ITO, New Delhi V. M/s. Ogaan Publication Pvt. Ltd., New Delhi

ITA 1744/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8247 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 29-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 25-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJA
• Keywords: Question of law; Relationship of principal and agent

Judgement Text

1 ITA NO. 17 44/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT & SMT. BEENA PILLAI, JUDICIAL MEMBER I.T.A .NO.-1744/DE L/2014 (ASSESSMENT YEAR-2009- 10) ITO WARD 13(4) NEW DELHI. VS OGAAN PUBLICATION P. LTD. H-2, HAUZ KHAS VILLAGE, NEW DELHI. AAACO1078K APPELLANT BY SH. P. DAM KANUNJA, SR. DR RESPONDENT BY SH. AJAY WADHWA, ADV. ORDER PER BEENA PILLAI, JUDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE A GAINST THE ORDER OF THE LD. CIT(A)S-XVI, NEW DELHI VIDE H IS ORDER DATED 27/12/2013 FOR A.Y. 2010-11 ON THE FOLLOWING GROUND S: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUN T OF DISALLOWANCE U/S 40(A)(IA) OF RS. 1,61,18,029/- BY IGNORING THE EXPRESS PROVISION OF LAW U/S 194H AND THE CBDT CIRCULAR NO. 715 DATED 08.08.1995 WHICH STATES THAT TAX HAS TO BE DEDUCTED ON THE PAYMENTS MADE TO ADVERTISING AGENCY. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BY IGNORING THE OBSERVATION OF THE ASSESS ING OFFICER THAT ASSESSEE HAS RAISED BILLS IN THE NAME OF DATE OF HEARING 29.08.2016 DATE OF PRONOUNCEMENT 19.04.2016 2 ITA NO. 17 44/DEL/2014 ADVERTISING AGENCIES FOR THE COST OF SPACE WHICH INDICATES THAT SPACE WAS PURCHASED FROM THE ASSESSE E ON BASIS OF SPECIFICATION BY ACTUAL PARTY AND THE A GENCY ACTED AS AN AGENT FOR THE ASSESSEE. 3. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUND OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUND OF APPEAL. 2. THE FACTS OF THE CASE AS NOTED BY THE LD. ASSESS ING OFFICER ARE AS UNDER: THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PUBLICATION OF A MAGAZINE AND IT SELL SPACE FOR ADVERTISEMENTS TO VARIOUS PARTIES THROUGH ADVERTISING AGENCIES. THE ASSESSEE COMPANY RAISED BILLS IN THE NAME OF ADVERTISING AGENCIES IN DICATING COST OF THE SPACE AND DEDUCTED THE AGENCY COMMISSION TOWARD S COMMISSION TO THE ADVERTISING AGENCIES. THIS CLEAR LY INDICATES THAT THE SPACE WAS PURCHASED FROM THE ASSESSEE COMP ANY ON THE BASIS OF SPECIFICATIONS BY THE ACTUAL PARTY AND THE AGENCY ACTED AS AN AGENT FOR THE ASSESSEE COMPANY. THERE IS NO DOU BT THAT THE SAME IS BEING PAID TO THE AGENCIES FOR THEIR SERVIC ES ONLY AND IT CANNOT BE TERMED AS A DISCOUNT AS THE BENEFIT OF TH AT ADVERTISEMENT DOES NOT GO TO THE AGENCY. THE AGENC Y ON THEIR PART IS GETTING THE REIMBURSEMENT OF THE ENTIRE AMOUNT F ROM THE CUSTOMER TO WHOM THE REAL BENEFIT OF THE ADVERTISEM ENT ACCRUES. THUS, THE ADVERTISEMENT AGENCY IS IN FACT WORKING F OR THE ASSESSEE FOR PROVIDING THEM ADS FOR THE SPACE FOR WHICH THEY ARE BEING GIVEN COMMISSION. THE AGENT CANVASSES ADVERTISEMEN T ON BEHALF OF THE MAGAZINE (ASSESSEE) AND ADVERTISEMENT CHARGE S RECOVERED FROM THE CUSTOMERS IN ACCORDANCE WITH THE TARIFF PR ESCRIBED BY THE MAGAZINE. THUS, THERE IS A CLEAR CUT RELATIONSHIP OF PRINCIPAL AND AGENT AND TAX IS DEDUCTIBLE U/S 194H. 3 ITA NO. 17 44/DEL/2014 3. THE LD.AO OBSERVED THAT THE ASSESSEE DID NOT DED UCT THE TAX, IT HAS VIOLATED THE RELEVANT PROVISIONS OF TDS . THE FACT THAT THE ASSESSEE EMPLOYED TWO DIFFERENT MECHANISMS TO A CCOUNT FOR AGENCY COMMISSION, INDICATES THAT THE ACTIVITIES OF THE ASSESSEE WERE NOT BONAFIDE AND THIS ENTIRE EXERCISE OF HAVIN G TWO SEPARATE TYPES OF TRANSACTIONS WERE TO BYPASS THE PROVISION OF TDS LAW. THE LD. AO THUS, HELD THAT THE ASSESSEE COMPANY IS LIABLE TO DEDUCT THE TAX IN THE AMOUNT OF RS. 1,61,18,029/- O N ACCOUNT OF AGENCY COMMISSION. 4. AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OFFI CER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). 5. CONSIDERING THE ORDERS PASSED BY THE TRIBUNAL IN THE PREVIOUS YEARS IN ASSESSEES OWN CASE THE LD. CIT(A ) HELD AS UNDER: 4.3 IDENTICAL ADDITIONS WERE MADE BY THE ASSESSING OFFICER IN AY 2006-07, 2007-08 & 2008-09 BY MAKING DISALLOWANCE U/S 40(A)(IA) OF RS. 1.20 CRORES, RS. 1.70 CRORES AND RS. 1.84 CRORES RESPECTIVELY ON ACCOUNT OF AGENCY COMMISSION AS HE HELD THAT THE RELATIONSHIP WITH THE PARTIES TO WHOM THE DISCOUNT WAS GIVEN WAS BASED ON PRINCIPAL TO AGENT RELATIONSHIP. THE ADDITIONS MADE IN THE ABOVE YEARS WERE DELETED BY THE HONBLE ITAT DELHI IN ITS DECISIONS IN ITA NOS. 1990/DEL/2010, 3741/DEL/2011 & 5050/DEL/2011 RESPECTIVELY FOR THE ABOVE ASSESSMENT YEARS WHERE IT IS HELD BY THE HONBLE TRIBUNAL THAT TRANSACTIONS ARE BASED ON PRINCIPAL TO PRINCIPAL RELATIONSHIP. IT WAS HELD BY HONBLE ITAT: THE PERUSAL OF BOTH THE ABOVE MENTIONED TRANSACTIONS WILL REVEAL THAT ASSESSEE IS GIVING DISCOUNT WITH RESPECT TO VOLUME AS WELL AS AGENCY COMMISSION IRRESPECTIVE OF THE FACT THAT WHETHER TH E ADVERTISEMENT IS BOOKED BY THE ADVERTISER ITSELF OR THROUGH ADVERTISING AGENCY. THE ASSESSEE DID NOT 4 ITA NO. 17 44/DEL/2014 COLLECT GROSS AMOUNT AND FROM GROSS AMOUNT ITSELF STRAIGHTWAY DEDUCTION HAS BEEN GRANTED TO THE PERSON WHO HAS BOOKED THE ADVERTISEMENT ON ACCOUNT OF VOLUME DISCOUNT AS WELL AS AGENCY COMMISSION. IT MAY BE SEEN THAT IN THE CASE OF MOO N RIVER (M.G. INDS.) THE ADVERTISEMENT HAS NOT BEEN BOOKED BY ADVERTISING AGENCY EVEN THEN AMOUNT OF RS. 11,250/- HAS BEEN REDUCED ON ACCOUNT OF AGENCY COMMISSION. THEREFORE, IT WILL CLEARLY DEMONSTRATE THAT ASSESSEE IS CONCERNED ONLY WITH THE AMOUNT TO BE REALIZED FINALLY WHICH IS THE SAME IN BOTH TYPE OF TRANSACTIONS. THEREFORE, THE NATURE OF AMOUNT AGENCY COMMISSION IS ONLY A DISCOUNT THOUGH IT HAS BEEN DESCRIBED AS AGENCY COMMISSION. BOTH THE TRANSACTIONS ARE ON PRINCIPAL TO PRINCIPAL BASIS. THE CASE LAW RELIED UPON BY THE ASSESSEE BEFORE CIT(A) AND BEFORE US SUPPORTS THE CASE OF THE ASSESSEE. THEREFORE, WE ARE OF THE OPINION THAT LD. CIT(A) IS RIGHT IN HOLDING THAT DISALLOWANCE COULD NOT BE MAD E AS ASSESSEE WAS NOT UNDER AN OBLIGATION TO DEDUCT TAX U/S 194H. WE DECLINE TO INTERFERE. THIS GROUN D OF THE REVENUE FOR BOTH THE YEARS IS DISMISSED. 4.4 ON FURTHER APPEAL BY THE DEPARTMENT AGAINST ABOVE ITAT DECISION, HONBLE DELHI HIGH COURT IN ITA NO. 181 & 182/2012 IN ITS DECISION DT. 16/03/2012 HAVE DISMISSED THE DEPARTMENTAL APPEAL BY HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FROM THE DECISION OF ITAT. FOLLOWING THE ABOVE DECISIONS, IDENTICAL ADDITIONS MADE IN AY 2009-10 WAS ALSO DELETED BY ME IN APPEAL NO. 379/11-12 DT. 15.02.2013. 4.5 THE FACTS AND CIRCUMSTANCES OF THE ISSUE IN APPEAL IS IDENTICAL TO THE ISSUE DECIDED IN AY 2006-07 TO AY 2009-10. IN VIEW OF THE ABOVE FACTUAL AND LEGAL POSITION, IT IS HELD THAT TRANSACTIONS BETWEEN THE APPELLANT AND THE AD AGENCIES ARE BASED ON PRINCIPAL TO PRINCIPAL BASIS. THEREFORE, APPELLANT WAS NOT UNDER ANY OBLIGATION TO DEDUCT TAX U/S 194H. AS SUCH THE DISALLOWANCE OF RS. 1,61,18,029/- MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) CANNOT BE SUSTAINED. THE APPEAL IS ALLOWED IN GROUND NOS. 2 & 3 OF APPEAL. 6. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 5 ITA NO. 17 44/DEL/2014 7. AT THE OUTSET THE LD. AR SUBMITTED THAT THE IDEN TICAL ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL FOR A.Y. 2009- 10 VIDE ORDER DATED 19/11/2013 IN ITA NO. 3062/DEL/2013, WHEREIN THE HONBLE TRIBUNAL HELD AS UNDER: 6. WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MATERIAL ON RECORD AND FIND THAT SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JURISDICTIONAL HIGH COURTS DECISION, IN WHICH TRIBUNALS ORDER IN ASSESSEES OWN CASE HAVE BEEN CONFIRMED, THEREFORE, WE DO NOT FIND ANY JUSTIFIABL E REASON TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A) WHICH IS CONFIRMED AND APPEAL OF THE REVENUE BEING DEVOID OF ANY MERIT IS DISMISSED. 8. THE LD. AR FURTHER SUBMITTED THAT AGAINST THE OR DER OF THE TRIBUNAL FOR A.Y. 2006-07 & 2007-08 THE DEPARTMENT HAD PREFERRED AN APPEAL BEFORE THE HONBLE JURISDICTION AL HIGH COURT WHICH HAS ALSO BEEN DISMISSED VIDE ORDER DATED 16/0 3/2012. THE HONBLE HIGH COURT HELD AS UNDER: 4. BEFORE US THE COPY OF THE AGREEMENT BETWEEN THE RESPONDENT-ASSESSEE AND THE ADVERTISING CONCERNS HAS NOT BEEN PLACED. IT IS NOT SHOWN AND STATED HOW AND ON WHAT BASIS IT IS STATED THAT THE FINDING RECORDED BY THE TRIBUNAL THAT THE TRANSACTIONS WERE BETWEEN PRINCIPAL AND PRINCIPAL IS NOT CORRECT AND THE CONTENTION THAT THE TRANSACTIONS WERE BETWEEN A PRINCIPAL AND AN AGENT IS URGED. THE ADVERTISING CONCERN HAD PURCHASED THE SPACE IN THE PUBLICATION AND HAD SOLD THE SAME TO THE THIRD PARTIES. THE FACTUAL FINDING RECORDED BY THE TRIBUNAL IS THAT AMOUNT TREATED AND GIVEN NOMENCLATURE OF COMMISSION WAS A DISCOUNT AND WHAT WAS RECEIVED BY THE ASSESSEE WAS THE NET AMOUNT. THE DESCRIPTION/DEDUCTION GIVEN IN THE BILL WAS IN FACT AND DE FACTO NOT COMMISSION. IN THE CASE OF DIRECTOR, PRASAR BHARTI (SUPRA), THE FINDING OF THE HIGH COURT WAS THAT THE 6 ITA NO. 17 44/DEL/2014 TRANSACTIONS WERE BETWEEN A PRINCIPAL AND AN AGENT AND THE COURT HAD REFERRED TO THE AGREEMENT ENTERED INTO BY THE DOORDARSHAN AND ITS AGENCIES. THE KERALA HIGH COURT IN THE SAID CASE, DISTINGUISHED AHMEDABAD STAMP VENDERS ASSOCIATION VS. UOI, (2002) 257 ITR 202 (GUJ.) AND THE GROUND THAT THEY RELATED TO DISCOUNTED PRICES. 9. ON THE CONTRARY THE LD. DR RELIED UPON THE ORDER PASSED BY THE LD. ASSESSING OFFICER. 10. WE HAVE PERUSED THE RECORDS AND THE RELEVANT OR DERS PASSED BY THIS TRIBUNAL AS WELL AS THE HONBLE JURISDICTIO NAL HIGH COURT IN ASSESSEES OWN CASE. 10.1 IT IS OBSERVED THAT IDENTICAL ADDITIONS HAVE BEEN DELETED BY THE TRIBUNAL FOR A.Y. 2006-07, 2007-08 AND 2009- 10 IN ASSESSEES OWN CASE. FURTHER THE HONBLE HIGH COUR T IN A.Y. 2006-07 & 2007-08 HAS UPHELD THE ORDER PASSED BY TH IS TRIBUNAL AND HAS DISMISSED THE APPEAL FILED BY THE DEPARTMEN T. THE LD. DR COULD NOT BRING OUT ANY MATERIAL ON RECORD OR AN Y FINDINGS OF THE AUTHORITIES BELOW, WHICH COULD DISTINGUISH THE FACTS IN THE PRESENT CASE FROM THAT OF THE PREVIOUS YEARS. WE THEREFORE RESPECTFULLY FOLLOWING THE DECISIONS P ASSED BY THE HONBLE HIGH COURT AND THIS TRIBUNAL IN THE ASSESSE ES OWN CASE, UPHOLD THE FINDINGS OF THE LD. CIT(A). ACCORDINGLY , THE GROUNDS RAISED BY THE REVENUE STANDS DISMISSED. 11. IN THE RESULT, THE APPEAL STANDS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 19.04. 2016. SD./- SD./- (G.D.AGRAWAL) (BEENA PILLAI) VICE PRESIDENT JUDICIAL MEMBER DATED: 7 ITA NO. 17 44/DEL/2014 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 05.04.2016 2. DRAFT PLACED BEFORE AUTHOR 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.