2008 (1) TMI 423 - AT - Income Tax

Summary

Issues Involved:
1. Eligibility of deduction under section 80Q of the Income-tax Act, 1961.
2. Classification of "Yellow Pages" as a book.
3. Distribution of "Yellow Pages" as publication.
4. Classification of "Yellow Pages" under excluded categories in section 80Q(3).
5. Profit derived from the publication of "Yellow Pages".
6. Disallowance under section 43B for contribution to Provident Fund and Family Pension Fund.
7. Classification of interest received from clients.
8. Charging of interest under section 220(2) of the Act.

Detailed Analysis:

1. Eligibility of Deduction under Section 80Q:
The primary issue was whether the assessee was entitled to a deduction under section 80Q for the profits derived from the business of printing and publication of the "Yellow Pages Directory." The Assessing Officer (AO) denied the deduction, arguing that the "Yellow Pages" did not qualify as a book and fell within excluded categories under section 80Q(3). The CIT(A) upheld this view, emphasizing that the "Yellow Pages" were akin to a collection of advertisements and lacked an author, thus not meeting the criteria for a book under section 80Q.

2. Classification of "Yellow Pages" as a Book:
The Tribunal examined the dictionary definitions of "book" and concluded that the term is of the widest amplitude, including even a collection of sheets. Therefore, the "Yellow Pages," which listed various professionals and businesses along with their contact information, qualified as a book. The Tribunal rejected the AO's and CIT(A)'s reasoning that a book must be authored or contain literary material.

3. Distribution of "Yellow Pages" as Publication:
The Tribunal referred to definitions of "publication" and "publish" from Black's Law Dictionary and the Concise Oxford Dictionary, concluding that offering or distributing copies to the public constitutes publication. Since the "Yellow Pages" were printed in large quantities and distributed free to the public, this amounted to publication.

4. Classification under Excluded Categories in Section 80Q(3):
The AO argued that "Yellow Pages" fell under excluded categories like newspapers and similar publications. The Tribunal disagreed, stating that the "Yellow Pages" did not contain public news or comments and thus did not fit the definition of a newspaper. The Tribunal also rejected the CIT(A)'s reasoning that the lack of an author in the "Yellow Pages" placed it within the excluded categories, noting that many excluded items do have authors.

5. Profit Derived from Publication:
The AO contended that the profits were derived from advertisements, not from the publication of books. The Tribunal, however, held that the revenue from advertisements was inseparable from the publication activity. It cited a similar case where the Tribunal had allowed the inclusion of advertisement revenue in computing profits for deduction purposes.

6. Disallowance under Section 43B:
The AO disallowed contributions to Provident Fund and Family Pension Fund, claiming they were paid beyond the due date. The CIT(A) found that payments were made within the grace period, and thus no disallowance was warranted. The Tribunal upheld the CIT(A)'s decision, noting that the issue was covered by a previous decision in the assessee's favor.

7. Classification of Interest Received from Clients:
The AO classified the interest received from clients as "Income from other sources," while the CIT(A) directed it to be assessed as "Business income." The Tribunal agreed with the CIT(A), referencing a prior decision in the assessee's favor.

8. Charging of Interest under Section 220(2):
The CIT(A) noted that no demand was pending beyond the specified period, and thus interest under section 220(2) should not be charged. The Tribunal found no merit in the revenue's appeal on this issue, affirming the CIT(A)'s decision.

Conclusion:
The Tribunal allowed the appeals of the assessee, holding that the "Yellow Pages" qualified as a book and its distribution amounted to publication, thus entitling the assessee to deduction under section 80Q. The revenue's appeal was dismissed, affirming the CIT(A)'s decisions on disallowance under section 43B, classification of interest income, and non-charging of interest under section 220(2).