN BOTH THE APPEALS ARE IDENTI CAL AND THEREFORE, BOTH THE APPEALS ARE BEING TAKEN UP BY THIS CONSOLIDATED ORD ER. 3. FIRST OF ALL WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE IN I.T.A. NO. 110/COCH/2016 FOR THE ASSESSMENT YEAR 2008-09 AND O UR ORDER HEREINABOVE SHALL BE IDENTICALLY APPLICABLE TO THE ISSUES IN THE APPE AL IN I.T.A. NO.111/COCH/2016 FOR THE ASSESSMENT YEAR 2010-11. 4. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL BUT BASICALLY THERE ARE THREE ISSUES, FIRSTLY, THE DISALLOWANCE U/S. 40 (A)(IA), SECONDLY, TREATMENT OF INTEREST INCOME AS INCOME FROM OTHER SOURCES AND TH IRDLY, DISALLOWANCE OF THE BELATED PAYMENT OF PF AND ESI. 1.FOR THAT THE ORDER OF THE COMMISSIONER OF INCOME- TAX (APPEALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CAS E TO THE EXTENT PREJUDICIAL TO THE INTERESTS OF THE APPELLANT AND I S OPPOSED TO THE PRINCIPLES OF NATURAL JUSTICE, EQUITY AND FAIR PLAY . 2. FOR THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) FAILED TO APPRECIATE THAT THE ORDER OF THE ASSESSING OFFICER IS WITHOUT JURISDICTION. 3. FOR THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN UPHOLDING THE DISALLOWANCE OF RS.3,01,00,367/- U/S. 40(A)(IA) . 4. FOR THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) FAILED TO APPRECIATE THAT THE TRADE DISCOUNT ALLOWED BY THE APPELLANT TO THE ACCREDITED AGENCIES IS ONLY DISCOUNT AND NOT COMMISSION. 5. FOR THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) FAILED TO APPRECIATE THAT THE APPELLANT IS NOT LIABLE TO DEDUCT TAX AT S OURCE ON THE TRADE DISCOUNT ALLOWED TO ACCREDITED AGENCIES SINCE THERE IS NO PRINCIPAL AND AGENT RELATIONSHIP BETWEEN THE APPELLANT AND THE AC CREDITED AGENCIES. ITA NOS.110&111/COCH/2016 3 6. FOR THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) FAILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 40(A)(IA) IS NOT INV OCABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. FOR THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN UPHOLDING THE ADDITION OF RS.60,83,001/- BEING INTEREST ON FI XED DEPOSITS AS INCOME UNDER THE HEAD OTHER SOURCES. 8. FOR THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) FAILED TO APPRECIATE THAT THE FIXED DEPOSIT IN THE BANK WAS MADE FOR BUS INESS EXIGENCIES AND HENCE THE INTEREST IS CHARGEABLE ONLY UNDER THE HEA D PROFITS AND GAINS OF BUSINESS OR PROFESSION. 9. FOR THAT WITHOUT PREJUDICE TO GROUND NO. 8, BROU GHT FORWARD UNABSORBED DEPRECIATION CAN BE SET OFF AGAINST THE INCOME UNDE R THE HEAD OTHER SOURCES. 10.FOR THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF BELATED PAYMENT OF PF AND ESI T O THE EXTENT OF RS.1,53,559/-. 11.FOR THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) FAILED TO APPRECIATE THAT THE APPELLANT HAS ALREADY DISALLOWED A SUM OF RS.1,30,404/- IN THE COMPUTATION OF INCOME TOWARDS BELATED PAYMENT OF EM PLOYEES SHARE OF ESI. 12.FOR THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) FAILED TO APPRECIATE THAT THE DISALLOWANCE OF PF/ESI PAYMENTS BY THE ASS ESSING OFFICER TO THE EXTENT ALREADY DISALLOWED BY THE APPELLANT COMPANY AMOUNTS TO DOUBLE DISALLOWANCE. 13.FOR THAT THE APPELLANT OBJECTS TO THE LEVY OF IN TEREST U/S. 234A. 5. THE ASSESSEE HAS ALSO RAISED THE ADDITIONAL GR OUNDS OF APPEAL AS UNDER: GROUND NO. 6. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 40(A) (IA) IS NOT INVOCABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NOS.110&111/COCH/2016 4 GROUND NO. 9. FOR THAT WITHOUT PREJUDICE TO GROUND NO. 8, BROUGHT FORWARD UNABSORBED DEPRECIATION CAN BE SET OFF AGA INST THE INCOME UNDER THE HEAD OTHER SOURCES. 6. AS REGARDS THE FIRST ISSUE, THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TELECASTING SATELLITE TE LEVISION PROGRAMMES. THEY DEBITED IN THE PROFIT AND LOSS ACCOUNT AN AMOUNT OF RS.3,01,00,367/- AS PAID TOWARDS AGENTS COMMISSION FOR THE ADVERTISEMENTS PR OCURED BY THE ADVERTISING AGENTS. THE ASSESSING OFFICER DISALLOWED THE SAID A MOUNT U/S. 40(A)(IA) OF THE ACT ON THE GROUND THAT TAX AS REQUIRED U/S. 194H OF THE ACT WAS NOT DEDUCTED FROM THE PAYMENTS MADE TO THE SAID AGENTS. FINDING THAT THE AGENTS ACTUALLY CANVASS BUSINESS FOR THE ASSESSEE THOUGH THE ASSESS EE CLAIMED THAT IT HAD NOT APPOINTED ANY AGENTS TO CANVASS FOR ADVERTISEMENTS ON ITS BEHALF, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE PAYMENTS OF COMMISSION MADE TO THE AGENTS FALLS WITHIN THE DEFINITION OF COMMISSION AN D BROKERAGE AS CONTEMPLATED UNDER EXPLANATION (I) TO SECTION 194H AND THEREBY I NVOKED THE PROVISIONS OF SECTION 40(A)(IA) FOR THE DEFAULT THE ASSESSEE HAD COMMITTED IN NOT DEDUCTING THE TAX AS REQUIRED. THE ASSESSING OFFICER FURTHER RELIED ON THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. DI RECTOR, PRASAR BHARTI REPORTED IN 189 TAXMAN 315 AND HELD THAT THE PAYMENT MADE TO TH E AGENTS AMOUNTS TO PAYMENT OF COMMISSION AND SUBJECT TO DEDUCTION OF T AX AT SOURCE U/S. 194H. BUT, THE CASE OF THE ASSESSEE IS THAT THEY HAVE NEI THER APPOINTED ANY AGENTS TO CANVASS ADVERTISEMENT ON THEIR BEHALF NOR PAID ANY COMMISSION TO SUCH AGENTS AND THE RELATIONSHIP BETWEEN THEM IS NOT ON PRINCIP AL TO AGENT BASIS BUT ON ITA NOS.110&111/COCH/2016 5 PRINCIPAL TO PRINCIPAL BASIS. THE ASSESSEE FURTHER CONTENDED THAT THE AMOUNT PAID TO THE ADVERTISING AGENTS IS NOT COMMISSION BU T ONLY A DISCOUNT AND THEREBY PROVISIONS OF SECTION 194H SO AS TO DEDUCT TAX WONT APPLY TO THEM. IN SUPPORT OF THEIR ARGUMENT, THE ASSESSEE RELIED ON T HE DECISIONS IN THE CASES OF ALL INDIA RADIO COMMERCIAL BROADCASTING SERVICE/PRASAR BHARATI BROADCASTING CORPORATION OF INDIA VS. ITO (2006) 8 SOT 513 (DELH I); ASST. COMMISSIONER OF INCOME TAX, CIRCDLE-16(2), HYDERABAD VS. USHODAYA E NTERPRISES LTD., HYDERABAD IN I.T.A. NOS. 701/HYD/2009 AND 426/HYD/2010 FOR TH E AYS. 2005-06 TO 2006-07 AND JAGRAN PRAKASHAN LIMITED VS. THE DEPUTY COMMISS IONER OF INCOME TAX(TDS) WRIT TAX NO.388 OF 2012 IN HIGH COURT OF JUDICATURE OF ALLAHABAD. 7. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASS ESSING OFFICER. 8. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON T HE WRITTEN SUBMISSIONS MADE BEFORE US WHEREAS THE LD. DR RELIED UPON THE ORDER OF BOTH THE AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. THE FACTS IN THE FIRST ISSUE ARE THAT THE ASSESSING OFF ICER HAS DISALLOWED THE SUM OF RS. 3,01,00,367/- FOR THE ASSESSMENT YEAR 2008-09 U/S. 40(A)(IA) STATING THAT THE ASSESSEE HAS CLAIMED COMMISSION EXPENSE BUT HAS NOT DEDUCTED TAX AT SOURCE ON SUCH PAYMENT. IT WAS CANVASSED BY THE LD. COUN SEL FOR THE ASSESSEE BEFORE ITA NOS.110&111/COCH/2016 6 THE AUTHORITIES BELOW AND ARGUED BEFORE US THAT IT IS ONLY A TRADE DISCOUNT ALLOWED BY THE ASSESSEE TO THE ACCREDITED AGENCIES. THE ASSESSEE COMPANY RECEIVES RELEASE ORDERS FOR ADVERTISEMENT FROM THE ADVERTISERS AGENT OR DIRECTLY FROM THE CLIENT AND IN MOST CASES THE TRADE DISCOUN T IS ALLOWED THOUGH IT IS MENTIONED IN COMMON PARLANCE AS AGENCY COMMISSION . SINCE THE ASSESSEE HAS SHOWN THE ENTIRE BILL VALUE AS INCOME, THE TRAD E DISCOUNT IN THE ASSESSMENT ORDER IS SHOWN AS AGENCY COMMISSION. IT WAS ARGUED THAT THE MISNOMER IN THE P&L ACCOUNT AS AGENCY COMMISSION WILL NOT CONVERT T RADE DISCOUNT INTO AGENCY COMMISSION. IT WAS ARGUED THAT THE ASSESSEE HAS NOT APPOINTED ANY AGENTS TO CANVASS ADVERTISEMENT ON ITS BEHALF. FURTHER THE A CCREDITED AGENCIES ARE NOT THE AGENTS OF THE ASSESSEE AND NO PAYMENT IS MADE T O THEM. HENCE THERE IS NO OCCASION TO DEDUCT TAX AT SOURCE. THE ASSESSEE COM PANY TELECASTS CERTAIN ADVERTISEMENTS GIVEN BY THE ACCREDITED AGENCIES ON BEHALF OF THEIR CLIENTS AND AS A TRADE ARRANGEMENT OF ACCREDITED AGENCIES IN IN DIA, THE ASSESSEE COMPANY HAS GIVEN THEM A DISCOUNT/REBATE ON THE BILLS RAISE D AGAINST THEM. NO PAYMENT IN THE NATURE OF COMMISSION IS MADE BY THE ASSESSEE COMPANY TO THE ACCREDITED AGENCIES. THE ACCREDITED AGENCIES PASS ON THE PAYMENT TO THE ASSESSEE COMPANY AFTER REDUCING THE DISCOUNT FROM T HE ENTIRE VALUE OF THE BILL. THE RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND T HE ADVERTISING AGENCY IS NOT THAT OF A PRINCIPAL AND AGENT BUT THAT OF A PRI NCIPAL TO PRINCIPAL BASIS SINCE THE ADVERTISING AGENCIES ARE DOING SERVICES ONLY FO R THEIR CLIENTS ON BEHALF OF WHOM THE ADVERTISEMENTS ARE GIVEN TO THE ASSESSEE C OMPANY FOR TELECASTING. ITA NOS.110&111/COCH/2016 7 1 0. AT THIS JUNCTURE, ATTENTION IS INVITED TO THE D ECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF JAGRAN PRAKASHAN LTD. VS. DCIT (2012) 345 ITR 288 (ALL) (REFER PGS. 4 TO 46 OF INDEX OF CASE LAWS) WHERE IT HAS BEEN OBSERVED AS FOLLOWS: .AS SUCH THE AMOUNT OF TRADE DISCOUNT ALLOWED BY THE PETITIONER TO THE ADVERTISING AGENCIES HAS ALREADY BEEN SUBJECTED TO TDS ON THE PAYMENT OF THE GROSS AMOUNT BY THE ADVERTISERS TO THE ADVERTIS ING AGENCIES. THE SAME AMOUNT CANNOT BE SUBJECTED TO TDS AGAIN AND AGAIN B Y ANY STRAINED AND ILLEGAL INTERPRETATION OF ANY OTHER PROVISION OF TH E ACT BY ASSUMING/DEEMING THE EXISTENCE OF THE JURISDICTIONAL FACTS NECESSARY FOR THE APPLICABILITY OF THE PROVISION. ATTENTION IS FURTHER INVITED TO THE DECISION OF THE CUTTACK BENCH OF THE INCOME TAX APPELLATE TRIBUNAL IN ACIT VS. THE SAMAJ (2001) 77 ITD 358 (CTK) (REFER PAGES 47 TO 51 OF INDEX OF CASE LAWS) WHERE IT HAS BEEN H ELD THAT PAYMENT DEDUCTED BY ADVERTISING AGENCIES AT A SPECIFIED PERCENTAGE O UT OF BILL RAISED BY THE ASSESSEE FOR ADVERTISEMENTS SUPPLIED BY THEM CANNOT BE TREATED AS COMMISSION SINCE THE TRANSACTION BETWEEN THE ASSE SSEE AND THE ADVERTISING AGENCIES IS ENTERED INTO ON PRINCIPAL TO PRINCIPAL BASIS AND THEREFORE, THE PROVISIONS OF SECTION 194H ARE NOT APPLICABLE. SIM ILARLY IN ABP LTD. VS. ACIT (2008) 23 SOT 28 (KOL) (REFER PAGES 52 TO 62 OF INDEX OF C ASE LAWS), THE KOLKATA BENCH OF THE INCOME TAX APPELLATE TRIBUNAL HAS HELD THAT ACCREDITED ADVERTISEMENT AGENCIES GOVERNED BY RULES AND REGULATION FRAMED BY INS COLLECTING ADVERTISEMENTS FROM ADVERTISERS AND PLACING ORDERS FOR PUBLICATION IN ASSESSEES ITA NOS.110&111/COCH/2016 8 NEWSPAPERS/MAGAZINES WITH NO CONTROL OF ASSESSEE AR E NOT AGENTS OF AS, HENCE TRADE DISCOUNT GIVEN BY ASSESSEE TO SUCH AGENCIES D OES NOT CONSTITUTE COMMISSION SO AS TO ATTRACT DEDUCTION OF LAW AT SOU RCE U/S. 194H. SIMILAR VIEW HAS BEEN TAKEN IN THE FOLLOWING DECISIONS: ACIT VS. USHODAYA ENTERPRISED LTD. (2012) 19 ITR (TRIB.) 199 (HYD.) ALL INDIA RADIO COMMERCIAL BROADCASTING SERVICE/ PRASAR BHARTI BROADCASTING CORP OF INDIA VS. ITO (20068 SOT 513 (DEL.). ATTENTION IS ALSO INVITED TO THE CIRCULAR OF CBDT I N CIRCULAR NO. 5/2016 DATED 29/02/2016 (REFER PAGES 1 TO 2 OF INDEX OF CASE LAW S) GIVEN IN THE CONTEXT OF TAX DEDUCTION AT SOURCE ON PAYMENTS BY TELEVISION CHANN ELS AND PUBLISHING HOUSES TO ADVERTISEMENT COMPANIES FOR PROCURING OR CANVASS ING FOR ADVERTISEMENTS, WHERE IT HAS BEEN CLARIFIED AS FOLLOWS: 5. IN VIEW OF THE ABOVE, IT IS HEREBY CLARIFIED TH AT NO TDS IS ATTRACTED ON PAYMENTS MADE BY TELEVISION CHANNELS/NEWSPAPER COMP ANIES TO THE ADVERTISING AGENCY FOR BOOKING OR PROCURING OF OR C ANVASSING FOR ADVERTISEMENTS. IT IS ALSO FURTHER CLARIFIED THAT COMMISSION REFERRED TO IN QUESTION NO. 27 OF BOARDS CIRCULAR NO.715 DATED 0 8/08/1995 DOES NOT REFER TO PAYMENTS BY MEDIA COMPANIES TO ADVERTISING COMPA NIES FOR BOOKING OF ADVERTISEMENTS BUT TO PAYMENTS FOR ENGAGEMENT OF MO DELS, ARTISTS, PHOTOGRAPHERS, SPORTSPERSONS ETC. AND THEREFORE, IS NOT RELEVANT TO THE ISSUE OF TDS REFERRED TO IN THIS CIRCULAR. IN THE SAID CIRCULAR, THE CBDT HAS ALSO REFERRED TO THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN JAGRAN PRAKASHAN LTD. (SUPR A) AND THE DECISION OF HONBLE DELHI HIGH COURT IN LIVING MEDIA LTD. (SLP FILED BY DEPARTMENT IN BOTH ITA NOS.110&111/COCH/2016 9 CASES DISMISSED BY HONBLE SUPREME COURT) AND STATE D THAT THOUGH THE DECISIONS ARE IN RESPECT OF PRINT MEDIA, THE RATIO IS ALSO APPLICABLE TO ELECTRONIC MEDIA /TELEVISION ADVERTISING AS THE BROAD NATURE O F THE ACTIVITIES INVOLVED IS SIMILAR. THE REVENUE IS BOUND BY THE CIRCULARS ISS UED BY THE BOARD. IN THIS CONNECTION REFERENCE IS DRAWN TO THE DECISION OF TH E HONBLE SUPREME COURT IN UCO BANK VS. CIT (1999) 237 ITR 889 (SC) WHERE IT H AS BEEN HELD THAT CBDT HAS POWER, INTER ALIA, TO ISSUE CIRCULARS TO TONE DOWN THE RIGOUR OF THE LAW AND ENSURE FAIR ENFORCEMENT OF ITS PROVISIONS; SO LONG AS SUCH A CIRCULAR IS IN FORCE IT WOULD BE BINDING ON THE DEPARTMENTAL AUTHORITIES IN VIEW OF THE PROVISIONS OF SECTION 119 TO ENSURE A UNIFORM AND PROPER ADMINISTRATION AND A PPLICATION OF THE IT ACT. SIMILAR VIEW HAS BEEN TAKEN IN NAVNIT LAL C. JAVERI VS. K.K. SEN, AAC (1965) 56 ITR 198 (SC). REFERENCE IS FURTHER DRAWN TO THE DECISI ON OF THE HONBLE KERALA HIGH COURT IN CIT VS. PUNALUR PAPER MILLS LTD. (1988) 17 0 ITR 37 (KER.) WHERE IT HAS BEEN HELD AS FOLLOWS:- THE BOARD OF REVENUE IS COMPETENT TO ISSUE CIRCULA RS U/S. 119 OF THE IT ACT. THE CIRCULARS SO ISSUED HAVE GOT THE FORCE OF LAW. ALL OFFICERS OF THE DEPARTMENT ARE BOUND THE SAID CIRCULARS. THE BENEVOLENT CIRCU LARS ISSUED BY THE BOARD ARE IN THE NATURE OF ADMINISTRATIVE RELIEF. THEY REALLY SUPPLANT THE LAW. THE CIRCULAR CAN AFFORD ADMINISTRATIVE RELIEF EVEN BEYOND THE RE LEVANT TERMS OF THE STATUTE. IT CAN DEVIATE FROM THE PROVISIONS OF THE ACT. THE COURTS HAVE HELD THAT SUCH CIRCULARS ARE BINDING ON THE OFFICERS OF THE DEPART MENT. IT IS NOT OPEN TO THE DEPARTMENT TO CONTEND, EVEN IN CASES WHERE THE CIRC ULAR GOES BEYOND THE TERMS OF THE SECTION, THAT THE CIRCULAR HAS NO LEGA L EFFECT OR SHOULD NOT BE GIVEN EFFECT TO. THE CIRCULARS WOULD GO TO THE ASSISTANC E OF THE ASSESSEE. IT IS SETTLED LAW THAT THE CIRCULARS CANNOT IMPOSE ANY BURDEN ON THE TAXPAYER. BUT, BY THE ISSUE OF A CIRCULAR, THE RIGOUR OF THE LAW CAN BE R ELAXED BY GIVING ADMINISTRATIVE RELIEF. APART FROM THE FACT THAT SUCH CIRCULARS AR E BINDING ON THE OFFICERS OF THE DEPARTMENT, EVEN IF THE CIRCULARS ARE RELIED ON FOR THE FIRST TIME IN THE HIGH COURT DURING THE COURSE OF HEARING, THE ASSESSEE WI LL BE ENTITLED TO THE BENEFIT AFFORDED BY THE CIRCULAR. THE COURT IS BOUND TO TAK E NOTE OF THE CIRCULAR. ITA NOS.110&111/COCH/2016 10 THEREFORE, THE ASSESSING OFFICER IS BOUND BY THE CB DTS CIRCULAR NO. 5/2016 DATED 29/02/2016 AND HENCE IN THE LIGHT OF THE ABOV E DECISIONS, THE TRADE DISCOUNT ALLOWED BY THE ASSESSEE COMPANY TO THE ACC REDITED AGENCIES IS ONLY DISCOUNT AND THE ASSESSEE COMPANY IS NOT LIABLE TO DEDUCT TAX AT SOURCE ON THE SAID DISCOUNT. IT IS NOTED THAT FOR THE ASSESSMEN T YEAR 2013-14, THE ASSESSING OFFICER HAS COMPLETED THE SCRUTINY ASSESSMENT VIDE ORDER U/S. 143(3) DATED 16/03/2016 IN WHICH THE ASSESSING OFFICER HAS NOT M ADE ANY DISALLOWANCE U/S. 40(A)(IA) IN RESPECT OF THE TRADE DISCOUNTS ALLOWED BY THE ASSESSEE COMPANY TO THE ACCREDITED AGENCIES FOR NON-DEDUCTION OF TAX AT SOURCE ON THE SAME. COPY OF THE ASSESSMENT ORDER IS PLACED ON RECORD. SINCE THE DISCOUNT AMOUNT IS RETAINED BY THE ACCREDITED AGENCIES AND ONLY THE BA LANCE PAYMENT IS MADE TO THE ASSESSEE COMPANY, THE PROVISIONS OF SECTION 40( A)(IA) ARE NOT INVOCABLE. IT IS RELEVANT TO MENTION THAT SECTION 40(A)(IA) REFERS O NLY TO EXPENDITURE WHICH IS PAYABLE. IN THE ASSESSEES CASE, SINCE THE DISCO UNT AMOUNT HAS ALREADY BEEN RETAINED BY THE ACCREDITED AGENCIES THERE IS NO AMO UNT THAT REMAINS PAYABLE TO THE ACCREDITED AGENCIES ON OR BEFORE THE END OF THE PREVIOUS YEAR I.E., 31/03/2008. THEREFORE THE LIABILITY TO DEDUCT TAX AT SOURCE WOULD NOT ARISE AND CONSEQUENTLY THE DISALLOWANCE U/S. 40(A)(IA) OF THE ACT CANNOT BE MADE. IN THIS CONNECTION, ATTENTION IS DRAWN TO THE DECISION OF T HE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VECTOR SHIPPING SERVIC ES (P) LTD. (2013) 357 ITR 642 (ALL) (REFER PAGES 64 TO 67 OF INDEX OF CASE LAWS) WHERE IT HAS BEEN HELD THAT FOR DISALLOWING EXPENSES FROM BUSINESS AND PROFESSION U /S. 40(A)(IA) ON THE GROUND ITA NOS.110&111/COCH/2016 11 THAT TAX HAS NOT BEEN DEDUCTED AT SOURCE, THE AMOUN T SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY THE END OF THE YEAR. TH E HONBLE SUPREME COURT IN CIT VS. VECTOR SHIPPING SERVICES (P) LTD. IN CC NO. 8068/2014 (SC) (SLP) (REFER PAGE 63 OF INDEX OF CASE LAWS HAS DISMISSED THE SLP FILED BY THE REVENUE AGAINST THE DECISION OF THE HONBLE HIGH COURT IN C IT VS. VECTOR SHIPPING SERVICES (P) LTD. (CITED SUPRA). THOUGH CONTRARY VIEWS WERE TAKEN BY THE HONBLE GUJARAT HIGH COURT IN CIT VS. SIKANDARKHAN N. TUNVAR (2013) 87 DTR (GUJ) 137 AND BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. MD. JAKIR HOSSAIN MONDAL (2013) 33 TAXMANN.COM 123 (CAL) AND IN CIT VS. CRES CENT EXPORT SYNDICATE & PARK INTERNATIONAL (2013) 262 CTR (CAL) 525, WHERE TWO VIEWS ARE POSSIBLE, THE VIEW FAVOURABLE TO THE ASSESSEE SHOULD BE ADOPTED. FOR THIS PROPOSITION REFERENCE IS MADE TO THE FOLLOWING DECISIONS OF THE HONBLE SUPREME COURT, WHERE IT HAS BEEN HELD THAT IF IN CASE OF A TAXING PROVISION TWO REASONABLE CONSTRUCTIONS ARE POSSIBLE, CONSTRUCTION WHICH FAVO URS THE ASSESSEE MUST BE ADOPTED. CIT VS. VEGETAB LE PRODUCTS LTD. (1973) 88 ITR 192 (SC). CIT VS. KULU VALLEY TRANSPORT CO. P. LTD. (1970) 7 7 ITR 518 (SC). WHEN A PERSON WHO IS RESPONSIBLE TO DEDUCT TAX AT S OURCE, FAILS TO DO SO AFTER DEDUCTING FAILS TO PAY THE SAME, THEN THE PERSON SH ALL BE DEEMED TO BE AN ASSESSEE IN DEFAULT U/S. 201(1) OF THE INCOME TAX A CT. SO THE APPLICABILITY OF TDS PROVISIONS TO A PARTICULAR TRANSACTION WOULD BE VER IFIED BY THE TDS OFFICER AND DEMAND U/S. 201(1) WOULD BE RAISED IN CASE OF DEFAU LT. WHERE NO DEMAND HAS BEEN RAISED U/S. 201(1) BY THE TDS OFFICER, IT IS N OT OPEN FOR THE ASSESSING OFFICER ITA NOS.110&111/COCH/2016 12 TO MAKE DISALLOWANCE U/S. 40(A)(IA). IN THE INSTAN T CASE, SINCE THERE IS NO DEMAND RAISED BY THE TDS OFFICER U/S. 201(1), NO DI SALLOWANCE U/S. 40(A)(IA) CAN BE MADE. 11. IN THE CIRCUMSTANCES AND FACTS OF THE CASE, TH E DISALLOWANCE CONFIRMED BY THE LD. CIT(A) IS DIRECTED TO BE DELETED. ACCORDING LY, THE GROUNDS ON THE FIRST ISSUE ARE ALLOWED IN FAVOUR OF THE ASSESSEE. 12. AS REGARDS THE SECOND ISSUE, THE BRIEF FACTS A RE THAT THE ASSESSING OFFICER HAS BROUGHT TO TAX A SUM OF RS.60,83,001/- THE INTEREST INCOME THE ASSESSEE CLAIMED TO HAVE EARNED FROM FIXED DEPOSITS AS INCOME FROM O THER SOURCES INSTEAD OF TREATING THE SAME AS BUSINESS INCOME AS CLAIMED BY THE ASSESSEE. 13. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASS ESSING OFFICER. 14. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON T HE WRITTEN SUBMISSIONS MADE BEFORE US WHEREAS THE LD. DR RELIED UPON THE ORDER OF BOTH THE AUTHORITIES BELOW. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. WE ARE CONVINCED WITH THE FINDINGS OF THE LD. CIT(A) T HAT THE INCOME EARNED BY WAY OF INTEREST ON SHORT TERM DEPOSITS MADE BY THE ASSESSEE CANNOT BE ITS ITA NOS.110&111/COCH/2016 13 BUSINESS INCOME BECAUSE THE ASSESSEE WAS NOT DOING ANY MONEY LENDING BUSINESS. FURTHER, THE MONEY DEPOSITED HAS NO DIRE CT LINK WITH THE SET PURPOSE FOR WHICH THE ASSESSEE COMPANY GOT INCORPORATED. T HE MONEY SO DEPOSITED CANNOT BE INCIDENTAL TO THE BUSINESS THE ASSESSEE H AS CARRIED OUT. THE INTEREST EARNED THEREFORE IS CHARGEABLE TO TAX AS INCOME FRO M OTHER SOURCES. THE WELL SETTLED POSITION OF LAW IS THAT RECEIPT OF INTEREST AMOUNTS TO INCOME OF THE ASSESSEE FROM OTHER SOURCES. RELIANCE IS PLACED HER E TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKA LI CHEMICALS AND FERTILIZERS LTD. (227 ITR 172) WHEREIN IT WAS OBSERVED THAT INT EREST EARNED WILL BE CHARGEABLE TO TAX U/S. 56 OF THE ACT. RELIANCE IS ALSO PLACED ON THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF T.O. A BRAHAM AND CO. VS. DCIT (325 ITR 201) WHEREIN IT WAS HELD THAT THE ASSESSEES C LAIM THAT INTEREST WAS EARNED FROM BANK DEPOSITS MADE IN THE COURSE OF BUSINESS, DID NOT MAKE THE INTEREST BUSINESS INCOME BECAUSE THE ASSESSEE WAS NOT ENGAGE D IN THE MONEY LENDING BUSINESS. INTEREST EARNED FROM THE BANK DEPOSIT WAS RIGHTLY HELD BY THE TRIBUNAL TO BE INCOME FROM OTHER SOURCES. THIS APART VARIO US COURTS HAVE HELD THAT INTEREST EARNED FROM BANK DEPOSITS IS TO BE ASSESSE D AS INCOME FROM OTHER SOURCES. MOREOVER, THE ITAT, COCHIN BENCH IN ITS OR DER IN I.T.A. NO.106/COCH/2011 DATED 21.11.2014 IN THE ASSESSEES OWN CASE FOR THE AY 2007-08 HAS ALREADY DISMISSED THE APPEAL FILED BY THE ASSESSEE ON THE S AME ISSUE. IN VIEW OF THE JURISDICTIONAL TRIBUNAL AND HIGH COURT AND ALSO OF THE LATER DECISION OF THE HONBLE SUPREME COURT (SUPRA), THE CASE LAWS RELIED UPON BY THE ASSESSEE WILL ITA NOS.110&111/COCH/2016 14 NOT SERVE ANY MEANINGFUL PURPOSE AND HENCE HAS NOT BEEN ENTERTAINED IN THE BACKGROUND OF FOREGOING, RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT, COCHIN BENCH (SUPRA), THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN BRINGING TO TAX THE INTEREST INCOME EARNED AS INCOM E FROM OTHER SOURCES AND ACCORDINGLY, DISMISSED THE APPEAL ON THIS ISSUE. 16. IN THE CIRCUMSTANCES AND FACTS OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY CONFIRM ED THE ACTION OF THE ASSESSING OFFICER. 17. AS REGARDS THE ALTERNATE PLEA RAISED IN THE AD DITIONAL GROUNDS OF APPEAL, THE ASSESSEE HAS SUBMITTED DETAILS OF BROUGHT FORWARD U NABSORBED DEPRECIATION FOR THE ASSESSMENT YEARS 2001-02 TO 2006-07 AS UNDER:- ASSESSMENT YEAR BROUGHT FORWARD UNABSORBED DEPRECIATION 2001-02 8,52,25, 714 2002-03 7,40,47,156 2003-04 6,00,77, 700 2004-05 5,02,90, 352 2005-06 2,10,70, 236 2006-07 2,10,66, 339 IT WAS PRAYED BY THE LD. COUNSEL FOR THE ASSESSEE T HAT THE ASSESSEE COMPANY HAD SUFFICIENT BROUGHT FORWARD UNABSORBED DEPRECIAT ION FOR SETTING OFF AGAINST THE INTEREST INCOME OF RS.60,83,001/- AND THE ASSES SED TOTAL INCOME WOULD ITA NOS.110&111/COCH/2016 15 BECOME NIL. IN THE CIRCUMSTANCES AND FACTS OF THE CASE, THE MATTER IS TO BE EXAMINED BY THE ASSESSING OFFICER AND IN THE INTERE ST OF JUSTICE, THE MATTER IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER WHO WILL EXAMINE THE ISSUE AS PER LAW AND PASS ORDER ACCORDINGLY WITH REGARD TO THE BROUG HT FORWARD UNABSORBED DEPRECIATION AGAINST THE INTEREST INCOME ASSESSED A S INCOME FROM OTHER SOURCES. ACCORDINGLY, THE ADDITIONAL GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 18. AS REGARDS THE THIRD ISSUE, THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER HAS DISALLOWED A SUM OF RS. 3,29,556/- FOR THE DEFAULT THE ASSESSEE HAS COMMITTED IN NOT CREDITING TO THE GOVERNMENT ACCOUN T THE EMPLOYEES CONTRIBUTION TOWARDS PF, ESI ETC. IN TIME. THE ASSE SSING OFFICER ACCORDINGLY MADE AN DISALLOWANCE OF RS.3,29,556/- AND THE CIT(A) RES TRICTED THE SAME TO RS.1,53,559/-. 19. IT WAS ARGUED BY THE LD. COUNSEL FOR THE ASSES SEE AS UNDER: THE DETAILS OF DELAYED PAYMENT OF PF AND ESI FOR TH E IMPUGNED ASSESSMENT YEAR ARE AS FOLLOWS: MONTH EMPLOYEES CONTRIBUTION DATE OF PAYMENT DUE DATE OF PAYMENT PF FOR FEB 2008 1,75,997 22.03.200 8 21.03.2008 ESI FOR JUL 2007 20,986 23.08.2 007 21.08.2007 ESI FOR AUG 2007 20,892 24.09.2 007 21.09.2007 ITA NOS.110&111/COCH/2016 16 ESI FOR SEP 2007 20,689 24.10.2 007 21.10.2007 ESI FOR NOV 2007 22,075 22.12.2 007 21.12.2007 ESI FOR JAN 2008 22,686 25.02.2 008 21.02.2008 ESI FOR FEB 2008 23,155 24.03.2 008 21.03.2008 ESI FOR MAR 2008 23,076 23.04.2 008 21.04.2008 TOTAL 3,29,566 EXCEPT FOR THE PF PAYMENT IN FEBRUARY 2008 AND ESI PAYMENT OF NOVEMBER 2007, THE OTHER PAYMENTS TOTALING TO RS.1,31,484/- (WRONG LY TAKEN BY THE ASSESSEE COMPANY AS RS.1,30,404/-) HAS ALREADY BEEN DISALLOW ED BY THE ASSESSEE COMPANY IN THE COMPUTATION OF INCOME WHICH IS PLACE D ON RECORD. IN RESPECT OF PAYMENT OF PF IN FEBRUARY 2008 AND PAYMENT OF ES I IN NOVEMBER 2007 THE CHEQUES WERE ISSUED AND PAID TO THE GOVERNMENT ACCO UNT ON 21 ST MARCH 2008 AND DECEMBER 2007 RESPECTIVELY WHICH IS WITHIN THE DUE DATE OF PAYMENT. HOWEVER, THE CHEQUES WERE CLEARED ON THE SUBSEQUENT DAY. AT THIS JUNCTURE, IT IS RELEVANT TO REFER TO THE FOLLOWING DECISIONS REN DERED IN THE CONTEXT OF ADVANCE TAX PAYMENTS WHERE IT HAS BEEN HELD THAT THE DATE O F PRESENTATION OF THE CHEQUE IS TO BE RECKONED AS THE DATE OF PAYMENT UNL ESS THE SAME IS DISHONOURED AND NOT THE DATE ON WHICH THE CHEQUE IS CLEARED. CIT VS. P.V.S. BEEDIES (P) LTD. (1987) 163 ITR 846 (KAR) CIT VS. KUMUDAM PUBLICATIONS (P) LTD. (1981) 128 I TR 617(MAD) CIT VS. REPCO HOME FINANCE LTD. (2014) 90 CCH 195 (MAD). ITA NOS.110&111/COCH/2016 17 THE CBDT VIDE CIRCULAR NO.261 DATED 08/08/1979 (REF ER PAGE 80 OF INDEX OF CASE LAWS) HAS STATED THAT IN TERMS OF RULE 80 OF THE COMPILATION OF THE TREASURY RULES, IF A CHEQUE OR DRAFT TENDERED IN PA YMENT OF GOVERNMENT DUES AND ACCEPTED UNDER THE PROVISIONS OF RULE 79 (IBID) IS HONOURED ON PRESENTATION THE PAYMENT IS DEEMED TO HAVE BEEN MADE ON THE DATE ON WHICH IT WAS HANDED OVER TO THE GOVERNMENT BANKERS. IT IS THER EFORE PRAYED THAT WHATEVER DELAYED PAYMENTS WERE MADE WERE DISALLOWED BY THE A SSESSEE COMPANY IN THE COMPUTATION OF INCOME ITSELF AND HENCE DISALLOW ANCE BY THE ASSESSING OFFICER AGAIN OF THE SAME AMOUNT WOULD AMOUNT TO DO UBLE DISALLOWANCE. FURTHER IN RESPECT OF THE OTHER TWO PAYMENTS THERE IS NO DELAY AS SUCH IN THE LIGHT OF THE ABOVE REFERRED DECISIONS. 20. THE LD. DR ON THE OTHER HAND RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 21. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. AS REGARDS THE PAYMENTS FOR THE MONTH OF FEBRUARY, 200 8 AND NOVEMBER 2007, THE CHEQUES WERE PRESENTED TO THE GOVERNMENT ON 21-03-2 008 AND 21-12-2007 RESPECTIVELY BEING THE DUE DATE OF PAYMENT AND THER EFORE, IN VIEW OF THE DECISIONS OF THE HONBLE KARNATAKA HIGH COURT AND T HE HONBLE MADRAS HIGH COURT (SUPRA) REFERRED TO BY THE LD. COUNSEL FOR TH E ASSESSEE, THE PAYMENTS ARE ITA NOS.110&111/COCH/2016 18 TREATED TO HAVE BEEN PAID IN TIME. AS REGARDS OTH ER PAYMENTS WHICH ARE TOTALING TO RS.1,31,484/-, THE ASSESSEE COMPANY HAS DISALLOWED RS.1,30,404 IN THE COMPUTATION OF INCOME ATTACHED. IT IS FOR RS.1004/ - WHICH HAS NOT BEEN DISALLOWED BY MISTAKE AND THE ASSESSING OFFICER CAN AT THE MOST DISALLOW RS.1004/- ONLY. ACCORDINGLY, IN THE CIRCUMSTANCES AND FACTS OF THE CASE, THE ASSESSING OFFICER IS DIRECTED TO DISALLOW RS.1004 O NLY AND DELETE THE REST OF THE DISALLOWANCE. ACCORDINGLY, THE ASSESSEE GETS PART D ISALLOWANCE. THUS THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATIS TICAL PURPOSES. 22. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESSE E IN I.T.A. NO. 111/COCH/2016 FOR THE ASSESSMENT YEAR 2010-11 WHERE THE ONLY ISSU E IS WITH REGARD TO THE DISALLOWANCE OF RS.4,82,16,845 U/S. 40(A)(IA) OF TH E ACT. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND ON THE SAME ISSUE. SINCE T HE ISSUE IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE IN ASSESSEES OWN CASE IN I.T.A. NO. 110/COCH/2016 FOR THE ASSESSMENT YEAR 2008-09 DECID ED BY US HEREINABOVE, THE FACTS IN THE CASE OF THE ASSESSEE IN I.T.A. NO.110/ COCH/2016 SHALL BE IDENTICALLY APPLICABLE TO THE FACTS IN THE PRESENT CASE FOR THE SAID DISALLOWANCE OF RS.4,82,16,845/-. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IN THE PRESENT APPEAL IS ALLOWED. THUS THE APPEAL OF THE ASSESSEE IS ALL OWED. ITA NOS.110&111/COCH/2016 19 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I.T.A. NO.110/COCH/2016 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE ASSESSEE IN I.T.A. NO.111/COCH/2016 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/07/2016. SD/- SD/- ( . ) (GEORGE GEORGE K.) ( . . ) ( B.P. JAIN) /JUDICIAL MEMBER /ACCOUNTANT MEMBER & /PLACE: /COCHIN 4 /DATED: 11 TH JULY, 2016 GJ/ 1 * (.5 65%. /COPY TO: 1. &' /M/S. MALAYALAM COMMUNICATION LTD., KAIRALI TOWERS, ASAN SQUARE, PALAYAM, TRIVANDRUM-695 034. 2. () &' /THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1 (1), TRIVANDRUM. 3. ,7 . ( )/THE COMMISSIONER OF INCOME-TAX(APPEALS),TRIVANDRU M. 4. ,7 . /THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. 589 (. , /THE DR/ITAT, COCHIN BENCH. 6. 9: ;- /GUARD FILE. 1, /BY ORDER < /ASSISTANT REGISTRAR - . =/ . > . =/ ., /I.T.A.T., COCHIN