THE COMMISSIONER OF INCOME TAX V. M/S THE PRINTERS (MYSORE) P LTD

ITA/665/2007

AI Insights

The case involves three income tax appeals filed by the Commissioner of Income Tax and the Income Tax Officer (TDS), challenging the orders of the Income Tax Appellate Tribunal (ITAT) which had favored the respondent, M/s The Printers (Mysore) P Ltd. The appeals pertain to the assessment years 2002-03 to 2004-05 and question whether payments made to agents for procuring advertisements should be classified as trade discounts rather than commissions, thereby not attracting the provisions of Chapter XVIIB of the Income Tax Act. The High Court found that the ITAT did not adequately consider the terms and conditions of the agreements with both accredited and unregistered advertising agencies, leading to a decision to set aside the ITAT's order and remand the matter for fresh consideration.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 729062 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 04-03-2014
• Assessment Year: misc
• Other Referred Cases: Jagran Prakashan Ltd. \\u2013vs- Deputy Commissioner of Income-Tax (TDS) (2012) 345 ITR 288 (All)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S PARTHASARATHI; MALLAHRAO K; JINITA CHATTERJEE
• Assessee Lawyers: K V ARAVIND
• Keywords: Advertising Agencies; Commission; Income Tax; Principal and Agent Relationship; Trade discount
• Section: 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 4th DAY OF MARCH 2014 PRESENT THE HON’BLE MR. JUSTICE DILIP B BHOSALE AND THE HON’BLE MR. JUSTICE B MANOHAR ITA.NO.665/2007 C/W ITA.NOs.666/2007, 667/2007 BETWEEN 1. THE COMMISSIONER OF INCOME TAX C.R.BUILDING, QUEENS ROAD BANGALORE 2. THE INCOME TAX OFFICER (TDS) WARD 16(3), C.R BUILDING QUEENS ROAD, BANGALORE ... COMMON APPELLANTS (BY SRI K V ARAVIND, ADV.,) AND M/S THE PRINTERS (MYSORE) P LTD NO.75, M.G.ROAD BANGALORE ... COMMON RESPONDENT (BY SRI S PARTHASARATHI, ADV., A/W SRI MALLAHARAO K, ADV., MS JINITA CHATTERJEE, ADV.,) ITA.NO.665/2007 IS FILED U/S.260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 29-03-2007 PASSED IN ITA NO. 1094/BNG/2006, FOR THE ASSESSMENT YEAR 2002-03, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED 2 BY THE ITAT BANGALORE IN ITA NO. 1094/BNG/2006,DATED 29-03-2007 CONFIRM THE ORDERS OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE INCOME TAX OFFICER, (TDS), WARD-16(3),BANGALORE. ITA.NO.666/2007 IS FILED U/S.260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 29-03-2007 PASSED IN ITA NO. 1095/BNG/2006, FOR THE ASSESSMENT YEAR 2003-04, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA NO. 1095/BNG/2006,DATED 29-03-2007 CONFIRM THE ORDERS OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE INCOME TAX OFFICER, (TDS),WARD-16(3), BANGALORE. ITA.NO.667/2007 IS FILED U/S.260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 29-03-2007 PASSED IN ITA NO. 1096/BNG/2006, FOR THE ASSESSMENT YEAR 2004-05, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA NO. 1096/BNG/2006, DATED 29-03-2007 CONFIRM THE ORDERS OF THE APPELLATE COMMISSIONER AND ORDER PASSED BY THE INCOME TAX OFFICER, (TDS), WARD-16(3), BANGALORE. THESE ITAs. COMING ON FOR HEARING, THIS DAY, Dilip B. Bhosale J., DELIVERED THE FOLLOWING: 3 PC: These income tax appeals are directed against the order dated 29.03.2007 passed by Income Tax Appellate Tribunal (for short ‘the Tribunal’) in ITA Nos.1094- 1096/Bang/2006 pertaining to the Assessment years 2002-03 to 2004-05 whereby the Tribunal allowed all three appeals preferred by the respondent-assessee. 2. The revenue, in these appeals, has raised the following substantial questions of law: “Whether the Tribunal was correct in holding that the payments made to agents for procuring advertisements is a trade discount and not a commission as held by the Assessing Officer and the provisions of Chapter XVIIB are not attracted?” 3. We have heard learned counsel for the parties for some time and with their assistance gone through the order of the Tribunal and so also the orders passed by the authorities below. The Tribunal seem to have proceeded on the assumption that all advertising agencies with whom 4 the respondent-assessee was dealing with, during the relevant assessment years were registered with the Indian Newspaper Society (for short “INS”) under Rule 14 of the Rules and Regulations Governing Accreditation of Advertising Agencies (for short “the Rules”). 4. Learned counsel appearing for the assessee fairly submits that it is not clear how many advertising agencies were in fact registered with the INS as contemplated under the said Rules. He submits that some of the advertising agencies were admittedly not registered with the INS. Though he could not give us the break-up, he submits that with all such advertising agencies, who were not registered with INS, the assessee had entered into agreements, which admittedly were not in terms of the “format agreements” prescribed under the Rules by INS. The prescribed ‘format of agreement’ to be entered into with accredited (advertising) agencies is appended, as Appendix-IV, to the Rules. 5 5. We have perused the ‘format agreement’ (Appendix-IV) and one of the agreements executed between advertising agencies, which had not been registered with INS and the respondent-assessee, and we find lot of difference between the terms and conditions in the agreements (i.e., the agreements actually executed and the format agreement). There cannot be any dispute, if the respondent-assessee had entered into agreements with the advertising agencies which had not registered with INS, were to be governed by the terms and conditions stipulated in the agreements executed between such agencies and the respondent-assessee, and in which case the question of looking into format agreement (Appendix-IV) would not arise. 6. We are of the opinion that in all the cases, the substantial question of law, as formulated in the memorandum of appeals, will have to be addressed and decided by the Tribunal, in the light of the terms and conditions of the agreements i.e., Appendix-IV, executed 6 by the assessee with the accredited agencies, if any, and the agreements executed between unregistered advertising agencies and the assessee. The question whether there exits relationship of principal and principal or principal and agent also will have to be gone into by the Tribunal. We find that the Tribunal has not considered all these aspects/questions in proper perspective. In the circumstances, learned counsel for the parties have fairly stated that we need not record any reasons for disposing of these appeals and they have agreed for the following order: ORDER i. The order of the Tribunal dated 29.03.2007 is set aside. ITA Nos.1094-1096/Bang/2006 are restored to file. ii. Tribunal shall consider the appeals afresh in the light of the observations made in this order and so also in the light of the judgments relied upon by the parties, and in particular the Judgment of the Allahabad High 7 Court in Jagran Prakashan Ltd. –vs- Deputy Commissioner of Income-Tax (TDS) (2012) 345 ITR 288 (All). We, however, make it clear that, we have not expressed any opinion on merits of the case including the question whether Allahabad High Court judgment covers the question raised in this matter. iii. The Tribunal while dealing with the appeals afresh shall consider the terms and conditions of the format agreement (Appendix-IV) so also the terms and conditions of the agreements executed between the unregistered newspaper agencies and the assessee. iv. It is needless to state that the assessee shall place on record the list of accredited advertising agencies and also unregistered advertising agencies with all other necessary information/data, so as to examine the questions raised. 8 v. Tribunal shall further allow the parties to place all such materials on record that would be necessary to decide the questions raised in these cases. 7. With these observations, the appeals are disposed of. All contentions of the parties are kept open. The Tribunal shall endeavour to dispose of the appeals as expeditiously as possible and preferably within a period of one year from the date of receipt of this order. Sd/- JUDGE Sd/- JUDGE TL "