2022 (9) TMI 1519 - AT - Income Tax

TDS u/s 194H - disallowances u/s. 40 (a) (ia) - 15% discount given by the assessee to its advertising agencies - Non deduction of TDS - HELD THAT - What is to be seen at the time of evaluation of applicability of section 194H is the relation of payer and payee and the character or nature business of assessee does not create any distinction in this regard. As in the case of Jagran Prakashan 2012 (5) TMI 488 - ALLAHABAD HIGH COURT categorically held that when there is no agreement between the payer and payee advertising agencies and the advertising agency has never been appointed as an agent of payer assessee then the commission paid to the advertising agencies cannot be characterize as an payment from principal to principal basis and in such a situation the provisions of section 194H of the Act are not applicable to the such discount / commission and the assessee is not under obligation deduct TDS thereon. CIT (A) was right in relying on CBDT Circular No.06.2016 - Undisputedly the AO never made any disallowance or addition on this issue of payment commissioner/ discount to the advertising agencies neither from earlier other nor from subsequent assessment year and only made disallowance in A.Y.2009-10. Principal of consistency always followed by the tax authorities, in the identical and similar facts and circumstances. AO has not mentioned any reason as to why he proceeded to take a deviated view from preceding assessment years contrary to rule of consistency, in this particular A.Y.2009-10 under identical facts and circumstances. Decided in favour of assessee. Disallowance u/s 14A r.w.r. 8D - CIT(A) restricted addition - HELD THAT - AO has invoked provisions of section 14A of the Act r.w.r 8D (iii) of the Rules by taking 0.5% of average of investments of assessee in the opening and closing of the year which has been reduced by the CIT(A) to the extent of average of investment out of which the assessee has earned exempt income during the relevant financial period. This conclusion of Ld. First appellate authority is in accordance with the order of ACIT Vs. Vireet Investment (P) Ltd. 2017 (6) TMI 1124 - ITAT DELHI No valid reason or any other factual dissimilarity or legal position, which may lead us to take a different view. Therefore, findings of Ld. CIT(A) on this issue are also confirmed. Decided against revenue.

Summary

Issues Involved:
1. Disallowance under Section 40(a)(ia) for non-deduction of TDS under Section 194H.
2. Disallowance under Section 14A read with Rule 8D.

Issue-wise Detailed Analysis:

1. Disallowance under Section 40(a)(ia) for non-deduction of TDS under Section 194H:

The primary contention of the revenue was that the CIT(A) erred in deleting the disallowance made by the AO under Section 40(a)(ia) due to the assessee's failure to deduct tax at source under Section 194H on the commission of 15% paid to advertising agencies. The revenue argued that the assessee, not being a newspaper or publishing house, could not rely on the CBDT Circular No.05/2016 and the Delhi High Court judgment in CIT Vs. Living Media India Pvt. Ltd.

The assessee countered, highlighting that from AY 2006-07 to AY 2018-19, no such disallowance was made except for AY 2009-10. The CIT(A) had relied on the Delhi High Court's judgment in CIT Vs. Living Media India Pvt. Ltd., which was upheld by the Supreme Court, and the CBDT Circular No.05/2016.

The Tribunal observed that the AO had not disallowed any amount in earlier or subsequent years and found no adverse material to support the disallowance for AY 2009-10. The Tribunal emphasized the need to examine the nature of the contract and payment, concluding that the payment was a trade discount, not a commission, thus not attracting Section 194H. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's grounds.

2. Disallowance under Section 14A read with Rule 8D:

The revenue contended that the CIT(A) erred in restricting the disallowance under Section 14A read with Rule 8D based on the assessee's calculations without confirming with the AO, violating Rule 46A of the IT Rules.

The assessee supported the CIT(A)'s decision, which was based on the Special Bench of ITAT Delhi's judgment in ACIT Vs. Vireet Investment (P) Ltd., stating that only investments yielding exempt income should be considered for disallowance under Section 14A read with Rule 8D(iii).

The Tribunal found the CIT(A)'s decision consistent with the Special Bench's judgment and saw no reason to deviate. Thus, the Tribunal confirmed the CIT(A)'s findings and dismissed the revenue's grounds.

Cross Objections by the Assessee:

The assessee's cross objections were supportive of the CIT(A)'s findings. Since the revenue's appeal was dismissed, the cross objections required no adjudication and were disposed of accordingly.

Conclusion:

The Tribunal dismissed the revenue's appeal and upheld the CIT(A)'s order, confirming that the disallowances under Sections 40(a)(ia) and 14A were correctly addressed by the CIT(A) in accordance with relevant judicial precedents and CBDT circulars.