2024 (6) TMI 929 - AT - Income Tax

Disallowance of advertisement expenses (newspaper and other media insertions expenses ) - HELD THAT - As M/s. Red Eye Media Pvt. Ltd. (being an agent of M/s. Dainik Bhaskar) had charged the assessee society for the advertisements in the newspaper viz. Dainik Bhaskar the same rate which was fixed by the newspaper company therefore the observation of the A.O that the assessee society was unreasonably charged for the said work is found to be factually incorrect. Discount of 15% that M/s. Red Eye Media Pvt. Ltd. had received from M/s Dainik Bhaskar on the bill amount we are of the view that as the said discount/incentive was received by M/s. Red Eye Media Pvt. Ltd. in its capacity as that of an agent of the aforesaid newspaper company thus the same cannot have any bearing on determining the reasonableness of the charges that were borne by the assessee society for the advertisements in the newspapers carried out through the aforesaid specified person. 15% discount received by M/s. Red Eye Media Pvt. Ltd. from M/s Dainik Bhaskar was not an incentive/discount that the assessee society could have obtained if it had got the said advertisement work done either directly through the newspaper company or through some other agent. As M/s. Red Eye Media Pvt. Ltd. (supra) had billed the assessee society the same amount that the newspaper company had billed to M/s. Red Eye Media Pvt. Ltd. thus it can safely be concluded that the related party had not availed any profit from the assessee society - Thus adverse inferences drawn by the A.O as regards unreasonableness of the charges raised by M/s. Red Eye Media Pvt. Ltd. (supra) regarding the advertisement work done for the assessee society through insertions in the newspapers vactaed. Hoarding Expenses - Although the CIT(Appeals) had summarily accepted the aforesaid claim of the assessee society but in absence of any material which would substantiate the aforesaid claim of the assessee society i.e. M/s. Red Eye Media Pvt. Ltd. was providing additional services as stated hereinabove we are unable to endorse the same. On being specifically queried about the nature of services which were rendered by M/s. Red Eye Media Pvt. Ltd. (supra) and to place on record documentary evidence supporting the said factual position the Ld. AR submitted that the same were not readily available with him. Considering the aforesaid facts we are of the view that justification given by the assessee society as regards the additional charges raised by M/s. Red Eye Media Pvt. Ltd. (supra) for carrying out advertisement through M/s. A.S. Advertiser Raipur (supra) cannot be summarily accepted and would require necessary verification. We thus in all fairness restore the matter to the file of the A.O with a direction to look into the reasonableness of the advertisement expenditure in the backdrop of the claim of the assessee society that M/s. Red Eye Media Pvt. Ltd. (supra) had raised additional charges with respect to the advertisement services rendered through M/s. A.S. Advertiser Raipur (supra) for certain services which were provided by it viz. script writing photoshoots layout and designing etc. Thus the Grounds of appeal Nos. 1 2 raised by the revenue are partly allowed for statistical purposes. Addition made on account of Commission brokerage expenses - Considering the fact that the A.O had failed to deal with the aforesaid documentary evidence that is stated to have been filed by the assessee society in the course of the proceedings before him the matter in all fairness requires to be revisited by him. At the same time we may herein observe that the assessee society in the course of the set-aside proceedings shall not only substantiate its claim for the aforesaid commission/brokerage expenses but also shall provide explanation as to on what basis the bills raised in the name of ITM University located at Aurangabad Nagpur and Mumbai etc. were to be considered in its case. We thus in terms of our aforesaid observation restore the matter to the file of the AO Addition on account of depreciation - AO had declined the assessee s claim for depreciation on fixed assets for the reason that once the cost of assets had been allowed as expenditure at one time no additional benefit of depreciation could thereafter be allowed - HELD THAT - We are of the view that for both the reasons viz. (i) that as observed by the CIT(Appeals) the assessee had not claimed the cost of assets as an application; and (ii) that prior to Section 11(6) of the Act made available on the statute w.e.f. A.Y.2015-16 the assessee was entitled to claim depreciation u/s.32 of the Act on assets whose cost has been allowed as application for charitable purposes u/s.11(1)(a) of the Act there was no justification for the A.O to have disallowed its claim for depreciation. Decided in favour of assesee.