DCIT, New Delhi V. M/s. Diamond Magazines Pvt. Ltd., New Delhi

ITA 5006/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3648 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 12-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY NATH
• Keywords: Business expenditure; Deemed dividend
• Section: 143(3)

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5006/DEL/2014 (ASSESSMENT YEAR: 2010 - 11 ) DCIT, CIRCLE - 10(1), NEW DELHI VS. DIAMOND MAGAZINES PVT. LTD, X - 30, OKHLA INDUSTRIAL AREA, PHASE - II, NEW DELHI PAN:AABCD9548E (APPELLANT) (RESPONDENT) REVENUE BY : SHRI ATIQ AHMAD, SR. DR ASSESSEE BY: SHRI SANJAY NATH, CA DATE OF HEARING 02/11 / 2017 DATE OF PRONOUNCEMENT 3 1 / 01 / 201 8 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS APPEAL IS PREFERRED BY REVENUE AGAIN S T THE ORDER OF THE LD CIT(A) - XIII, NEW DELHI DATED 30.06.2014 RAISING FOLLOWING THREE GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 10476993/ - MADE BY THE ASSESSING OFFICER ON A/C OF ADVERTISEMENT EXPENSES BY HOLDING THAT PROVISION OF SECTION 40(A)(IA) IS NOT APPLICABLE. 2. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 704969/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BRAND PROMOTION EXPN. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD CIT(A) HAS ERRED IN D ELETING THE ADDITION OF RS. 2052195/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEMAND DIVIDEND BY WRONGLY HOLDING THAT THE TRANSACTION WERE ALL ON THE BUSINESS ACCOUNT WITHOUT CONSIDERING THE CONTRARY FINDING OF THE AO IN THIS RESPECT. 2. THE BRIEF FACT S OF THE CASE ARE THAT ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF PUBLISHING AND SALE OF MAGAZINES. IT FILED ITS RETURN OF INCOME ON 15.10.2010 DECLARING INCOME OF RS. 2050494/ - . THE ASSESSMENT U/S 143(3) OF THE ACT WAS PASSED ON 05.02.2013 AT TOTAL INCOME OF RS. DCIT VS.DIAMOND MAGAZINES PVT. LTD, ITA NO. 5006/DEL/2014 (ASSESSMENT YEAR: 2010 - 11) PAGE | 2 15683572/ - . THE ASSESSEE AGGRIEVED WITH THE ORDER OF THE LD AO PREFERRED APPEAL BEFORE THE LD CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. ON THE DISALLOWANCES WHICH WERE DELETED BY THE LD CIT(A) ARE CONTESTED BEFORE US BY REVENUE. 3. THE FIRST GROUND OF APPEAL RELATES TO DISALLOWANCE DELETED BY THE LD CIT(A) OF RS. 10476993/ - ON ACCOUNT OF ADVERTISEMENT EXPENSES HOLDING THAT PROVISIONS OF SECTION 40(A)(IA) DOES NOT APPLY. THE LD ASSESSING OFFICER FOUND THAT ASSESSEE HAS MADE THE PAYMEN T UNDER THE HEAD ADVERTISEMENT AND PUBLICITY TO VARIOUS PUBLISHERS / OTHERS BUT NO TAX HAS BEEN DEDUCTED AT SOURCE THEREON. THE ASSESSEE SUBMITTED THAT NO TAX IS REQUIRED TO BE DEDUCTED AS THESE ARE THE TRANSACTION OF PURCHASE OF THE BOOKS. THE LD ASSESS ING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND HELD THAT TAX IS REQUIRED TO BE DEDUCTED. HENCE HE DISALLOWED THE ABOVE SUM. THE LD CIT(A) DELETED THE SAME HOLDING THAT THE TRANSACTIONS OF RS. 3913925/ - ARE THE TRANSACTIONS IN THE NATURE OF PURCHASE OF GOODS WITH RESPECT TO TWO PARTIES AND WITH RESPECT TO THE OTHER TWO PAYMENTS OF RS. 6563068/ - , HE SUBMITTED THAT THEY ARE BEING PURELY BARTER IN NATURE AND NO PAYMENTS HAVE BEEN MADE, HENCE, NO TAX IS REQUIRED OT BE DEDUCTED. HE RELIED ON THE DECISION OF 10 TAXMANN.COM 181. 4. THE LD DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUBMITTED THAT IN CASE OF BARTER SYSTEM TAX IS REQUIRED TO BE DEDUCTED AS PAYMENTS HAVE BEEN MADE FOR WORK OF ADVERTISEMENT. 5. THE LD AUTHORISED REPRESENTATIVE RELIED UPON THE ORDER OF THE LD CIT (A). 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. APPARENTLY THE ASSESSEE HAS ENTERED INTO TRANSACTION OF THE PURCHASE OF FINISHED GOODS IN THE SHAPE OF BOOKS WITH RESPECT TO TOTAL PAYMENT OF RS. 3913925/ - , THEREFORE, SAME ARE SALE OF GOODS. HENCE, WE CONFIRM THE FINDING OF THE LD CIT(A) IN DELETING THE ABOVE DISALLOWANCE. HOWEVER, THE ASSESSEE HAS MADE PAYMENTS TO TWO PARTIES NAMELY PRATIYOGITA DARPAN OF RS. 6463000/ - AND GENESIS COLOUR LAB OF RS. 100068/ - . FROM PRATIYOGITA DARPAN ACCOUNT ASSESSEE HAS DCIT VS.DIAMOND MAGAZINES PVT. LTD, ITA NO. 5006/DEL/2014 (ASSESSMENT YEAR: 2010 - 11) PAGE | 3 PLACED AT PAGE NO. 23 TO 27 OF THE PAPER BOOK WHICH SHOWS THAT ASSESSEE IS PURCHASING BOOKS FROM THIS PART Y SUCH AS COMPETITION SCIENCE VISION, SAMNAYA GYAN DARPAN AND PRATIYOGITA DARPAN. THEREFORE, CREDIT TO ACCOUNT OF THESE PARTIES ON ACCOUNT OF PURCHASES OF GOODS WHEREAS, DEBIT TO THIS ACCOUNT OF THE PARTY IS ON ACCOUNT OF ADVERTISEMENT SALE. THE BILL S ARE ALSO PLACE D AT PAGE NO. 28 TO 33 OF THE PAPER BOOK WHICH ALSO SHOWS THAT ASSESSEE HAS RECEIVED THE ABO VE MAGAZINES AND BOOKS FROM THE SUPPLIER. THEREFORE, THIS ALSO IS TRANSACTION OF PURCHASE OF GOODS. MERELY BECAUSE THERE ARE TRANSACTION OF RECEIPT OF SERVICE AND SALE IT DOES NOT BECOME BARTER SALE. FACTS OF THE DECISIONS AS RELIED ARE DIFFERENT. HOWEVER, WITH RESPECT TO THE PAYMENTS MADE TO GENESIS COLOUR LAB THE TRANSACTION IS FOR ADVERTISEMENT ON WHICH TAX SHOULD HAVE BEEN DEDUCTED. HOWEVER, BY VIRTUE OF INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) W.E.F. 01.04.2013, IF THE ASSESSEE FURNISHES NECESS ARY EVIDENCES STATED THEREIN THEN NO DISALLOWANCE IS REQUIRED TO BE MADE. THE ABOVE PROVISO IS HELD TO BE RETROSPECTIVE IN NATURE AS IT REMOVES HARDSHIP TO THE ASSESSEE IN VIEW OF THIS TO THE EXTENT OF DISALL O WANCE OF RS. 1 , 00 , 068/ - ON ACCOUNT OF PAYMENT MADE TO GENESIS COLOUR LAB IS SENT BACK TO THE FILE OF THE LD ASSESSING OFFICER WITH A DIRECTION TO COMPLY AND SUBMIT NECESSARY DETAILS. THE LD ASSESSING OFFICER MAY VERIFY THE SAME AND DELETE THE ADDITION/ DISALLOWANCE IF FOUND IN ACCORDANCE WITH THE LAW. THEREFORE, WE COFIRM THE FINDING OF THE LD CIT(A) DELETING THE DISALLOWANCE OTHER THAN THE ABOVE SUM OF RS. 1 , 00 , 068 / - . THIS GROUND OF APPEAL OF THE REVENUE IS PARTLY ALLOWED. 7. GROUND NO. 2 OF THE APPEAL IS WITH RESPECT TO ADDITION OF RS. 704969/ - ON ACCO UNT OF BRAN D PROMOTION EXPENSES. DURING THE YEAR ASSESSEE HAS MADE PAYMENT TO ITC LTD AND MAJESTIC PARK PLAZA FOR MEETING . THE ASSESSEE COULD NOT FURNISH THE NECESSARY EVIDENCE AS DESIRE BY THE LD AO THEREFORE, SAME WAS DISALLOWED. ON APPEAL BEFORE THE LD CIT(A) IT IS SUBMITTED THAT THE ABOVE EXPENDITURE WAS INCURRED IN MAY 2009 OF CUSTOMERS MEET AND THEREFORE, IT WAS A NORMAL BUSINESS EXPENDITURE. BEFORE THE LD CIT(A) AS WELL AS BEFORE THE LD AO THE ASSESSEE SUBMITTED DCIT VS.DIAMOND MAGAZINES PVT. LTD, ITA NO. 5006/DEL/2014 (ASSESSMENT YEAR: 2010 - 11) PAGE | 4 THE COPIES OF THE BILL AND PROOF OF PA YMENT. THEREFORE, THE D CIT(A) DELETED THE SAME. 8. THE LD DR RELIED UPON THE ORDER OF THE LD AO WHEREAS THE LD AR RELIED UPON THE ORDER OF THE LD CIT(A). 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. THE ASSESSEE HAS EXPLAINED THAT ABOVE EXPENDITURE HAS BEEN INCURRED ON ACCOUNT OF DEALERS AND AGENTS MEET. NATURALLY THE COPIES OF THE BILL AND PROOF OF PAYMENT ALSO SHOWS THE SAME. THE EXPENDITURE INCURR ED BY THE ASSESSEE WAS ALSO FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. IN VIEW OF THIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CIT(A). THEREFORE, GROUND NO. 2 OF THE APPEAL OF THE REVENUE IS DISMISSED. 10. GROUND NO. 3 OF THE APPEAL IS WITH RESPECT TO THE ADDITION OF RS. 2052 195/ - U/S 2(22)(E) OF THE ACT. THE ASSESSEE HAS RECEIVED EXCESS PAYMENT OF THE ABOVE SUM FROM M/S. DIAMOND POCKET BOOKS PVT LTD. THERE WERE COMMON SHARE HOLDERS IN THE ASSESSEE AS WELL AS THE PAYER COMPANY. THEREFORE, THE LD AO HELD THAT THE ABOVE SUM IS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. THE LD CIT(A) DELETED THE ABOVE ADDITION FOR THE REASON THAT AFTER COMPLETE EXAMINATION OF COPY OF ACCOUNT OF THE DIAMOND POCKET BOOKS PVT. LTD IT WAS CLEAR THAT THE TRANSACTIO NS ARE CONSISTING OF PURCHASE AND SALES. HE THEREFORE, HELD THAT IT CANNOT BE A CASE OF DEEMED DIVIDEND. 11. THE LD DR RELIED UPON THE ORDERS OF THE LD AO WHEREAS, THE LD AR RELIED UPON THE ORDER OF THE LD CIT(A). HE FURTHER SUBMITTED THE CIRCULAR OF CBDT WH ICH ACCEPTS THE VIEW THAT IN THE BUSINESS TRANSACTION PROVISION OF SECTION 2(22)(E) DOES NOT APPLY. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. THE COPY OF THE ACCOUNT OF THE DIAMOND POCKET BOOKS PVT. LTD FROM THE BOOKS OF ASSESSEE HAVE BEEN TABUL ATED BY THE LD AO IN PARA NO. 7.1 OF THE ORDER. THE ABOVE TRANSACTION SHOWS THAT ALL THE TRANSACTIONS ARE WITH RESPECT TO THE ADVERTISEMENT, SALES, SUBSCRIPTION AND PURCHASES ONLY. THE LD ASSESSING OFFICER HAS FURTHER STATED THAT APPROXIMATELY 30% OF THE T OTAL ENTRIES ARE ONLY FUND TRANSFER ENTRIES AND THEREFORE, THE ADDITION WAS MADE. THE PAGE DCIT VS.DIAMOND MAGAZINES PVT. LTD, ITA NO. 5006/DEL/2014 (ASSESSMENT YEAR: 2010 - 11) PAGE | 5 NO. 8 TO 22 OF THE PAPER BOOK SHOWS THE DETAILED ACCOUNT OF THE DIAMOND POCKET BOOKS PVT. LTD. FROM THE EXAMINATION OF THE ABOVE ACCOUNT IT IS APPARENT THAT THE ASSE SSEE PURCHASES THE MATERIAL AS WELL AS SALES MATERIAL TO THIS PARTY. IT IS ALSO EVIDENT THAT THERE ARE TRANSACTION OF RECEIPT OF THE FUNDS AS WELL AS PAYMENT OF THE FUNDS. THE ABOVE TRANSACTION IS A MIXED ACCOUNT SHOWS THAT PAYMENTS ARE FOR THE PURCHASES A ND RECEIPTS ARE FOR THE SALE OF THE GOODS. MERELY BECAUSE THERE ARE PAYMENT AND RECEIPT IN A MIXED TRANSACTION OF PURCHASE AND SALE OF GOODS IT MAY ALSO PARTAKE THE CHARACTER OF TRADE ADVANCES WHICH ARE OF THE COMMERCIAL NATURE. THE CBDT ISSUED A CIRCULAR NO. 19/2017 DATED 12.06.2017 WHEREIN, IT HAS BEEN STATED THAT IT IS A SETTLED POSITION THAT TRADE ADVANCES WHICH ARE IN THE NATURE OF COMMERCIAL TRANSACTIONS WOULD NOT FALL WITHIN THE AMBIT OF THE WORD ADVANCE IN SECTION 2(22)(E) OF THE ACT. IN VIEW OF T HIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CIT(A) IN DELETING THE ABOVE ADDITION. IN THE RESULT GROUND NO. 3 OF THE APPEAL IS DISMISSED. 13. IN THE RESULT APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 1 / 01/2018 . - S D / - - S D / - ( AMIT SHUKLA ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 1 / 01/2018 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI