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TMI Blog2012 (10) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... not deducted from the said payment. Aggrieved, the assessee carried the matter in appeal before the CIT(A). 3. The CIT(A) directed the Assessing Officer to delete the disallowance made by the Assessing Officer by observing as under:- "4.1 The first issue relates to disallowance of discount paid/given to advertising consultants. From the return, the Assessing Officer noted that during the previous year the appellant has paid a sum of Rs. 49,93,84,045/- towards agents commission for sale of space for advertisements in newspapers and time slots for television broadcasting. In response to query raised by the Assessing Officer regarding details of TDS on such payments, the appellant has submitted that tax has to be deducted at the time of credit of such income to the account of the payee or at the time of payment of such income to the account of the payee in cash or by issue of a cheque or by a draft or by any other mode, whichever is earlier. It was stated that the appellant company is neither crediting any amount nor paying any amount to the advertising consultant. Since the payments for booking the space for advertisement and time slots for television broadcasting are directly ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. It was stated that none of the ingredients of section 1 H are present in the transaction taking place between publisher/broadcaster and the advertising consultant. It was further submitted that no payment will be made by the publisher/broadcaster to the advertising consultant. But, it is the advertising consultant who makes payment to the publisher/broadcaster. 4.4 It was further submitted that the appellant has neither credited nor made any payment to the advertising consultants and the actual bill amount for space/time charges, less discount, is debited to the advertising consultant's account as per the contract as' illustrated hereunder: Cost of space of an advertisement Rs.1,000 Trade discount to agency as per Indian Newspaper Society(INS) Rules 150 Net amount debited to advertising agency Rs. 850 4.5. From the above, it could be seen that no payment/credit is made by the publisher/broadcaster to the advertising agency. Thus, as the main ingredient which casts liability for making TDS is missing, the appellant is not liable for making TDS and therefore, provisions of section 4O(a)(ia) of the Act, are not applicable to its case. In this regard, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking TDS u/s. 194H of the Act. In this context, it was submitted that no services are rendered by the advertising consultant to the appellant, who is the publisher/broadcaster, in this case. Advertising consultants render services to the advertiser by way of giving advice on the mode of advertisement, layouts, visual effects etc., but to not the publisher/broadcaster. With reference to the second aspect of section 194H regarding crediting/payment of commission brokerage, it was stated that no such credit/payment was made by the appellant which required TDS. In this regard, the appellant further referred to the decision of Hon'ble Delhi High Court in the case of CIT vs. Living Media India Ltd. in ITA.No.1264 of 2007 dated 06.05.20OS affirming the ITAT decision in the same case i.e., CIT vs. Living Media India Ltd. in ITA.No.3807/Del/2005 dated 31.05.2007 (for A.Y. 2003-04), wherein the Hon'ble Tribunal have held that amounts deducted by way of discounts by publisher/broadcaster are not commission and TDS need not be made on such amounts. The learned AR furnished before me a certified copy of the said decision. With these submissions, and relying on the above noted decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y have to claimed the same as bad debts in their accounts, but cannot pass on the same to the publisher/broadcaster, i.e. the appellant. 5.3. Referring to provisions of section 194H of the Act, the appellant submitted that as may If seen under that section two things are essential for making TDS. The first one being that when a person renders services to another person in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, and second one being that when commission or brokerage is credited to the account of the payee, or at the time of making payment, whichever is earlier. Tax as per section 194H of the Act has to be deducted in the case of existence of the above two conditions. Since no services are rendered by the advertising consultant to the appellant, and further no payment/credit is made by the appellant, who is the publisher/broadcaster, to the advertising agency, the appellant is not liable for making any TDS and therefore, no disallowance can be made u/s. 4O(a)(ia) of the Act, for the said amount of Rs. 49,93,84,045 allowed towards discount to the advertising consultants. 5.4.1. In support of its c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had sold the airtime to the advertising agents who in their tum had sold sud7 air time to various other advertisers. The assessee was to receive certain consideration for selling the air time to the advertising agents and the advertising agents had retained part of that commission which was in the nature of agency commission. Thus, the assessee received payment from the advertising agents net of such agency commission. Those ~re in the form of trade discount offered and not in the form of commission paid. " 5.4.4. In ABP (P) Ltd. vs. Am [23 SOT 28], the Hon'ble ITAT, Kolkata Bench, after referring to the above decision of Hon'ble ITAT, Cuttack Bench, of Samaj (supra), and the decision in ACIT vs. Bharati cellular Ltd. [105 ITD 129], have held that the advertising agency was not working under control of the assessee and thus transaction between the assessee and the accredited advertising agency were on principal to principal basis and not on a principal to agent basis. It was further held that payment made by the assessee to those advertising agencies could not be termed as payment of commission and provisions of section 194H are not applicable. It is pertinent to reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee to agency, the assessee would not be liable to deduct TDS on the payment received by the agency. In view of the CBDT Circular No.715, dated 8-8-1995, it was dear that the intention of the Legislature was not to impose liability on the assessee for deduction of TDS on the amount received by the advertising agencies. Thus, the provisions of section 194H were not applicable to the assessee and the assessee was not liable to deduct tax. That was more so because no payment was made by assessee to the advertising agency. " . 5.4.6. In the case of ACIT vs. Living Media India Ltd. in ITA.No.3807/DeI/2005 vide order dated 31.05.2007 (A.Y. 2003-04)], the Hon'ble ITAT, Delhi Bench, after referring to the decision in the case of the Prasar Bharthi Broadcasting Corporation of India (supra), have held that the relationship between the assessee and the advertising is in the nature of principal to principal basis, and not as principal to agent basis. The Hon'ble ITAT further held that the amount deducted out of the gross payment received by the agency from the advertiser cannot be treated as payment of commission by the assessee to the advertising agency, and thus, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of Unit of 10 seconds in the case of TV Channels. When the public approaches the advertisement agency for booking a space/time slot as per the required choice, the public is called advertiser. The advertising agency then prepares the content that is to be broad casted through the media and books its space/time slots as per tariff agreed by the advertiser. All these agencies are jointly divided into two categories i.e. accredited and non-accredited. Accredited is one who has been recognized by the newspapers entitling him to certain privileges such as booking a space/time slots on credit at a higher rate of commission on the tariff. In the non-accredited category, the advertising agent is deprived of all these privileges. 3.0 It can be seen that it is the Newspaper or a TV Channel which is selling the space through the medium of advertising agents who in-turn are entitled for their commission. The advertisers broad cast their advertisements or message for various purposes. The advertisers generally do not go to the Newspaper or TV channel directly except in classifieds but approach an advertising agency. Since the advertising agency is already accredited and is familiar with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be treated as discount but it has to be treated as commission only. 6.0 The basic premise for applying sec.40(a)(ia) read with provisions of TDS is that such expenditure on which provisions of sec.40(a)(ia) are to be applied, shall be acceptable as a debit u/s 30 to 37 for the purpose of arriving incomes u/s 28. Since the a~~essee company has debited the very expenditure of commission to profit and loss account after crediting the gross revenue from sale of advertisements as can be seen from the Schedule-XIII and Schedule-XIX of the balance sheet, the assessee company cannot escape the rigors of section 194H and thereby the section 40(a)(ia). 7.0 The receipt arriving from sale of advertisement is deemed to be full receipt and payment commission by book adjustment also shall require tax deduction. The retention of the advertisement agents' commission by him ab initio and remitting the balance amount to the account of the publisher is only an accounting treatment or book adjustment. 8.0 While deciding a similar matter, allowing the appeal of the revenue, the Hon'ble Kerala High Court in the case of CIT Vs Director, Prasarbharathi (2010) 325 ITR 205 held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue and hence the departmental appeal is dismissed on this issue." 6. The learned counsel for the assessee also submitted that the disallowance is also not justified in the light of the ratio of the recent decision of the Hon'ble ITAT Special Bench, Vizag in ITA No. 477/H/08 dated 09/04/2012 in the case of M/s Merilyn Shipping & Transports, Visakhapatnam that section 40(a)(ia) of the Act is applicable only to expenditure which is payable as on 31st March of every year and cannot be invoked to disallow the amounts which have already been paid during the year without deducting tax at source. 7. After hearing the arguments of both the parties and perusing the record as well as the decision of the coordinate bench in assessee's own cases (supra), we uphold the order of the CIT(A) on this count and dismiss the grounds raised by the revenue in this regard in both the years under consideration . 8. As regards the another issue regarding payment of data circuit rentals to BSNL, the AO noted that the assessee had incurred an amount of Rs. 8,68,80,460/- towards data circuit lines charges, which was paid to BSNL. The AO disallowed the said amount applying the provisions of section 40(a)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technology or techniques in the future without depending upon the provider. Hence, we confirm the order of the CIT(A) that tax is not deductible on payment Data circuit rentals and dismiss the departmental appeal on this issue." 14. Since the issue under consideration is identical to the one decided by the coordinate bench in assessee's own case (supra), respectfully following the same, we uphold the order of the CIT(A) in deleting the disallowance of Rs. 8,68,80,46/- made by the AO on account of payment to BSNL by the assessee and accordingly, the ground raised in both the years under consideration is dismissed. 15. In AY 2006-07 (ITA No. 426/Hyd/10), the revenue has raised a ground regarding restriction of depreciation on computer accessories to 15%. 16. The assessee had shown additions to fixed assets and claimed depreciation @60% under the head 'computers' on computer accessories. The AO was of the view that only computers or computer software is eligible for deprecation @60%. The AO therefore, held that since the accessories like printers, scanners, modems, routers, etc. come under the head plant & machinery, the depreciation rate applicable to the accessories is 15%. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter accessories and peripherals. While completing the assessment, the AO has held that the computer peripherals such as printers, scanners, modems, routers etc. cannot be categorized as computer but treated them as plant & machinery ~ restricted the depreciation from 60% to 15%. The learned C1T(A) has deleted the addition relying on the decisions in the cases of Sameeran Majumdar 98 ITD 119 (Cal.), Amadeus India Pvt Ltd 79 ITD 407 (Del), Datacraft India Pvt Ltd 9 ITR Trib. 712 (Mum). The department is in appeal against the orders of the CIT(A). 2.0 It is desirable to understand what is a computer to begin with. A computer is one which can ~mathematical calculations at a very fast pace compared to human mind. The entire industry categories the products available in the computer sector into two categories such as computer hardware and computer software. As we are only concerned with computer hardware here, the computer hardware is further categorized into computers and computer peripherals. The computers with peripherals in the industry on both the categories individually i.e. to say a manufacturer who is manufactures computers would not manufacture computer peripherals generally a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the AO be sustained." 18. On the other hand, the learned counsel for the assessee relied upon the order of the CIT(A). 19. After hearing the arguments of both the parties and perusing the record, we are of the view that we do not find any infirmity in the order of the CIT(A) in deleting the disallowance made by the AO on account of depreciation on computer accessories and peripherals as the order of the CIT(A) is in consonance with the decision of the Hon'le Delhi High Court in the case in the case of Asst. CIT Vs. Amadeus India (P) Ltd. [2001] 79 ITD 407 (Del.), wherein the Hon'ble High Court held that the term computer software should be interpreted liberally, broadly and in consonance with the intent of the legislation and working of the entire system as a whole. Therefore, we confirm the order of the CIT(A) on this count and dismiss the ground of appeal of the revenue. 20. One more ground raised by the revenue in AY 2006-07 regarding interest on borrowed funds in respect of purchase of printing machinery which are not put to use. 21 During the year consideration, the assessee-company purchased printing machinery of Rs. 6.73 crores. The AO noted that the printing mach ..... X X X X Extracts X X X X X X X X Extracts X X X X
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