DCIT (TDS) 2(1), MUMBAI V. OGILVY & MATHER P LTD, MUMBAI

ITA 3946/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5302 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 30-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKEYAN
• Assessee Lawyers: AASTHA SHAH
• Keywords: TDS
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 3946 / MUM/20 1 7 ( ASSESSMENT YEAR : 2012 - 13 ) DCIT (TDS) 2(1) R.NO.615, 6 TH FLOOR SMT. K.G. MITTAL AYURVEDIC HOSPITAL BUILDING CHARNI ROAD (W) MUMBAI 400 002 VS. M/S. OGILVY & MATHER PVT LTD 11, 14 TH FLOOR, COMMERZ INTERNATIONAL BUSINESS PARK, OBEROI GARDEN CITY, OFF WESTERN EXPRESS HIGHWAY GOREGAON (E) MUMBAI 400 063 PAN/GIR NO. AAACO0427A ( APPELLANT ) .. ( RESPONDENT ) REVENUE BY SHRI ABI RAMA KARTIKEYAN ASSESSEE BY MS. AASTHA SHAH DATE OF HEARING 26 / 09 /201 8 DATE OF PRONOUNCEMENT 18 / 10 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 60, MUMB AI DATED 07/03/2017 FOR A.Y.2012 - 13 IN THE MATTER OF ORDER PASSED U/S.201(1) & 201(1A) OF THE IT ACT. 2. THE ONLY GRIEVANCE OF ASSESSEE RELATES TO CIT(A) HOLDING THAT PAYMENT FOR ADVERTISEMENTS MADE BY THE ASSESSEE FALLS U/S.194C AND NOT U/S.194I OF THE IT ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. ITA NO. 3946/MUM/2017 M/S. OGILVY & MATHER PVT. LTD., 2 4. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF ADVERTISING AND MARKETING CONSULTANCY SERVICES . A SURVEY WAS CONDUCTED U/S.133A OF THE ACT ON 8 TFL JULY, 2011 AT THE ASSES SEE 'S PREMISE. DURING THE SURVEY, STATEMENT OF MR. YOGESH JOSHI, GENERAL MANAGER, FINANCE OF THE A SSESSEE COMPANY WAS RECORDED. THE AO HELD THAT THE PAYMENT FOR HOARDING CHARGES WERE RENT REQUIRING DEDUCTION OF TDS U/S.1941 OF THE ACT. 5. BY THE IMPUGNED O RDER CIT(A) HELD THAT ASSESSEE IS LIABLE FOR DEDUCTION OF TAX U/S.194C AND NOT U/S.194I OF THE IT ACT AFTER HAVING THE FOLLOWING OBSERVATION. I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE APPELLANT, THE ORDER PASSED BY THE AO AS WELL AS THE FACTS OF THE CASE. I AGREE WITH THE APPELLANT THAT THE PAYMENTS MADE BY IT TO VARIOUS PARTIES FOR THE PURPOSE OF DISPLAY OF ADVERTISEMENTS OF THE APPELLANT'S CLIENTS DO NOT FALL IN THE CATEGORY OF 'RENT' AND HENCE, THE TAX WAS NOT REQUIRED TO BE DEDUCTED UNDER SECTION 194 - 1 OF THE ACT IN RESPECT OF THESE PAYMENTS. FOR THE PURPOSE OF DECIDING THE ISSUE AND THE CLARIFICATORY CIRCULARS ISSUED BY THE BOARD IN RESPECT OF THE PROVISIONS OF SECTION 194C, 194J AND 194 - I OF THE ACT 6. AGAINST THE ABOVE ORDER OF CIT(A), REVENU E IS IN FURTHER APPEAL BEFORE US. 7. LEARNED AR PLACED ON RECORD THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.YS. 2010 - 11 AND 2011 - 12, W HEREIN IT WAS HELD THAT PAYMENT OF HOLDING CHARGES IS LIABLE TO DEDUCTION OF TAX U/S.194C OF THE IT ACT. ITA NO. 3946/MUM/2017 M/S. OGILVY & MATHER PVT. LTD., 3 7. IN THE CROSS APPEAL OF THE REVENUE FOR A.Y 2010 - 11, VIDE ITA NO.7380/MUM/2012, THE ONLY ISSUE RAISED IS WITH REGARD TO THE DEDUCTION OF TAX AT SOURCE ON THE PAYMENTS OF HOARDING CHARGES MADE TO VARIOUS PARTIES. THE STAND OF THE ASSESSING OFFICER IS T HAT THE PAYMENT OF HOARDING CHARGES IS TO BE UNDERSTOOD AS 'RENT' AND, THEREFORE, WAS LIABLE FOR DEDUCTION OF TAX AT SOURCE UNDER SECTION 194I OF THE ACT, WHEREAS THE CLAIM OF THE ASSESSEE HAS BEEN THAT SUCH PAYMENTS ARE LIABLE FOR DEDUCTION OF TAX AT SOURCE IN TERMS OF SECTION 194C OF THE ACT. 7.1 ON THIS ASPECT, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT SIMILAR ISSUE CAME UP BEFORE DELHI BENCH O F THE TRIBUNAL FOR A.Y 2002 - 03 IN ASSESSEE'S OWN CASE AND VIDE ITA NO.5202/DEL/2004 AND CO NO.104/DEL/2005 DATED 23/09/2005, THE TRIBUNAL UPHELD THE STAND OF THE ASSESSEE. 7.2 WE HAVE CAREFULLY PERUSED THE DECISION OF THE TRIBUNAL DATED 23/9/2005(SUPRA) A ND FIND THAT AFTER CONSIDERING THE NATURE OF WORK AND SERVICES RENDERED BY THE ASSESSEE AGAINST THE IMPUGNED PAYMENT OF HOARDING CHARGES, THE TRIBUNAL CAME TO CONCLUDE THAT SUCH PAYMENTS WERE LIABLE FOR DEDUCTION OF TAX AT SOURCE IN TERMS OF SECTION 194C OF THE ACT AND NOT UNDER SECTION 194 - I OF THE ACT AS CONTENDED BY THE REVENUE. THE FOLLOWING DISCUSSION IN THE ORDER OF THE TRIBUNAL DATED 23/5/2005(S UPRA), IS WORTHY OF NOTICE: - '9. WE HAVE CAREFULLY CONSIDERED THE ENTIRE MATERIAL ON RECORD AND FIND THAT THE LD. CIT(A) VERY CAREFULLY CONSIDERED THE RELEVANT CASE LAW AND THE CIRCULAR OF THE BOARD. HE HAS UNDERTAKEN A PROPER ANALYSIS AND EXAMINATION OF T HE NATURE OF WORK DONE BY THE ASSESSEE. THE LD. CIT(A) HAS ALSO TAKEN INTO ACCOUNT THE ASPECT THAT THE WORK OF ADVERTISEMENT INCLUDES VARIOUS SERVICES AND THUS THE PAYMENT WAS MADE BY THE ASSESSEE FOR COMPOSITE SERVICES AND NOT FOR HIRING ANY PREMISES OR L AND OR BUILDING. IN THE CASE OF NATIONAL PANASONIC INDIA PVT. LTD., DELHI BENCH 'D' OF ITAT (SUPRA) HAS OBSERVED AS UNDER: '6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD. SECTION, 194 - I OF THE ACT MANDATES A PERSON, OTHER THAN AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY (HUF), PAYING RENT TO A RESIDENT TO DEDUCT TAX AT SOURCE AT THE TIME OF CREDIT OR PAYMENT, WHICHEVER IS EARLIER. CLAUSE (I) OF THE EXPLANATION TO SECTION 194 - I GIVES THE MEANING OF 'RENT'TO BE A PAYMENT UNDER ANY LEASE, SUB - LEASE, TENANCY OR ANY OTHER BUILDING (INCLUDING FACTORY BUILDING), TOGETHER WITH FURNITURE, FITTINGS AND THE LAND APPURTENANT THERETO, WHETHER OR NOT SUCH BUILDING IS OWNED BY THE PAYEE. THUS 'RENT' FOR THE PURPOSE OF SECTION 194I, IS ESSEN TIALLY A PAYMENT FOR THE USE OF ANY LAND OR BUILDING. IN OTHER WORDS, THE AGREEMENT OR ARRANGEMENT WHICH GIVES RISE TO THE PAYMENT OF RENT, MUST NECESSARILY BE AN AGREEMENT OR ITA NO. 3946/MUM/2017 M/S. OGILVY & MATHER PVT. LTD., 4 ARRANGEMENT PREDOMINANTLY FOR THE USE OF LAND OR BUILDING. HOWEVER, WHERE THE AG REEMENT IS NOT PREDOMINANTLY FOR THE USE OF LAND OR BUILDING, BUT FOR SOMETHING ELSE, THEN PAYMENT UNDER THAT AGREEMENT WILL NOT CONSTITUTE RENT EVEN IF THAT 'SOMETHING ELSE' INVOLVES THE USE OF LAND OR BUILDING AS AN INTEGRAL PART OF OR INCIDENTAL TO THE PREDOMINANT OBJECTIVE OF THE AGREEMENT. LET US CONSIDER THE FACTS OF THE CASE BEFORE US IN THE LIGHT OF THIS BASIC CONCEPT OF RENT.' 9.2. IN THE CASE OF JAPAN AIRLINES (SUPRA), IT HAS BEEN HELD THAT THE SERVICES PROVIDED BY THE AIRPORT AUTHORITY FOR LANDIN G AND PARKING OF ITS AIRCRAFT DID NOT AMOUNT TO LEASE OF THE PROPERTY AND, THEREFORE, THE PAYMENTS ARE NOT IN THE NATURE OF RENT AS ENVISAGED UNDER SECTION 194I OF THE ACT. THE TRIBUNAL WHILE DEALING WIT H THE DEFINITION OF RENT HAS OBSERVED AS UNDER: '9.6 IN VIEW OF THIS DEFINITION, THERE HAS TO BE EITHER LEASE, SUB - LEASE, TENANCY AGREEMENT OR ARRANGEMENT FOR GOVERNING THE USE OF ANY LAND. SUCH LAND TO BE SPECIFIC PORTION OF LAND AND LEASE ETC. OF SUCH LA ND HAS TO REGULATE THE MANNER OF USE OF SUCH LAND OR BUILDING AND ITS TENURE AS WELL AS MANNER OF PAYMENT IN LIEU THEREOF. AFTER TAKING INTO CONSIDERATION THE DEFINITION OF RENT, IT APPARENTLY APPEARS TO BE A COMPOSITE CONCEPT. IN BLACK'S LAW DICTIONARY, T HE TERM 'RENT' MEANS - 'CONSIDERATION PAID FOR USE OR OCCUPATION OF PROPERTY'. IN A BROADER SENSE, IT IS THE COMPENSATION OR FEE PAID, USUALLY PERIODICALLY FOR THE USE OF ANY RENTED PROPERTY, LAND, BUILDING, EQUIPMENT ETC. 9.3 ON GOING THROUGH THE QUESTION NO.2 TO 5 OF CIRCULAR NO.715 DATED 8.8.1995, IT IS CLEAR THAT THE BOARD HAS CLARIFIED THE ISSUE BY GIVING THE FOLLOWING ANSWER TO THE QUESTION: QUESTION5: WHETHER A CONTRACT FOR PUTTING UP A HOARDING WOULD BE COVERED UNDER SECTION 194C OR 194I OF THE ACT. ANSWER: THE CONTRACT FOR PUTTING UP A HOARDING IS IN THE NATURE OF ADVERTISING CONTRACT AND PROVISIONS OF SECTION 194C WOULD BE APPLICABLE. IT MAY, HOWEVER, BE CLARIFIED THAT IF A PERSON HAS TAKEN A PARTICULAR SPACE ON RENT AND THEREAFTER SUBLETS THE SAME FULLY OR IN PART FOR PUTTING UP A HOARDING, HE WOULD BE LIABLE TO TDS UNDER SECTION 194I AND NOT UNDER SECTION 194C OF THE ACT. 9.4 FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN APPLYING THE PROVISIONS OF SECTION 194I IN THE CASE OF THE ASSESSEE. ON THE OTHER HAND, THE LD. CIT(A) HAS ADOPTED A VERY CORRECT INTERPRETATION OF THE RELEVANT PROVISIONS OF SECTION 194I AND 194C AND HAS APPLIED SUCH CONSTRUCTION AFTER PROPERTY APPRECIATING THE FACTS AND CIRCUMSTANCES RELATING TO THIS MATTER INCLUDING THE RELEVANT ASPECTS OF THE WORK DONE BY THE PERSONS TO WHOM THE PAYMENTS WERE MADE BY THE ASSESSEE. WE, THEREFORE, DO NOT FIND ANY SCOPE TO INTERFERE IN THE ITA NO. 3946/MUM/2017 M/S. OGILVY & MATHER PVT. LTD., 5 FINDINGS OF THE LD. CIT(A), WHICH ARE UPHELD BY US. CONSEQUENTLY, GROUND NOS. 1 TO 5 TAKEN IN THIS APPEAL ARE REJECTED. THE APPEAL IS, THEREFORE, DISMISSED.' 7.3 FOLLOWING THE A FORESAID PRECEDENT, IN ASSESSEE'S OWN CASE WHICH HAS BEEN RENDERED UNDER IDENTICAL CIRCUMSTANCES, WE HEREBY AFFIRM THE ACTION OF THE CIT(A) IN HOLDING THAT THE PAYMENT OF HOARDING CHARGES ARE LIABLE FOR DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C OF THE ACT AND NOT UNDER SECTION 194 - I OF THE ACT. THUS, THE APPEAL OF THE REVENUE IS DISMISSED. 8. SIMILARLY, THE ISSUE RAISED IN THE CROSS - APPEAL BY THE A SSESSEE AND REVENUE FOR A.Y 2011 - 12 ARE SIMILAR TO THOSE CONSIDERED BY US IN THE CROSS - APPEALS FOR A.Y 2010 - 11 IN THE EARLIER PARAS. THEREFORE, OUR DECISION IN THE CROSS - APPEALS FOR A.Y 2010 - 11 WOULD APPLY MUTATIS - MUTANDIS IN THE APPEALS FOR ASSESSMENT YE AR 2011 - 12 ALSO. THUS, FOR A.Y 2001 - 12, WHEREAS THE APPEAL OF THE ASSESSEE IS ALLOWED, THAT OF THE REVENUE IS DISMISSED. 8. WE HAD CAREFULLY GONE THROUGH THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE AND FOUND THAT FACTS AND CIRCUMSTANCES DURING THE Y EAR UNDER CONSIDERATION ARE PARIMATERIA, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) FOR HOLDING THAT ASSESSEE IS LIABLE TO DEDUCTION OF TAX U/S.194C OF THE IT ACT. 9. IN THE RESULT APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 / 10 /201 8 SD/ - ( SANDEEP GOSAIN ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 18 / 10 /201 8 KARUNA SR. PS ITA NO. 3946/MUM/2017 M/S. OGILVY & MATHER PVT. LTD., 6 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//