THE ITO, WARD - 4(2), Visakhapatnam V. M/s Waltair Communications Pvt. Ltd., Visakhapatnam

ITA 594/VIZ/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1065 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 16-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMESH KUMAR
• Keywords: General deduction
• Section: 142(1); 194C; 37; 28

Judgement Text

ITA NOS.593&494/VIZAG/2013 CO NOS.125 & 126/VIZAG/2013 M/S. WALTAIR COMMUNICATIONS PVT. LTD., VISAKHAPATNA M 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NOS.593&594/VIZAG/2013 ( / ASSESSMENT YEARS: 2007-08 & 2009-10) ITO, WARD - 4(2), VISAKHAPATNAM VS. M/S. WALTAIR COMMUNICATIONS PVT. LTD., VISAKHAPATNAM [PAN: AAACW6437A ] ( % / APPELLANT) ( &'% / RESPONDENT) C.O. NOS.125&126/VIZAG/2013 (ARISING OUT OF I.T.A.NOS.593&594/VIZAG/2013) ( / ASSESSMENT YEARS: 2007-08 & 2009-10) M/S. WALTAIR COMMUNICATIONS PVT. LTD., VISAKHAPATNAM VS. ITO, WARD - 4(2), VISAKHAPATNAM ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI A. RAMESH KUMAR, DR / RESPONDENT BY : SHRI C. SUBRAHMANYAM, AR / DATE OF HEARING : 18.05.2016 / DATE OF PRONOUNCEMENT : 29.06.2016 ITA NOS.593&494/VIZAG/2013 CO NOS.125 & 126/VIZAG/2013 M/S. WALTAIR COMMUNICATIONS PVT. LTD., VISAKHAPATNA M 2 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE ARE TWO APPEALS FILED BY THE REVENUE AND CRO SS OBJECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPA RATE, BUT IDENTICAL ORDERS OF CIT(A), VISAKHAPATNAM FOR THE ASSESSMENT YEARS 2007-08 & 2009-10. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OFF, BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY WHICH IS ENGAGED IN THE BUSINESS OF PROVIDING MULTI SYSTEM OPERATOR (MSO) SERVICES TAKING SIGNALS FROM THE PAY CHANNELS AND TRANSMIT THE SAME TO THE LOCAL CABLE OPERATORS. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 1.11.2007 DECLARING LOSS OF ` 11,37,443/-. THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (H EREINAFTER CALLED AS 'THE ACT'). SUBSEQUENTLY, THE CASE HAS BEEN SEL ECTED FOR SCRUTINY AND ACCORDINGLY, NOTICE U/S 143(2) & 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND ITA NOS.593&494/VIZAG/2013 CO NOS.125 & 126/VIZAG/2013 M/S. WALTAIR COMMUNICATIONS PVT. LTD., VISAKHAPATNA M 3 FURNISHED THE INFORMATION CALLED FOR. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS PAID SUBSCRIPTION CHARGES TO PAY CHANNELS WITHOUT DEDUCTING TAX AT SO URCE U/S 194C OF THE ACT. THE A.O. FURTHER OBSERVED THAT THE EXPENDI TURE INCURRED BY THE ASSESSEE IS IN THE NATURE OF BROADCASTING AND TELEC ASTING CHARGES AS DEFINED U/S 194C OF THE ACT AND ACCORDINGLY, OUGHT TO HAVE DEDUCTED TDS ON SUCH PAYMENT AT THE TIME OF PAYMENT OR CREDI T, HOWEVER, FAILED TO DEDUCT TDS U/S 194C OF THE ACT, THEREFORE THE EX PENDITURE INCURRED UNDER THE HEAD SUBSCRIPTION CHARGES CANNOT BE ALLOW ED AS DEDUCTION. WITH THESE OBSERVATIONS, DISALLOWED THE EXPENDITURE UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE SUBMITTED THAT THE EXPENDITURE INCURRED TOWARDS SUBSCRIPTION CHARGES PAID TO PAY CHANNELS IS A DIRECT EXPENDITURE INCURRED TO EARN T HE INCOME, WHICH FALLS UNDER THE SCOPE OF SECTION 28 OF THE ACT, BUT NOT C OMING UNDER THE EXPRESS PROVISIONS PROVIDED U/S 30 TO 38 OF THE ACT , THEREFORE, NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT F OR NON DEDUCTION OF TDS. THE ASSESSEE FURTHER SUBMITTED THAT ANY EXPEND ITURE INCURRED WHICH IS IN THE NATURE OF DIRECT EXPENDITURE INCURR ED TO EARN THE INCOME ITA NOS.593&494/VIZAG/2013 CO NOS.125 & 126/VIZAG/2013 M/S. WALTAIR COMMUNICATIONS PVT. LTD., VISAKHAPATNA M 4 IS ALLOWABLE AS DEDUCTION UNDER THE PROVISIONS OF S ECTION 28 OF THE ACT, BUT NOT UNDER THE PROVISIONS OF SECTION 37 OF THE A CT. THE ASSESSEE HAS INCURRED THE EXPENDITURE TOWARDS SUBSCRIPTION CHARG ES PAID TO PAY CHANNELS WHICH IS THE MAIN ACTIVITY OF THE ASSESSEE , THEREFORE, ADJUSTABLE AGAINST THE REVENUE FOR THE PURPOSE OF D ETERMINING THE PROFIT FROM THE BUSINESS UNDER THE PROVISIONS OF SE CTION 28(1) OF THE ACT. HENCE, ANY PAYMENTS MADE IN THE NATURE OF DIRE CT EXPENDITURE ARE NOT HIT BY THE PROVISIONS OF SECTION 40(A)(IA) OF T HE ACT. IN SUPPORT OF HIS ARGUMENTS RELIED UPON THE DECISION OF ITAT HYDE RABAD BENCH IN THE CASE OF TEJA CONSTRUCTIONS VS. ACIT (2010) 36 DTR 2 20 AND ALSO ITAT DELHI BENCH DECISION IN THE CASE OF ITO VS. AAHAR C ONSUMER PRODUCTS PVT. LTD. IN ITA NO.2910/DEL/2010. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS FURNISHED BY THE ASSESSEE HELD THAT TH E EXPENDITURE INCURRED BY THE ASSESSEE IS IN THE NATURE OF DIRECT EXPENDITURE REFERRED TO IN SECTION 28 OF THE ACT, WHICH IS INCURRED TO E ARN THE REVENUE FROM THE BUSINESS, THEREFORE, NOT COMING WITHIN THE PROV ISIONS OF SECTION 40(A)(IA) OF THE ACT. WITH THESE OBSERVATIONS, DELE TED THE ADDITIONS MADE BY THE A.O. UNDER THE PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN AP PEAL BEFORE US AND RAISED THE FOLLOWING GROUNDS: ITA NOS.593&494/VIZAG/2013 CO NOS.125 & 126/VIZAG/2013 M/S. WALTAIR COMMUNICATIONS PVT. LTD., VISAKHAPATNA M 5 1. THE ORDER OF THE CIT(A) IS ERRONEOUS ON FACTS AND I N LAW. 2. THE CIT(A) ERRED IN ACCEPTING THE ASSESSEE'S SUB MISSION THAT A LITERAL READING OF THE PROVISIONS CONTAINED IN SECT ION 40(A)(IA) WOULD IMPLY THAT THE DISALLOWANCE UNDER THAT SECTION COME S INTO PLAY FOR NON- DEDUCTION OF TDS ONLY ON THE EXPENSES REFERRED TO I N SECTIONS 30 TO 38 OF THE INCOME TAX ACT. 3. THE CIT(A) ERRED IN TREATING THE PAYMENTS MADE T O PAY CHANNELS AS DIRECT EXPENSES FOR DETERMINING PROFITS U/S 28 O F THE L.T. ACT, BUT DO NOT FALL UNDER THE PROVISIONS OF SECTIONS 30 TO 38 OF THE ACT. 4. THE CIT(A) IGNORED THE FACT THAT THE ASSESSEE IT SELF DEDUCTED TAX AT SOURCE ON SOME OF THE PAYMENTS MADE TO THE CHANN EL COMPANIES. 5. THE ASSESSEE ITSELF ADMITTED THAT IT IS A MEDIAT OR BETWEEN THE CHANNEL COMPANIES AND THE DELIVERY OPERATORS WHICH MAKES ITS PAYMENT IN THE CATEGORY OF COMMISSION. 6. ANY OTHER GROUND THAT MIGHT BE RAISED AT THE TI ME OF HEARING. 4. THE LD. D.R. SUBMITTED THAT THE LD. CIT(A) ERRED IN ACCEPTING THE ASSESSEES EXPLANATION THAT THE EXPENDITURE INCURRE D BY THE ASSESSEE IS IN THE NATURE OF DIRECT EXPENDITURE TO EARN THE INC OME FROM THE BUSINESS WHICH IS COMING UNDER THE PROVISIONS OF SE CTION 28(1) OF THE ACT AND HENCE CANNOT BE DISALLOWED U/S 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX AT SOURCE. THE LD. D.R. FURTHER S UBMITTED THAT A LITERAL READING OF THE PROVISIONS CONTAINED IN SECTION 40(A )(IA) OF THE ACT WOULD IMPLY THAT THE DISALLOWANCE UNDER THAT SECTION COME S INTO PLAY FOR NON DEDUCTION OF TDS ONLY ON THE EXPENSES REFERRED TO I N SECTION 30 TO 38 OF THE ACT. THE CIT(A) IGNORING THE FACT THAT THE A SSESSEE ITSELF HAS DEDUCTED TAX AT SOURCE ON SOME OF THE PAYMENTS MADE TO PAY CHANNEL ITA NOS.593&494/VIZAG/2013 CO NOS.125 & 126/VIZAG/2013 M/S. WALTAIR COMMUNICATIONS PVT. LTD., VISAKHAPATNA M 6 COMPANIES, HOWEVER, FAILED TO EXPLAIN NON DEDUCTION OF TAX AT SOURCE ON THE REMAINING AMOUNT PAID TO SAME PAY CHANNELS. THE ASSESSEE ITSELF ADMITTED THAT IT IS A MEDIATOR BETWEEN THE P AY CHANNELS AND THE DELIVERY OPERATORS WHICH MAKES IT PAYMENT IN THE CA TEGORY OF COMMISSION WHICH ATTRACTS TDS PROVISIONS. THE ASSE SSEE HAS FAILED TO EXPLAIN THE REASONS FOR NON DEDUCTION OF TAX AT SOU RCE ON PART PAYMENTS, THEREFORE, THE A.O. HAS RIGHTLY DISALLOWE D THE AMOUNT U/S 40(A)(IA) OF THE ACT AND HIS ORDER SHOULD BE UPHELD . 5. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). THE A .R. FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT STARTS WITH NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIO N 30 TO 38 OF THE ACT THE FOLLOWING AMOUNT SHALL NOT BE DEDUCTED. O N A CLOSE READING OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, IT WOULD APPLY WITH REGARD TO THE PAYMENTS MADE RELATED TO SECTION 30 TO 38 OF THE ACT ALONE. THIS INDICATES THAT ANY ITEM OF EXPENDITURE ALLOWAB LE UNDER THE PROVISIONS OF THE ACT PRECEDING TO SECTION 30 OF TH E ACT ARE NOT COVERED BY THE SAID STATUTORY DISALLOWANCE ENVISAGED UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE A.R. FURTHER SUBM ITTED THAT PAYMENTS MADE BY THE ASSESSEE TO PAY CHANNELS REPRESENTS DIR ECT COST INCURRED ITA NOS.593&494/VIZAG/2013 CO NOS.125 & 126/VIZAG/2013 M/S. WALTAIR COMMUNICATIONS PVT. LTD., VISAKHAPATNA M 7 FOR THE PURPOSE OF EARNING INCOME AND THEREFORE ADJ USTABLE AGAINST REVENUE FOR THE PURPOSE OF DETERMINING THE PROFIT P ROVIDED U/S 28(1) OF THE ACT BEFORE ALLOWING ANY DEDUCTIONS TOWARDS EXPE NDITURE/DEDUCTIONS ENVISAGED UNDER THE PROVISIONS OF SECTION 30 TO 43D OF THE ACT. SINCE, THE EXPENDITURE INCURRED BY THE ASSESSEE IS IN THE NATURE OF DIRECT EXPENDITURE, THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TDS IS NOT APPLICABLE. THE CIT(A) HAS RIGHTLY DELETED THE ADDITIONS THEREFORE, HIS ORDER SHOULD BE UPHELD. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSESSEE IS INVOLVED IN THE BUSINESS OF MULTI SYSTEM OPERATO R FOR PAY CHANNELS. THE ASSESSEE RECEIVES SIGNALS FROM THE PAY CHANNELS AND TRANSMITS THE SAME TO THE CABLE OPERATORS. THE ASSESSEE HAS PAID SUBSCRIPTION CHARGES TO PAY CHANNELS WITHOUT DEDUCTION OF TAX AT SOURCE. THE A.O. WAS OF THE OPINION THAT EXPENDITURE INCURRED BY THE ASSESSEE IS IN THE NATURE OF BROADCASTING AND TELECASTING CHARGES AS D EFINED U/S 194C OF THE ACT WHICH ATTRACTS TDS PROVISIONS OF SEC. 194C. THE A.O. FURTHER WAS OF THE OPINION THAT THE ASSESSEE ITSELF HAS DED UCTED TDS ON PART PAYMENT MADE TO THE PAY CHANNELS, HOWEVER FAILED TO OFFER ANY REASONS FOR NON DEDUCTION OF TAX AT SOURCE ON REMAINING AMO UNT TO THE SAME ITA NOS.593&494/VIZAG/2013 CO NOS.125 & 126/VIZAG/2013 M/S. WALTAIR COMMUNICATIONS PVT. LTD., VISAKHAPATNA M 8 PAY CHANNELS. IT IS THE CONTENTION OF THE ASSESSEE THAT THE EXPENDITURE INCURRED UNDER THE HEAD SUBSCRIPTION CHARGES PAID TO PAY CHANNELS IS IN THE NATURE OF DIRECT EXPENDITURE WHICH IS INCURR ED TO EARN THE REVENUE FROM THE BUSINESS COMING UNDER THE PROVISIO NS OF SECTION 28(1) OF THE ACT, CONSEQUENTLY, DISALLOWANCE PROVID ED U/S 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TDS AT SOURCE IS NOT A PPLICABLE. 7. THE QUESTION BEFORE US IS WHETHER EXPENDITURE IN CURRED BY THE ASSESSEE TOWARDS SUBSCRIPTION CHARGES PAID TO PAY C HANNELS IS IN THE NATURE OF DIRECT EXPENDITURE COMING UNDER THE PROVI SIONS OF SECTION 28(1) OF THE ACT OR AN EXPENDITURE COMING UNDER THE GENERAL DEDUCTIONS UNDER THE PROVISIONS OF SECTION 37 OF TH E ACT. IT IS THE CONTENTION OF THE ASSESSEE THAT IT HAS INCURRED THE EXPENDITURE TO EARN THE INCOME. THE EXPENDITURE INCURRED IS IN THE NATU RE OF DIRECT EXPENDITURE, THEREFORE, NOT COMING UNDER ANY OF THE PROVISIONS OF SECTION 30 TO 38 OF THE ACT, THEREFORE, NO DISALLOW ANCE CAN BE MADE FOR WANT OF NON DEDUCTION OF TAX AT SOURCE. WE FIND THAT THE LD. CIT(A) AFTER CONSIDERING THE EXPLANATIONS FURNISHED BY THE ASSESSEE CATEGORICALLY HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS IN THE NATURE OF DIRECT EXPENSES, ADJUSTABLE AGAINST T HE REVENUE FOR DETERMINATION OF PROFIT U/S 28(1) OF THE ACT, BUT N OT AN EXPENDITURE ITA NOS.593&494/VIZAG/2013 CO NOS.125 & 126/VIZAG/2013 M/S. WALTAIR COMMUNICATIONS PVT. LTD., VISAKHAPATNA M 9 COVERED U/S 30 TO 38 OF THE ACT, THEREFORE, DISALLO WANCE PROVIDED U/S 40(A)(IA) OF THE ACT IS NOT ATTRACTED. THE RELEVAN T PORTION OF THE CIT(A) ORDER IS EXTRACTED BELOW: 9.4 I HAVE CONSIDERED THE SUBMISSION MADE. THE PROV ISIONS CONTAINED IN SECTION 40(A)(IA) STATES AS FOLLOWS: '40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SE CTIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMP UTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. (A) IN THE CASE OF ANY ASSESSEE (IA) ANY INTEREST, COMMISSION OR BROKERAGE, [RENT, ROYALTY] FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDIN G SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEE N DEDUCTED OR, AFTER DEDUCTION, [HAS NOT BEEN PAID ON OR BEFOR E THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139]. 9.5 A LITERAL READING OF THE ABOVE PROVISION INDICA TES THAT THE DISALLOWANCE U/S.40(A)(IA) COMES INTO PLAY FOR NON- DEDUCTION OF TDS ON THE EXPENSES REFERRED IN SECTION 30 TO 38 OF THE I.T . ACT. THE NATURE OF PAYMENT TO THE CHANNEL COMPANIES IS FOR DISTRIBUTIO N OF THE CHANNELS TO THE SUBSCRIBERS THROUGH CABLE OPERATORS, AND THE PA YMENT IS MADE FOR THE PURPOSE WHICH IS NOT IN DISPUTE. THE SUBSCRIPTION R EVENUE IS EARNED FROM THE SUBSCRIBERS THROUGH THE CABLE OPERATORS. THUS, THE PAYMENT OF SUBSCRIPTION TO CHANNEL COMPANIES IS A DIRECT COST FOR EARNING THE SUBSCRIPTION REVENUE. I HAVE ALSO CAREFULLY EXAMINED TO NOTE THAT THE PAYMENT MADE TO THE CHANNEL COMPANIES IS NOT AN EXP ENSE COVERED IN SECTIONS 30 TO 38 OF THE I.T. ACT. IT CANNOT BE CONSI DERED AS A GENERAL EXPENSE FALLING U/S.37 OF THE I.T. ACT. 9.6 THE SCOPE OF SECTION 28 AND THE EXPENSES EMBEDD ED IN ASCERTAINING PROFIT U/S 28 IS DISCUSSED IN THE SAMP ATH IYENGARS LAW OF INCOME TAX 11 TH EDITION PAGE 4525 AS FOLLOWS: AS MAY BE SEEN FROM THE ABOVE DECISIONS, WHAT IS R EFERRED TO IN SECTION 28 ARE THE COMMERCIAL PROFITS AS NOTED IN T HE SUPREME COURT DECISION FROM WHICH ONLY THE STATUTORY PROFIT S ASSESSABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS ARE TO BE COMPUTED IN ACCORDANCE WITH PROVISIONS OF SECTION 30 TO 38, SO AS TO BE ITA NOS.593&494/VIZAG/2013 CO NOS.125 & 126/VIZAG/2013 M/S. WALTAIR COMMUNICATIONS PVT. LTD., VISAKHAPATNA M 10 INCLUDED IN THE TOTAL INCOME FOR PURPOSES OF TAX. IN OTHER WORDS, THE INCOME REFERRED TO IN SECTION 28 ARE PROFITS AN D GAINS WHICH ARE THE GROSS PROFITS OR THE COMMERCIAL PROFITS ARRIVED AT IN THE TRADING AND MANUFACTURING ACCOUNT AFTER ALLOWING THE NECESS ARY TRADING, CONSTRUCTION AND MANUFACTURING COSTS, BUT BEFORE AD JUSTMENT FOR ALLOWANCE OF EXPENSES OR DEDUCTION AND ALSO DISALLO WANCES ENVISAGED UNDER SECTIONS 30 TO 38. SUCH COMMERCIAL PROFITS OR THE GROSS PROFITS ARE THOSE WHICH ARE ARRIVED AT AFTER DEDUCTING THE MANUFACTURING OR TRADING OR CONSTRUCTION COST. SUC H TRADING OR MANUFACTURING OR CONSTRUCTION COSTS ARE NOT THOSE L ISTED IN SECTION 30 TO 38 REFERRED TO IN THE NON OBSTANTE CLAUSE OF SECTION 40(A)(IA) SEEKING TO DISALLOW PAYMENTS IN RESPECT OF DEFAULT OF TAX DEDUCTION, REFERRED TO UNDER VARIOUS SECTIONS 194A, 194C, 194H , 194I AND 194J. THIS MAY BE ILLUSTRATED BY THE FACT THAT EVE N ITEMS LIKE PURCHASES AND WAGES NEED NOT FIGURE IN SECTIONS 30 TO 38, BUT ALL THE SAME CONSIDERED AS ALLOWED UNDER SECTION 28 . THE COURTS HAVE HELD THAT BUSINESS LOSSES ON GROUNDS OF COMMER CIAL EXPEDIENCY MAY BE ELIGIBLE FOR DEDUCTION IN COMPUTA TION UNDER SECTION 28 ITSELF. 9.7 I AM OF THE VIEW THAT THE SUBJECT PAYMENTS MADE TO CHANNEL COMPANIES IS IN THE NATURE OF DIRECT EXPENSES ADJUS TABLE IN THE DETERMINATION OF PROFIT U/S 28, AND IS NOT AN EXPEN SE COVERED IN SECTIONS 30 TO 38 OF THE I.T. ACT; THEREFORE, THE DISALLOWAN CE U/S 40(A)(IA) IS NOT ATTRACTED. ACCORDINGLY, THE IMPUGNED ADDITION MADE U/S 40(A)(IA) IN REGARD TO PAYMENT TO CHANNEL COMPANIES IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED IN FAVOUR OF THE APPELL ANT. 8. THE FACTS REMAIN SAME BEFORE US. THE REVENUE HAS FAILED TO BROUGHT ON RECORD ANY EVIDENCES TO PROVE THAT THE F INDINGS OF THE FACT RECORDED BY THE LD. CIT(A) IS INCORRECT. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITIONS M ADE BY THE A.O. UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE AC T, BY HOLDING THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS NOT COMING UNDER THE PROVISIONS OF SECTION 30 TO 38 OF THE ACT, HENCE NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) FOR NON DEDUCTION OF TDS. WE DO NOT SEE ANY ERROR ITA NOS.593&494/VIZAG/2013 CO NOS.125 & 126/VIZAG/2013 M/S. WALTAIR COMMUNICATIONS PVT. LTD., VISAKHAPATNA M 11 OR INFIRMITY IN THE ORDER PASSED BY THE CIT(A). HEN CE, WE INCLINED TO UPHOLD THE CIT(A) ORDER AND REJECT THE GROUND RAISE D BY THE REVENUE. 9. THE ASSESSEE HAS FILED CROSS OBJECTIONS SUPPORTI NG THE ORDER OF THE LD. CIT(A). THEREFORE, FOR THE REASONS RECORDED IN THE PRECEDING PARAGRAPHS, WE DISMISS THE CROSS OBJECTIONS FILED B Y THE ASSESSEE AS NOT MAINTAINABLE. 10. IN THE RESULT, THE APPEALS FILED BY THE REVENUE IN ITA NOS.593 & 594/VIZAG/2013 AND THE CROSS OBJECTIONS FILED BY TH E ASSESSEE IN CO NO.125 & 126/VIZAG/2013 ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 29 TH JUN16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 29.06.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO, WARD-4(2), VISAKHAPATNA M 2. / THE RESPONDENT M/S. WALTAIR COMMUNICATIONS PVT . LTD., 4 TH FLOOR, BHUVANESWARI PLAZA, DWARAKANAGAR, VISAKHAPATNAM 3. + / THE CIT-2, VISAKHAPATNAM ITA NOS.593&494/VIZAG/2013 CO NOS.125 & 126/VIZAG/2013 M/S. WALTAIR COMMUNICATIONS PVT. LTD., VISAKHAPATNA M 12 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM