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

ITA 3062/DEL/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69471 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 16-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAYAM PATEL
• Keywords: Question of law; Relationship of principal and agent

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SHRI U. B. S. BEDI, JUDICIAL MEMBER AND SHRI J. S. REDDY , ACCOUNTANT MEMBER ITA NO. 3062 /DEL/ 2013 ASSESSMENT YEAR: 2009 - 10 ITO WARD - 13(4), ROOM NO. 219, CR BUILDING, NEW DELHI VS. ORGAAN PUBLICATION PVT. LTD., H - 2, HAUZ KHAS VILLAGE, AAACO1078K ( APPELLANT) (RESPONDENT) APPELLANT BY: SHRI KAYAM PATEL, SR. DR RESPONDENTS BY: SRI AJAY WADHWA, ADVOCATE O R D E R PER U. B. S. BEDI, JM THIS APPEAL OF THE DEPARTMENT IS DIRECTED AGAINST THE ORDER PASSED BY LD CIT(A) , XVI, NEW DELHI DATED 15.02.2013 RELEVANT TO THE ASSESSMENT ORDER 2009 - 10, WHEREIN FOLLOWING EFFECTIVE GROUNDS HAVE BEEN RAISED: - 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELET ING THE ADDITION OF RS. 1,99,03,748/ - ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT MADE BY THE ASSESSING OFFICER AFTER GIVING DETAILED REASONS IN THE ASSESSMENT ORDER. 2. THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE COMMISSION PAI D BY THE ASSESSEE COMPANY TO THE ADVERTISEMENT AGENCIES FOR ADVERTISEMENTS CANVASSED BY THEM DOES NOT ATTRACT THE PROVISIONS OF SECTION 194H OF THE ACT WHICH PROVIDES FOR DEDUCTION OF TAX AT SOURCE ON PAYMENT OF COMMISSION/ BROKERAGE. PAGE NO. 2 ITA NO. 3062/DEL/ 2013 3. THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE COMMISSION PAID BY THE ASSESSEE COMPANY THE ADVERTISEMENT AGENCIES ARE BASED ON PRINCIPAL TO PRINCIPAL BASIS WITHOUT APPRECIATING THE FACT THAT THERE IS CLEAR CUT RELATIONSHIP OF PRINCIPAL AND AGENT BETWEEN TH E BOTH. 4. THE LD CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ABOVE ADDITION RELYING UPON THE DECISION OF ITAT AND JURISDICTIONAL DELHI HIGH COURT ON THE SIMILAR ISSUE IGNORING THE FACT THAT THE MATTER IS SUB - JUDICE BEFORE THE HONBLE APEX COURT AND HAS NOT COME TO ITS FINALITY. 2. FACTS OF THE CASE AS NOTED BY LD CIT(A) ARE AS FOLLOWS: 4.2 THE ASSESSING OFFICER IN THE ASSESSMENT ORDER OBSERVED THAT THE ASSESSEE COMPANY WAS ASKED TO FILE DETAILS OF DISCOUNT ALLOWED, TO EXPLAIN THE NATURE AND THE BASIS FOR WHICH THE DISCOUNT HAS BEEN GIVEN. THE ASSESSEE COMPANY IS INVOLVED IN ADVERTISING SALES. MOST OF THE CORPORATE CLIENTS RELEASE THEIR ADVERTIS EMENTS THROUGH THEIR AD AGENCIES. THE ADVERTISING AGENCIES RELEASE ADVERTISEMENTS AGAINST A FLAT 15% AGENCY COMMISSION. SINCE, THE ASSESSEE COMPANY AGREES THAT THE AGENCIES TAKE A FLAT 15% AS AGENCY COMMISSION, THEREFORE, BY CHANGING THE NOMENCLATURE OF AG ENCY COMMISSION TO DISCOUNT DOES NOT CHANGE THE NATURE OF THE PAYMENT. THE INVOICE IS RAISED AS AGENCY COMMISSION. THE COMMISSION, WHICH IS RETAINED BY THE AGENCIES, IS INCOME IN THE HANDS OF THE AGENCIES. THEREFORE, THE RELATIONSHIP BETWEEN THE MEDIA AND THE ADVERTISING AGENCY IS THAT OF PRINCIPAL TO AGENT AS THE ADVERTISING AGENCY BRINGS BUSINESS TO THE MEDIA. AS SUCH, THE AGENCY COMMISSION GIVEN BY THE ASSESSEE COMPANY COMES WITHIN THE PURVIEW OF SEC 194H OF THE ACT EVEN IT IS GIVEN A NAME OF DISCOUNT. T HE ASSESSEE MAY CALL INCOME TAX ACT, 1961 DISCOUNT BUT VIEW OF THE SUBMISSION MADE BY IT, IT IS IN FACT IN THE NATURE OF COMMISSION. THE AGENCY DISCOUNT WHICH IS IN FACT AGENCY COMMISSION IS TO BE PAID AFTER DEDUCTION OF TAXES. AS THE ASSESSEE COMPANY FAIL ED TO MAKE TDS ON THE AGENCY COMMISSION PAID HENCE AMOUNT OF DISCOUNT OF RS. 1,99,03,748/ - IS DISALLOWED BY THE ASSESSING OFFICER U/S 40(A)(IA) AND ADDED TO THE INCOME OF THE ASSESSEE COMPANY. 3. THE ASSESSEE TOOK UP THE MATER IN APPEAL AND LD CIT( A) , WHILE CONSIDERING THE PRECEDENTS OF TRIBUNAL AS WELL AS OF HONBLE HIGH COURT AND OTHER RELEVANT DETAILS , HAS CONCLUDED TO DELETE THE PAGE NO. 3 ITA NO. 3062/DEL/ 2013 DISALLOWANCES OF RS. 1,99,03,748/ - MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE ACT , AS PER PARA 4.3 TO 4.5 OF HIS ORDER , WHICH IS REPRODUCED AS UNDER: - ] 4.3 IDENTICAL ADDITIONS WERE MADE BY THE A.O. IN A.Y. 2006 - 07, A.Y. 2007 - 08 AND A.Y. 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 HON'BLE ITAT DELHI IN ITS DECISIONS IN I.T.A NOS. 1990/DEL 2010, 3741/DEL 2011 & 5050LDEL 2011 RESPECTIVELY FOR THE ABOVE ASSESSMENT YEARS WHERE IT IS HELD BY HON'BLE TRIBUNAL THAT TRANSACTIONS ARE BASED ON PRINCIPAL TO PRINCIPAL RELATIONSHIP. IT WAS HELD BY HON'BLE ITA T : '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 THE ADVERT ISEMENT IS BOOKED BY THE ADVERTISER ITSELF OR THROUGH ADVERTISING AGENCY. THE ASSESSEE DID NOT 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 DISC OUNT AS WELL AS AGENCY COMMISSION. IT MAY BE SEEN THAT IN THE CASE OF MOON RIVER (M.G. INDS.) THE ADVERTISEMENT HAS NOT BEEN BOOKED BY ADVERTISING AGENCY EVEN THEN AMOUNT OF RS.LL ,2501 - 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 COMMISSI ON'. 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 MADE AS ASSESSEE WAS NOT UNDER AN OBLIGATION TO DEDUCT TAX ULS 194H. WE DECLINE TO INTERFERE. THIS GROUND OF THE REVENUE FOR BOTH THE YEARS IS DISMISSED.' PAGE NO. 4 ITA NO. 3062/DEL/ 2013 4. 4 ON FURTHER APPEAL BY THE DEPARTMENT AGAINST ABOVE ITAT DECISION, HON'BLE 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 DECIS ION OF ITA T. 4.5 THE ABOVE DECISIONS ARE SQUARELY APPLICABLE IN THE INSTANT APPEAL. THE FACTS AND CIRCUMSTANCES, THE ISSUES BEING IDENTICAL, THEREFORE, FOLLOWING THE DECISION OF HON'BLE ITA T, DELHI AND JURISDICTIONAL DELHI HIGH COURT IT IS HELD THAT TR ANSACTIONS 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.1,99,03,748/ - MADE BY THE A.O. U/S 40(A)(IA) CANNOT BE SUSTAINED. THE APPEAL IS ALLOWED IN GROUND NOS. 2 & 3 OF APPEAL. 4. AGGRIEVED BY THE ORDER OF THE LD CIT(A) , DEPARTMENT HAS COME UP IN APPEAL AND RAISED FOUR EFFECTIVE GROUNDS OF APPEAL , WHICH ARE REPRODUCED IN EARLIER PARAGRAPH , TO PLEAD FOR SETTING ASIDE THE ORDER OF LD CIT(A) AND RESTORING THAT OF THE ASSESSING OFFICER ON THE GROUND THAT DEPARTMENT HAS FILED APPEAL BEFORE THE APEX COURT IN ASSESSEES OWN CASE FOR EARLIER YEARS WHICH IS PENDING . 5. LD COUNSEL FOR THE ASSESSEE STRONGLY PLEADED THAT SINCE THE ISSUE RAISED BY THE DEPARTMENT IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE NOT ONLY BY TRIBUNALS DECISION BUT ALSO BY JURISDICTIONAL HIGH COURT IN ASSESSEE OWN CASE AND PENDENCY OF THE MATTER BEFORE THE SUPREME COURT , CAN NOT BE A GROUND TO REVERSE THE ORDER OF LD CIT(A) TILL FINAL DECISION IS PRONOUNCED BY THE HONBLE APEX COURT IN REVENUES FAVOUR . THEREFORE, IT WAS PLEA DED FOR DISMISSAL OF THE APPEAL OF THE REVENUE BEING A COVERED MATTER . 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 COURT S DECISION , IN WHICH PAGE NO. 5 ITA NO. 3062/DEL/ 2013 TRIBUNALS ORDER IN ASSESSEES OWN CASE HAVE BEEN CONFIRMED, THEREFORE, WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE IN THE ORDER PASSED BY LD CIT(A) WHICH IS CONFIRMED AND APPEAL OF THE REVENUE BEING DEVOID OF ANY MERIT IS DISMISSED. 7 6. IN THE RESULT APPEAL OF THE REVENUE GETS DISMISSED . ORDER PRONOUNCED SOON AFTER THE CONCLUSION OF HEARING ON 19.11.2013. - S D / - - S D / - ( J. S. REDDY ) ( U. B. S. BEDI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 1 9 /11 /2013 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR DELHI BENCHES , DELHI