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TMI Blog2024 (6) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... apers 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 spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (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. - SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER For the Assessee by : S/shri Ravindra Turaga, CA Ankit Jain, Advocate For the Revenue by : Shri S.K Meena, CIT-DR ORDER PER RAVISH SOOD, JM : The captioned appeals filed by the revenue are directed against the respective orders passed by the Commissioner of Income-Tax (Appeals)-1, Raipur, dated 24.05.2018 and 01.07.2019, which in turn arises from the orders passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (in short the Act ) dated 31.03.2016 and 29.12.2017 for the assessment year 2013-14 2015-16, respectively. As the issues involved in the captioned appeals are inextricably interlinked or interwoven, therefore, the same are being taken up and disposed of by way of a consolidated order. 2. We shall first take up the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. issued notice u/s. 133(6) of the Act to M/s. A.S. Advertisers (supra) and called for the details of advertisement work of ITM University, Raipur, which was done by it through Red Eye Media Pvt. Ltd. and copy of ledger account of Red Eye Media Pvt. Ltd. a/w. bills and other supporting material. Further, the A.O. called upon the assesseee society to explain why the heavy profits charged by Red Eye Media Pvt. Ltd., a specified person, may not be treated as a diversion of its income as per the provisions of section 13(2)(g) of the Act. In reply, it was submitted by the assessee society that Red Eye Media Pvt. Ltd. (supra) had not charged any amount over and above its purchase cost on the advertisement work carried out by way of insertions in the newspaper. Elaborating on its claim, it was submitted by the assessee that as per the advertisement agency norms of the newspaper company, the rate for the ultimate customer and the advertisement agency remained the same. However, for an advertisement agency, as per norms, a discount @15% of the contracted amount was provided by the newspaper company. Apart from that, it was the claim of the assessee that Red Eye Media Pvt. Ltd. (supra) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee society and allowed the same. 7. The revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 8. We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. As muti-facet issues are involved in the present appeal, therefore, we shall deal with the same, as under: A. Disallowance of advertisement expenses (newspaper and other media insertions expenses): 1,70,41,267/- 9. Shri Ravindra Turaga, Ld. Authorized Representative (for short 'AR') for the assessee society at the threshold submitted that the assessee had incurred advertisement expenses of Rs. 2,44,16,151/- which includes, viz. newspaper insertions, hoardings, web advertisements, and radio, etc., out of which expenditure of Rs. 1,94,37,596/- pertained to advertisement work that was handled by M/s. Red Eye Media Pvt. Ltd., a related party and a specified person as per the meaning of Section 13(3) of the Act, wherein the directors of the advertising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asonable. It was further submitted by him that as the assessee society had failed to prove that any additional services were rendered by M/s. Red Eye Media Pvt. Ltd., therefore, the additional charges @15% over and above the actual bill for advertisement through hoardings revealed the diversion of the funds of the assessee society to a specified person falling within the meaning of Sec. 13(3) of the Act. The Ld. DR relied on the judgment of the Hon'ble Supreme Court in the case of Ganapathy Co. Vs. CIT (2016) 65 taxmann.com. 194 (SC). 11. We have heard the Ld. Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record. On a perusal of the CIT(Appeals)'s order, it transpires that M/s. Red Eye Media Pvt. Ltd. Was charging the assessee society the same rates which were fixed by the newspaper company, viz. Dainik Bhaskar. Further, we find that M/s. Red Eye Media Pvt. Ltd being an agent of M/s. Dainik Bhaskar (supra) received a discount of 15% from the said newspaper company on the bill amount. As M/s. Red Eye Media Pvt. Ltd. (supra) had charged the assessee society for the advertisements in the newspaper, viz. Da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, amount charged by A.S. Advertisers in respect of Hording at station road, fafadih chowk of size 25x30 was 50,000/- whereas Red Eye media Pvt. Ltd. has charged Rs .62,353/-. Again Hording space at Telibandha Market of size 30x10, A.S.Advertisers charged 25,000/-whereas Red Eye Charged 30,824/- for the same. Moreover, the total bill amount charged by A.S.Advertisers was Rs. 3,54,608/- whereas Red Eye charged Rs. 4,17,186/-. On a perusal of the aforesaid observation, we find that as observed by the A.O, and rightly so, a comparative perusal of the bills raised by M/s. Red Eye Media Pvt. Ltd. (supra) on the assessee society as against those of M/s. A.S Advertiser, Raipur, revealed that M/s. Red Eye Media Pvt. Ltd. (supra), i.e. specified person, had raised bill of a higher amount on the assessee society. On being queried, it was the claim of the assessee society that as M/s. Red Eye Media Pvt. Ltd. (supra) was providing certain incidental services for preparing the advertisement material, viz. script writing, photoshoots, layout and design etc., therefore, it had made a cost addition/mark up of 15% (approx.) for providing the said services. Although the CIT(Appeals) had summarily a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving incurred the aforesaid expenditure towards brokerage and commission. Also, it was observed by the A.O that certain bills furnished in respect of brokerage and commission expenses were in the name of ITM, Mumbai while for some of the bills were marked as due for payment. As the assessee society had failed to substantiate its aforesaid claim of expenditure on the basis of supporting documentary evidence, the A.O had disallowed the entire amount. 15. During the course of the proceedings, the Ld.AR rebutted the aforesaid observation of the A.O. Elaborating on the aforesaid claim of expenditure, the Ld.AR submitted that as the assessee society which was running a university that was recognized as a deemed university and had commenced its educational activities in July 2012, was located at the outskirts, i.e., 30 kms from municipal limits of the city, and thus, being a new entity, was less known amongst student fraternity, courses were provided by it to organize counseling at different cities in the state for creating their interest. The Ld. AR submitted that as the responsibility to carry out the aforesaid works was assigned to consultants for fee/commission, therefore, the expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition on account of depreciation: Rs. 2,34,92,053 /- 18. On a perusal of the assessment order, it transpires that the A.O had declined the assessee's claim for depreciation of Rs. 2,34,92,053/- 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. The A.O while observing as hereinabove had drawn support from the judgment of the Hon'ble High Court of Kerala in the case of Lissie Medical Institutes Vs. CIT (2012) 384 ITR 344 (Ker.). 19. On appeal, the CIT(Appeals) had vacated the aforesaid addition/disallowance with an observation that as Section 11(6) of the Act which puts restriction on the claim of depreciation on fixed asset as application once the cost of asset is allowed as application, was made available on the statute only w.e.f. 01.04.2015, i.e. from A.Y.2015-16 onwards, therefore, the same would not be applicable in the case of the assessee society for A.Y.2013-14. Apart from that, it was observed by him that even otherwise, as the assessee society had not claimed the cost of asset as an application, therefore, there was no justification for the A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the revenue is dismissed in terms of our aforesaid observations. 23. In the result, appeal of the revenue in ITA No.175/RPR/2018 for A.Y.2013-14 is partly allowed for statistical purposes in terms of our aforesaid observations. ITA No.237/RPR/2019 A.Y.2015-16 24. As the facts and the issue involved in the captioned appeal as regards Ground of appeals No. 1 2 remains the same as were there before us in the Revenue s Grounds of appeal Nos. 1, 2 3 in ITA No. 175/RPR/2018 for A.Y.2013-14, therefore, the view therein taken shall mutatis-mutandis apply for the purpose of disposing off the Grounds of appeal Nos. 1 2 in the captioned appeal i.e. ITA No.237/RPR/2019 for A.Y.2015-16. Thus, the Grounds of appeal Nos. 1 2 raised by the revenue are partly allowed for statistical purposes in terms of our observations as were recorded in ITA No. 175/RPR/2018 for A.Y.2013-14. 25. Apropos the disallowance of the assessee's claim for depreciation on assets, we are persuaded to subscribe to the view taken by the CIT(Appeals) that as the assessee society has not claimed cost of asset as an application, therefore, there was no justification for the A.O to have disallowed the same for the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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