DCIT, New Delhi V. M/s. Omni Media Communication Pvt. Ltd., New Delhi

ITA 4089/DEL/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6785 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 09-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 21-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY SI
• Keywords: Earning of tax free income
• Section: 14A; 10

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.: 4089/DEL/2014 ASSESSMENT YEAR: 2010 - 11 DCIT CIRCLE 13 (1) NEW DELHI VS. OMNI MEDIA COMMUNICATION PVT LTD, NSIC COMPLEX, MAA ANADMAYEE MARG, OKHLA PHASE - II, NEW DELHI PAN:AAACO1310Q (APPELLANT) (RESPONDENT) CO NO. 31/DEL/2015 (IN ITA NO.: 4089/DEL/2014) ASSESSMENT YEAR: 2010 - 11 DCIT CIRCLE 13 (1) NEW DELHI VS. OMNI MEDIA COMMUNICATION PVT LTD, NSIC COMPLEX, MAA ANADMAYEE MARG, OKHLA PHASE - II, NEW DELHI PAN:AAACO1310Q (APPELLANT) (RESPONDENT) APPELLANT BY : SH RAJESH KUMAR, SR. DR RESPONDENT BY: SH. VIJAY SIPANI, CA DATE OF HEARING 09/02/2017 DATE OF PRONOUNCEMENT 09 / 02/2017 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS IS AN APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT ( A) XVI, NEW DELHI DATED 30.04.2014 FOR THE AY 2010 - 11. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN REDUCING THE DISALLOWANCE FORM RS. 31713/ - TO RS. 24246/ - WITHOUT APPRECIATING THE FACT THAT THE AO IN HIS ASSESSMENT ORDER, AND THE DETAILED CALCULATIONS MADE BY THE AO AS PER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF THE IT RULES. 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ABOVE DISALLOWANCE NEXUS BETWEEN BORROWING AND INVESTMENTS AND LOANS AND A DVANCES, WHICH INVARIABLY INDICATES THAT FINANCE COSTS HAVE BEEN INCURRED TOWARDS FINANCING OF INVESTMENTS, YIELDING EXEMPT INCOME. 1.2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ABOVE DISALLOWANCE BY F AILING TO APPRECIATE THAT THE PROVISIONS LAID DOWN BY THE ACT THROUGH SECTION THE DIRECT EXPENSES HAVE BEEN ADDED BACK BY THE ASSESSEE ON ITS OWN. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS. 2,87,42,535/ - ON ACCOUNT OF COMMISSION PAID ON ADVERTISEMENT INCOME U/S 40(A)(IA) OF THE ACT, IGNORING THE FACT THAT THE ASSESSEE, EVEN AFTER MANY OPPORTUNITIES WAS NOT ABLE TO SUBMIT THE COPIES OF DOCUMENTS/ DETAILS/ PROOFS/ AGREEMENTS IN SUPPOR T OF ITS CLAIM. 2.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ABOVE DISALLOWANCE BY IGNORING THE FACT T DS HAVE NOT BEEN DEDUCTED ON COMMISSION PAID TO AGENTS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE A SSESSEE IS A COMPANY ENGAGED I N THE BUSINESS OF ADVERTISING AND MARKETING. IT FILED ITS RETURN OF INCOME ON 01.10.2010 DECLARING INCOME OF RS. 5990384/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , ON VERIFICATIONS OF THE BILLS , LD ASSESSING OFFICER HAS NOTED THAT ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE ON THE DISCOUNT WHICH THE ASSESSEE HAS FAILED TO DEDUCT AND THEREFORE, DISALLOWED A SUM OF RS. 28742535/ - U/S 40 A (IA) OF THE ACT. THE REASONS GIVEN BY THE LD ASSESSING OFFICER FOR DISALLOWANCE ARE AS PER PARA NO. 3 OF HIS ASSESSMENT ORDER DATED 14.03.2013 WHICH ARE AS UNDER: - 3. DISALLOWANCE OF COMMISSION PAID ON ADVERTISEMENT INCOME U/S 40(A(IA). 3.1 THE ASSESSEE VIDE THIS OFFICE NOTE SHEET DATED 4.3.2013 WAS REQUIRED TO FURNISH DETAILS OF NETTING OFF OF COMMISSION INCLUDED IN ITS TOTAL RECEIPTS OF RS, 16,28,74,369/ - AND TO SHOW HOW MUCH COMMISSION/DISCOUNT WAS ALLOWED TO WHOM AND WHETHER TDS WAS D EDUCTED OR NOT ON SUCH COMMISSION. IN COMPLIANCE THERETO THE ASSESSEE DID NOT FURNISH ANY DETAIL AND HOW MUCH COMMISSION/DISCOUNT DEDUCTED BY THE CONCERNED PERSONS. THE ASSESSEE SIMPLY FURNISHED 2 OR 3 BILLS AS NOTED BELOW AND STATED AS UNDER IN ITS REPLY DATED 07/03/2013. 1. THE TRIBUNE TRUST SECTOR29, CHANDIGARH M/S OMNI MEDIA COMMUNICATION PVT. LTD. BILL NO: ACT/01100811 NSIC COMPLEX BILL DATE: 30/ 11 / 2009 OKHLA PHASE RO. NO, 1435/09 NEW DELHI RO DATE:30/11/2009 CLIENT: ALL INDIA PVT. LTD. BILL AMOUNT - 18.24.848/ - LESS: DISCOUNT 15% - 273727/ - NET BILL AMOUNT 1551121/ - 2.CONDE NAST INDIA PVT. LTD. 2 ND FLOOR, DARABSHAW HOUSE, VALLABHADAS MARG, BALLARD ESTATE, MUMBAI - 4000001 M/S OMNI MEDIA COMMUNICATION PVT. INVOICE NO: AD/10 - 11/0098 LTD. INVOICE DT: 27.04.2010 NSIC COMPLEX OKHLA PHASE - III NEW DELHI ITEM CODE DESCRIPTION BRAND QTY UOM RATE DISC% AMOUNT 430270 00 ROUNDING KHANNA 1 PAGE 175000 15 1,48,750/ - OFF ADJUSTMENT ' IN RESPECT OF ABOVE WE HAVE TO INFORM YOU THAT NO COMMISSION IS INCLUDED IN THE RECEIPTS OR PAYMENTS IN THE CASE OF THE ASSESSEE. THE ASSESSEE HAS RAISED BILLS TO ITS CLIENTS FOR TOTAL AMOUNT PAYABLE TO MEDIA HOUSES FOR ANY PARTICULAR JOB. AS THE ASSESSEE HAS NEITHER PAID ANY COMMISSION NOR RECEIVED ANY COMMISSION THE QUESTION OF TDS DOES NOT ARRIVE AT ALL' 3.2 THE CONTENTION OF THE ASSESSEE THAT NO COMMISSION IS INCLUDED IN RECEIPT CANNOT BE ACCEPTED BECAUSE AS PER BILLS SUBMITTED BY THE ASSESSEE AS ABOVE THE PAYMENT OF COMMISSION HAS BEEN MADE TO THE ASSESSEE COMPANY AFTER DEDUCTING COMMISSION / DISCOUNT AS CLEAR FROM THE COPIES OF BILLS NOTED ABOVE. 3.3 A QUESTION MAY ARISE WHETHER THERE WOULD BE DEDUCTION OF TAX AT SOURCE UNDER SECTION 194H WHERE COMMI SSION OR BROKERAGE IS RETAINED BY THE CONSIGNEE/AGENT AND NOT REMITTED TO THE CONSIGNOR/PRINCIPAL WHILE REMITTING THE SAME CONSIDERATION. IT MAY BE CLARIFIED THAT SINCE THE RETENTION OF COMMISSION BY THE CONSIGNEE/AGENT AMOUNTS TO CONSTRUCTIVE PAYMENT OF T HE SAME TO HIM BY THE CONSIGNOR/PRINCIPAL, DEDUCTION OF TAX AT SOURCE IS REQUESTED TO BE MADE FROM THE AMOUNT OF COMMISSION. THEREFORE, THE CONSIGNOR/PRINCIPAL WILL HAVE TO DEPOSIT THE TAX DEDUCTIBLE ON THE AMOUNT OF COMMISSION INCOME TO THE CREDIT OF THE CENTRAL GOVERNMENT, WITHIN THE PRESCRIBED TIME, AS EXPLAINED IN THE SUCCEEDING PARAGRAPHS. 3.4 A PLAIN READING OF CBDT CIRCULAR 619 CLEARLY ESTABLISHES THE FACT THAT IN THE CASES WHERE COMMISSION OR BROKERAGE IS RETAINED BY THE CONSIGNEE/AGENT AND NOT RE MITTED TO THE CONSIGNOR /PRINCIPAL WHILE REMITTING THE SALE CONSIDERATION, DEDUCTION OF TAX AT SOURCE U/S 194H IS CLEARLY APPLICABLE. IT HAS BEEN FURTHER CLARIFIED IN THE SAID CBDT CIRCULAR THAT SINCE THE RETENTION OF COMMISSION BY THE CONSIGNEE/AGENT AMOU NTS TO CONSTRUCTIVE PAYMENT OF THE SAME TO HIM BY THE CONSIGNOR/PRINCIPAL, DEDUCTION OF TAX AT SOURCE IS REQUIRED TO BE MADE FROM THE AMOUNT OF COMMISSION. THUS, THE ASSESSEE WAS OBLIGED TO DEDUCT TAX AT SOURCE THE PAYMENT TO AGENTS OR AMOUNT WITHHELD BY A GENTS. MORE SO, CBDT CIRCULAR NO. 715 DATED 08.08.1995 ALSO SPECIFIES THAT COMMISSION RECEIVED BY THE ADVERTISING AGENCY FROM THE MEDIA WOULD REQUIRE DEDUCTION OF TAX AT SOURCE U/S 194J. 3.5 IN THE VIEW OF THE FACT, RELYING UPON THE DECISION OF HON'BLE H IGH COURT OF DELHI, IT IS CONCLUDED THAT THE PAYMENT RETAINED BY THE AGENT IS INEXTRICABLY LINKED TO THE SALE OF THE ADVERTISEMENT TO BE PUBLISHED BY THE ASSESSEE, IT CANNOT BUT LEAD TO A CONCLUSION THAT THE PAYMENTS RETAINED BY THE AGENTS IS A COMMISSION WITHIN THE MEANING OF SECTION 194H OF THE ACT. THIS IS ESPECIALLY SO, AS INDICATED ABOVE, AT NO POINT IN TIME THE AGENT OBTAINS PROPRIETY RIGHTS TO THE ADVERTISEMENT. IT IS CLEARLY NOT A CASE OF DISCOUNT IN THIS CASE SINCE THERE IS NO VALUE OR PRICE PAID B Y THE ASSESSEE ON WHICH THE AGENT GETS A DEDUCTION. THE PRICE OR VALUE IS RECEIVED BY THE ASSESSEE COMPANY THROUGH THE MEDIUM OF THE AGENT FROM THE ADVERTISERS WHICH IS ALSO ONE OF THE FACTS OF SERVICES OFFERED BY THE AGENTS. THE PRICE OR VALUE OF THE ADVE RTISEMENT TO BE PUBLISHED IN THE MEDIA RECEIVED FROM THE ADVERTISERS BY THE AGENTS FOR AND ON BEHALF OF THE ASSESSEE IS HELD IN TRUST. THUS, THE MONEY RETAINED BY THE ASSESSEE IS COMMISSION WITHIN THE MEANING OF SECTION 194H OF THE ACT AND IN NO STRETCH OF IMAGINATION THIS CAN BE TERMED AS 'TRADE DISCOUNT'. 3.6 THE ASSESSEE CO. DID NOT FURNISH ANY DETAIL REGARDING QUANTUM OF DISCOUNT / COMMISSION DEDUCTED FROM THE ADVERTISEMENT REVENUE GENERATED TO THE ADVERTISING AGENCIES. THEREFORE, THE TOTAL RECEIPTS DIS CLOSED BY THE ASSESSEE CO. AT RS 16,28,74,369/ - WHICH IS NETTED OFF OF COMMISSION PAID TO THE AGENCIES @ 15%. THE ASSESSEE WAS ASKED TO FURNISH GROSS AMOUNT CHARGED DURING THE YEAR UNDER CONSIDERATION BUT NO DETAILS HAVE BEEN FURNISHED BY THE ASSESSEE. THE REFORE CONSIDERING THE 15% COMMISSION PAID BY THE ASSESSEE ON REVENUE OF RS. 16,28,74,369/ - THE GROSSED UP REVENUE COMES AT RS. 19,16,16,9047 - AND COMMISSION ON THE GROSS REVENUE @ 15% COMES AT RS. 2,87,42,535/ - WHICH HAS BEEN PAID BY THE ASSESSEE. 3.7 IN VIEW OF THE FACTS AS DISCUSSED IN THE FOREGOING PARAGRAPHS IT IS CLEAR THAT THE TRANSACTIONS (ON WHICH DISCOUNT AS CLAIMED BY THE ASSESSEE) WAS NOT PAID ON PRINCIPAL TO PRINCIPAL BASIS BUT WAS IN THE NATURE OF PRINCIPAL - AGENTS FOR THE SERVICES RENDERED TO 3RD PARTIES, AND BY NO STRETCH OF IMAGINATION CAN BE TERMED AS DISCOUNT AND THE ASSESSEE HAS ITSELF IN ITS INVOICES CATEGORIES THE SAID AMOUNT AS COMMISSION. THEREFORE, THE DISCOUNT (AS CLAIMED BY ASSESSEE) PAID BY THE ASSESSEE IS NOTHING BUT AGENCY COMMIS SION LIABLE FOR DEDUCTION OF TDS EITHER IN SECTION 194H OR 194J OR BOTH. HOWEVER, IT HAS NOT DEDUCTED THE TDS AT ALL ON SUCH AMOUNT. THEREFORE RS. 2,87,42,5357 - IS DISALLOWED U/S 40(A)(IA) OF THE IT ACT.,1961 AND ADDED TO THE INCOME OF THE ASSESSEE. IN THI S CONTEXT, THE ASSESSEE MAY PLEAD THAT NO AMOUNT OF COMMISSION HAS ACTUALLY BEEN PAID TO THE ACT. HOWEVER, AS DISCUSSED IN THE PRECEDING PARAGRAPH THE AMOUNTS WITHHELD BY THE AGENCIES IN THE FORM OF COMMISSION ARE ACTUALLY CONSTRUCTIVE RECEIPTS IN THEIR HA NDS AND THE SAID AMOUNTS HAVING BEEN NETTED FROM THE RECEIVABLE OF THE ASSESSEE AS AMPLIFIED IN CBDT CIRCULAR NO 619 ALSO(DISCUSSED SUPRA). ACCORDINGLY, AN AMOUNT OF RS.2,87,42,535/ - IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. I AM SAT ISFIED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME THEREBY CONCEALED INCOME ON THIS ISSUE, THEREFORE, PENALTY PROCEEDINGS U/S 271(1)(C) ARE HEREBY INITIATED. 4. AGGRIEVED WITH THE ORDER OF THE LD AO THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT(A), WHO DELETED THE IMPUGNED ADDITION VIDE PARA NO. 4 OF THE ORDER WHICH IS AS UNDER: - 4.1.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE A/R OF THE APPELLANT COMPANY, THE FACTS OF THE CASE AS WELL AS THE FINDINGS OF THE A.O. GROUND NOS. 1 & 4 OF APPEAL ARE GENERAL IN NATURE AND NOT PRESSED FOR BY THE APPELLANT. THEREFORE, NO ADJUDICATION IS CALLED FOR. GROUND NO. 2 OF APPEAL IS DIRECTED AGAINST ADDITION OF RS. 2,87,42,535/ - ON ACCOUNT DISALLOWANCE OF COMMISSION U/S 40(A)(IA). AO IN THE ORDER OBSERVED THAT THE ASSESSEE HAS SHOWN TOTAL RECEIPTS OF RS. 16,28,74,369/ - . AO OBSERVED FROM 2/3 BILLS FURNISHED BY THE APPELLANT THAT COMMISSION HAS BEEN PAID TO THE ASSESSEE. THE FIRST BILL CITED IN THE ASSESSMENT ORDER WAS ISSUED BY THE T RIBUNE TRUST AND THE SECOND ONE BY CONDE NAST INDIA PVT. LTD. INDICATING DISCOUNT OF RS. 15% AND NET BILL AMOUNT RAISED ON THE ASSESSEE. AO, THEREFORE, CONCLUDED THAT COMMISSION IS INCLUDED IN RECEIPTS AND THAT COMMISSION HAS BEEN PAID AFTER DEDUCTING COMM ISSION. AO OBSERVED THAT SINCE COMMISSION IS RETAINED BY THE CONSIGNEE / PRINCIPAL AS SUCH THE SAME AMOUNTS TO CONSTRUCTIVE PAYMENTS BY THE CONSIGNOR/PRINCIPAL TO THE ASSESSEE ON WHICH TDS HAS TO BE MADE ON THE AMOUNT OF COMMISSION RETAINED. AO OBSERVED TH AT PAYMENTS RETAINED BY THE AGENTS IS COMMISSION WITHIN THE MEANING OF SEC 194 OF THE ACT. THEREFORE, AO HELD THAT SINCE THE TOTAL RECEIPTS DISCLOSED BY THE ASSESSEE IS RS. 16,28,74,369/ - WHICH IS NETTED OF THE COMMISSION PAID TO THE AGENCIES @ 15%. THEREF ORE, COMMISSION @ 15% IS PAID BY THE ASSESSEE ON THE REVENUE OF RS. 16,28,74,369/ - . AS SUCH THE REVENUE HAS BEEN GROSSED UP BY THE AO TO RS. 19,16,16,9047 - AND COMMISSION @ 15% OF THE GROSS REVENUE WAS CALCULATED AT RS. 2,07,42,5357 - WHICH WAS DISALLOWED U /S 40A(IA) OF THE ACT AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 4.1.2 THE APPELLANT SUBMITTED THAT THE ASSESSEE HAS NEITHER PAID ANY COMMISSION NOR RECEIVED ANY COMMISSION DURING THE YEAR. THE APPELLANT SUBMITTED THAT AO HAS FAILED TO GIVE ANY DETAIL S AS REGARDS TO MODE OF RECEIPTS OF COMMISSION AND NAME OF THE PARTIES FROM WHOM SUCH COMMISSION WAS RECEIVED. IT IS SEEN THAT THE 2 (TWO) BILLS QUOTED BY THE AO ARE INVOICES THAT ARE INCLUDED IN THE P&L ACCOUNT UNDER THE HEAD ADVERTISING, ARTWORK AND PROD UCTION EXPENSES THE TOTAL OF WHICH IS RS. 15,42,45,848/ - . THEREFORE, THE BILLS ARE NOT PART OF RECEIPTS BUT PART OF EXPENSES CLAIMED IN THE P&L ACCOUNT. NO COMMISSION WAS PAID TO THE ASSESSEE COMPANY AS PER THE ABOVE BILLS. THE APPELLANT WAS BILLED BY THE PARTIES OF THE NET AMOUNT AFTER THE DISCOUNT @ 15% 7 AGENCY COMMISSION WAS ALLOWED BY THE PARTIES ON THE BILLED AMOUNT. ON THE OTHER HAND, THE AMOUNT OF RS. 16,28,74,369/ - REPRESENTS THE TOTAL RECEIPTS OF THE ASSESSEE UNDER THE HEAD ADVERTISING, ARTWORK AN D PRODUCTION REVENUES. THEREFORE, AO HAS ERRED IN CONCLUDING THAT COMMISSION IS PAID BY THE ASSESSEE ON THE ABOVE REVENUES ON THE BASIS OF THE TWO INVOICES WHICH ARE PART OF EXPENSES. AO HAS FURTHER ERRED IN CALCULATING THE AMOUNT OF COMMISSION ALLEGED TO HAVE BEEN PAID BY THE ASSESSEE ON THE BASIS OF RECEIPTS. THEREAFTER, AO HAS ARRIVED AT THE ABSURD LOGIC THAT COMMISSION RETAINED BY THE CONSIGNOR/PRINCIPAL AMOUNTS TO CONSTRUCTIVE PAYMENTS OF COMMISSION TO THE ASSESSEE ON WHICH TDS WAS TO BE MADE BY THE PR INCIPAL. SINCE TDS WAS NOT MADE BY THE PRINCIPAL/CONSIGNOR, THEREFORE, THE DISALLOWANCE WAS MADE BY THE AO HOLDING THE ASSESSEE LIABLE FOR TDS. IT IS APPARENT THAT THE ABOVE ADDITIONS WERE MADE BY THE AO AS THE AO WAS CONFUSED ABOUT THE ISSUES BEFORE MAKIN G THE ASSESSMENT. THE CONFUSION OF THE AO IS ALSO CLEAR FROM THE OBSERVATION IN PARA 3.2 OF THE ASSESSMENT ORDER AS UNDER: - '3.2 THE CONTENTION OF THE ASSESSEE THAT NO COMMISSION IS INCLUDED IN RECEIPT CANNOT BE ACCEPTED BECAUSE AS PER BILLS SUBMITTED BY T HE ASSESSEE AS ABOVE THE PAYMENT OF COMMISSION HAS BEEN MADE TO THE ASSESSEE COMPANY AFTER DEDUCTION COMMISSION/DISCOUNT AS CLEAR FROM THE COPIES OF BILLS NOTED ABOVE.' 4. 1 .3 THE PROVISIONS OF SEC 1 94H RELATING TO TDS ON COMMISSION/BROKERAGE SAYS: - COMMISSION OR BROKERAGE. 194H. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING, ON OR AFTER THE 1ST DAY OF JUNE, 2001, TO A RESIDENT, ANY INCOME BY WAY OF COMMISSION (NOT BEING INSURANCE COMMISSION REFERRED TO IN SECTION 194D) OR BROKERAGE, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT OF SUCH INCOME IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME - TAX THER EON AT THE RATE OF [TEN] PER CENT FROM THE ABOVE PROVISION IT IS CLEAR THAT ANY PERSON WHO IS RESPONSIBLE FOR PAYING ANY INCOME BY WAY OF COMMISSION OR BROKERAGE, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAY MENT OF SUCH INCOME IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME - TAX THEREON AT THE PRESCRIBED RATE. 4.1.4 COMMISSION MEANS FEE PAID TO THE AGENT OR EMPLOYEE FOR TRANSACTING PIECE OF BUSINESS OR P ERFORMING THE SERVICE. WHEREAS DISCOUNT IMPLIES A DEDUCTION FROM THE ORIGINAL PRICE OR DEBT ALLOWED FOR PAYING PROMPTLY OR IN CASH OR FOR PROMOTING SALES. THEREFORE, THERE IS A COMPLETE DISTINCTION BETWEEN COMMISSION AND DISCOUNT. THERE HAS TO BE A RELATIO NSHIP OF PRINCIPAL AND AGENT FOR COMMISSION. ON THE OTHER HAND DISCOUNT CANNOT BE EQUATED TO COMMISSION AND WHEN THE TRANSACTION IS ON A PRINCIPAL TO PRINCIPAL BASIS, THE DIFFERENCE IN PRICE CAN ONLY BE DISCOUNT AND NOT COMMISSION AND OUTSIDE THE PURVIEW O F SECTION 194H OF THE ACT. HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS.SINGAPORE AIRLINES LTD.(2009) - 180 - TAXMAN - 128 HELD THAT WHEN THE TRANSACTION IS ONE THAT BETWEEN PRINCIPAL - TO - PRINCIPAL THE DIFFERENCE IN PRICE WOULD BE ONLY BE DISCOUNT FALLING OUTSI DE THE PURVIEW OF PROVISIONS OF SECTION 194H OF THE ACT. HON'BLE DELHI ITAT IN THE CASE OF MOTHER DAIRY INDIA LTD. VS. ITO (2009) - 28 - SOT - 42 HELD THAT WHEN THE TRANSACTIONS TAKE PLACE BETWEEN TWO PRINCIPALS PROVISIONS OF SECTION 94H DO NOT COME INTO PLAY. F ROM THE ABOVE PROVISIONS OF SEC 194H AND LEGAL POSITIONS IT IS CLEAR THAT LIABILITY TO DEDUCT TDS WILL ARISE ONLY IF COMMISSION IS PAID AND THERE IS PRINCIPAL AND AGENT RELATIONSHIP. 4.1.5 FROM THE INSTANCES CITED BY THE AO IT IS CLEAR THAT NO COMMISSION IS PAID BY THE ASSESSEE ON THE OTHER HAND DISCOUNT WAS ALLOWED TO THE ASSESSEE ON THE BILLS RAISED BY THE PARTIES, THEREFORE, THE RELATIONSHIP IN THE TRANSACTIONS WAS BETWEEN PRINCIPAL AND PRINCIPAL. THE CONCESSION ALLOWED BEING DISCOUNT AND NOT COMMISSION AS SUCH OUTSIDE THE PURVIEW OF SEC 194H OF THE IT ACT. SINCE THE DISCOUNT IS ALLOWED BY THE PARTIES AND ASSESSEE HAS MADE THE PAYMENT ON THE NET BILL AND NO PAYMENT IN THE NATURE OF C OMMISSION OR BROKAGE IS MADE BY THE ASSESSEE TO THE PARTIES, THEREFORE, THERE IS NO LIABILITY FOR TDS ON THE ASSESSEE. SINCE, THE EXPENSES UNDER THE HEAD ADVERTISING, ARTWORK AND PRODUCTION ARE INCURRED ON THE BASIS OF BILLS RAISED BY PARTIES AFTER DISCOUN T @ 15% ALLOWED TO THE ASSESSEE AND NO COMMISSION IS PAID BY THE APPELLANT TO THE PARTIES, THERE IS NO LIABILITY OF TDS ON THE ASSESSEE. FURTHER, THE REVENUE IN THE FORM OF ADVERTISING, ARTWORK AND PRODUCTION REVENUES OF RS. 16,28,74,369/ - ARE RECEIPTS IN THE HANDS OF THE APPELLANT, SINCE THE ABOVE SUMS ARE RECEIPTS, THEREFORE, THERE IS NO LIABILITY ON THE ASSESSEE TO DEDUCT INCOME TAX BECAUSE LIABILITY OF TDS IS THERE ONLY AT THE TIME OF PAYMENT. THEREFORE, THE ARGUMENT OF THE AO THAT THE ASSESSEE HAS PAID COMMISSION @ 15%OF THE TOTAL REVENUE DISCLOSED BY THE ASSESSEE HAS NO LEGS TO STAND. IN VIEW OF THE ABOVE, THE DISALLOWANCE OF RS. 2,87,42,535/ - MADE BY THE AO U/S 40(A)(IA) OF THE IT ACT HAS NO BASIS. AS SUCH THE SAME IS DELETED. THE APPEAL IS ALLOWED IN THIS GROUND.. 5. REVENUE IS IN APPEAL BEFORE US CONTESTING THIS AS PER GROUND NO. 2 OF THE APPEAL. 6. OVER AND ABOVE THIS DISALLOWANCE THE ASSESSING OFFICER DISALLOWED RS. 31713/ - U/S 14A OF THE ACT, WHICH WAS REDUCED TO A SUM OF RS. 24246/ - BY THE LD CIT(A). THIS IS CONTESTED BY REVENUE AS PER GROUND NO. 1 OF THE APPEAL. 7. THE ASSESSEE HAS PREFERRED CROSS OBJECTION RAISING TWO GROUND ONE RELATING TO DISALLOWANCE U/S 14A AND SECOND ONE IS REGARDING DISALLOWANCE OF RS. 28742535/ - ON ACCOUNT OF COMMISSION. BOTH THESE GROUNDS ARE SUPPORTIVE IN NATURE AND DURING THE COURSE OF HEARING THE LD AR SUBMITTED THAT THE ASSESSEE DOES NOT WANT PRESS THEM. IN VIEW OF THIS CO OF THE ASSESSEE IS DISMISSED. 8. COMING TO THE GROUND NO. 1 OF THE APPEAL AGAINST DISALLOWANCE U/S 14A THE LD DR SUPPORTED THE ORDER OF THE LD ASSESSING OFFICER WHERE THE LD AR SUPPORTED THE ORDER OF THE LD CIT(A). 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. DURING THE YEAR THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 142795/ - WHICH IS EXEMPT U/S 10 OF THE INCOME TAX ACT. THE ASSESSEE HAS ALSO MADE INVESTMENT OF RS. 4849200/ - IN EQUITY SHARES. THE ASSESSEE HAS NOT DISALLOWED ANY SUM AS NO INTEREST PAYMENT WAS ATTRIBUTABLE TO SUCH INVESTMENT. THE AO AND THE LD CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED EVEN THE ADMINISTRATIVE AND MANAGERIAL NATURE FOR EARNING THE EXEMPT INCOME. THEREFORE, LD CIT(A) LOOKING TO THE QUANTUM OF INVESTMENT AS WELL AS LOOKING TO THE AMOUNT OF DIVIDEND EARNED H AS RESTRICTED THE DISALLOW ANCE OF RS. 31713/ - TO RS. 24246/ - BY DELETING THE ADDITION OF RS. 7467/ - AS THE ONLY INTEREST EXPENDITURE INCURRED BY THE ASSESSEE IS ON ACCOUNT OF VEHICLE LOAN . WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CIT(A) AND THEREFORE IT IS DISMISSED. IN THE RESULT GROUND NO. 1 OF THE APPEAL OF THE REVENUE IS DISMISSED. 10. GROUND NO. 2 OF THE APPEAL OF THE REVENUE IS AGAINST DELETION OF THE DISALLOWANCE OF RS. 28742535/ - ON ACCOUNT OF DISCOUNT AND COMMISSION U/S 40 A (IA). 11. THE LD DR RELIED ON THE ORDER OF THE LD ASSESSING OFFICER WHEREAS THE LD AR RELIED UPON THE ORDER OF THE LD CIT(A). LD. AUTHORIZED REPRESENTATIVE ALSO SUBMITTED THE COPY OF THE ANNUAL ACCOUNTS OF THE COMPANY TO SHOW THAT THERE IS NO DISCOUNT PAID BY THE COMPANY EXCEPT RS. 6375/ WHICH IS SHO WN IN THE SELLING AND DISTRIBUTION EXPENSES IN SCHEDULE NO. 13 OF THE BALANCE SHEET. HE THEREFORE SUBMITTED THAT WHEN THE ASSESSEE HAS NOT FILED ANY DISCOUNT AND COMMISSION TO ANY OF THE PERSONS THERE IS NO REASON FOR DISALLOWANCE. 12. WE HAVE CAREFULLY CONSI DERED THE RIVAL CONTENTIONS AS WELL AS THE ORDERS OF THE LOWER AUTHORITY. THE LD. ASSESSING OFFICER HAS DEALT WITH THE TWO BILLS WHICH ARE FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIED ITS REPLY DATED 07/03/2013. ACCORDING TO THOSE BILLS THE CUSTOMERS HAVE SHOWN DISCOUNT IN THE BILLS RAISED BY THEM ON THE ASSESSEE. THEREFORE ACCORDING TO US THE CUSTOMERS HAVE RAISED THE BILL ON THE ASSESSEE AND IN THOSE BILLS THEY ARE GRANTED DISCOUNT AT THE RATE OF 15% TO THE ASSESSEE. HENCE A CCORDING TO US THE ASSESSEE IS RECEIVER OF THE DISCOUNT AND NOT THE PAYER OF THE DISCOUNT. THEREFORE PRIMA FACIE ACCORDING TO US THE LD. ASSESSING OFFICER HAS ERRED IN HOLDING THAT ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE ON THIS COMMISSION, WHICH WAS RECEIVED BY IT. IT WAS THE CONTENTION OF THE ASSESSEE THAT NO COMMISSION IS INCLUDED IN THE RECEIPTS ARE PAYMENTS IN THE CASE OF THE ASSESSEE AND THE ASSESSEE HAS RAISED BILLS TO ITS CLIENTS FOR TOTAL AMOUNT PAYABLE TO MEDIA HOUSES FOR ANY PARTICULAR JOB AS THE ASSESSEE IS NEITHER PAID ANY DISCOUNT OR COMMISSION THE QUESTION OF TAX DEDUCTION AT SOURCE DOES NOT ARISE. IT IS INTERESTING TO NOTE THAT IN PARA NO. 3.2 OF HIS ORDER THE ASSESSING OFFICE R HAS REJECTED THE CONTENTION OF THE ASSESSEE THAT NO COMMISSION IS INCLUDED IN THE RECEIPT CANNOT BE ACCEPTED BECAUSE AS PER THE BILLS SUBMITTED BY THE ASSESSEE IS ABOUT THE PAYMENT OF COMMISSION HAS BEEN MADE TO THE ASSESSEE COMPANY AFTER DEDUCTING COMMI SSION DISCOUNT IS CLEAR FROM THE COPIES OF THE BILLS NOTED. THEREFORE FROM THE OBSERVATION OF THE LD. ASSESSING OFFICER IT IS VERY CLEAR THAT IT IS NOT THE ASSESSEE WHO IS PAYING DISCOUNT OR COMMISSION BUT IT IS THE SUM WHICH IS BEEN DEDUCTED BY THE CUSTOM ERS AT THE TIME OF THE BUILDING ITSELF. THEREFORE, ACCORDING TO US AT THE MOST IT IS A TRADE DISCOUNT. THE LD. CIT APPEAL HAS DELETED THE ABOVE ADDITION AND HAS CATEGORICALLY STATED THAT THAT NO COMMISSION IS PAID BY THE ASSESSEE BUT ON THE OTHER HAND, DIS COUNT WAS ALLOWED TO THE ASSESSEE ON THE BILLS RAISED BY THE PARTIES THEREFORE THE RELATIONSHIP IN THE TRANSACTION WAS BETWEEN PRINCIPLE AND PRINCIPLE. ACCORDING TO THE LD. CIT APPEAL WHEREIN HE HAS HELD THAT THE DISCOUNT IS ALLOWED BY THE PARTIES AND ASSE SSEE HAS THE MADE PAYMENT ON THAT THAT BILL AND NO PAYMENT IN THE NATURE OF COMMISSION OR BROKERAGE IS MADE BY THE ASSESSEE TO THE PARTIES THEREFORE THERE IS NO LIABILITY FOR TEDIOUS ON THE ASSESSEE IT WAS FURTHER HELD BY HIM THAT THE REVENUE IN THE FORM O F ADVERTISEMENT AND ARTWORK OF RS. 1 6287 4369/ RECEIPTS IN THE HANDS OF THE APPELLANT AND AS THE ABOVE SUM IS RECEIPT THAT THE THERE IS NO QUESTION OF DEDUCTION OF TAX AT SOURCE ON SUCH RECEIPTS BY THE ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE COUL D NOT POINT OUT ANY INFIRMITY IN THE ORDER OF THE LD. CIT APPEAL. IN VIEW OF THIS WE CONFIRM THE FINDING OF THE LD. CIT APPEAL IN DELETING THE ADDITION OF RS. 2 874 2535/ MADE BY THE ASSESSING OFFICER UNDER SECTION 40 A (IA) OF THE INCOME TAX ACT. IN THE RESULT GROUND NO. 2 OF THE APPEAL OF THE REVENUE IS DISMISSED. 13. IN THE RESULT APPEAL OF THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 /02/2017. - SD/ - - SD/ - (H.S.SIDHU) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 09 /02/2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI