M/S EXPRESS PUBLICATIONS (MADURAI) LTD, CHENNAI V. DCIT COMPANY CIRCLE 11(1) (NOW DCIT, CORPORATE CIRCLE 2 (1), CHENNAI

ITA 615/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5018 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 20-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: T N SEETHARAMAN
• Keywords: Business income; Proportionate interest; Additional evidence; Non-deduction of tax; Commercial expediency; TDS; Rule 8D
• Section: 43B; 143(3); 14A; 40(a)(ia); 195; 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , , [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ] ./I.T.A. NO. 615/CHNY/2018 ! / ASSESSMENT YEAR : 2009-10. EXPRESS PUBLICATIONS (MADURAI) LTD, NO.29, 2 ND MAIN ROAD, AMBATTUR INDUSTRIAL ESTATE, CHENNAI 600 058. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1) CHENNAI. ./I.T.A. NO.706/CHNY/2018 ! / ASSESSMENT YEAR : 2009-10. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1) CHENNAI. VS. EXPRESS PUBLICATIONS (MADURAI) LTD, NO.29, 2 ND MAIN ROAD, AMBATTUR INDUSTRIAL ESTATE, CHENNAI 600 058. [PAN AAACI 0842D] ( / APPELLANT) ( /RESPONDENT) ASSESSEE BY : SHRI. T.N. SEETHARAMAN, ADV DEPARTMENT BY : SHRI. CLEMENT RAMESH KUMAR, ADDL. CIT. ' # $ % /DATE OF HEARING : 09-04-2019 &'! $ % /DATE OF PRONOUNCEMENT : 27-05-2019 ITA NO. 615 & 706/2018. :- 2 -: / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE RESPECTIVELY DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-6 (HEREINAFTER CALLED AS CIT (A), CHENNAI DATED 30.11.2017 FOR THE ASSESSMENT YEAR 2009-10. 2. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY M/S. EXPRESS PUBLICATIONS (MAD URAI) LTD IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF PRINTING A ND PUBLISHING OF NEWSPAPERS AND PERIODICALS. THE RETURN OF INCOME F OR THE AY 2009-10 WAS FILED ON 16.12.2009 DISCLOSING BUSINESS LOSS O F RS.3,02,23,164/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT W AS COMPLETED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(2), CHENNAI (HEREINAFTER CALLED AO) VIDE ORDER 29.12 .2011 PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AT TOTAL INCOME OF RS. 3,38,47,111/-. WHILE DOING SO, THE AO MADE THE FOLLOWING DISALLOWANCES:- ITA NO. 615 & 706/2018. :- 3 -: (I) FEES PAID FOR INCREASING HE AUTHORIZED SHARE CAPITAL : 1,13,200 (II) DISALLOWANCE U/S.43 : 13,92,220 (III) DISALLOWANCE OF EXPENDITURE U/S.14A READ WITH RULE 8D : 1,73,20,973 (IV) DISALLOWANCE U/S.37(1) : 7,90,225 (V) DISALLOWANCE U/S. 40(A)(I) : 26,31,000 (VI) DISALLOWANCE OF TRANSSHIPMENT CHARGES : 54,96,637 (VII) CLAIM OF PAYMENT OF INCENTIVE : 76,64,585 (VIII) COMMON NEWS SERVICE CHARGES : 66,23,665 (IX) DISALLOWANCE OF INTEREST PAID ON AMOUNT DIVERTED TO GROUP COMPANIES. : 1,00,05,643 3. BEING AGGRIEVED BY THE ABOVE ADDITIONS, AN APPEAL W AS PREFERRED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER PARTLY ALLOWED THE APPEAL, WHILE DOING SO, LD. COMMISSIONE R OF INCOME TAX (APPEALS) DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION ON ACCOUNT OF FEES PAID FOR INCREASING THE AUTHORIZED CAPITAL OF F1,13,200/- ON THE GROUND THAT EXPENDITURE DOES NOT FALL WITHIN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER C ONSIDERATION AND ALSO DELETED THE ADDITION OF F1,73,20,973/- MADE U NDER SECTION 14A ITA NO. 615 & 706/2018. :- 4 -: R.W.RULE 8 ON THE GROUND THAT IN THE ABSENCE OF EX EMPT INCOME RESORT TO PROVISIONS OF SECTION 14A OF THE ACT CANNOT BE M ADE PLACING RELIANCE ON THE DECISION OF JURISDICTIONAL HIGH COURT IN TH E CASE OF REDINGTON (INDIA) LTD VS. ADDL. CIT, 392 ITR 633, AND ALSO DELETED THE DISALLOWANCE OF TRANSSHIPMENT CHARGES OF F54,96,637 /- CONSIDERING THE ADDITIONAL EVIDENCE FILED BEFORE HIM AFTER CAL LING FOR THE REMAND REPORT FROM THE ASSESSING OFFICER. AS REGARDS TO THE ADDITION ON ACCOUNT OF SECTION 43B OF THE ACT OF F13,92,220/-, CONSIDERING THE EVIDENCE FILED BEFORE HIM, THE PAYMENTS OF PR OFESSIONAL TAX AND PROPERTY TAX/WATER TAX, DIRECTED THE ASSESSING OFF ICER TO ALLOW TO THE EXTENT OF F8,75,184/-, AS REGARDS TO THE BALANCE OF DISALLOWANCE, THE MATTER WAS RESTORED TO THE LD. ASSESSING OFFICER FO R THE PURPOSE OF VERIFYING THE CLAIM OF THE ASSESSEE THAT THE TAXES HAS BEEN PAID. THE LD. CIT(A) CONFIRMED THE ADDITION OF F26,31,000/- MADE U/S.40(A)(I) OF THE ACT FOR NON DEDUCTION OF TAX AT SOURCE PLAC ING RELIANCE ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN T HE CASE OF CIT VS. POOMPUHAR SHIPPING CORPORATION LTD 282 ITR 3. AS REGARDS TO DISALLOWANCE OF INCENTIVE OF F76,64,584/-, LD. COMM ISSIONER OF INCOME TAX (APPEALS) HELD THAT PAYMENTS MADE IN THE NATUR E OF COMMISSION AND THEREFORE TDS PROVISION IS SQUARELY APPLICABLE AND ACCORDINGLY SUSTAINED THE ADDITION. REGARDING DISALLOWANCE OF COMMON NEWS SERVICE CHARGES OF F66,23,665/-, LD. COMMISSIONER O F INCOME TAX ITA NO. 615 & 706/2018. :- 5 -: (APPEALS) CONFIRMED THE ADDITION ON THE GROUND THAT THE NEWS GATHERING IS A TECHNICAL MATTER, THEREFORE ATTRACTS THE TDS PROVISIONS, ACCORDINGLY, CONFIRMED THE ADDITION. AS REGARDS TO THE DISALLOWANCE OF INTEREST OF F1,00,05,643/- ON THE ALLEGED DIVERSIO N OF FUNDS TO THE SUBSIDIARY COMPANIES, THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) HAD NOT ACCEPTED THE CONTENTION THAT LOANS WERE ADV ANCED OUT OF NON INTEREST BEARING FUNDS FOR WANT OF DETAILS. THUS, THE APPEAL FILED BY THE ASSESSEE BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS) CAME TO BE PARTLY ALLOWED. 4. THE ASSESSEE IS IN APPEAL BEFORE US BEING AGGRIEVE D BY THE CONFIRMATION OF DISALLOWANCE BY THE LD. COMMISSION ER OF INCOME TAX (APPEALS) IN ITA NO.615/CHNY/2018, SIMILARLY THE R EVENUE IS IN APPEAL IN ITA NO.706/CHNY/2018 ON THE GROUNDS WHIC H ARE DECIDED IN FAVOUR OF THE ASSESSEE. 5. NOW WE TAKE UP APPEAL OF THE ASSESSEE IN ITA NO.615/CHNY/2018 FOR ADJUDICATION. 6. ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (A PPEALS), IN SO FAR AS IT RELATES TO THE ISSUES RAISED IN THI S APPEAL, IS OPPOSED TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WEIGHT OF EVIDENCE AND LAW. ITA NO. 615 & 706/2018. :- 6 -: 2. THE COMMISSIONER (APPEALS) ERRED IN CONFIRMING T HE DISALLOWANCE OF RS.7,90,225/- TREATING THE AMOUNT A S PENALTY AND FINE UNDER THE PF AND ESI ACTS. 3. THE COMMISSIONER (APPEALS) ERRED IN NOT ACCEPTIN G THE CONTENTION THAT THE SUM OF RS.7,90,225/- (RS.6,82,283/- PLUS IS RS.98,855/-) I S A COMPOSITE LEVY COMPRISING PARTLY OF COMPENSATORY INTEREST FOR DELAY IN PAYMENT AND PARTLY OF PENALTY AND TO THE EXTENT THE LEVY IS COMPENSATORY IS AN ALLOWABLE DEDUCTION U/S 37 OF TH E ACT - CIT VS. HYDERABAD ALLWYN METAL WORKS LTD (1988) 172 ITR 113 (AP)]. 4. THE COMMISSIONER (APPEALS) ERRED IN CONFIRMING T HE DISALLOWANCE OF RS.26,31,000/- REPRESENTING PAYMENT S MADE BY THE APPELLANT, A PUBLISHER OF NEWSPAPERS AND PERIOD ICALS, TO FOREIGN CORRESPONDENTS AND FOREIGN NEWS AGENCIES ON THE GROUND OF NON-DEDUCTION OF TAX AT SOURCE U/S 195, INVOKING SECTION 40(A)(I) OF THE ACT. 5. THE COMMISSIONER (APPEALS) AS GONE WRONG IN REL YING ON THE DECISION OF THE HON'BLE MADRAS HIGH COURT ON POOMPUHAR SHIPPING CORPORATION LTD VS. INCOME TAX OFFICER, INTERNATIONAL TAXATION 11, CHENNAI [(2014) 360 ITR 257 (MAD)] AND THE JUDGMENT OF THE SUPREME COURT IN TRANSMISSI ON CORPORATION OF AP LTD AND ANOTHER VS. CIT [(1999) 2 39 ITR 587 (SC)] RENDERED ON THE FACTS OF THE CASE AND IN DIFF ERENT CONTEXTS AND DISTINGUISHABLE FROM THE APPELLANTS CASE. 6.THE COMMISSIONER (APPEALS) ERRED IN NOT TAKING NO TE OF THE SUBMISSIONS MADE IN THE APPELLANT'S AR'S LETTER DATED 13.11.2017 RELYING ON THE JUDGMENT OF THE SUPREME COURT IN G.E.LNDIA TECHNOLOGY CENT P. LTD VS. CIT (2010) 327 ITR 456 (SC) WHEREIN THE JUDGMENT OF THE COURT IN TRANSMISSION CORPORATION'S CASE HAS BEEN REFERRED TO AND EXPLAINED AND DISTINGUISHED. 7. THE APPELLANT SUBMITS AND URGES HAT IN ITS CASE NO PART OF THE SERVICE WAS RENDERED BY THE PAYEES IN INDIA TO BRIN G THE PAYMENTS WITHIN THE PURVIEW OF INCOME 'CHARGEABLE U NDER THE PROVISIONS OF THE ACT' AND, CONSEQUENTLY, THE PROVI SIONS OF SECTION 195 1 40(A)(I) OF THE ACT ARE INAPPLICABLE. ITA NO. 615 & 706/2018. :- 7 -: 8. THE COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.76,64,584/- BEING BULK INCENTIVE ALLOWED TO A ADVERTISING AGENCIES (RELYING SOLELY ON THE AO'S RE MAND REPORT) ON THE INCORRECT UNDERSTANDING THAT THE AMOUNTS ARE IN THE NATURE OF 'COMMISSION' AND THE PROVISIONS OF SECTION 194H 1 40(A)(IA) ARE ATTRACTED. 9. THE COMMISSIONER (APPEALS) FAILED TO SEE THAT THE B ULK INCENTIVES ARE BASED ON VARYING PERCENTAGES DEPENDI NG UPON THE VOLUME OF ADVERTISEMENTS GENERATED BY EACH ADVE RTISING AGENCY IN THE YEAR AND REPRESENT ADDITIONAL TRADE D ISCOUNT OVER AND ABOVE THE NORMAL DISCOUNT AS PER TRADE PRACTICE TO ENCOURAGE THE ADVERTISING AGENCIES TO PROCURE MORE ADVERTISEMENTS AS WELL AS FOR PROMPT PAYMENT OF DUE S TO THIS COMPANY. 10. THE APPELLANT SUBMITS THAT THE EXPENDITURE INCURRED BY WAY OF BULK INCENTIVES IS NOT HIT BY THE PROVISIONS OF SEC TION 194 H/ 40(A)(IA) AND IS ALLOWABLE AS DEDUCTION IN COMPUTIN G THE APPELLANT COMPANY'S BUSINESS INCOME. 11. THE COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.66,23,665/- (WHICH INCLUDES RS.2 6,31,000/- SEPARATELY DISALLOWED) BEING COMMON NEWS SERVICE CH ARGES PAID. THE REASONS STATE BY THE COMMISSIONER (APPEAL S) THEREFOR IN PARA 4.22 (@ PAGES 26 1 27) OF THE APPELLATE ORDER ARE VAGUE AND NON - SPECIFIC. 12. THE APPELLANT SUBMITS THAT THE REASON STATED FOR TH E DISALLOWANCE VIZ., THAT NEWS GATHERING FOR PUBLICAT ION IMPLIED 'TECHNICAL CONSULTANCY' AND ATTRACTS TAX DEDUCTION REQUIREMENT U/S 194J OF THE ACT IS INCORRECT; ON THE CONTRARY, NEWS GATHERING IS AKIN TO PROCUREMENT OF ORDERS FOR SUPPLY OF GOODS A ND DOES NOT INVOLVE ANY TECHNICAL CONSULTANCY 1 SERVICES AND THE PROVISIONS OF SECTION 194J / 40(A)(IA) ARE CLEARLY NOT APPLICABLE . 13. WITHOUT PREJUDICE TO THE ABOVE GROUNDS THE APPELLAN T SUBMITS THAT, IN ANY EVENT, THE EXPENDITURE OF RS.26,31,000 /- PAYMENT TO FOREIGN CORRESPONDENTS / NEWS AGENCIES SEPARATELY D ISALLOWED BY THE AO AND CONFIRMED BY THE COMMISSIONER (APPEALS)) OUGHT TO HAVE BEEN DELETED / ALLOWED BY THE COMMISSIONER (AP PEALS). 14. THE COMMISSIONER (APPEALS) E RED IN SUSTAINING THE DISALLOWANCE OF RS.1,00,05,643/- OUT OF INTEREST PA ID ALLEGING DIVERSION OF INTEREST BEARING BORROWALS TO GROUP CO MPANIES WITHOUT APPRECIATING THE OBJECTIONS RAISED BY THE A PPELLANT TO THE SAID DISALLOWANCE IN THE GROUNDS OF APPEAL BEFORE H IM (GROUND NOS.25 TO 27 / PAGES 5 & 6 OF THE APPELLATE ORDER) IN THE WRITTEN ITA NO. 615 & 706/2018. :- 8 -: SUBMISSIONS (PAGES 10 / 11 OF THE APPELLATE ORDER) AND IN THE REJOINDER TO THE AO'S REMAND REPORT (PAGES 17 / 18 OF THE APPELLATE ORDER). 15. THE APPELLANT CRAVES LEAVE TO EXPLAIN THE RELATIONS HIP BETWEEN THE APPELLANT AND THE TWO GROUP COMPANIES, THE NATURE OF THE TRANSACTIONS WITH THEM AND THE BALANCES IN T HEIR ACCOUNTS AND SUBSTANTIATE ITS CLAIM FOR DELETION OF THE DISA LLOWANCE OUT OF INTEREST PAID. 16. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE HON'BLE TRIBUNAL BE PLEASED TO ALLOW THE APPEAL AND RENDER JUSTICE . 7. GROUNDS 1 AND 16 ARE GENERAL IN NATURE, NEEDING NO SPECIFIC ADJUDICATION. 8. GROUND NO.2 & 3, CHALLENGES THE DISALLOWANCE OF F7, 90,225/- MADE ON ACCOUNT OF PENALTY AND FINE UNDER THE PF A ND ESI ACTS. IT IS CONTENDED BEFORE US THAT IT WAS A COMPOSITE LEVY CONSISTING OF COMPENSATORY INTEREST FOR DELAY IN PAYMENT AND PENA LTY. TO THE EXTENT, COMPENSATORY IN NATURE, SHOULD BE ALLOWED A S DEDUCTION U/S.37 (1) OF THE ACT, PLACING RELIANCE ON THE DECISION OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. HYDERABAD ALLWYN METAL WORKS LTD, 172 ITR 113 AND HONBLE SUPREME COURT IN THE CASE OF SWEDESHI COTTON MILLS CO. LTD VS. CIT, 233 ITR 199. 9. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES ITA NO. 615 & 706/2018. :- 9 -: 10. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ISSUE WHETHER THE AMOUNT OF F7,90,225/- DISALLOWED BY THE LD. ASSESSING OFFICER ON THE GROUND THAT IT IS PENALTY AND FINE UNDER THE PROVISIONS OF PF AND ESI ACTS REQUIRES TO BE DECIDED BY EXAMINING THE SCHEME OF THE PROVISIONS OF RELEVANT STATUTE PROVIDED FOR LEVY. THE AMOUNT WHICH IS PAID TOWARDS COMPENSA TORY INTEREST SHOULD BE ALLOWED AS DEDUCTION WHERE THE LEVY IS CO MPOSITE. THE ASSESSING AUTHORITIES ARE DUTY BOUND TO BIFURCATE T HE TWO COMPONENTS OF THE LEVY AND ALLOW DEDUCTION IN RESPECT OF THE ELEMENT OF LEVY WHICH IS COMPENSATORY IN NATURE. THIS IS IN LAW LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF PRAKASH COTTON MILLS LTD, 201 ITR 684 BY APPROVING THE JUDGMENT OF HONBLE ANDHRA PRADESH IN THE CASE OF HYDERABAD ALLWYN METAL WORKS LTD (SUPRA ) AND THE SAME RATIO WAS REITERATED BY THE HONBLE SUPREME COURT IN THE CAS E OF SWEDESHI COTTON MILLS CO. LTD. (SUPRA), IN VIEW OF THE ABOVE LEGAL POSITIONS, WE ARE OF THE CONSIDERED OPINION THAT THE MATTER REQUI RES REMISSION TO THE ASSESSING OFFICER TO BIFURCATE THE AMOUNT OF F7,90,225/- INTO ROYALTY OR INTEREST BY EXAMINING THE PROVISION U NDER THE RELEVANT STATUTE UNDER WHICH THE PENALTY OF F7,90,225/- IS LEVIED. ACCORDINGLY, THE GROUNDS OF APPEAL NO. 2 & 3 FILED BY THE ASSES SEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 615 & 706/2018. :- 10 -: 11. GROUNDS 4 TO 7 CHALLENGES DISALLOWANCE OF A SUM OF F26,31,000/- BEING PAID TO FOREIGN CORRESPONDENTS AND FOREIGN NEWS AGENCIES FOR NON DEDUCTION OF TAX AT SOURCE U/S.1 95 OF THE ACT. THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE BEING THE AMOUNT PAID TO FOREIGN CORRESPONDENTS AND FOREIGN NEWS AGENCIES O N THE GROUND THAT NO TDS WAS DEDUCTED ON THE SAID PAYMENTS. ON APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE ADDITION WAS CONFIRMED PLACING RELIANCE ON THE DECISION OF HONBE JURISDIC TIONAL HIGH COURT IN THE CASE OF M/S. POOMPUHAR SHIPPING CORPORATION LTD. (SUPRA ). BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US IN T HE PRESENT GROUNDS OF APPEAL. 12. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ISSUE IN THE PRESENT GROUNDS OF APPEAL RELATES TO THE DISALLOWANCE OF SUM OF F26,31,000/- PAID TO THE FO REIGN CORRESPONDENTS AND FOREIGN NEWS AGENCIES, THIS SUM WAS DISALLOWED BY THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SE CTION 40(A)(I) OF THE ACT FOR A REASON THAT NO TDS DEDUCTION WAS MADE BY THE ASSESSEE. FROM THE PERUSAL OF THE MATERIAL ON RECORD, IT IS NOT CLEAR WHETHER SERVICES ARE RENDERED IN ABROAD OR RENDERED IN IN DIA. FURTHER, THE ASSESSING OFFICER FAILED TO EXAMINE WHETHER THE P AYMENTS PARTAKES ITA NO. 615 & 706/2018. :- 11 -: THE CHARACTER OF ROYALTY OR NOT. IN THE CIRCUMSTANC ES, WE ARE OF THE CONSIDERED OPINION THAT THE MATTER REQUIRES REMISSI ON TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. ACCORDINGLY, THE GROUNDS OF APPEAL 4 TO 7 FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 13. GROUNDS 8 TO 10 CHALLENGES THE DISALLOWANCE OF A S UM OF F76,64,584/- TREATING INCENTIVES PAID TO ADVERTING AGENCIES AS COMMISSION FOR DEFAULT OR NOT WITH TDS PROVISIONS . 14. THE ASSESSING OFFICER DISALLOWED THIS INCENTIVE PA ID TO THE DISTRIBUTORS INCENTIVE AS COMMISSION PAYMENT AND DISALLOWED THE SAME FOR REASON THAT NO TDS WAS DEDUCTED AT SOURC E UNDER PROVISIONS OF SECTION 194H OF THE ACT. THE ASSESSIN G OFFICER ALSO RECORDED A FINDING THAT NO EVIDENCE WAS FURNISHED I N SUPPORT OF THE CLAIM THAT REPRESENTS INCENTIVES. 15. DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE FILED ADDITIONAL EVIDENCE IN THE FORM OF LEDGER COPIES BEFORE LD. CO MMISSIONER OF INCOME TAX (APPEALS). THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) HAD CALLED FOR REMAND REPORT FROM THE ASSESSING O FFICER AND THE ASSESSING OFFICER OBSERVED THAT IN THE ABSENCE OF BILLS AND INVOICES ITA NO. 615 & 706/2018. :- 12 -: COPIES, IT CANNOT BE SAID THAT IT IS AN INCENTIVE P AYMENT BUT COMMISSION PAYMENT AND THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) WITHOUT EXPRESSING ANY INDEPENDENT VIEW O N THIS, SIMPLY CONFIRMED THE FINDINGS OF THE ASSESSING OFFICER. W E ARE OF THE CONSIDERED OPINION THAT THE ISSUE WHETHER IT IS AN INCENTIVE OR COMMISSION CAN BE DETERMINED HAVING REGARD TO TH E TERMS AND CONDITIONS BETWEEN ASSESSEE AND DISTRIBUTORS. THER E IS NOTHING ON RECORD TO FIND OUT UNDERSTANDING BETWEEN THE PART IES AND THE LD. COMMISSIONER OF INCOME TAX (APPEALS) SIMPLY CONFIRM ED THE FINDINGS OF THE ASSESSING OFFICER WITHOUT EXPRESSING ANY IN DEPENDENT OPINION OF HIS OWN AND THEREFORE WE REMAND THIS ISSUE BACK TO THE FILE OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR FRESH ADJUDICATION AND VERIFICATION OF INVOICES AND BILLS IN ACCORDANCE W ITH LAW. THUS, THE GROUNDS OF APPEAL 8 TO 10 FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. 16. GROUNDS 11 TO 13 CHALLENGES DISALLOWANCE OF COMMON NEWS SERVICE CHARGES PAYMENT OF F66,23,665/-. THE ASSE SSING OFFICER HAD DISALLOWED THE SAME BY HOLDING THAT NEWS GATHERING FOR PUBLICATION IS A TECHNICAL MATTER AND THEREFORE PAYMENT IS SUBJECT TO TDS PROVISIONS UNDER THE PROVISIONS OF SECTION 194J OF THE ACT. T HE AMOUNT WAS DISALLOWED INVOKING THE PROVISIONS OF SECTION 40(A )(IA) OF THE ACT. ITA NO. 615 & 706/2018. :- 13 -: EVEN ON APPEAL BEFORE LD. COMMISSIONER OF INCOME TA X (APPEALS), THE DISALLOWANCE WAS CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ADMITTEDLY, THE PAYMENT DOES NOT FALL WITHIN THE SCOPE AND AMBIT OF PROFESSIONAL CHARGES BUT WHETHER NATU RE OF SERVICES FALLS WITHIN THE AMBIT OF TECHNICAL FEES AS DEFINED UNDER EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9 OF THE ACT REQUIRES TO BE EXAMINED, HOWEVER, THERE IS NO MATERIAL ON RECORD. IN THE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THA T THE MATTER REQUIRES REMISSION TO THE ASSESSING OFFICER FOR FR ESH ADJUDICATION IN ACCORDANCE WITH LAW. ACCORDINGLY, THE GROUNDS OF APPEAL 11 TO 13 FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATIS TICAL PURPOSE. 17. GROUNDS 14 & 15 CHALLENGES DISALLOWANCE OF F1,00,05 ,643/- ON THE GROUND THAT INTEREST BEARING FUNDS WERE DIV ERTED TO GROUP COMPANIES. 18. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER NOTICED THAT THE ASSESSEE HAD GIVEN LOANS T O GROUP COMPANIES TO THE EXTENT OF F7,11,01,788/- I.E. M/S. SIDDHART H MEDIA HOLDINGS PVT LTD. F1,79,20,760/-, M/S. EXPRESS NETWORK PVT LTD. F5,31,07,266/- AND M/S. EXPRESS PUBLICATION (CHENNAI) LTD F73,762/-). IT IS ALLEGED BY THE ASSESSING OFFICER THAT INTEREST BEARING FUNDS HAD BEEN DIVERTED TO THE ITA NO. 615 & 706/2018. :- 14 -: GROUP COMPANIES FOR NON BUSINESS PURPOSE, THEREFOR E HE DISALLOWED PROPORTIONATE INTEREST OF F1,00,05,643/-. EVEN BEFO RE LD. COMMISSIONER OF INCOME TAX (APPEALS) IT IS PLEADED THAT SMALL PORTION OF INTEREST BEARING FUNDS WERE DIVERTED TO THE SUBSIDIARY COMPA NIES, HOWEVER NO DETAILS WERE FILED BEFORE LD. COMMISSIONER OF INCOM E TAX (APPEALS) FOR SUBSTANTIATING THE CLAIM. HENCE, LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION. 19. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE U S IN THE PRESENT GROUNDS OF APPEAL. IT IS CONTENDED THAT A DVANCES TO THE SUBSIDIARIES WERE NOT MADE FULLY OUT OF BORROWED F UNDS BUT OUT OF OWN FUNDS OF THE ASSESSEE AND LOANS WERE MADE TO GROUP COMPANIES OUT OF COMMERCIAL EXPEDIENCY AND BUSINESS PURPOSES , NO DISALLOWANCES WAS CALLED FOR IN THIS REGARD, PLACIN G RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD VS. CIT, 288 ITR 1 AND HONBLE DELHI HIGH COURT IN THE CASE OF PCIT VS. BASTI SUGARS MILLS LTD 408 ITR 184. 20. WE HEARD THE LD. SR. DEPARTMENTAL REPRESENTATIVE AN D PERUSED THE MATERIAL ON RECORD. 21. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE PRESENT GROUNDS OF APPEAL RELATES TO D ISALLOWANCE OF ITA NO. 615 & 706/2018. :- 15 -: PROPORTIONATE INTEREST ON AMOUNT ADVANCED TO SISTER COMPANIES. THERE CAN BE NO QUARREL AS TO THE PROPOSITION ADVANCED THAT WHEN THE ADVANCES ARE MADE OUT OF OWN FUNDS, NO DISALLOWANCE OR INTEREST CAN BE MADE. BUT IT IS A MATTER OF FACTS WHICH REQUIRE S TO BE PROVED BY SUBMITTING NECESSARY EVIDENCE ON RECORD. THE LOWER AUTHORITIES HAD RECORDED CATEGORICAL FINDINGS THAT NO EVIDENCE WAS FILED FOR PROVING THAT LOANS WERE MADE TO SISTER COMPANIES OUT OF OW N FUNDS. SIMILARLY, WHETHER THE ADVANCES WERE MADE FOR BUSINESS PURPOSE S OUT OF COMMERCIAL EXPEDIENCY IS A QUESTION OF FACT WHICH REQUIRES TO BE PROVED BY BASED ON MATERIALS ON RECORD. ADMITTEDL Y, ASSESSEE COULD NOT SUBMIT ANY MATERIALS TO PROVE THE COMMERCIAL E XPEDIENCY IN ADVANCING THE LOANS TO THE SISTER COMPANIES. HENC E, GROUNDS OF APPEAL 14 & 15 FILED BY THE ASSESSEE ARE DISMISSED. 22. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSE. 23. NOW WE TAKE UP APPEAL OF THE REVENUE IN ITA NO.706/CHNY/2018, FOR ASSESSMENT YEAR 2009-2010. ITA NO. 615 & 706/2018. :- 16 -: 24. THE ONLY ISSUE INVOLVES IN THE PRESENT GROUNDS OF APPEAL FILED BY THE REVENUE IS WITH REGARD TO DISALLOWANCE U/S.14A R.W.R 8D FOR F1,73,20,973/-. 25. THE ASSESSING OFFICER DISALLOWED SUM OF F1,73,20,9 73/- U/S.14A R.W.RULE 8D. AN APPEAL WAS FILED BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS) WHO VIDE IMPUGNED ORDER DELET ED THE DISALLOWANCE BY HOLDING THAT IN THE ABSENCE OF EXE MPT INCOME RESORTING TO THE PROVISIONS OF SECTION 14A OF THE A CT CANNOT BE MADE, PLACING RELIANCE ON THE DECISION OF HONBLE JURISD ICTIONAL HIGH COURT IN THE CASE OF REDINGTON (INDIA) LTD VS. ADD. CIT, 392 ITR 633. 26. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE FINDING OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) IS BASED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF REDINGTON (INDIA) LTD (SUPRA). ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE A PPEAL OF THE REVENUE IS DISMISSED. ITA NO. 615 & 706/2018. :- 17 -: 27. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 27TH DAY OF MAY, 2019, AT CHE NNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER ( # / CHENNAI ) / DATED: 27 MAY, 2019. KV $ +%,- .-!% / COPY TO: 1 . /0 / APPELLANT 3. ' 1% () / CIT(A) 5. -4 +%5 / DR 2. +6 /0 / RESPONDENT 4. ' 1% / CIT 6. 7 8# / GF