TMI Blog2019 (7) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, 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 conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogether and adjudicated by this common order. 2. The grounds of appeal raised by assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the tribunal ) in ITA no. 852/Mum/2016 for AY 2010-11, read as under:- 1. Business promotion expenses : ₹ 3,35,198/- 1.1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the learned AO who disallowed 20% of the expenditure incurred on business promotion for want of supporting evidence on an adhoc basis without any cogent reason. 1.2. Without prejudice to the above, it is submitted that the disallowance made by the learned CIT(A) upholding the action of the learned AO is excessive and without basis. 2. Disallowance under section 14A : ₹ 62,16,426/- 2.1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the learned AO's action of applying the provisions of Rule 8D of the Income Tax Rules, 1962 ( the Rules ) while making a disallowance under section 14A of the Act to arrive at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 14A of the Act. 3. Addition to Book Profits u/s. 115JB being disallowance u/s, 14A 3.1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the stand of the learned AO in adding disallowance u/s. 14A amounting to ₹ 62,16,426/- to the book profit u/s. 115JB amounting to ₹ 33,73,01,797/- computed by the Appellant for MAT Liability. It is respectfully submitted that Section 14A cannot be imported into while computing the book profit u/s. 115JB because clause (f) of Explanation to Section 115JB of the Act refers to the amount debited to the Profit and Loss Account which can be added back to the book profit while computing book profit u/s. 115JB of the Act. 4. Depreciation on software expenses disallowed in Assessment Year 2007-08 4.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not directing the learned AO to grant depreciation on software expenses amounting to ₹ 15,720/- being expenses capitalized in A.Y. 2007-08. 5. Credit for Tax deducted at source 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made u/s. 40(a)(ia) of ₹ 27,43,52,361/-claimed as 'Agency Discount' by placing reliance on the decision of Living Media India Ltd. (ITA No, 3807(Del)/2005 for AY 2003-04 passed in May, 2007),the facts of which are not pari materia with that of the instant case. 4) On the facts and in circumstances of the case and in law, whether the Ld. CIT(A) was justified in deleting the disallowance of website development expenses, despite the fact that the creation of website, results in bringing in an asset of enduring nature. 5) On the facts and in circumstances of the case and in law, whether the Ld. CIT(A) was justified in deleting the disallowance made on account of excess commission paid to M/s. Bennet Coleman and Company Ltd. (BCCL), ignoring the fact that the said concern is a parent company of the assessee and the transaction is not at arm's length. 6) On the facts and circumstances of the case and in law, where the disallowance u/s. 36(1)(iii) was made on the basis of ratio laid down by the CIT(A) in assessee's own case for AY 2009-10, whether the CIT(A) was justified in deleting the same by relying on the ITAT&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advertiser Broadcaster is an entity which broadcasts the advertisements. Advertising Agency is an entity which sources advertisements for advertiser. Advertiser is an entity which advertised its product/service. 4.3 The AO elaborately discussed this issue in its assessment order and came to conclusion that there is a principal agency relationship between the assessee and advertising agency to whom commission is paid and the assessee ought to have deducted income-tax at source u/s. 194H of the 1961 Act on such advertising agency commission. The AO observed that the gross of advertising revenue is payable by the Advertising Agency to the assessee. The commission is payable by assessee to the Advertising Agency. The AO observed that the commission payable to the Advertising Agency is appropriated from the Gross Advertising Revenue. The AO observed that after deducting commission due to them the advertisement agency remits net advertising revenue to the assessee. The AO observed that provisions of Section 194H of the 1961 Act is clearly applicable on the said payments even if commission is retained by agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy charges the commission for the services rendered by it and this is a time tested trade practice. 4.6. The AO was of the view that the advertising agency are performing services for the assessee as middleman and these advertising agencies are entitled for commission for services provided by them to the assessee. Further, the AO was of the view that discounts are allowances of concession in price which is given to induce buyer to place order and make payment in time. The AO also looked into relation between the assessee and the advertising agency and came to conclusion that relationship is that of principal to agent and not principal to principal, on following reasoning:- 1. The broadcasting of the advertisement is under the complete operation, control, management and execution of the assessee. The agency cannot independently perform release of advertisement without the full fledged involvement and intervention of the broadcaster. This necessarily means that it is a Principal to Agent relationship. The pricing factor of broadcasting the advertisements is predominantly dictated by the broadcaster. It is in this sense of the matter that the advertising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bharati, Doordarshan Kendra (2010) 189 Taxman 315 (Ker.) which had held this issue in favour of Revenue and additions were made to the income of the assessee by the AO to the tune of ₹ 27,43,52,361/- u/s. 40(a)(ia) of the Act for non deduction of income-tax at source under Chapter XVIIB of the 1961 Act, vide assessment order dated 28.03.2013 passed by the AO u/s 143(3) of the 1961 Act. 5. The second issue concerns itself with disallowance of Business Promotion Expenses to the tune of 20% of the expense amounting to ₹ 16,75,990/- which led to disallowance of ₹ 3,35,198/- on the grounds that these expenses were incurred by Managing Director and other employees for entertaining clients which include food expenses, bouquets, sweet boxes purchased for celebrities, clients, entry fees for ad club awards, movie tickets, tickets for cricket matches etc. and the business nexus of these expenses could not be proved by the assessee, which led the AO to make additions to the income of the assessee to the tune of ₹ 3,35,198/-, vide assessment order dated 28.03.2013 passed by the AO u/s 143(3) of the 1961 Act. 6. The next addition to the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aff of the assessee and hence gives a better leverage to the contribution. The assessee explained before the AO that the assessee is paying commission to BCCL@5% on business procured by and through them as against normal commission in the media industry which is between 15-20%. The assessee submitted that it paid commission of ₹ 7,59,558/- to BCCL, which is disclosed in P L account under the head Miscellaneous Expenditure‟. The assessee submitted that similar issue arose in AY 2009-10, wherein the AO while framing assessment for AY 2009-10 has disallowed 50% of commission paid by the assessee to BCCL by holding as under: At the outset, it appears to be an unhealthy business practice wherein, the equity holder would demand business as a quid-pro-quo. It is a restrictive trade practice in as much as the client company cannot approach the competitors as they receive equity or funding from BCCL. The assessee explained that with the above remarks, the AO restricted commission to 50% in AY 2009-10 which is unjustified. 7.3 The AO after considering the submissions of the assessee was of the view that there is an intense competitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of revaluation of assets but including the decrease on account of revaluation of assets. 39,02,50,000/ 4,28,15,14,251 x 4, 67,94,141 42,65,176/- iii) An amount equal to one-half per cent of the average of the value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year. 39,02,50,000 X 0.5% (420,250,000 - 30,000,000) 30,000,000 consists of growth funds 19,51,250/- Total 62,16,426/- Therefore disallowance u/s 14A r.w. Rule 8D works out to ₹ 62,16,426/-. 8.2 While making aforesaid additions to the income of the assessee by disallowing expenses incurred in relation to earning of an income which is not chargeable to tax u/s 14A read with Rule 8D(2)(ii) and 8D(2)(iii) of the 1962 Rules, the AO noted the submissions of the assessee that no interest bearing funds were utilised for earning exempt income. The AO also note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view that for AY 2006-07, 2008-09 and 2009-10, this issue was decided by AO against the assessee. The AO was of the view that even in this year under consideration, the assessee has used loans for non business purposes and the assessee has failed to prove business expediency of the interest paid. The AO observed that for preceding years, the learned CIT(A) vide its appellate order no. CIT(A)-3/Addl.CIT/11(1)/IT-274/11-12 dated 31.12.2012 had apportioned the disallowable interest expenses and the appellate order of learned CIT(A) is acceptable to Revenue. Based upon the same, the AO disallowed an amount of ₹ 80 lacs @ 8% of the investment in its subsidiary to the tune of ₹ 10 crores, vide assessment order dated 28.03.2013 passed by the AO u/s 143(3) of the 1961 Act. 10. Aggrieved by an assessment framed by the AO u/s 143(3) of the 1961 Act wherein aforesaid addition(s) were made by the AO to the income of the assessee, the assessee filed first appeal before learned CIT(A). 10.2 With respect to the first issue wherein additions were made by the AO to the income of the assessee concerning disallowance of expenses towards advertising agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. From above it is observed that the discount is for the customer or the buyer and commission is to the agent/middleman. Whether the appellant has appointed the advertising agency as its agent is 'a question of fact and has to be determined based on the prevailing evidence. The nature of work of the appellant and advertiser is completely different. Appellant is in the business of operating radio channel and sells its airtime to generate revenue whereas the advertising agency is in the business of creating advertisement and books airtime on radio/TV and space in print media on behalf of the advertisers. With regard to airtime sold to advertisers through advertising agency the appellant has given 15% discount on the tariff amount as per industry practice. The appellant has nowhere in its account shown as receivable this 15% discount. The terms and conditions between the advertisement agency and the appellant was perused. None of the clause of terms and conditions connotes that the appellant has appointed the advertising agency as their agent to bring the advertisement for sale of their air-time. There is nothing on record to prove that the advertisin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n' under the definition includes payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any service in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article; or thing (not being securities). It takes into account a situation where a person render's service to another person for which the person rendering service either receives or is entitled to receive, directly or indirectly payment from that another person to whom the service is rendered. 2.4 The Hon'ble Gujarat High Court in the case of Ahmadabad Stump Vendors Association vs Union of India has made a reference to the distinction between the 'commission and 'discount' as explained in law dictionaries and in judicial pronouncement. The definition of commission as given in the Black's law dictionary is that; The recompense, compensation or reward of an agent, salesman, executor, trustee, receiver, factor; broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the commission is in the nature of refund or compensation for performing some task or business by one person on behalf of the other. In the case in hand, the undisputed fact is that the amount of discount has been reduced from the value of price charged by the assessee from the advertising agency on sale of airtime. 2.6 The AO had relied on the the Hon'ble Delhi High Court in the case of Commissioner of Income-tax vs. M/s.Idea Cellular Ltd. reported in 325 ITR 148 which has also discussed the definition of commission as well as discount and also the difference between two terms/expression. There is no dispute that there is no necessity for a formal contract of agency it may be implied which could arise from the act and conduct of the parties or situation in which the parties are put as observed by the Hon'ble Supreme Court in the ease of Lakshminarayan Ram Gopal and Sons Ltd. v. Government of Hyderabad reported in 25 ITR 449. In the case in hand, it is manifested from the records as well as from the facts and circumstances of the case that the benefit/incentive given by the assessee is the nature of discount because the discount is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agency render service to Advertiser 5 Control Agents are controlled by Prasar Bharti Agents are controlled by Advertisers. 6 Entry passed for the transaction Prasar Bharti passes entry for ₹ 100 received from the advertiser and then accounts for ₹ 15 as commission paid to Advertising Agency ENIL accounts for ₹ 85/- as income received from the Agency. ₹ 15 is not accounted as expenditure by ENIL as this is in the nature of Trade discount. 2.8. Further, the Hon'ble Allahabad High court in the case of Jagran Prakashan has held that it is clear that no foundational facts exists on the basis of which any inference can be drawn that advertising agencies are agent of the petitioner and further advertising agencies render any. service to 'the newspaper . 2.9 The Hon'ble Delhi Tribunal in the case of ACIT vs. Living Media India Limited (ITA No 1264 of 2007) vindicates the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. 2.9 The above issue has also been decided in favour of the appellant by the CIT (Appeals) - 14 while disposing off the Company's Appeal for the Assessment Years 2011-12 2012-13 against the Order of the ITO(OSD)(TDS)-1(2), Mumbai. In view of the aforesaid discussion and considering the legal and factual matrix of the case. I am of the considered opinion that the appellant is not required to make TDS thus following the above referred to decisions. The Assessing Officer is directed to delete the disallowance of ₹ 27,43,52,361 /-. 10.3 With respect to second issue of disallowance of 20% of the business promotion expenses which stood added to income of the assessee by the AO in an assessment framed u/s 143(3) of the 1961 Act, the learned CIT(A) was pleased to dismiss the appeal of the assessee, as in the opinion of learned CIT(A) the assessee could not prove business nexus of these expenses, vide appellate order dated 16.11.2015 passed by learned CIT(A) by holding as under:- 3.3 I have considered the issue under appeal, carefully. I find that Ld. AO has rightly disallowed 20% of the total expenses of ₹ 16,25,990/- claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 176 Taxman 56] wherein it was held that business expenses incurred for development of website to promote business activities, and display information and product is allowable as revenue expenditure. The AR further relied in the case of Edelweiss Capital Limited, wherein the tribunal held that the expenditure incurred on website could not have been viewed as capital expenditure because the website is put up for purpose of day to day running of the business. Similar view was also in the case of M/s. R.R. Kabel Ltd s. The Addl. CIT wherein the expenditure relating to webhosting charges is regarded of revenue in nature. It is, further seen that this ground has been decided in favour by my predecessor white disposing off the Appellant's Appeal for the Assessment Year 2009-10 vide Order dated 31 December 2012. Respectfully following the above referred to decisions, the AO is directed to delete the disallowance of ₹ 1,54,819/-. 10.5. With respect to the next disallowance of commission paid to BCCL to the tune of 2.5% of the business procured for the assessee as against commission @5% paid to BCCL for procurement of business for the assessee by or through BCCL, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant's Appeal for the Assessment Year 2009-10 vide Order No.CIT(A)-3/Addl.CIT11(1)/IT-274/11-12 dated 31 December 2012 is as under :- I have considered the fact. It is seen that the Appellant has made investment in exempt income being equity shares in the subsidiary companies and investment in the mutual funds. Therefore, the claim of the appellant that no expenditure has been incurred for earning dividend income cannot be accepted as it is impossible to earn substantial exempt income without incurring any expenses. This view is also fortified by decision in the case of Citicorp Finance (India) Ltd. [2007] 108 ITD 471 (Mum) wherein it was held that it is difficult to accept the hypothesis that one can earn substantial dividend income without incurring any expenses, whatsoever, Including management or administrative expenses and Gujarat Gas Financial Services Ltd. vs. ACIT [2008] 14 DTR (Ahd) (SB) 481] wherein it was held that there is no dispute and there cannot be any doubt, that some expenditure is incurred for making or earning the income from dividend. I find that Hon ble Bombay High Court in the case of Godrej Boyce Manufacturing Co. Ltd. vs. DCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) for the AY 2009-10. The learned CIT(A) while adjudicating appeal for the impugned AY 2010-11 under consideration observed that this issue also came up in AY 2006-07 and 2007-08 in assessee‟s own case which was adjudicated by Mumbai-tribunal vide ITA no. 3114/Mum/2011 and ITA no. 1063/Mum/2011 vide orders dated 26.12.2012 in favour of the assessee, wherein additions as were made by the AO which were partly confirmed by learned CIT(A) were deleted by Mumbai-tribunal. The learned CIT(A) by Respectfully following the appellate orders passed by Mumbai-tribunal for AY 2006-07 and 2007-08 in assessee‟s own case, allowed the appeal of the assessee vide appellate order dated 16.11.2015 passed by learned CIT(A), by holding as under:- 7.3 I have gone through the submissions of the Appellant. It is also seen from the submissions that the ITAT, Mumbai has accepted the contentions of the Appellant and decided the issue in its favour for the Assessment Years 2006-07 and 2007-08. Vide ITA No.3114/Mum/2011 and ITA No. 1063/Mumbai/2011 dated 26.12.2012. Respectfully following the decision of Hon'ble ITAT. The AO is directed to delete the disallowance of expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble Supreme Court in the case of JCIT Vs. Rolta India Ltd. (2011) 330 ITR 470(SC) has ruled that section 115J is a special provision. It is clear from reading section 115J and 115JB that the question whether a company which is liable to pay tax under either provisions does not receive importance because specific provisions are made in the section saying that all other provisions of the Act so apply to MAT copy under Section 115(A) and 115JB(5). Respectfully following the proposition declared by the Hon'ble Supreme Court in the case of JCIT Vs. Rolta India Limited and in view of the fact that there is no exclusion of Section 115JB in the statutory disallowance of expenses to earn exempt income under section 14A of the Act r.w.r. 8D of I.T. Rules. 1962, it is held that statutory disallowance under section 14A r.w.r.8D of I.T. Rules, 1962 is applicable to the facts of the present case. In view of the specific provisions in section 115JB(5) to the effect that all other provisions of the Act shall apply to the MAT company, the statutory disallowance under section 14A r.w.r.8D is applicable in respect of working out the book profit under section 1I5JB of the Act. Therefore, the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion charges which is a new issue which is so far not adjudicated by tribunal in assessee‟s own case. The assessee has also prepared and filed a chart of various issues which are emanating in these cross appeals and details as to the how these issue‟s are covered by tribunal decision in assessee‟s own case. The said chart is placed in file. The assessee has made statement before us that no exempt income was received by the assessee during the previous year relevant to the impugned assessment year. The assessee has also filed earlier years appellate orders passed by Mumbai-tribunal in cross appeals in assessee‟s own case in ITA no. 181 238/Mum/2012 for AY 2008-09 and Mumbai-tribunal decision in ITA No. 1864 1910/Mum/2013 for AY 2009-10 respectively, vide common orders dated 04.10.2017. The assessee has also filed before the Bench, decision of Mumbai-tribunal in assessee‟s own case in ITA no. 3114 1863/Mum/2011 for AY 2006-07 and ITA no. 3115/Mum/2011 for AY 2007-08, vide common order dated 26.12.2012. The assessee has also relied on judgment of Hon‟ble Delhi High Court decision in the case of CIT v. Indian Visit.com Private Limited (2009) 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o advertising agency. The advertising agency in turn make payments to assessee after retaining their commission @15% and net revenue is received by assessee after retention of agency commission by the advertising agency on advertisements procured by them from advertisers. The assessee did not deducted income-tax at source on these advertising agency commission retained by advertising agency. The said net revenue from advertisement after adjusting of advertising agency commission is accounted for by the assessee in its books of accounts and Profit and Loss Account. Thus, the assessee has not claimed advertising agency commission expenses as separate expenses in its books of accounts and in P L account prepared by it. This issue came up before tribunal for AY 2011-12 and 2012-13 in assessee‟s own case and we have observed that the tribunal in assessee‟s own case vide common order dated 11.01.2017 in ITA No. 1352/Mum/2014 and 5227/Mum/2014 for AY 2011-12 and 2012-13 respectively has adjudicated this issue in favour of the assessee wherein the tribunal came to the conclusion that no income-tax was required to be deducted at source by assessee under Chapter XVII-B on these a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act on behalf of the media companies for procuring advertisements, the margin retained by the former amounts to constructive payment of commission and, accordingly, TDS under section 194H is attracted. 4. The issue has been examined by the Allahabad High Court in the case of Jagran Prakashan Ltd and Delhi High Court in the matter of Living Media Limited and it was held in both the cases that the relationship between the media company and the advertising agency is that of a 'principal to principal' and, therefore, not liable for TDS under section 194H. The SLPs filed by the Department in the matter of Living Media Ltd. and Jagran Prakashan Ltd 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. 5. 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 of or canvassing for advertise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner of Income Tax(Appeals)-II, Thiruvananthapuram and the order dated 22.09.2003 passed by the Assessing Officer. 4. In order to appreciate the issue involved in these appeals, it is necessary to set out the facts hereinbelow. 5. The appellant is known as Prasar Bharati Doordarshan Kendra . It functions under the Ministry of Information and Broadcasting, Government of India. The dispute in this case relates to the appellant's Regional Branch at Trivandrum. 6. The appellant, in the course of their business activities, which include the running of the TV channel called Doordarshan , has been regularly telecasting advertisements of several consumer companies. 7. With a view to have a better regulation of the practice of advertising and to secure the best advertising services for the advertisers, the appellant entered into an agreement with several advertising agencies (Annexure-P-12). 8. In terms of the agreement, the advertising agency (hereinafter referred to as the Agency ) was required to make an application to the appellant to get the accredited status for their Agency so as to enable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicable to the payments made by the appellant to the Agencies because the payments were made in the nature of commission as defined in Explanation appended to Section 194H of the Act. The AO held that the appellant, therefore, committed default thereby attracting the rigor of Section 201(1) of the Act because they failed to deduct the tax at source from the amount paid to various advertising agencies during the Assessment Years in question as provided under Section 194A of the Act. 13. On quantification, the AO found that during the Assessment Year 2002-2003, the appellant had paid a sum of ₹ 2,56,75,165/- towards the commission to the Agencies and on this sum, they were required to deduct tax amount to ₹ 16,34,283/- and a sum of ₹ 3,80,611/- towards interest for delayed payment under Section 201(1-A) of the Act and during the Assessment Year 2003-2004, the appellant had paid a sum of ₹ 2,29,65,922/- towards the commission to the Agencies and on this sum, they were required to deduct tax amounting to ₹ 11,15,944/- and a sum of ₹ 1,54,050/- towards interest for delayed payment under Section 201(1-A) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint out that the Agencies, in terms of the agreement, purchased the air time from the appellant and then sold it in the market for advertisement to their customer after retaining 15% commission given to them by the appellant. It was, therefore, his submission that such transaction cannot be regarded as being between the principal and agent and nor the payment can be regarded as having been made by way of commission so as to attract the rigor of Section 194H and Section 201 of the Act. 22. Learned counsel also submitted that by mistake some other format of the agreement was placed by the appellant before the High Court and, therefore, the appellant suffered adverse order in question (see averments made in Paras 4 and 5 of the application seeking permission to file additional documents at page 134/135). Learned counsel then took us to the relevant provisions of the proper agreement filed in this Court as Annexure P-12 and contended that having regard to the nature of the agreement and its terms, the submission urged deserves acceptance. 23. In reply, learned counsel for the respondent (Revenue) supported the impugned judgment and contended that the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... article or thing, not being securities; (ii) the expression professional services means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by the Board for the purposes of section 44AA; (iii) the expression securities shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (iv) where any income is credited to any account, whether called suspense account' or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.' 26. The aforementioned Section was inserted in the Act with effect from 01.06.2001 by replacing the earlier Section 194H. This Section deals with the payment of commission or brokerage . 27. It provides that any person other than individual or HUF, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplaint was made to this effect by the appellant; Third, the terms of the agreement indicate that both the parties intended that the amount paid by the appellant to the agencies should be paid by way of commission and it was for this reason, the parties used the expression commission in the agreement; Fourth, keeping in view the tenure and the nature of transaction, it is clear that the appellant was paying 15% to the agencies by way of commission but not under any other head; Fifth, the transaction in question did not show that the relationship between the appellant and the accredited agencies was principal to principal rather it was principal and Agent; Sixth, it was also clear that payment of 15% was being made by the appellant to the agencies after collecting money from them and it was for securing more advertisements for them and to earn more business from the advertisement agencies; Seventh, there was a clause in the agreement that the tax shall be deducted at source on payment of trade discount; and lastly, the definition of expression commission in the Explanation appended to Section 194H being an inclusive definition giving wide meaning to the expression commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of which it was contended that no deduction at source was required. The Tribunal held that there was no liability for deduction of tax at source under Section 194H which judgment was reversed by the Kerala High Court. From the facts of the aforesaid case, it is clear that Doordarshan had appointed agents i.e. advertising agencies and there was agreement entered between them. In the aforesaid circumstances, 15% advertisement charges collected and remitted was held to be in the form of commission payable to the agent by Doordarshan. There was explicit agreement between the agency and the Doordarshan where both understood that payment made to the agency was liable to tax deduction. It is useful to quote the following observations of the judgment of Kerala High Court:- * * * * * * From the above, it is very clear that parties have understood their relationship as Principal and Agent and what is paid to the agent by Doordarshan is 15% of advertisement charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * It is very clear from the above provision that the advertising agency clearly understood the agreement as an agency arrangement and the commission payable by the respondent to such agency is subject to tax deduction at source under the Income Tax Act and so much so the provision in the agreement was for the agent after retaining 15% to give cheque or demand draft for TDS amount which was originally 5% until it was enhanced to 10% by Finance Act 2007 with effect from 1.6.2007. 62. In the aforesaid case, the relationship of principal and agent was fully established since the advertising agency was appointed as agent by written agreement and there was specific clause that tax shall be deductible at source on payment of trade discount. In the said circumstances, the Kerala High Court held that Section 194H of the Income Tax Act was applicable. In the present case, there is no agreement between the petitioner and the advertising agency and the advertising agency has never been appointed as agent of the petitioner. Thus the above case of the Kerala High Court is clearly inapplicable and the reliance on the said judgment for fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal did not had the benefit of judgment of Hon‟ble Supreme Court in the case of Director, Prasar Bharati(supra). In fitness of things and in the interest of justice and fairness, we are of the considered view that this 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 in view prevailing factual matrix of the case in accordance with ratio of recent decision of Hon‟ble Supreme Court in the case of Director, Prasar Bharati(supra) as the issue is no more res integra and is now settled by Hon‟ble Supreme Court in the aforesaid judgment in the case of Director, Prasar Bharati (supra). Thus, we set aside and restore the matter back to the file of the AO to decide this issue denovo afresh on merit in accordance with ratio of decision of Hon‟ble Supreme Court in the case of Director, Prasar Bharati(supra) applied to prevailing factual matrix of the assessee‟s case. Needless to say that proper and adequate opportunity of being heard shall be provided by the AO to the assessee in accordance with principles of natural justice in accordance with law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the wide spread use of the internet has provided a very powerful medium to companies to publicize their activities to a larger spectrum of people at a much lower cost. Websites enable companies to do what the printed brochures did but, in a much more efficient manner as well as in a much shorter period of time and covering a much larger set of people worldwide. 8. The Tribunal has correctly appreciated the facts as well as the law on the subject and has come to the conclusion that the expenditure on the website was of a revenue nature and not of a capital nature. We see no reason to interfere with the impugned order. No such substantial question of law arises for our consideration. The appeal is dismissed. Reference is also drawn to decision of Delhi-tribunal in the case of Polyplex Corporation Limited v. ITO, reported in (2009) 122 TTJ 0949(Delhi-trib.) and decision of Mumbai-tribunal in the case of R.R.Kabel Limited v. Addl.CIT reported in (2012) 54 SOT 0374(Mum-trib.), wherein website development expenses were held to be Revenue expenses. Respectfully following the foresaid decisions, we decide this issue in favour of the assesse by holding thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in the case of Radhasoami Satsang v. CIT (1992) 193 ITR 321(SC) is relevant. The Revenue fails on this Ground number 5 raised by it in its appeal filed with tribunal.We order accordingly. 15. The next issue raised by Revenue in its appeal vide ground number 6 and 7 concerns itself with disallowance of interest of ₹ 80 lacs u/s. 36(1)(iii) of the 1961 Act. The AO made additions as it could not be proved that borrowed funds were used for business purposes. Similar disallowance was made by the AO for earlier years also viz. AY 2006-07, 2008-09 and 2009-10. The learned CIT(A) granted part relief for earlier year by disallowing proportionate interest expenses based on which AO made disallowance. The learned CIT(A) for the impugned year under consideration deleted disallowance by following ITAT, Mumbai decision in the case of assessee itself for AY 2006-07 and 2007-08 in ITA no. 3114/Mum/2011 and ITA no. 1063/Mum/2011 vide orders dated 26.12.2012. This issue is also decided by tribunal in ITA no. 181 238/Mum/2012 and ITA no. 1864 1910/Mum/2013 for AY 2008-09 2009-10 respectively vide common order dated 04.10.2017 in assessee‟s own case, wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee s own case for the A.Y. 2006-07 2007-08 in ITA. No. 3114/M/2011, 3115/M/2011 1863/M/2011.The relevant para is hereby reproduced as under.:- 3. Before us, while the Revenue disputes the relief in respect of interest paid to MIB (₹ 191.39 lakhs), the assessee challenges the proportionate disallowance of interest on borrowing (₹ 67.86 lakhs). The assessee, apart from on its financial statements, claiming of them to be in support of its case the reserves surplus as at the year-end being at ₹ 216.18 lakhs, also relied on the decision in the case of S.A. Builders Ltd. vs. CIT(Appeals) (2007) 288 ITR 1 (SC) and CIT vs. Reliance Utilities Power Ltd. (2009) 313 ITR 340 (Bom). On being queried by the Bench as to the purpose of the loans and advances to sister concern/s, the ld. AR explained that the same was to a subsidiary company and, in fact, carried interest @ 8% p.a., i.e., the rate at which interest was paid on the borrowings. Further, as regard investments, these could not be termed as tax-exempt in as much as the investments were in Mutual Funds with growth option, yielding capital gains. These could not, accordingly, be termed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Loans and investment in subsidiary 760.00 D Preoperative expenses 811.04 25,570.06 C Surplus 239.36 (A-B) D Financing cost (net of interest 2.05L) 259.20 (259.25-2.05) E Shortfall @ 17.84 (D-C) [@ implying a reduction in cash/cash equivalents, i.e., at the end of the current year vis-a-vis the beginning of the year.] 4.3 How could, we wonder, the borrowed funds, forming part of the long term funds, generated at ₹ 258.09 crores during the relevant year, be said to have been utilized for non-business purposes? That is, assuming the investments and the loans and advances to subsidiary to represent a non-business purpose. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not even clear if the same arises under the terms of the contract or is as per the directions of the hon ble court. It would thus be a little consequence even if some borrowed capital was utilized (for a given period) to pay the same, being only a business purpose, as is a payment of license fee itself. The payment, in any case, is compensatory in character. The Revenue s only case, rather, could be that interest, corresponding to the period for which the radio stations were not operative and under installation, be capitalized, as itself done by the assessee for a part of interest paid during the year. No case for a disallowance would arise unless the Revenue shows the payment to be not for business purpose or for any infraction of law, in which case the entire of it, and not the interest incurred on the corresponding borrowings (where so), would stand to be disallowed, and as in fact stands done by the Revenue. The impugned order thus merits confirmation in respect of this disallowance also. We decide accordingly. 5. We next consider the assessee s appeal for the second year under reference, i.e., AY 2007-08. The AO s order, who has proceeded to disallow the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores (₹ 47.67 crores as at 31.03.2009) and Reserves Surplus to the tune of ₹ 283.82 crores(₹ 265.95 crores as at 31.03.2009) as at 31.03.2010, aggregating to ₹ 331.49 crores as at 31.03.2010(₹ 313.62 crores as at 31.03.2009), while the investments are to the tune of ₹ 40.02 crore as at 31st March 2010 and ₹ 39.03 crores as at 31.03.2009. The investments/loans to subsidiary namely Times Innovative Media Limited‟ and Alternate Brand Solutions Limited‟ to the tune of ₹ 10 crores were considered for disallowance of interest expenses u/s 36(1)(iii) of the 1961 Act. Thus, as can be seen from above 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. The decision of Hon‟ble Bombay High Court in the case of CIT v. Reliance Utilities and Power Limited (2009) 313 ITR 340(Bom) and also decision of Hon‟ble Bombay High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n expenses are not warranted, by holding as under:- 8. Under this issue the assessee has challenged the ad hoc disallowance to the extent of 10% of the Business Promotion Expenses to the tune of ₹ 3,14,292/. The Ld. Representative of the assessee has argued that the assessee has given the detail of the Business Promotion Expenses which lies at page no. 62 of the paper book and also submitted the copy of Tax Audit Report which lies at page no. 37 to 59 of the paper book. The AO disallowed the 20% of the Business Promotion Expenses without any basis and the CIT(A) has restricted the disallowance to the extent of 10% of the Business Promotion expenses just on estimation basis which is wrong against law and fact, therefore, the said expenses are liable to be allowed in the interest of justice. It is also argued that the appellant has paid the fringe benefits Tax on these expenditures incurred for the purpose of business and the case of the assessee has duly been covered by the order of CIT(A) dated 01.12.2010 for the A.Y. 2006-07 and the department appeal before the ITAT. In support of this contentions, the Ld. Representative of the assessee has placed reliance upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) is relevant. Thus, ground number 1 of the assessee‟s appeal is allowed. We order deletion of the said disallowance of 20% of Business Promotion Expenses. The assessee succeeds on this ground. We order accordingly. 18. The next issue raised by assessee in its appeal filed with tribunal vide ground number 2 concerns itself with disallowance of expenditure of ₹ 62,16,426/- by authorities below purported to be incurred in relation to earning of an exempt income by invoking provisions of Section. 14A of the 1961 Act read with Rule 8D(2)(ii) and 8D(2)(iii) of the 1962 Rules. Both the authorities below had confirmed and sustained the aforesaid disallowances. Statement has been made by Ld. Counsel for the assessee before the Bench that there is no exempt income earned by the assessee during the previous year relevant to the impugned assessment year. It is also claimed before the Bench that investments in securities had been made out of own interest free funds available with the assessee by way of share capital and free reserves and no borrowed funds were utilised for making investments. Our attention was drawn to the contentions made before learned CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of Maxopp Investment Limited v. CIT reported in (2018) 402 ITR 640(SC) and hence this contention of the assessee stood rejected. We have observed that the assessee has claimed that no exempt income was earned by the assessee during the impugned assessment year and hence in view of decision(s) of Hon‟ble Delhi High Court in the case of Cheminvest Ltd. v. CIT reported in (2015) 378 ITR 33(Delhi) and in the case Joint Investments Private Ltd. v. CIT reported in (2015) 372 ITR 694(Delhi) as well as decision of Hon‟ble Bombay High Court in the case of The PCIT v. Ballarpur Industries Ltd. in ITA No. 51 of 2016 vide judgment dated 13.10.2016, we are of the view that no disallowance of expenditure purported to be incurred for earning of an exempt income be made u/s 14A of the 1961 Act 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue is restored back to the file of the AO for fresh adjudication on merits in accordance with law after verification of factual matrix of the case. We order accordingly. 21. The next issue concerns itself vide ground no 5 with regard to non grant of credit by the AO for income-tax deducted at source(TDS) of ₹ 1,75,228/- from the income of the assessee for the year under consideration. 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. After hearing both the parties we restore this issue back to the file of the AO for necessary verification and grant of TDS credit on merits in accordance with law. We order accordingly. 22. The other grounds raised by the assessee in memo of appeal filed with tribunal vide ground number 6 to 8 are consequential in nature and does not require separate adjudication. Accordingly, we dismiss ground numb ..... 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