ITO, New Delhi V. M/s. Ogaan Publication Pvt. Ltd., New Delhi

ITA 6719/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3065 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 10-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJANA
• Keywords: Question of law; Relationship of principal and agent

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI P. K. BANSAL, VICE PRESIDENT AND SMT BEENA A. PILLAI, JUDICIAL MEMBER ITA NO. 6719/DEL/2014 : A SSTT. YEAR : 2011-12 ITO WARD-19(1) NEW DELHI VS. OGAAN PUBLICATION PVT. LTD. H-2, HAUZ KHAS VILLAGE NEW DELHI PAN : AAACO1078K [APPELLANT] [RESPONDENT] ASSESSEE BY : NONE REVENUE BY : SH. P.DAM KANUNJANA, SR. DR DATE OF HEARING: 1 1 12 2017 DATE OF PRONOUNCEMENT: 11 12 2017 O R D E R PER P.K. BANSAL, VICE PRESIDENT : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) DATED 19.09.2014 BY TAKING THE FOLLOWING GRO UND OF APPEAL :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON AC COUNT OF DISALLOWANCE U/S 40(A) (IA) BY IGNORING THE EXPRESS PROVISION OF LAW U/S 194H AND THE CBDT CIRCULAR NO. 715 DATED 08.08. 1995 WHICH STATES THAT THE TAX HAS TO BE DEDUCTED ON THE PAYME NTS MADE TO ADVERTISING AGENCY. ITA NO.6719/DEL./2014 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED BY IGNORING THE OBSERVATION OF THE A.O. THAT ASSESSEE HAS RAISED BILLS IN THE NAME OF ADVERTISIN G AGENCIES FOR THE COST OF SPACE AND DEDUCTED AGENCY COMMISSION TO WARDS COMMISSION TO THE ADVERTISING AGENCIES WHICH INDICA TES THAT SPACE WAS PURCHASED FROM THE ASSESSED ON BASIS OF SPECIFI CATIONS BY ACTUAL PARTY AND THE AGENCY ACTED AS AN AGENT FOR THE ASSESSEE. 2. NON-APPEARED ON BEHALF OF THE ASSESSEE, WE T HEREFORE DECIDED DISPOSE OF THE APPEAL AFTER HEARING THE LD. DR. 3. AFTER HEARING THE LD. DR AND GOING THROUGH TH E ORDER OF THE TAX AUTHORITIES BELOW, WE NOTED THAT THE ISSUE INVOLVED IN THIS APP EAL REGARDING THE DISALLOWANCE MADE U/S 40(A) (IA) IS COVERED BY THE DECISION OF THIS TRIBUNAL IN ASSESSES CASE FOR THE ASSESSMENT YEAR 2006-07, 200 7-08, 2008-09 AND 2009- 10 AND EVEN THE DELHI HIGH COURT HAVE DISMISSED TH E DEPARTMENTAL APPEAL. FOR THE ASSESSMENT YEAR 2006-07 AND 2007-08 WHICH I S APPARENT FROM THE ORDER OF THE CIT(A). THE FINDING OF THE CIT(A) WHIC H ARE REPRODUCED AS UNDER : I HAVE CONSIDERED THE FINDINGS OF THE A.O. AS WELL AS SUBMISSIONS OF THE A/R OF THE APPELLANT. GROUND NO. 1 OF APPEAL IS GENERAL IN NATURE.G ROUND NOS. 2, 3 & 4 OF APPEAL ARE DIRECTED AGAINST DISALLOWANCE OF AGENCY COMMISS ION AMOUNTING TO RS. 1,88,89,718/- BY INVOKING PROVISIONS OF SEC 40(A)(IA) OF THE I.T. ACT, 1961. THE ASSESSEE COMPANY DURING THE YEAR WAS ENGAGED IN THE BUSINESS OF PUBLICATION OF FASHION MAGAZINES. THE A.O. IN THE A SSESSMENT ORDER OBSERVED THAT THE AUDITED P&L ACCOUNT AS ON 31.03.2011 SHOWS AMOUNT OF RS. 15,62,23,710/- IS DEBITED ON ACCOUNT OF DISCOUNT AL LOWANCES. OUT OF RS. 15,62,23,710/- AN AMOUNT OF RS. 13,73,33,992/- RELA TES TO VOLUME DISCOUNT AND BALANCE AMOUNT OF RS. 1,88,89,718/- RELATES TO THE AGENCY DISCOUNT. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PUBL ICATION OF A MAGAZINE AND IT SELLS SPACE FOR ADVERTISEMENTS TO VARIOUS PARTIE S THROUGH ADVERTISING AGENCIES. AO OBSERVED THAT THE ASSESSEE COMPANY RAI SED BILLS IN THE NAME OF ADVERTISING AGENCIES INDICATING COST OF THE SPACE A ND DEDUCTED THE AGENCY COMMISSION TOWARDS COMMISSION TO THE ADVERTISING AG ENCIES. THIS CLEARLY INDICATES THAT THE SPACE WAS PURCHASED FROM THE ASS ESSEE COMPANY ON THE BASIS OF SPECIFICATIONS BY THE ACTUAL PARTY AND THE AGENCY ACTED AS AN AGENT FOR ITA NO.6719/DEL./2014 3 THE ASSESSEE COMPANY. THERE IS NO DOUBT THAT THE SA ME IS BEING PAID TO THE AGENCIES FOR THEIR SERVICES ONLY AND IT CANNOT BE T ERMED AS A DISCOUNT AS THE BENEFIT OF THAT ADVERTISEMENT DOES NOT GO TO THE AG ENCY. THE AGENCY ON THEIR PART IS GETTING THE REIMBURSEMENT OF THE ENTIRE AMO UNT FROM THE CUSTOMER TO WHOM THE REAL BENEFIT OF THE ADVERTISEMENT ACCRUES. THUS, THE ADVERTISEMENT AGENCY IS IN FACT WORKING FOR THE ASSESSEE FOR PROV IDING THEM ADS FOR THE SPACE FOR WHICH THEY ARE BEING GIVEN COMMISSION. AO OBSER VED THAT THE AGENT CANVASSES ADVERTISEMENT ON BEHALF OF THE MAGAZINE ( ASSESSEE) AND ADVERTISEMENT CHARGES RECOVERED FROM THE CUSTOMERS IN ACCORDANCE WITH THE TARIFF PRESCRIBED BY THE MAGAZINE. AO, THEREFORE, H ELD THAT THERE IS A CLEAR CUT RELATIONSHIP OF PRINCIPAL AND AGENT AND TAX IS DEDU CTIBLE U/S 194H. THE AGENCY DISCOUNT WHICH IS IN FACT AGENCY COMMISSION IS TO B E PAID AFTER DEDUCTION OF TAXES. AS THE ASSESSEE COMPANY FAILED TO MAKE TDS O N THE AGENCY COMMISSION PAID HENCE AMOUNT OF AGENCY DISCOUNT OF RS. 1,88,89 ,718/- IS DISALLOWED BY THE A.O. U/S 40(A)(IA) AND ADDED TO THE INCOME OF THE A SSESSEE COMPANY. IDENTICAL ADDITION WAS MADE BY THE AO IN A.Y. 2010-11 WHICH W AS DECIDED BY ME IN THE FAVOUR OF THE APPELLANT IN APPEAL NO. 76-12-13, DT. 27.12.2013 AS UNDER:- IN THIS REGARD PROVISIONS SEC 194H SAYS:- COMMISSION OR BROKERAGE. 194H. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDI VIDED 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 BEIN G INSURANCE COMMISSION REFERRED TO IN SECTION 194D) OR BROKERAGE, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYE E 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 INC OME-TAX THEREON AT THE RATE OF [TEN] PER CENT FROM THE ABOVE PROVISION IT IS CLEAR THAT ANY PERSO N WHO IS RESPONSIBLE FOR PAYING ANY INCOME BY WAY OF COMMISSION OR BROKE RAGE, 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 O F A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE PRESCRIBED RATE. IN THE INSTANT CASE NO PAYM ENTS ARE MADE BY THE APPELLANT TO THE AGENCIES. ON THE OTHER HAND, CONSE QUENT TO THE SALE OF SPACE TO THE AGENCIES, THE AGENCIES ARE BILLED BY T HE APPELLANT ON THE NET AMOUNT AFTER DISCOUNT IS ALLOWED TO THEM. THERE AFTER THE PAYMENTS ARE MADE BY THE AGENCIES TO THE APPELLANT ON THE NE T AMOUNT BILLED. IN OTHER WORDS PAYMENTS ARE NOT MADE BY THE APPELLANT BUT BY THE AGENCIES AGAINST SALE OF SPACE BY THE APPELLANT. SI NCE, THE ASSESSEE IS ITA NO.6719/DEL./2014 4 NOT RESPONSIBLE FOR MAKING ANY PAYMENTS TO THE AGEN CIES, THEREFORE, THERE IS NO LIABILITY FOR DEDUCTION OF INCOME TAX O N THE ASSESSEE. IN VIEW OF THE ABOVE, THE PROVISIONS OF SEC 194H DOES NOT A PPLY IN THE INSTANT ISSUE IN APPEAL. IDENTICAL ADDITIONS WERE MADE BY THE A.O. IN A.Y. 2 006-07, A.Y. 2007-08 AND A.Y. 2008- 09 BY MAKING DISALLOWANCE U/S 40(A)(IA) OF RS . 1.20 CRORES, RS. 1.70 CRORES AND RS. 1.84 CRORES RESPECTIVELY ON ACCOUNT OF AGEN CY COMMISSION AS HE HELD THAT THE RELATIONSHIP WITH THE PARTIES TO WHOM THE DISCOUNT WAS GIVEN WAS BASED ON PRINCIPAL TO AGENT RELATIONSHIP. THE ADDIT IONS MADE IN THE ABOVE YEARS WERE DELETED BY HONBLE ITAT DELHI IN ITS DECISIONS IN I.T.A NOS. 1990/DEL 2010, 3741/DEL 2011 & 5050/DEL 2011 RESPECTIVELY FOR THE ABOVE ASSESSMENT YEARS WHERE IT IS HELD BY HONBLE TRIBUNAL THAT TRANSACTI ONS ARE BASED ON PRINCIPAL TO PRINCIPAL RELATIONSHIP. IT WAS HELD BY HONBLE ITAT : THE PERUSAL OF BOTH THE ABOVE MENTIONED TRANSACTIO NS WILL REVEAL THAT ASSESSEE IS GIVING DISCOUNT WITH RESPECT TO VO LUME AS WELL AS AGENCY COMMISSION IRRESPECTIVE OF THE FACT THAT WHETHER TH E ADVERTISEMENT IS BOOKED BY THE ADVERTISER ITSELF OR THROUGH ADVERTISING AGENCY . THE ASSESSEE DID NOT COLLECT GROSS AMOUNT AND FROM GROSS AMOUNT ITSELF STRAIGHTW AY DEDUCTION HAS BEEN GRANTED TO THE PERSON WHO HAS BOOKED THE ADVERTISEM ENT ON ACCOUNT OF VOLUME DISCOUNT AS WELL AS AGENCY COMMISSION. IT MAY BE SE EN THAT IN THE CASE OF MOON RIVER (M.G. INDS.) THE ADVERTISEMENT HAS NOT BEEN B OOKED BY ADVERTISING AGENCY EVEN THEN AMOUNT OF RS. 11,250/- HAS BEEN REDUCED O N ACCOUNT OF AGENCY COMMISSION. THEREFORE, IT WILL CLEARLY DEMONSTRATE THAT ASSESSEE IS CONCERNED ONLY WITH THE AMOUNT TO BE REALIZED FINALLY WHICH I S THE SAME IN BOTH TYPE OF TRANSACTIONS. THEREFORE, THE NATURE OF AMOUNT AGENC Y COMMISSION IS ONLY A DISCOUNT THOUGH IT HAS BEEN DESCRIBED AS AGENCY CO MMISSION. BOTH THE TRANSACTIONS ARE ON PRINCIPAL TO PRINCIPAL BASIS. T HE CASE LAW RELIED UPON BY THE ASSESSEE BEFORE CIT (A) AND BEFORE US SUPPORTS THE CASE OF THE ASSESSEE. THEREFORE, WE ARE OF THE OPINION THAT ID. CIT (A) I S RIGHT IN HOLDING THAT DISALLOWANCE COULD NOT BE MADE AS ASSESSEE WAS NOT UNDER AN OBLIGATION TO DEDUCT TAX U/S 194H. WE DECLINE TO INTERFERE. THIS GROUND OF THE REVENUE FOR BOTH THE YEARS IS DISMISSED. ON FURTHER APPEAL BY THE DEPARTMENT AGAINST ABOVE I TAT DECISION, HONBLE DELHI HIGH COURT IN ITA NO. 181 & 182/2012 IN ITS DECISIO N DT. 16/03/2012 HAVE DISMISSED THE DEPARTMENTAL APPEAL BY HOLDING THAT N O SUBSTANTIAL QUESTION OF LAW ARISES FROM THE DECISION OF ITAT. FOLLOWING THE ABOVE DECISIONS, IDENTICAL ADDITIONS MADE IN AY 2009-10 WAS ALSO DELETED BY ME IN APPEAL NO. 379/11-12 DT. 15.02.2013. ITA NO.6719/DEL./2014 5 THE FACTS AND CIRCUMSTANCES OF THE ISSUE IN APPEAL IS IDENTICAL TO THE ISSUE DECIDED IN AY 2006-07 TO AY 2009-10. IN VIEW OF THE ABOVE FACTUAL AND LEGAL POSITION, IT IS HELD THAT TRANSACTIONS BETWEEN THE APPELLANT AND THE AD AGENCIES ARE BASED ON PRINCIPAL TO PRINCIPAL BASIS. THEREFOR E, APPELLANT WAS NOT UNDER ANY OBLIGATION TO DEDUCT TAX U/S 194H. AS SUCH THE DISALLOWANCE OF RS. 1,61,18,029/- MADE BY THE A.O. U/S 40(A)(IA) CANNOT BE SUSTAINED. THE APPEAL IS ALLOWED IN GROUND NOS. 2 & 3 OF APPEAL. AS THE ISSUE IN INSTANT APPEAL IS IDENTICAL, THEREF ORE, FOLLOWING THE ABOVE DECISION FOR A.Y. 2010- 11 THE ISSUE IS DECIDED IN FAVOUR OF THE APPELLANT. THE APPEAL IS ALLOWED IN THIS GROUND. 4. SINCE THE ISSUE INVOLVED IN THIS YEAR IS ALS O THE SAME AS IN THE EARLIER YEAR. WE, THEREFORE, DO NOT FIND ANY ILLEGALITY OR INFIRM ITY IN THE ORDER OF THE CIT(A) WHICH WARRANT OUR INTERFERENCE. WE ACCORDINGLY DISM ISS THE APPEAL FILED BY THE REVENUE. 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 11/12/2 017) SD/- (BEENA A. PILLAI) SD/- (P.K.BANSAL) JUDICIAL MEMBER VICE PRESIDENT DATED: 11 .12.2017 *BINITA* COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSIST ANT REGISTRAR ITA NO.6719/DEL./2014 6 DATE INITIAL 1. DRAFT DICTATED ON 11/12/2017 2. DRAFT PLACED BEFORE AUTHOR 11/12/2017 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON /12/2017 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. ITA NO.6719/DEL./2014 7