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2019 (7) TMI 16 - AT - Income TaxTDS u/s 194H - advertising agency commission - addition made u/s. 40(a)(ia) - net revenue from advertisement was booked after adjusting of advertising agency commission - assessee has not claimed advertising agency commission expenses as separate expenses in its books of accounts and in P&L account prepared by it. - HELD THAT:- Decision of Hon‟ble Supreme Court in the case of Director, Prasar Bharati [2018 (4) TMI 201 - SUPREME COURT] held that Section 194H are applicable to the appellant because the payments made by the appellant pursuant to the agreement in question were in the nature of payment made by way of "commission" and, therefore, the appellant was under statutory obligation to deduct the income tax at the time of credit or/and payment to the payee. The judgment was rendered 3rd April, 2018 and Hon‟ble Supreme Court has held that applicability of provisions of Section 194H will depend upon facts and circumstances of each case and hence it was held that there is a need to evaluate the factual matrix of each case before applying provisions of Section 194H to advertising agency commissions paid by Media/Broadcasting companies including evaluating commercial terms and conditions of the contract existing between and inter-se all the relevant parties to this process of advertisement in Media/Broadcasting companies. The Hon‟ble Supreme Court has laid down tests to determine as to applicability of Section 194H to advertising commission paid by Media /Broadcasting companies to advertising agencies. The aforesaid decision of Hon‟ble Supreme Court was rendered on 03.04.2018, while Mumbai-tribunal passed an orders in assessee‟s case for AY 2011-12 and 2012-13 [2017 (3) TMI 427 - ITAT MUMBAI] which was pronounced prior to the aforesaid judgment of Hon‟ble Supreme Court. Thus, tribunal did not had the benefit of judgment of Hon‟ble Supreme Court in the case of Director, Prasar Bharati(supra) - Thus issue needs to be restored to the file of the AO to determine applicability of Section 194H to advertising commission paid by assessee to advertising agencies keeping - Decided in favour of Revenue for statistical purposes. Allowability of website development expenses - revenue expenses u/s 37(1) - HELD THAT:- As in the case of Polyplex Corporation Limited v. ITO [2008 (8) TMI 400 - ITAT DELHI-F] and R.R.Kabel Limited v. Addl.CIT [2012 (6) TMI 513 - ITAT MUMBAI] wherein website development expenses were held to be Revenue expenses. Respectfully following the foresaid decisions, we decide this issue in favour of the assessee by holding these website creation charges as revenue expenses and are allowed u/s 37(1). We uphold the appellate orders of learned CIT(A) Excess commission paid to BCCL - disallowance by the AO to the tune of 50% being 2.5% of the commission expenses paid to BCCL on business procured by BCCL for the assessee - HELD THAT:- This issue was decided by tribunal in assessee‟s own case AY 2008-09 and 2009-10 as held commission @ 5% was paid to BCCL. The range of commission in such type of business varies from 5% to 20%. - Decided in favour of assessee. Disallowance of interest u/s. 36(1)(iii) - investments/loans to subsidiary at low interest rate - sufficiency of own funds - HELD THAT:- The interest free own funds available with the assessee were higher than investments/loans made by the assessee and in the absence of any specific findings that interest bearing borrowed funds were used for making investments/loans, the presumption shall apply that the assessee invested its own interest free funds for making investments in securities. Case of CIT v. Reliance Utilities and Power Limited [2009 (1) TMI 4 - BOMBAY HIGH COURT] and CIT v. HDFC Bank Limited [2014 (8) TMI 119 - BOMBAY HIGH COURT] are relevant. However, this claim of the assessee that interest free funds available with it are more than investments/loans made by it requires verification of facts from records and for this very limited purposes, we are remitting the issue back to file of the AO for verification from records that its own interest free funds were higher than investments/loans made by it as there are no categorical finding of fact recorded by authorities below on these facts which are contended by assessee before the Bench Disallowance of business promotion expenses u/s. 37(1) - addition to 20% of the expenses incurred on the ground that the assessee could not prove business nexus of these expenses - HELD THAT:- We donot find any reason to deviate from the aforesaid decision of ITAT, Mumbai in assessee‟s own case for AY 2008-09 and 2009-10,, which we Respectfully follow. The decision of Hon‟ble Supreme Court in the case of Radhasoami Satsang [1991 (11) TMI 2 - SUPREME COURT] is relevant. Thus, ground number 1 of the assessee‟s appeal is allowed. Disallowance u/s 14A r.w. Rule 8D(2)(ii) and 8D(2)(iii) - HELD THAT:- As relying on BALLARPUR INDUSTRIES LIMITED [2016 (10) TMI 1039 - BOMBAY HIGH COURT] no disallowance of expenditure purported to be incurred for earning of an exempt income be made u/s 14A in view of the claim that no exempt income being earned by the assessee. However, this claim of the assessee that it did not earn any exempt income and also that interest free funds available with it are more than investments made by it requires verification of facts from records and for this very limited purposes, we are remitting the issue back to file of the AO for verification from records that no exempt income was earned by the assessee and secondly that its own interest free funds were higher than investments made by it as there are no categorical finding of fact recorded by authorities below on these two facts which are now contended by assessee before the Bench. Disallowance u/s. 14A r.w.s. 115JB to compute book profit on which MAT - HELD THAT:- This issue is required to be restored to the file of AO to be decided afresh in accordance with ratio of law laid down by Hon‟ble Special Bench of Delhi Tribunal in the case of ACIT v. Vireet Investment Private Limited [2017 (6) TMI 1124 - ITAT DELHI] . This ground of appeal filed by the assessee is allowed for statistical purposes. Depreciation on software expenses which were capitalised in AY 2007-08 - HELD THAT:- Prayers are made by learned counsel for the assessee to restore this issue back to the file of the AO for necessary verifications and grant of appropriate depreciation on merits in accordance with law after due verifications. The learned DR did not object if the issue is restored back to the file of the AO for necessary verifications and fresh adjudication on merits in accordance with law. Non grant of credit of TDS - HELD THAT:- Prayer are made by learned counsel for the assessee to restore this issue back to the file of the AO for verification and grant of appropriate credit for TDS after due verification. The learned DR did not object if the issue is restored back to the file of the AO for necessary verifications and grant of appropriate credit for TDS on merits in accordance with law.
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