ZAKIR HUSSAIN PROMOTIONS . P.LTD, MUMBAI V. ITO 5(3)(4), MUMBAI

ITA 7262/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9150 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 03-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 25-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJARSHRI DIWEDI
• Assessee Lawyers: G P MEHTA
• Keywords: Non-deduction of tax
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G , MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.7262/MUM/2010 ASSESSMENT YEAR : 2007-08 M/S. ZAKIR HUSSAIN PROMOTIONS P. LTD. C/O., G.P. MEHTA & CO. CAS, 807 TULSIANI CHAMBERS 212 NARIMAN POINT MUMBAI-400 021. PAN NO.AAACZ 0909 N VS. INCOME TAX OFFICER WARD -5(3)(4) AAYAKAR BHAVAN, 5 TH FLOOR M.K. ROAD MUMBAI-400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.P. MEHTA RESPONDENT BY : SHRI RAJARSHRI DIWEDI DATE OF HEARING : 03.12.2012 DATE OF PRONOUNCEMENT : 07.12.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER D ATED 3.8.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2007-08. THE DISPUTES RAISED IN THIS APPEAL RELATE TO DISALLOWANCE OF EXPENSES UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE FIRST DISPUTE IS REGARDING DISALLOWANCE OF AMOUN T PAID TO SHANMUKHANAND FINE ARTS AND SANGEET SABHA TOWARDS AUD ITORIUM BOOKING AND OTHER CHARGES ON WHICH ASSESSEE HAD NOT DEDU CTED TAX AT ITA NO.7262/M/10 A.Y. 07-08 2 SOURCE. THE AO HELD THAT THE NATURE OF PAYMENT WAS REN T WITHIN THE MEANING OF RENT DEFINED IN SECTION 194-I AND, THERE FORE, TAX WAS REQUIRED TO BE DEDUCTED AS THE ASSESSEE HAD NOT DEDUCTED TAX, THE AO DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 40(A)(IA ). IN APPEAL, ASSESSEE SUBMITTED THAT THE PAYMENT ALSO INCLUDED PAYMENT FOR OTHER ANCILLARY CHARGES AND THEREFORE ENTIRE PAYMENT COULD NOT BE DISALLOWED. IT WAS ALSO SUBMITTED THAT ITO(TDS) HAD ISSU ED A CERTIFICATE DATED 20.10.2006 FOR NON DEDUCTION OF TAX AT SOURCE AND, THEREFORE, NO TAX WAS REQUIRED TO BE DEDUCTED. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, CIT(A) HELD THAT NO TDS WAS REQ UIRED TO BE DEDUCTED IN VIEW OF CERTIFICATE ISSUED BY AO IN RESPE CT OF RENTAL PART I.E. RS.2,50,000/-. HE, THEREFORE, DELETED THE ADDITI ON MADE TO THAT EXTENT AND BALANCE AMOUNT WAS UPHELD AGGRIEVED BY WH ICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 2.1 BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THA T THE BALANCE AMOUNT OF RS.43,984/- RELATED TO ANCILLARY EXPENSES SUCH AS ELECTRICITY CHARGES, WATER ETC. IN CONNECTION WITH RENTING OF THE A UDITORIUM. SUCH EXPENSES WERE NOT COVERED UNDER SECTION 194-I. MOREOVER IT WAS SUBMITTED THAT THE PROVISIONS OF SECTION 40(A)(IA) WAS AP PLICABLE ONLY IN RESPECT OF AMOUNT OUTSTANDING AT THE END OF THE YEA R AS HELD BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SH IPPING & TRANSPORTS VS. ACIT (136 ITD 23 ). IN CASE OF THE ASSESSEE N O AMOUNT ITA NO.7262/M/10 A.Y. 07-08 3 REMAINED OUTSTANDING AND, THEREFORE, NO DISALLOWANCE CO ULD BE MADE UNDER SECTION 40(A)(IA). THE LD. DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDER OF CIT(A). 2.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTE R CAREFULLY. THE DISPUTE IS REGARDING DISALLOWANCE OF EXPE NSES INCURRED IN CONNECTION WITH RENTING OF AUDITORIUM. THE AO DISALLOW ED THE ENTIRE EXPENDITURE HOLDING THAT THE SAME WAS COVERED UNDER SECT ION 194-I. THE CASE OF THE ASSESSEE IS THAT RENTAL PART OF THE EXPEND ITURE WAS RS.1.50 LACS AND BALANCE RELATED TO ANCILLARY EXPENSES SUCH AS ELECTRICITY ETC. CIT(A) HAS ALLOWED THE CLAIM OF RS.1.50 LACS ON THE BASIS OF CERTIFICATE ISSUED BY AO-ITO(TDS) THAT NO TAX WA S REQUIRED TO BE DEDUCTED. HE HAS HOWEVER CONFIRMED THE BALANCE AMOUNT UNDER SECTION 40(A)(IA). THE LD. AR SUBMITTED THAT THE ENTIR E AMOUNT HAD BEEN PAID DURING THE YEAR AND NOTHING WAS OUTSTANDING AT THE END OF THE YEAR. THIS CLAIM OF THE ASSESSEE HAS NOT BEEN CONTROVER TED BEFORE US. THEREFORE, FOLLOWING THE DECISION OF THE SPECIAL BE NCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS ( SUPRA), ADDITION MADE CAN NOT BE UPHELD. WE ACCORDINGLY SET ASIDE THE ORD ER OF CIT(A) AND ALLOW THE CLAIM OF THE ASSESSEE. 3. THE SECOND DISPUTE IS REGARDING DISALLOWANCE OF EXPEN DITURE OF RS.59,912/- INCURRED BY THE ASSESSEE ON ACCOUNT OF PAYMENT TO J.K. ITA NO.7262/M/10 A.Y. 07-08 4 ADVERTISERS FOR ARRANGING ADVERTISEMENT OF THE SHOW IN VARIOUS NEWSPAPERS. SINCE THE ASSESSEE HAD NOT DEDUCTED TAX AT SOUR CE UNDER SECTION 194C, THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO W HY THE CLAIM OF EXPENDITURE SHOULD NOT BE DISALLOWED UNDER SE CTION 40(A)(IA). THE ASSESSEE SUBMITTED THAT J.K. ADVERTISERS WAS MERELY A SE RVICE PROVIDER FOR FACILITATING THE ADVERTISEMENTS. THE ASSESSE E HAD NOT AVAILED ANY SERVICE OF ADVERTISEMENT DIRECTLY FROM THE SAID PARTY. THEREFORE, PROVISIONS OF SECTION 194C WERE NOT APPLICABL E. THE AO HOWEVER DID NOT ACCEPT THE CONTENTIONS RAISED. HE REFERR ED TO CIRCULAR NO.715 OF CBDT AS PER WHICH TDS IS REQUIRED TO BE DED UCTED FROM ANY PAYMENT MADE BY THE CLIENT TO AN ADVERTISING AGENCY UN DER SECTION 194C. THE AO THEREFORE DISALLOWED THE CLAIM UNDER SECTI ON 40(A)(IA) ON THE GROUND OF NON DEDUCTION OF TAX AT SOURCE. IN AP PEAL CIT(A) CONFIRMED THE ORDER OF AO AGGRIEVED BY WHICH, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3.1 BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT UNDER THE PROVISIONS OF SECTION 194C, ANY PERSON RESPONSIBLE FOR PAY ING ANY SUM TO A CONTRACTOR FOR CARRYING OUT ANY WORK WAS REQUIRED TO DEDUCT TAX AT SOURCE. THE WORD WORK HAS BEEN DEFINED IN THE SECTION TO INCLUDE ADVERTISING. IT WAS ARGUED THAT THE WORD ADVERTISING HAD BEEN USED IN THE CONTEXT OF THE PERSON WHO IS HIMSELF ENGAGED IN THE BUSINESS OF PREPARATION AND RELEASE OF ADVERTISING MATERIAL AND N OT IN THE CONTEXT ITA NO.7262/M/10 A.Y. 07-08 5 OF AN AGENT OR FACILITATOR WHO MERELY ACTS AS A CONDUIT BETWEEN A PERSON SEEKING ADVERTISEMENT AND A PERSON WHO ACTUALLY A DVERTISES. IN THIS CASE THE ASSESSEE HAD MADE PAYMENT TO J.K. ADVERTISERS FOR ONWARD REMITTANCE TO NEWSPAPER OWNERS IN RESPECT OF MEDI A ADVERTISEMENT WORK WHICH IS NOT COVERED UNDER SECTION 194 C. IT WAS THUS ARGUED THAT NO TAX WAS REQUIRED TO BE DEDUCTED AN D THEREFORE FOR FAILURE TO DO SO, NO DISALLOWANCE COULD BE MADE UNDER SE CTION 40(A)(IA). THE LD. DR ON THE OTHER HAD SUBMITTED THA T ANY PAYMENT MADE TO A CONTRACTOR FOR ADVERTISEMENT WORK WAS COVERED UNDER SECTION 194C AND THEREFORE, TAX WAS REQUIRED TO BE DED UCTED. HE ALSO PLACED RELIANCE ON THE CIRCULAR NO.715 ISSUED BY CBDT. 3.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING DISALLOWA NCE OF EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF PAYMEN T TO ADVERTISING AGENCY. THE DISALLOWANCE HAS BEEN MADE BY TH E AO UNDER SECTION 40(A)(IA) FOR NON-DEDUCTION OF TAX UNDER SECTION 194C. UNDER THE PROVISIONS OF SECTION 194C, TAX IS REQUIRED TO BE DEDUCTED IN RESPECT OF ANY PAYMENT TO A CONTRACTOR FOR CARRYING OUT ANY WORK. THE WORD WORK HAS BEEN DEFINED TO INCLUDE ADVERTISING. T HEREFORE, ANY PAYMENT MADE TO A CONTRACTOR FOR ADVERTISING WILL BE CO VERED UNDER THE PROVISIONS OF SECTION 194C. THE ASSESSEE HAS OBVIOUSLY CO NTRACTED WORK RELATED TO ADVERTISEMENT TO AN ADVERTISING AGENCY AND, THEREFORE, ITA NO.7262/M/10 A.Y. 07-08 6 IN RESPECT OF ANY PAYMENT TO THE SAID AGENCY, TAX IS REQ UIRED TO BE DEDUCTED IRRESPECTIVE OF THE FACT WHETHER ADVERTISING A GENCY GETS THE WORK DONE THROUGH SOME OTHER PERSON. CBDT HAS ALSO ISSUED CIRCULAR NO.715 CLARIFYING THE POINT THAT PAYMENT MADE BY CLIE NT TO ADVERTISING AGENCY HAS TO BE SUBJECTED TO TDS. IN THIS CASE, THERE I S NO DISPUTE THAT THE TAX HAD NOT BEEN DEDUCTED. THEREFORE, WE SE E NO INFIRMITY IN THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE UNDER SECTION 40(A)(IA) ON THE GROUND OF NON-DEDUCTION OF TAX AT SOURCE. ORDER OF CIT(A) IS THEREFORE UPHELD. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 07.12.2012. SD/- SD/- (AMIT SHUKLA ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 07.12.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR G BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.