TMI Blog2019 (4) TMI 1381X X X X Extracts X X X X X X X X Extracts X X X X ..... 14A - disallowance of expenses incurred in relation to exempt income - HELD THAT:- Assessee has not earned any exempt income for the year under consideration. AO has brought out this fact in his assessment order. Once, there is no exempt income for the year under consideration whether expenses incurred in relation to earning exempt income contemplated u/s.14A could be disallowed or not is no longer res integra. See BALLARPUR INDUSTRIES LIMITED [ 2016 (10) TMI 1039 - BOMBAY HIGH COURT] and CHEMINVEST LIMITED VERSUS COMMISSIONER OF INCOME TAX-VI [ 2015 (9) TMI 238 - DELHI HIGH COURT] . Decided in favour of assessee. - ITA No.7318/Mum/2016, ITA No.7443/Mum/2016 And CO No.89/Mum/2018 - - - Dated:- 28-3-2019 - SHRI MAHAVIR SINGH, JM AND SHRI G. MANJUNATHA, AM For The Assessee : Shri M.P. Lohia Shri Hemen Chandariya For The Revenue : Shri Pankaj Kumar ORDER PER G. MANJUNATHA (A.M): These cross appeals filed by the assessee as well as the revenue and cross objection filed by the assessee are directed against order of the CIT(A)-4, Mumbai dated 19/09/2016 for the A.Y.2012-13. Since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The brief facts of the case are that the assessee is an Indian company engaged in the business of broadcasting. The assessee is running two current affairs and news channels being Asianet News Channel in Malayalam and Suvarna News channel in Kannada. The assessee has filed its return of income for the A.Y.2012-13 on 30/09/2012 declaring total income of ₹ 1,60,29,420/-. Subsequently, a revised return of income has been filed on 04/09/2013 declaring total loss of ₹ 9,32,94,502/-. The case has been selected for scrutiny and the assessment has been completed u/s.143(3) of the Income Tax Act, 1961 on 09/03/2015 by making various additions, including additions towards disallowance of agency commission, transponder hire charges and channel placement fees u/s.40(a)(ia) for failure to deduct tax at source u/s.194J of the Income Tax Act, 1961. Similarly, the AO has also made additions towards disallowance of expenses incurred in relation to exempt income u/s.14A of the Act r.w.r. 8D of Income Tax Rules, 1962. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). 4.1. Before the CIT(A), the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, not liable for TDS under section !94H. The SLPs filed by the Department in the matter of Living Media Ltd. and Jagran Prakashan Lid. have been dismissed by the Supreme Court vide order dated 11.12.2009 and order dated 05.05.2014, respectively. Though, these decisions are in respect of print media, the ratio is also applicable to electronic media/television advertising as the broad nature of the activities involved is similar. 2. In view of the above, it is hereby clarified that no TDS is attracted on payments made by television channels/newspaper companies to the advertising agency for booking or procuring afar canvassing for advertisements. It is also further clarified that commission referred to in Question No 27 of the Board's Circular No 715 dated 8.8.95 does no! refer lo payments by media companies to advertising companies for booking of advertisements bur lo payments for engagement of models, artists, photographers, sportspersons, etc and. therefore, is not relevant lo the issue of TDS referred to in this Circular. 4.3. In view of the above, the addition of ₹ 8,86,98,230/- made by the Assessing u/s 40(a)(ia) of the Act can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of DCIT-11(2) vs.M/s. Chandanbhoy Jassobhoy ITA No.20/Mum/2010 dated 21.10.2011 and also case of CIT vs. S.K.ekriwal 361 ITR 472(Calcutta). 5.3 I have considered the findings of the AO and the rival submissions of the appellant, carefully. The decisions relied upon by the Ld. A R clearly support the view that where tax has been deducted at source under a particular section and in the opinion of the AO tax ought to have been deducted under a different section, no disallowance arises u/s 40(a)(ia) of the Act, The Hon'ble Calcutta High Court in CIT v SK Tekriwal (361 ITR 472) has also upheld the view of the ITAT that no disallowance is warranted u/s. 40(a)(ia) in a case where tax has been deducted at source under a particular section. Further, the Ld. A R has also placed on records various judicial precedents wherein it has been held by the Hon'ble ITATs/ High Court that withholding provisions u/s 194J of the IT. Act are not attracted in the case of channel placement fees since the same do not fall under the term 'royalty' as defined u/s 9 of the IT. Act. It is further observed that the appellant has also placed reliance on the decisions of the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant assessment year. Hence the question as framed would not arise. 6.2. The appellant also submitted that following the aforesaid decision of the Hon'ble Bombay High Court, the Hon'ble Jurisdictional Mumbai ITAT in the case of Avshesh P. Ltd. vs. DCIT ITA No.5779/Mum/2006 ITA No.208/Mum/2009, has held that when assessee has actually not earned the dividend income (exempt income), no disallowance under Section 14A of the act could be made by the Id AO. 6.3. Further, reliance was also placed on the decision of the Hon'ble Chennai ITAT in the case of Siva Industries and Holdings Ltd vs. ACIT ITA No 2148/Mds/2010, wherein it was held that if there is no claim of tax free income, there cannot be any disallowance u/s 14A of the Act. In the instant case, the appellant has not earned any exempt income, hence, no disallowance can be made u/s 14A of the Act. Reliance was also placed on the decision of the Hon'ble Chennai ITAT in the case of ACIT vs M Baskaran ITA No 1717/Mds/2013, wherein (after considering Circular no 5 of 2014 dated 11 February 2014 issued by the Central Board of direct taxes), it was held that in the absence of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same, the Id AR submitted that no disallowance is required to be made u/s 14A in respect of these investments. The details of the investments held as on 31 March 2012 were also provided by the appellant in its submission in order to substantiate its proposition. 6.7. I have considered the submissions of the appellant as well as the findings given by the AO. It is noticed that the Id AO had disallowed a sum of ₹ 19,39,204 by applying Rule 8D u/s 14A of the Act. The disallowance of expenditure made by the Assessing Officer is worth approval because investment made by the Appellant is also capable of exempt income. The argument that during the year, no exempt income has been earned is not material because investment so made is capable of earning exempt income. Further, the contention that no actual expenditure has been incurred is not convincing one because for making investment and taking track of investment may be of subsidiary companies requires use of office premises, managerial cost and other related expenditure. Further, argument that an entire investment has been made in own subsidiary and is strategic in nature, makes no because expenditure element is v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (India) Pvt. Ltd. (supra), the following questions of law were urged before the High Court by the Revenue : (a) Whether on the facts and in the circumstances of the case and in law, the Tribunal is justified in holding that the disallowance of Channel Placement Fee cannot be made u/s 40(a)(ia) of the I.T. Act when the tax was deducted thereon u/s 194C instead of Sec. 194J of the I.T. Act? (b) Whether on the facts and in the circumstances of the case and in law, the Tribunal is justified in holding that the disallowance of Channel Placement Fee is not in the nature to be deducted u/s 194J of the I.T. Act despite Explanation 6 thereto inserted w.e.f. 01/06/1976? The Hon ble High Court held that (d) We find that view taken by the impugned order dated 9th July of the Tribunal that a party cannot be called upon to perform an impossible Act i.e. to comply with a provision not in force at the relevant time but introduced later by retrospective amendment. This is in accord with the view taken by this Court in CIT v. Cello Plast (2012) 209 Taxman 617- wherein this Court has applied the legal maxim lex non cogit ad i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion as to taxability of any item or nature of payments falling under various TDS provisions, the assessee can be declared to be an assessee in default u/s 201, but no disallowance can be made by invoking provisions of section 40(a)(ia). However, the Hon'ble Kerala High Court has held that disallowance u/s 40(a)(ia) is to be made where TDS has been made under wrong provisions. In absence of decision of jurisdiction High Court, in view of contrary decisions, one has to follow the view which is in favour of the assessee as laid down in Vegetable Products Ltd. (supra). 8. In view of the above reasons, we uphold the order of the Ld. CIT(A) and dismiss the appeal filed by the revenue. 8. In this view of the matter and consistent with view taken by the Co-ordinate Bench in assessee s own case, we are of the considered view that there is no error in the findings recorded by the CIT(A) in deleting additions made by the AO towards carriage fees / channel placement fees u/s.40(a)(ia) of the Income Tax Act, 1961. Hence, we are inclined to upheld the order of ld. CIT(A) and dismiss the appeal filed by the revenue. 9. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture Ltd., In ITA No.4769/Mum/2017 has considered an identical issue and by following the decision of Hon ble Bombay High Court in the case of Pr. CIT vs. Ballarpur Industries Ltd., held that when there is no exempt income earned for the year under consideration, expenses incurred in relation to exempt income cannot be disallowed. 14. The ld. DR on the other hand fairly accepted that the issue is covered in favour of the assessee by the decision of Hon ble Bombay High Court, however, he further submitted that in view of specific provisions of section 14A r.w.r. 8D, the AO is required to determine the disallowance of expenses in relation to exempt income whether or not the assessee has earned exempt income for the year under consideration. 15. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee has not earned any exempt income for the year under consideration. In fact, the AO has brought out this fact in his assessment order. Once, there is no exempt income for the year under consideration whether expenses incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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