ACIT, New Delhi V. M/s. Zoom Communication Ltd., New Delhi

ITA 414/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7876 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 18-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 23-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K JAIN
• Keywords: Business expenditure
• Section: 37(1); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI : JUDICIAL MEMBER ITA NO. 414/DEL/2014 ASSTT. YR: 2010-11 ACIT CENTRAL CIRCLE-8, VS. ZOOM COMMUNICATION LTD. , NEW DELHI. B-10, GREATER KAILASH, ENCLAVE-I, NEW DELHI-48. PAN: AAACZ 0080 E ( APPELLANT ) (RESPONDENT) APPELLANT BY : SH. M.K. JAIN SR. DR ASSESSEE BY : NONE DATE OF HEARING : 18/04/2016. DATE OF ORDER : _____/04/2016. O R D E R PER S.V. MEHROTRA, A.M: THIS IS REVENUES APPEAL AGAINST THE ORDER DATED 2 2.10.2013, PASSED BY THE LD. CIT(A)-XXXII, NEW DELHI IN APPEAL NO. 13 5/ 2013-14, RELATING TO A.Y. 2010-11. 2. NONE PUT IN APPEARANCE ON BEHALF OF THE ASSESSEE AT THE HEARING. THE NOTICE OF HEARING SENT TO ASSESSEE AT THE ADDRESS F URNISHED IN COLUMN NO. 11 OF FORM NO. 36 HAS BEEN RETURNED UNSERVED WITH THE POSTAL REMARKS NO SUCH FIRM. UNDER THESE CIRCUMSTANCES WE PROCEED TO DISP OSE OF THE DEPARTMENTAL 2 APPEAL, EX PARTE, QUA THE ASSESSEE AND IN THAT PROC ESS WE HAVE HEARD LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAD FI LED RETURN DECLARING INCOME OF RS. 26,91,30,450/-. THE ASSESSEE COMPANY, IN THE RELEVANT ASSESSMENT YEAR CARRIED ON THE BUSINESS OF SERVICE PROVIDER AND WAS ENGAGED IN PROVIDING OF EVENTS AND PROGRAMMES MEANT FOR BRO ADCASTING. THE ASSESSEE USED ITS OWN EQUIPMENT AND EMPLOYEES TO PROVIDE THE SE SERVICES AND MAINLY TO T.V. CHANNELS. DURING THE YEAR UNDER CONSIDERATI ON THE AO NOTICED THAT ASSESSEE COMPANY HAD MADE CERTAIN PAYMENTS AND NO T DS HAD BEEN DEDUCTED THEREON. HE, THEREFORE, MADE A DISALLOWANC E U/S 40(A)(IA) OF RS. 4,25,300/-. FURTHER HE NOTED THAT ASSESSEE HAD DEBI TED AN AMOUNT OF RS. 55,63,143/- UNDER THE HEAD INTEREST ON DELAYED PAY MENTS. THE ASSESSEES EXPLANATION WAS AS UNDER: 'INTEREST ON DELAYED PAYMENTS INCLUDES INTEREST ON LATE DEPOSIT OF INCOME TAX, TDS, SERVICE TAX AND PENALTY FOR LAT E FILING OF SERVICE TAX RETURN PAID VOLUNTARY. INTEREST ON INCO ME TAX AND ON LATE DEPOSIT OF TAX DEDUCTED AT SOURCE AMOUNTING TO RS. 9,43, 795/ - AND PENALTY FOR LATE FILING OF SER VICE TAX RETURN PAID VOLUNTARILY OF RS. 7,434/ - HAS BEEN ADDED BAC K IN THE COMPUTATION OF TOTAL INCOME. REFERENCE IN THIS REGA RD MAY ALSO BE MADE TO CLAUSE 17(F) OF FORM 3CD FOR THE RELEVAN T ASSESSMENT YEAR, FILED ALREADY VIDE OUR SUBMISSION DATED 20.10.2011 . 4. THE ASSESSEE FURTHER EXPLAINED VIDE ITS REPLY DA TED 12.3.2013 AS UNDER: ' INTEREST ON DELAYED PAYMENTS OF SERVICE TAX AND PEN ALTY FOR BELATED FILING OF RETURNS) BOTH OF WHICH ARE AUTOMA TIC AND MANDATORY LEVIES, REQUIRED TO BE DISCHARGED BEFORE FILING OF THE STATUTORY SERVICE TAX RETURN '. 3 5. THE AO, HOWEVER, DID NOT ACCEPT THE ASSESSEES C ONTENTION AND MADE A DISALLOWANCE OF RS. 46,11,914/-, INTER ALIA, OBSE RVING THAT ASSESSEE ITSELF HAD ADMITTED THAT IT HAD COMMITTED FAULT OF LATE FI LING THE SERVICE TAX RETURN AND LATE DEPOSITS OF TDS, INCOME TAX AND SERVICE TA X. 6. LD. CIT(A) PARTLY ALLOWED THE ASSESSEES APPEAL. BEING AGGRIEVED THE DEPARTMENT IS IN APPEAL BEFORE US AND HAS TAKEN FOL LOWING GROUNDS OF APPEAL: 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITI ON OF RS. 4,25,300/- MADE BY AO ON ACCOUNT OF DISALLOWANCE U/ S 40(A)(IA) OF THE I.T.ACT,1961. 2. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN LAW-AND ON FACTS OF THE CASE IN DELETING THE ADDITI ON OF RS. 46,11,914/- MADE BY THE AO ON ACCOUNT OF INTEREST O N DELAYED PAYMENT OF SERVICE TAX. 3. (A) THE ORDER OF THE CIT(A) IS ERRONEOUS AND N OT TENABLE IN LAW AND ON FACTS. (B) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AM END ANY/ ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE C OURSE OF THE HEARING OF THE APPEAL. 7. APROPOS GROUND NO. 1, LD. CIT(A) AFTER DETAILED EXAMINATION OF FACTS AND WRITTEN SUBMISSIONS, REPRODUCED IN HIS ORDER IN PARA 6, HAS POINTED OUT THAT THE IMPUGNED PAYMENTS WERE MADE TO CAMERA ATTE NDANTS WHO WERE HIRED ON AD HOC BASIS AND, THEREFORE, TDS PROVISION S WERE NOT APPLICABLE. 8. AFTER HEARING LD. DR AND CONSIDERING THE NATURE OF ACTIVITIES CARRIED ON BY ASSESSEE, WE DO NOT FIND ANY REASON TO INTERF ERE WITH THE FOLLOWING FINDINGS OF LD. CIT(A) I HAVE CONSIDERED THE FACTS OF THE CASE, FINDINGS O F THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND THE W RITTEN 4 SUBMISSIONS OF THE APPELLANT. FROM THE FINDINGS OF THE ASSESSING OFFICER, IT APPEARS THAT THE REASON WHICH WEIGH HIM TO INVOKE SECTION 40(A)(IA) OF THE ACT WAS THAT THE PAYMENTS TO SOME PERSONS EXCEEDED RS.75,0001- IN AGGREGATE IN A YEAR AND THEREFORE, THE SAME WERE LIABLE FOR DEDUCTION AT SO URCE, WHICH WAS NOT DONE BY THE APPELLANT. ON PERUSAL OF THE WR ITTEN SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND F ILED BEFORE ME, IT IS SEEN AT THE IMPUGNED PAYMENTS WERE MADE T O CAMERA ATTENDANTS. THE APPELLANT HAS EXPLAINED THAT THESE PAYMENTS WERE MADE TO CAMERA ATTENDANTS HIRED ON AD-HOC BASI S AND THEREFORE TDS PROVISIONS WERE NOT APPLICABLE AS IT WAS A PAYMENT TO PERSONS ENGAGED ON 'AD-HOC' AND 'AS AND WHEN REQUIRED' BASIS. ON CONSIDERING THE FACTS OF THE CA SE, I AGREE WITH THE APPELLANT THAT THE PAYMENTS TO THE PERSONS ENGAGED ON 'AD-HOC' BASIS DO NOT FALL WITHIN THE EXPRESSION 'W ORK' FOR THE PURPOSES OF SECTION 194C OF THE I.T. ACT, 1961. THE APPELLANT HAS INCURRED THE IMPUGNED EXPENDITURE ON ACCOUNT OF ENGAGING SOME CAMERA ATTENDANTS ON AD-HOC BASIS I.E. FOR A D AY OR TWO OR AS AND WHEN REQUIRED BASIS. OBVIOUSLY, AN ACTIVITY OF ENGAGING SOME CAMERA ATTENDANTS FOR USING THEM IN THE BUSINE SS OF PROVIDING OF VIDEO PRODUCTION SERVICES WOULD NOT AM OUNT TO CONTRACT FOR CARRYING OUT OF 'WORK' AS CONTEMPLATED UNDER SECTION 194C OF THE I.T. ACT, 1961. THERE IS NO MAT ERIAL ON RECORD TO DEMONSTRATE THAT THE IMPUGNED PAYMENTS CO NSTITUTED PAYMENTS FOR CARRYING OUT OF ANY WORK WITHIN THE ME ANING OF SECTION 194C. OF THE ACT. THE ASSESSING OFFICER HAS NOT ASSERTED THAT THERE WAS ANY CONTRACT BETWEEN THE APPELLANT A ND THE ABOVE INDIVIDUALS FOR PROVIDING SERVICES AS CAMERA ATTENDANTS. ENGAGING SOME PERSONS ON 'AD-HOC' BASIS OR 'AS AND WHEN REQUIRED' BASIS, IN MY VIEW, CANNOT BE EQUATED TO A CONTRACT CONTEMPLATED U/S 194C OF THE I.T. ACT, 1961. THEREF ORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , I HOLD THAT THE AO WAS NOT JUSTIFIED INVOKING SECTION 40(A)(IA) AND MAKING IMPUGNED DISALLOWANCE. ACCORDINGLY, THE ADDITION OF RS 4,25,300/- MADE BY THE ASSESSING OFFICER IS DELETED . 5 GROUND FAILS. 9. APROPOS GROUND NO. 2, WE FIND THAT THE SOLE CONT ROVERSY IS WHETHER THE IMPUGNED SUM OF RS. 46,11,914/- WAS COMPENSATORY OR PENAL IN NATURE. THE PAYMENT OF INTEREST FOR DELAYED PAYMENTS OF CERTAIN TYPES OF TAXES AND IMPOSTS I.E. CESS, PURCHASE TAX, SALES-TAX ETC. IS DEFINITELY COMPENSATORY IN NATURE, AS IT IS CALCULATED WITH REFERENCE TO THE P ERIOD FOR WHICH DELAY IN DEPOSIT OF THE SAME HAS BEEN COMMITTED. WE ARE IN A GREEMENT WITH THE FOLLOWING OBSERVATIONS MADE BY LD. CIT(A) IN PARA 1 0 OF HIS ORDER: 10. I HAVE CONSIDERED THE FACTS OF THE CASE, FINDI NG GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND T HE WRITTEN SUBMISSIONS OF THE APPELLANT. I HAVE ALSO PERUSED T HE CASE LAWS RELIED UPON BY THE APPELLANT IN SUPPORT OF ITS CASE AND CASE LAWS CITED BY THE ASSESSING OFFICER IN FAVOUR OF HI S FINDING. IT ,HAS BEEN NOW BEEN WELL SETTLED THAT THE INTEREST P AID FOR DELAYED PAYMENTS OF CERTAIN TYPES OF TAXES AND IMPO STS E.G. CESS, PURCHASE TAX, SALES TAX ETC. IS A DEDUCTIBLE ITEM OF EXPENDITURE. ON CONSIDERING THE FACTS OF APPELLANT' S CASE IN THE LIGHT OF THE VARIOUS CASE LAWS RELIED UPON BY IT, I FIND THAT THE EXPENDITURE IN RESPECT OF PAYMENTS OF INTEREST ON L ATE DEPOSIT OF SERVICE TAX IS AN ALLOWABLE BUSINESS EXPENDITURE IN CURRED BY THE APPELLANT FOR THE PURPOSE OF CARRYING ON ITS BUSINE SS. THE INTEREST ON DELAYED PAYMENTS OF SERVICE TAX IS CERT AINLY COMPENSATORY IN NATURE AND HENCE ALLOWABLE AS DEDUC TION AS IT IS NOT IN THE NATURE OF PENALTY. THE FACTS OF THE C ASES CITED BY THE ASSESSING OFFICER ARE COMPLETELY DIFFERENT FROM THE FACTS OF THE INSTANT CASE AS THEY RELATE TO NON-COMPLIANCE OF SP ECIFIC PROVISIONS OF INCOME-TAX ACT AND PAYMENT OF PENALTY FOR NON- PAYMENT/DELAYED PAYMENT OF SALES-TAX. PENALTY AND I NTEREST ARE TWO DIFFERENT THINGS AND THUS CANNOT BE EQUATED. TH E PENALTY IS AN IMPOST FOR AN INFRACTION/VIOLATION OF ANY LAW WH EREAS INTEREST IS AN IMPOST OF A COMPENSATORY NATURE FOR HOLDING THE STATUTORY DUES FOR A PERIOD LONGER THAN AS STIPULAT ED BY THE RELEVANT LAW. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWIN G THE VARIOUS 6 CASE LAWS RELIED UPON BY THE APPELLANT, I HOLD THAT THAT THE INTEREST CLAIMED ON DELAYED PAYMENT OF SERVICE-TAX IS AN ALLOWABLE EXPENDITURE U/S 37(1) OF THE I.T. ACT, 19 61. ACCORDINGLY, THE ADDITION OF RS.46, 11,914/- MADE B Y THE ASSESSING OFFICER IS DELETED. THIS GROUND OF APPEAL IS ALSO ALLOWED . 10. AS NOTHING HAS BEEN BROUGHT ON RECORD BY THE DE PARTMENT TO CONTROVERT THE FINDINGS OF LD. CIT(A), WE UPHOLD TH E SAME. GROUND FAILS. 11. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCEMENT IN OPEN COURT ON 26/04/2016. SD/- SD/- (BEENA A. PILLAI) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: ____/04/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.