TMI Blog2024 (4) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... d out of own funds and not out of borrowed funds. We find that no such exercise has been carried out by Ld. AO and therefore, it was to be presumed that funds were advanced first out of interest free funds available with the assessee. This is as per the decision of Hon ble Supreme Court in the case of CIT Vs. Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT] The decision of Savera [ 1997 (11) TMI 37 - MADRAS HIGH COURT] also supports this view. Therefore, we delete the impugned disallowance and allow corresponding grounds raised by the assessee. This issue arises in assessee s appeal for AY 2011-12 also. Facts being pari-materia the same, the corresponding grounds raised in AY 2011-12 also stand allowed accordingly. Nature of expenses - Relaunch expenses - deferred revenue expenditure claimed to the extent of 1/3rd in each of the year - HELD THAT:- Assessee has undertaken publicity campaign and incurred relaunch expenses, such an activity has not enlarged the profit making apparatus of the assessee. The assessee has not ventured into any new line of business rather it is seeking growth in the existing line of business. Further, the nature of the expenditure would show th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee by the decision of Checkmate Services P. Ltd [ 2022 (10) TMI 617 - SUPREME COURT] Respectfully following the same, we dismiss the corresponding grounds raised by the assessee. TDS u/s 195 - Disallowance u/s 40(a)(i) on account of payment made to foreign agencies - PE in India or not? - impugned disallowance was deleted by CIT(A) as held that Fees for Technical Services means managerial, technical and consultancy services but do not include payments considered as salary by the recipient of such income. Journalism is the process of collection, analyzing and disseminating information in public interest - HELD THAT:- Admittedly, none of the payee has permanent establishment in India. As noted by Ld. CIT(A), Fees for Technical Services means managerial, technical and consultancy services. The process of gathering information is nothing but a profession and these kind of services are covered under specific Article-5, Article-7 and Article-15 of India-USA DTAA and India-UK DTAA which are applicable to the facts of the present case. These articles exempt such payment from taxation in the absence of any permanent establishment. The provisions of DTAA, being more beneficial to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (25% of Rs. 4,64,31,000/-) thereby disallowing Rs. 42,95,250/- in computing Income. 5. The Assessing Officer/ Commissioner (Appeals) erred in going by the nomenclature and treatment by the appellant in its books without seeing that the expenses incurred such as printing charges, telecasting, hoardings I banners, music concerts, sound and light shows, hall hire charges, travelling expenses, cost of complimentary items, cost of CDs distributed and other promotional activities, all of which were expenditure of a revenue nature incurred in the ordinary course of the appellant's business and are allowable in computing the appellant's income of the year. 6. The appellant submits that in holding that the appellant's contention is not tenable the Commissioner (Appeals) has been misled by the Assessing Officer's view that by incurring the expenditure the appellant was trying to build up its brand value when the fact is that the appellant's publication (The New Indian Express) was already a well-established well known newspaper; further the lengthy reference in the assessment order regarding the dispute over the publication rights / logo I masthead I territory relate bac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... free loans to group concerns for Rs. 732.75 Lacs as under:- i) Secured loans Rs. 65,15,53,568 ii) Unsecured loans Rs. 67,30,91,155 iii) Long term creditors Rs. 3,15,16,000 Total Rs. 1,35,61,60,723 i) M/s. Siddarth Media Holdings P. Ltd Rs. 1,65,00,000 ii) M/s. Express Network Pvt.Ltd Rs. 5,66,93,720 iii) M/s. Express Pub. (Chennai) Ltd. Rs. 77,760 iv) Dinamani Publications Ltd. Rs. 3,948 Total Rs. 7,32,75,428 3.2 The Ld. AO was of the opinion that the loan was diverted for non-business purposes and accordingly, he proceeded to make interest disallowance u/s 36(1)(iii). The assessee submitted that advances were not out of borrowed money and there was no correlation between interest bearing borrowings and loans advanced by the assessee. However, rejecting the same, Ld. AO computed proportionate interest disallowance of Rs. 96.49 Lacs and added the same to income of the assessee. 3.3 During appellate proceedings, the assessee reiterated that there was no correlation between interest bearing borrowings and amounts advanced. Further, the assessee had non-interest bearing funds to the tune of Rs. 60 Crores. The assessee has both interest bearing and non-interest bearing funds and there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the year. The expenditure so incurred by the assessee represent expenditure incurred by the assessee on its flagship English daily The New Indian Express with new look and contents which was well received by the public. It was also submitted that the expenses were incurred on telecasting, hoarding, music concerts, branding and other promotional activities and that the relaunch was part of the process of implementing a strategy to completely overhaul its operations and embark on a high growth path. Finally, the assessee stated that the business makeover includes substantial improvement in readership rankings, brand build-up and efficiency enhancement. 4.2 On the basis of these facts, Ld. AO held that the assessee was trying to build up its brand value which endures for an extended period of time. It would be essential to look into the importance of brands and brand value. Brands are psychology and science brought together as a promise mark as opposed to a trademark. Products have life cycles but brands outlive products and convey a uniform quality, credibility and experience and they are valuable. Building brands builds incredible value for entities and it is not just about a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn so undertaken by the assessee was to generate brand recall among the public. These expenses were therefore, for creating an asset of enduring nature and as such capital in nature Therefore, deferred revenue expenditure of Rs. 159.03 Las was disallowed and the entire amount spent was treated as an intangible asset which would be eligible for depreciation. 4.4 During appellate proceedings, the assessee, inter-alia, relied n the decision of Hon ble Supreme Court in the case of Madras Industrial Investment Corporation vs. CIT (225 ITR 802) and various other decisions. However, the Ld. CIT(A) confirmed the stand of Ld. AO against which the assessee is in further appeal before us. 4.5 From the facts, it emerges that the assessee has undertaken publicity campaign and incurred relaunch expenses of Rs. 464.31 Lacs. In the books of accounts, the assessee has treated the same as deferred revenue expenditure and claimed expenditure to the extent of 1/3rd in each of the year. The expenditure so incurred by the assessee represent expenditure incurred by the assessee on its flagship English daily The New Indian Express with new look and contents. As a part of relaunch activities, the expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as allowed to the assessee shall stand reversed. The corresponding ground stand allowed accordingly. 4.8 This issue arises in assessee s appeal for AYs 2011-12 and 2012- 13 also. Facts being pari-materia the same, the corresponding grounds raised in those years stand allowed accordingly. 5. Short Credit of TDS In this ground, the assessee merely seeks correct TDS credit. It has been submitted that the assessee has claimed TDS credit of Rs. 36.28 Lacs as per Form 26AS whereas Ld. AO has allowed credit of Rs. 21.25 Lacs only. We direct Ld. AO to allow correct TDS credit in accordance with law. This ground stand allowed for statistical purposes. 6. The assessee s appeal for AY 2010-2011 stand allowed in terms of our above order. 7. Assessment Year 2011-12 The issue of interest disallowance and relaunch expenses have already been decided by us at appropriate places in AY 2010-11. The remaining grievance of the assessee is (i) Disallowance u/s 14A; (ii) Disallowance of prior period items. (iii) Disallowance of late payment of Employee s contribution to PF / ESI. The same are adjudicated as under. 8. Disallowance u/s 14A 8.1 In this year, Ld. AO made interest disallowance u/s 36(1)(iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability arose on 09-09-2010 and the payment was made on 15-09-2010. The performance incentive was stated to be quantified as and when reports are received from the various centres and to the extent it is found that the performance period is prior to this year, the same is classified as prior period expenses. The same represent liabilities ascertained during this year and accordingly, allowable to the assessee. The other amounts pertain to travelling expenses, rent etc. which has been debited in the year on account of delayed claims received during this year. However, Ld. CIT(A) confirmed the view of Ld. AO against which the assessee is in further appeal before us. 9.3 From assessee s submissions, it emerges that various expenditure, though pertaining to earlier years, have been ascertained during this year only. The same would be claimed and allowable only upon crystallization. It is also not the case that the assessee has claimed deduction of the same in earlier years. Therefore, the impugned expenditure, in our considered opinion, is allowable to the assessee in this year only. We order so. The corresponding grounds raised by the assessee stand allowed. 9.4 This issue arises i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored. Evidently, the grievance of the revenue is two-fold i.e., (i) disallowance u/s 40(a)(i) on account of payment made to foreign agencies; (ii) Interest receipts and bad debts. The same are adjudicated as under. 13. Disallowance u/s 40(a)(i) 13.1 The assessee made payment to foreign agencies. The same was stated to be for services rendered abroad and no part of amount was stated to be taxable in India. Therefore, no TDS was deducted against the same However, Ld. AO held that the assessee being publisher of newspapers has many reporters / journalists who gather information, verify the same and file reports. These reports undergo editing at assessee s office and get published as news report. The news gathering is done through company s group companies. In some case, the assessee depends upon well known news agencies like PTI for latest and reliable news. The assessee, for international news, has to depend on the input given by the special correspondents deputed to foreign countries. The company has made contractual payment on annual ..... X X X X Extracts X X X X X X X X Extracts X X X X
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