As per CBDT circular sec 194 applied on advertisement when client make payment to add agencies but not when payment made by add agencies to media

IN THE INCOME TAX APPELLATE TRIBUNAL

(DELHI BENCH “C” New Delhi)

BEFORE SHRI G.D. AGARWAL, HON’BLE VICE-PRESIDENT AND

SHRI RAJPAL YADAV: HON’BLE JUDICIAL MEMBER

ITA No. 4062/Del/2010

Assessment Year: 2004-05

Global Media Services Pvt. Ltd.

4162 Sector-B, Pocket 5 & 6,

Vasant Kunj, New Delhi-110070

(PAN: AABCG2896G)

(Appellant)

Vs.

Income-tax Officer,

Ward 12(2),

New Delhi.

 (Respondent)

Appellant by: Shri SP Aggarwal, CA

Respondent by: Smt.Renu Janhri, Sr. DR

Date of hearing: 21.02.2012

Date of pronouncement: 23.03.2012

ORDER

PER RAJPAL YADAV: JUDICIAL MEMBER

The assessee is in appeal before us against the order of Learned CIT(Appeals) dated 18.6.2010 passed for assessment year 2004-05. Ground No.1 is general in nature and no specific arguments were raised by the learned counsel for the assessee, therefore, it is rejected.

2. In ground No.2, assessee has pleaded that Learned CIT(Appeals) has erred in confirming the addition of Rs.4,17,379 which was added by the Assessing Officer on account of suppression of receipts.

3. The brief facts of the case are that the assessee is a private limited company engaged in the business of posting advertisement in various publication including newspapers. It has filed its return of income on 29.7.2005 declaring a total income of Rs.45,550. The case of the assessee was selected for scrutiny assessment and a notice under sec. 143(2) of the Act dated 26.7.2006 was issued and served upon the assessee. On scrutiny of the accounts, learned Assessing Officer found discrepancies in the receipts appearing in the TDS Certificate vis-à-vis shown by the assessee in the profit and loss account. He observed that in the TDS certificate contract receipts are shown by the assessee at Rs.11,90,516 whereas in the profit and loss account, it has shown Rs.7,73,137. In response to the query of the Assessing Officer, it was contended by the assessee that the company accepts orders both with and without material for printing. It books sales in its books of account and charges sales tax on deliveries made against orders inclusive of material, still tax has been deducted at source from payments made to it. The assessee has furnished the details, however, Assessing Officer was not satisfied with the explanation of the assessee, he made the addition of Rs.4,17,379 which is the difference between Rs.11,90,516 – Rs. 7,73,137.

4. Appeal to the learned CIT(Appeals) did not bring any relief to the assessee.

5. Before us, learned counsel for the assessee submitted that the learned revenue authorities have failed to appreciate the true controversy. The total sales made by the assessee is of Rs.22,03,004. These sales include the sale proceeds wehre material was also accepted by the assessee. Out of these total sales, a TDS on the bill amount of Rs.11,90,516 was deducted. This TDS has been shown by the assessee at Rs.24,410. In other words, when certain entities booked the advertisement required to be placed by the assessee has supplied the material. They have deducted TDS.

Assessee has shown those bills separately. The bifurcation of the sales have been shown on pages 2 & 3 of the paper book. The learned counsel for the assessee pointed out that on page 27 of the paper book, summary of expenses for advertisement as well as advertisement income has also been placed by the assessee. Assessing Officer failed to construe that the amount of Rs.11,90,516 is already forming part of Rs.22,03,004. Thus, Assessing Officer ought to have not considered this amount of Rs.11,90,516 separately. Learned DR was unable to controvert the contentions of the learned counsel for the assessee.

6. We have duly considered the rival contentions and gone through the record carefully. The learned counsel for the assessee has placed on record the details exhibiting the total sales made by it. It has also shown the bill amount on which purchasers have deducted the tax. It is not the case of the assessee that it has only accounted Rs.7,73,137 as advertisement receipts whereas in the TDS certificate a different amount has been shown. The total sales is much higher than this. To our mind, Assessing Officer has erred in construing the transaction treating the contract receipts only at Rs.11,90,516 which according to him shown in the TDS certificate and thereby comparing this receipt against the advertisement income. He ought to have considered the total sales including the sales on which purchaser have deducted the TDS in booking the advertisement contract. Therefore, we deem it appropriate to set aside this issue to the file of the Assessing Officer for verification and readjudication.

7. In the next ground of appeal, grievance of assessee is that Learned CIT(Appeals) has erred in confirming the addition of Rs.8,67,704. The assessee has debited expenses of Rs.867,704. This has been disallowed to the assessee by the Assessing Officer on the ground that TDS was not deducted as well as assessee failed to produce relevant evidence in support of the expenditure. Before the Learned CIT(Appeals), it was contended by the assessee that CBDT has issued a Circular bearing No. 715 dated 8.8.1995 wherein it was provided that TDS would be deducted by a client while making payment to an advertisement agency and not when advertising agency makes a payment to the media which includes both print and electronics media. According to the assessee, it was not supposed to deduct the TDS and, therefore, disallowance cannot be made. Learned First Appellate Authority has rejected this contention of the assessee on the ground that section 40(a)(ia) of the Act is applicable upon the assessee and in case it failed to deduct the TDS, expenses would not be allowable to the assessee.

8. The learned counsel for the assessee submitted that section 40(a)(ia) of the Act has been brought on the statute book w.e.f. Ist of April 2005 and it is not applicable in the case of assessee in this year. Learned DR was unable to controvert the contention of the learned counsel for the assessee.

9. We have duly considered the rival contentions and gone through the record carefully. Learned First Appellate Authority has confirmed the disallowance by observing as under:

5. “During the course of present proceedings, AR has stated that TDS provision is not applicable on payment made towards the cost of advertisement to print media by media agency. AR has placed reliance on CBDT Circular No. 715 dated 09.09.1995, it has been pleaded that the said Sec. 194 would apply when client makes the payment to an advertising agency and not when the advertisement agency makes a payment to the Media, however, in view of the amendment made in 2004, however, in view of the amendment made w.e.f. 01.04.2004 provision of Sec. 40(a)(ia) are clearly applicable in the assessment year under reference. Hence the stand of the A.O. is confirmed.”

10. We find that the Learned First Appellate Authority has failed to take note of the correct position of law. Sub-clause (i)(ia) and (ib) of the Act were substituted for sub-clause (i) by the Finance Act, 2004 w.e.f. Ist of April, 2005. learned revenue authorities have not looked into the correct position of law while considering this issue. Learned First Appellate Authority has called for a remand report also on this issue and assessee has given its comments on the remand report which has been placed in tabular form on pages 37 & 38 of the paper book. Learned CIT(Appeals) has reproduced the remand report given by the Assessing Officer on pages 3 to 6 of the impugned order, however, failed to take cognizance of the comments made by the assessee which are available in the paper book. After reproduction of the remand report of Assessing Officer, Learned First Appellate Authority has not discussed the issues. We have already extracted the brief finding recorded by the Learned CIT(Appeals) (supra). Considering this aspect, we deem it appropriate to remit this issue also to the file of the Assessing Officer, he will ascertain true position of law and thereafter readjudicate the issue.

11. In Ground Nos. 4 & 5, assessee is challenging disallowance of Rs.22,900 out of the vehicle and conveyance expenses and Rs.10430 out of telephone expenses. With the assistance of learned representatives, we have gone through the record carefully. We find that the assessee is not maintaining any log book in respect of cars and also not maintaining any call register for the telephones. Assessing Officer has made ad hoc disallowance on the ground that these facilities were not exclusively used for the purpose of the business. There can be non-business user of these facilities. Considering the findings of the Learned revenue authorities below, we do not find any merit in these grounds of appeal. Hence, both these grounds are rejected.

7. In the result, the appeal filed by the assessee is partly allowed.

Decision pronounced in the open court on 23.03.2012

                                                        Sd/-                                    Sd/-

                                            (G.D. AGRAWAL)          (RAJPAL YADAV)

                                    ACCOUNTANT MEMBER    JUDICIAL MEMBER

Dated: 23/03/2012

Mohan Lal

Copy forwarded to:

1) Appellant

2) Respondent

3) CIT

4) CIT(Appeals)

5) DR:ITAT

ASSISTANT REGISTRAR