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M/s. Dish TV India Ltd. Versus ACIT, Range - 11 (1) Worli, Mumbai [New ACIT - 11 (1) ] And Vice-Versa

2017 (10) TMI 539 - ITAT MUMBAI

TDS u/s 194H - disallowance under section 40(a)(i) for non deduction of tax on payment of commission - whether the payment made by the assessee to the distributor is a commission or cash discount? - Held that:- Referring to documents as a whole along with the terms and conditions of the agreement entered into between the assessee and the distributor in respect of talk time card is essential to determine the true nature of the transaction whether the transaction entered into between the assessee .....

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and fair play to both the parties set aside this issue and restore it to the file of the AO with the direction that the AO shall redecide this issue afresh in accordance with law after going though the agreement which the assessee has entered into with the distributor as well as the sample subscription application form, whether the amount represents the expenditure incurred by the assessee towards commission or whether the said amount represents cash discount given by the assessee to the distri .....

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OURT ] following the decision of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT [2015 (9) TMI 238 - DELHI HIGH COURT]took the view that provisions of Section 14A of the Income Tax Act, 1961 would not apply to the facts of the case as no exempt income was received or receivable during the relevant previous year by the assessee - Decided in favour of assessee - TDS u/s 194C OR 194J - expenses on customer support services, CAS, Middleware and SMS charges - Held that:- As de .....

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sallowance could be made invoking the provisions of Section 40(a)(ia). No infirmity or illegality in the order of the CIT(A) in holding that provisions of Section 40(a)(ia) will not be applicable in the case of the assessee as there is nothing in the section to treat the assessee as defaulter where there is shortfall in deduction of TDS. We, therefore, affirm the CIT(A) and dismiss the grounds taken by the Revenue in both the appeals - ITA Nos. 3061 & 3062/Mum/2017, ITA Nos. 3691 & 3692/Mum/2017 .....

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years assessee has taken a common ground in respect of disallowance made under section 40(a)(ia) except the change in figures. Both the parties agreed that the appeals of the assessee may be decided on the basis of the facts relating to A.Y. 2011-12. During A.Y. 2011-12 the assessee has taken the following effective grounds of appeals: - 1. Commission of ₹ 33,86,68,406/- (i) The Ld. CIT(A) erred in facts and law in upholding the disallowance of ₹ 33,86,68,406/- u/s 40(a)(ia) of the A .....

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dealer does not render any service to the appellant but invests at discounted price and recovers face value and earns profit as opportunity cost of money. In A.Y. 2012-13 the figure of ₹ 33,86,68,406/- be read as ₹ 50,52,75,132/-. 3. The Revenue in its appeal being ITA Nos. 3691 & 3692/Mum/2017 has taken ground 2, 3, 4, 5 and 6 to be the common ground being grounds A, B, C, D & E in A.Y. 2012-13 while ground No. 1 taken in A.Y. 2011-12 is not taken in A.Y. 2012-13. Both the .....

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xpenditure u/s.14A read with Rule 8D, without appreciating that once the AO rejects the claim of the assessee of not incurring any expense for earning tax-free income, he is about to follow provisions of Section 14A r.w. rule 8D for determining expenditure which was presumed to be incurred for earning tax-free income. 2) Whether on the facts and circumstances of the case and as per law, whether the Ld. CIT(A) was justified in directing to delete the disallowance u/s. 40(a)(ia) rws 194J in respec .....

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s', whereas the jurisdictional ITAT, Mumbai 'L' Bench, in its order dated 28.03.2014 in the case of ADIT-(IT)-2(2), Mumbai Vs. Viacom 18 Media Pvt. Ltd. has confirmed that the payments made for use/right to use of 'process' are 'royalty' in terms of the Income Tax Act, 1961. 4) Whether on the facts and circumstances of the case and as per law, whether the Ld. CIT(A) was justified in directing to delete the disallowance u/s. 40(a)(ia) rws 194J in respect of 'CAS, M .....

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dictional ITAT, Mumbai 'L' Bench, in its order dated 28.03.2014 in the case of ADIT-(IT)-2(2), Mumbai Vs. Viacom 18 Media Pvt. Ltd. has confirmed that the payments made for use/right to use of process are royalty in terms of the Income-tax Act, 1961. 6) Whether on the facts, in the circumstances of the case and as per law, the Ld. CIT(A) has erred in directing to delete the disallowance u/s. 40(a)(ia) without appreciating the Hon'ble Kerala High Court in its judgment dated 20.07.2015 .....

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ot deducted TDS under section 194H of the Income Tax Act. The AO, therefore, after giving opportunity to the assessee disallowed the same under section 40(a)(ia). The assessee went in appeal before the CIT(A). The assessee took the view that the assessee has given cash discount to the distributer and it was not in fact commission but it was in fact the discount given to the distributor and therefore provisions of Section 194H was not applicable. The CIT(A) rejected the plea of the assessee and s .....

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he basis of the decisions of the Hon'ble Delhi High Court in the case of CIT vs. Text Hundred India Pvt. Ltd. 351 ITR 57 and Hon'ble Patna Tribunal in the case of Abhay Kumar Shroff vs. Income Tax Officer 63 ITD 144 (TM) additional evidence should be admitted if it is vital and essential for the purpose of consideration of the subject matter of the appeal. We noted that in this case the issue before us is whether the payment made by the assessee to the distributor is a commission or cash .....

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the substance of justice admit the additional evidence. Before us, on the basis of the agreement as well as the sample subscriber application form, the learned A.R. vehemently contended that as per Annexure-A of the said agreement the assessee has to give discount to the distributor although in the agreement the term has been used as commission. The learned A.R. also pointed out on the basis of the bills that in fact the assessee has raised bills by showing this amount as discount out of the tot .....

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ssessee has not submitted the agreement between the distributor and the assessee as well as the sample subscription form neither before the AO nor before the CIT(A). Accepting the document at the level of the Tribunal will prejudice the Revenue. 8. We have gone through the copy of the agreement entered into by the assessee with the distributor available on pages 138 to 148 as well as the sample subscription application form available on pages 149 to 150 of the paper book. On the basis of the doc .....

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transaction entered into between the assessee and the distributor is that of commission but in case if it is decided that the nature of transaction is not commission but discount given on sales it cannot be regarded to be commission which is hit by the provisions of Section 194H of the Income Tax Act. We, therefore, in the interest of justice and fair play to both the parties set aside this issue and restore it to the file of the AO with the direction that the AO shall redecide this issue afresh .....

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or discount should not be influenced by the nomenclature given by the assessee in the said agreement. We, accordingly set aside the order of the CIT(A) and restore this issue to the file of the AO. 9. In the result, both the appeals filed by the assessee are statistically allowed. ITA Nos. 3061 & 3062/Mum/2017 10. Now coming to the appeals filed by the Revenue, ground No. 1 taken by the Revenue in A.Y. 2011-12 relates to the deletion of disallowance made by the AO under section 14A r.w. Rule .....

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ollowing the decision of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT 378 ITR 33 (Del) took the view that provisions of Section 14A of the Income Tax Act, 1961 would not apply to the facts of the case as no exempt income was received or receivable during the relevant previous year by the assessee. Similar view has been taken by the Hon'ble Allahabad High Court in the case of CIT vs. Shivam Motors (P) Ltd. 272 CTR 277 and that of Hon'ble Punjab & Haryana Hig .....

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mer support services or disallowance under section 40(a)(ia) r.w.s. 194J in respect of CAS, Middleware and SMS charges. 14. The brief facts relating to this issue are that the AO noted that the assessee has deducted TDS in respect of expenditure on customer support services under section 194C by applying a rate of 2% whereas it should have been deducted tax under section 194J @10%. The AO was of the view that these expenses are incurred mainly for the purpose of solving customer grievances and t .....

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ion of TDS and, therefore, he deleted the disallowance made under section 40(a)(ia). Similarly, the AO has noted that the assessee has paid a sum of ₹ 36,61,17,648/- towards CAS, Middleware and SMS charges to Integrated Subscriber Management Services Ltd. and on which the assessee has deducted TDS under section 194C. The AO was of the view that the said expenditure has to be incurred under the provisions of Section 194J. Therefore, he disallowed a sum of ₹ 36,61,17,648/-. When the ma .....

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herefore, the AO applied provisions of Section 40(a)(ia) and made the disallowance in respect of both the expenditures. Before us the learned D.R. relied on the decision of the Hon'ble Kerala High Court in the case of CIT vs. PVS Memorial Hospital Ltd. 60 taxmann.com 69 copy of which was placed before us in which it was held that deduction under a wrong provisions of the law will not save an assessee from section 40(a)(ia), i.e. where the tax was deductible under section 194J but was actuall .....

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the provisions of Section 40(a)(ia) could not be invoked and if there was any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various tax deduction at source provisions, the assessee could be declared to be an assessee in default under section 201 but no disallowance could be made invoking the provisions of Section 40(a)(ia). The said decision of the Hon'ble Calcutta High Court has not been referred to before the Hon'bl .....

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of P V M Memorial Hospital (supra). But such a decision may not have a persuasive value as it is quite a trite law that if there are two conflicting decisions of non- Hon'ble Jurisdictional High Courts, then the decision in favour of the assessee should be taken. We agree with such a contention raised by the assessee that, if there are two conflicting decisions and in absence of any Hon'ble Jurisdictional High Court, decision one favourable to the assessee should be preferred and this p .....

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Court as well as that of Hon'ble Kerala High Court on the same issue and ultimately under paras 10 & 11 of its order held as under: - 10. The Departmental Representative relied upon the Hon'ble Kerala High Court judgment in the case of M/s. P.V.S. Memorial Hospital Ltd. (supra) and argued that the provisions of section 40(a)(ia) is applicable even for short deduction of TDS. The Hon ble Kerala High Court has upheld the disallowance of expenditure under sec. 40(a)(ia) of the Act, for .....

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getable Products Ltd. (1973) 88 ITR 192. 11. Considering the facts and circumstances of the case and also applying the ratio of the Hon'ble Calcutta High Court judgment in the case of S.K. Tekriwal (supra), we are of the opinion that the CIT(A) rightly deleted the addition made under sec. 40(a)(ia) of the Act. In the present case on hand, the assessee has deducted TDS and deposited the same with the Central Govt. account as prescribed under the Act. The allegation of the A.O. is that the ass .....

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