2016 (7) TMI 1471 - AT - Income Tax

Disallowance u/s. 40(a)(ia) - Assessee receives advertisement revenue and as part of receipt commission amount was paid out of the amounts received - CIT(A) relying on many other cases in assessee case the disallowance was deleted - Held that - No reason to interfere with the order of the Ld. CIT(A) as it is in compliance to the order of ITAT in earlier years. Moreover CBDT also has recently issued a Circular bearing F.No. 275/2006/2016-IT(B) dt. 29-02-2016 clarifying that TDS is not required to be made on payments made by TV channels/News paper companies to the advertising agency for booking or procuring or canvassing for advertisement. In view of that we do not see any reason to defer from the findings. This Ground is rejected. Disallowance of depreciation on computer accessories - Held that - This issue is covered against the department by the orders of ITAT in earlier years. Since accessories like printers scanners and modems etc. are part of computer machinery Assessee is eligible for depreciation at 60%. Accordingly the ground is rejected. Disallowance of employees contribution to ESI - AO disallowed the above amount holding that the amounts were paid beyond the due date - Held that - As relying on assessee s own case since the payments are made within the year the amendment brought to the Act is equally applicable. Therefore there is no merit in Revenue s ground. Disallowance of prior period expenses - Held that - Assessee it seems paid an amount of 19, 00, 263/- in the immediately preceding previous year from the group gratuity premium which related to period 01-11-2009 to 31- 10-2010. Part of the amount pertaining to earlier year was claimed in financial year 2009-10 and balance 11, 14, 301/- in the current year. Since the payment was made in the earlier year it was accounted as prior period expenditure but the amount pertains to the current year s liability. Accordingly we do not find any reason to defer from the findings of the Ld. CIT(A). As regards the amount of 9, 36, 420/- it was found that the same related to excess billing of earlier years reversed in the current year. Relying on the decision of the Co-ordinate Bench of ITAT in assessee s own case for AY. 2007-08 2014 (1) TMI 250 - ITAT HYDERABAD Ld. CIT(A) deleted the disallowance. We do not see any reason to interfere with such order. Disallowance of payment to Employees Group Gratuity Scheme - AO disallowed on the ground that the schemes to which assessee contributed the amounts were approved w.e.f. 18-08-2011 - Held that - After taking into account the amounts appropriated towards premium for employees group insurance and gratuity payments made during the year and also after adding interest received net amount of 1, 35, 67, 598/- was transferred to the accounts of demerged companies including the unpaid liability. The demerged companies viz. Eenadu Television Pvt. Ltd. Prism TV Pvt. Ltd. and Panorama TV Pvt. Ltd. reflected the payments in their books. Since the amount was transferred to the account of demerged companies and since there was no claim for deduction for the impugned amount in computing total income in assessee s case the order of CIT(A) is to be upheld. As assessee submitted additional evidence to explain the entries in assessee books and its demerged companies we are of the opinion that this can be examined by the AO.

Summary

Issues Involved:
1. Disallowance of commission amount under section 40(a)(ia) of the Act.
2. Disallowance of depreciation on computer accessories.
3. Disallowance of employees' contribution to ESI.
4. Disallowance of prior period expenses.
5. Disallowance related to Employees' Group Gratuity Scheme.

Issue 1: Disallowance of Commission Amount under Section 40(a)(ia) of the Act:
The case involved a disallowance of commission amount under section 40(a)(ia) of the Act. The Assessee received advertisement revenue and paid a commission amount, leading to a disallowance by the AO. However, the Ld. CIT(A) deleted the disallowance based on previous ITAT cases and a Circular by CBDT clarifying TDS requirements. The Tribunal upheld the CIT(A)'s decision, citing compliance with ITAT orders and the CBDT Circular.

Issue 2: Disallowance of Depreciation on Computer Accessories:
The dispute revolved around the disallowance of depreciation on computer accessories claimed by the Assessee. The AO allowed depreciation at 15% considering the accessories as Plant & Machinery, contrary to the Assessee's claim of 60%. Following previous ITAT decisions, the Ld. CIT(A) allowed depreciation at 60%, which was upheld by the Tribunal, stating that the accessories were part of computer machinery.

Issue 3: Disallowance of Employees' Contribution to ESI:
The issue concerned the disallowance of employees' contribution to ESI by the AO due to delayed payments. The Ld. CIT(A) found that most payments were made within the accounting year, and the ITAT had previously ruled in favor of the Assessee. The Tribunal dismissed the Revenue's ground, emphasizing that the payments were made within the year, aligning with the applicable amendment.

Issue 4: Disallowance of Prior Period Expenses:
Regarding the disallowance of prior period expenses, the AO disallowed an amount debited as 'prior period expenditure.' The Ld. CIT(A) differentiated between payments pertaining to the current year and those mistakenly booked under 'prior period expenditure.' The Tribunal agreed with the Ld. CIT(A)'s findings, upholding the deletion of disallowances based on the nature of the expenses and previous ITAT decisions.

Issue 5: Disallowance Related to Employees' Group Gratuity Scheme:
The AO disallowed an amount related to the Employees' Group Gratuity Scheme, alleging non-compliance with approval dates. The CIT(A) accepted the Assessee's explanation that the payment did not belong to them. The Tribunal allowed the Assessee to submit additional evidence regarding the transactions with demerged companies. The AO was directed to reexamine the facts, giving the Assessee an opportunity to present their case. The Tribunal partially allowed the Revenue's appeal for statistical purposes.

In conclusion, the Tribunal's decision addressed various issues raised by the Revenue, consistently upholding the Ld. CIT(A)'s orders based on legal precedents and factual considerations, providing detailed reasoning for each issue resolved.