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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI ABY T. VARKEY,HONBLE & SHRI S. RIFAUR RAHMAN, HONBLE
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “A”, MUMBAI BEFORE SHRI ABY T. VARKEY,HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NO.1297/MUM/2014(A.Y: 2010-11) DCIT (TDS)-2(1) V. M/s. Laqshya Media Pvt. Ltd., Room No. 702, 7th Floor Laqshya House K.G. Mittal Ayurvedic Hospital Next to Rameshwer Temple Building, Charni Road Saraswati Baug, Society Road Mumbai - 400002 Jogeshwari (E), Mumbai -400060 PAN: AAACL5004C (Appellant) (Respondent) Assessee Represented by : Shri S. Sriram Department Represented by : Shri Manoj Kumar
Date of Hearing : 31.10.2022 Date of Pronouncement : 18 .01.2023
O R D E R PER S. RIFAUR RAHMAN (AM)
This appeal is filed by the revenue against order of the Learned Commissioner of Income Tax (Appeals)-14, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 03.12.2013for the A.Y.2010-11.
The ITAT in the original appellate proceedings decided the issue against the revenue and against which revenue has filed the appeal
2 ITA NO.1297/MUM/2014 (A.Y: 2010-11) M/s. Laqshya Media Pvt. Ltd., before Hon'ble Bombay High Court and Hon'ble High Court has remitted one of the issue in appeal relating to payments for putting up advertisement hoardings which should be chargeable to TDS under provisions of section 194I of the Act back to the Tribunal.
The relevant background of the above appeal is, the AO issued a series of notices under section 133(6) of the Income-tax Act, 1961 ("the Act") to the Assessee, calling for information on various expenses incurred by the Assessee and the tax deducted thereon during A.Y. 2010-11. Based on the information and submissions filed by the Assessee, vide order dated 26.03.2012 passed under section 201(1) 201(1A) of the Act, the AO treated the Assessee as an Assessee-in- default for alleged failure to deduct taxes on the following sums:
Sr. Amount TDS Nature of payment Interest Remarks No paid failure 1. Processing fee paid to 40,18,998 4,55,352 1,63,927 Decided in favour nationalized bank for of Assessee by obtaining loans (alleged ITAT in first round. default u/s 194J) No further appeal by Revenue. 2. Guarantee fee paid to 8,92,665 1,01,139 36,410 Decided in favour nationalized banks obtaining of Assessee by guarantee (alleged default High Court. u/s 194H) 3. Payments for putting up 6,65,73,383 1,50,85,529 54,30,790 Remanded to advertisement hoardings ITAT by the High (erroneously treated as Court. payments for obtaining rights to put 1941) up advertisements) (alleged default u/s 194I)
3 ITA NO.1297/MUM/2014 (A.Y: 2010-11) M/s. Laqshya Media Pvt. Ltd., 4. Aggrieved by the order dated 26.03.2012 of the AO, the Assessee preferred an appeal before the CIT(A). In relation to item (3), the Assessee contended that it had filed detailed evidences/ submissions before the AO to contend that the amount spent is not in relation to rent, and that in any case, tax has been deducted, wherever applicable. It was submitted that the AO had completely ignored the submission.
The Ld.CIT(A), vide order dated 03.12.2013, allowed the appeal of the assessee on items (1) and (2) above. With regards to item (3) above in relation to TDS on hoarding/ display rights, the Ld.CIT(A) held as under:
"5.3. It is noticed that the TDS was deducted on many items of expenses and many items have been capitalized. Therefore, on the items capitalized, no TDS is to be deducted. The appellant is directed to furnish the complete details of expenditure along with details of TDS made and the AO is directed to verify the said expenditure. The AO is directed to delete the demand raised on account of tax deducted at source on items of expenditure which are capitalized. On expenditure which are not capitalized i.e. revenue, the AO is directed to verify the deduction of TDS and then re-compute/delete the demand accordingly. Ground is allowed, subject to direction."
Aggrieved by the order of the CIT(A), the AO filed an appeal before the Tribunal on 24.02.2014, in relation to items (1), (2) and (3). In the meantime, the AO vide order dated 25.02.2014 gave effect to the
4 ITA NO.1297/MUM/2014 (A.Y: 2010-11) M/s. Laqshya Media Pvt. Ltd., order of the CIT(A). In relation to item (3), after examining the details of expenditure incurred and TDS deducted thereon, the AO held as under:
“2. In reply to letter dated 08/01/2014, assessee produced list of TDS & sample copies of bills on hoarding display charges of Rs. 6,63,73,383/0 & it was seen that TDS of Rs. 12,80,966/- had been deducted Accordingly, relief is allowed to assessee on this amount as per direction of ld CIT(A)."
Subsequent to the order of the AO, the co ordinate bench, vide order dated 27.05.2016, dismissed the appeal of the Revenue in relation to items (1) and (2). With regards to item (3) in relation to TDS on payment for putting up hoarding display boards, the Co ordinate bench held as under
“7. Lastly, coming to the issue of payment on hoarding and display expenses, first of all from the impugned order it is seen that the Ld. CITA) has directed the AO to remove the expenditure which has been capitalized by the assessee in its books of accounts. Once an item of expenditure has been capitalized then there is no requirement for deducting the TDS Thus, to this extent, there cannot be any infirmity in the order of the CIT(A) and the same is affirmed. For the balance amount the Ld Counsel submitted that, assessee has filed a break-up of expenditure before the AO and it was explained that these payments were in the nature of.- (a) Ground level and beatification; (b) Material purchased and installation charges; and (c) Purchase of Wall laminated units. Once that is so, then definitely there is no requirement of deducting TDS under section 194I on such payment, because it does not fall within "rent". Since CIT(A) has already directed the AO
5 ITA NO.1297/MUM/2014 (A.Y: 2010-11) M/s. Laqshya Media Pvt. Ltd., to verify, therefore, we also reiterate the same direction that AO should look into the nature of expenses and if the contention of the Ld. Counsel is correct that these are in the nature of aforesaid payments, then there would be no requirement of deducting tax under section 194I. With this direction, this ground of the revenue is treated as dismissed."
In the said order, the ITAT had not referred to the order dated 25.02.2014 passed by the AO giving effect to the order of the CIT(A). The Assessee therefore filed a Miscellaneous Application No. 398/Mum/2016 before the ITAT seeking correction of the mistake apparent from the record-since the AO had already passed the order giving effect to the order of the CIT(A). It was submitted that the reiteration by the ITAT of the same direction of the CIT(A) when the direction has already been given effect to, was a mistake apparent from the record. The Tribunal, however, vide order dated 13.10.2017, dismissed the application of the Assessee holding that there was no mistake apparent from the record.
Aggrieved by the order dated 27.05.2016 of the Tribunal, the AO filed an appeal to the Hon’ble High Court of Bombay, on items (2) and (3). The Hon’ble High Court, vide order dated 23.10.2019, dismissed the appeal of the Revenue on items (2) [TDS on bank guarantee commission]. Regarding the TDS on the payments made for the
6 ITA NO.1297/MUM/2014 (A.Y: 2010-11) M/s. Laqshya Media Pvt. Ltd., acquisition of hoarding/ display rights, the Hon’ble High Court held as under. “4. Regarding question (b):- The appeal is admitted on the substantial question of law at (b) above. The appeal is taken up for final disposal. Both the parties are agreed that the impugned order of the Tribunal needs to be set aside and the appeal be restored to the Tribunal for fresh consideration. This for the reasons that it has not considered the submission of both sides, in reaching its conclusion. 5. We are in agreement with the reasons made for the joint request by the parties. We note that there is no clarity in the impugned order with regard to which of the consideration paid would be subject to TDS under section 194I of the Act. The Assessing Officer's order seems to hold that Section 1941 of the Act applies to the premium paid for the site of the hoarding while the Tribunal proceeds on the basis that the TDS is being sought on purchases made for putting up the hoardings. 6. In the above view, the impugned order is set aside to the above extent and the appeal is restored to the Tribunal for fresh consideration.”
Consequent to the directions of the Hon’ble High Court, the instant appeal is listed for hearing again for the limited purpose of determining the issue as to whether the payments made by the Assessee towards putting up of hoardings and displays be liable to deduction of tax at source.
At the time of hearing, Ld. AR of the assessee submitted as under:- “TDS wherever applicable, was duly deducted- Order of the Appellant giving effect to the CIT(A)'S order
7 ITA NO.1297/MUM/2014 (A.Y: 2010-11) M/s. Laqshya Media Pvt. Ltd., During the year under consideration, the Assessee incurred an amount of Rs. 6,65,73,383/- towards putting up of hoardings and displays. During the TDS assessment proceedings, the AO required the Assessee to inter alia provide details of such sum and the tax deducted thereon. The Assessee submitted detailed break-up of such expenditure along with the applicability of TDS thereon and the reasons for non-deduction of TDS, if any, and the copy of invoices relating to such payments. The details clearly provided that the expenses relate to putting up of hoardings and displays and not for availing space on rent from any government authority. The Assessee had also filed all the invoices for these expenses with the AO, which clearly showed that significant payments were in the nature of: a. Ground leveling and beatification b. Material purchase and installation charges c. Purchase of wall mounted units The AO, without taking into account any of these submissions, erroneously noted in the assessment order that no details were provided by the Assessee vis-à-vis deduction of TDS on such payments. The AO then held that the Assessee acquired 'boarding' display rights' and that the payments made thereof would be in the nature of 'rent' and therefore, the Assessee defaulted in deducting tax under section 194I of the Act. During the appellate proceedings, the Assessee again submitted the detailed break-up of these expenses, nature of the expense and the details of deduction of tax and non-deduction, if any. The appellate authorities appreciated the submissions of the Assessee and the fact that the payments are in fact for the putting up of the hoardings and displays and noted that: a. the Assessee has capitalized certain expenses in its books of accounts b. the Assessee has deducted tax on certain other expenses under section 194C of the Act The authorities therefore directed the AO to verify the details and pass an order accordingly. In the remand proceedings before the AO, the Assessee again filed the detailed break-up of the expenditure. After examining the same and having noted that he Assessee has duly deducted tax. the AO deleted the demand raised.
8 ITA NO.1297/MUM/2014 (A.Y: 2010-11) M/s. Laqshya Media Pvt. Ltd., In view of the order of the AO giving effect to the CIT(A)'s order, the Assessee submits that the demand raised by the AO in the TDS assessment order is liable to be set-aside. Expenditure is not in the nature of rent but in the nature of works contract and TDS has been duly deducted thereon The Assessee humbly submits that the AO has misunderstood the facts and has not appreciated the facts of the case, which were duly explained to him by the Assessee. The expenditure incurred is not for availing space on rent from any government authority, as alleged by the AO, but is towards putting up of the hoardings and displays. Expenditure incurred on putting up of the hoardings and displays can, by no stretch of imagination, be treated as being in the nature of 'rent' and liable for TDS under section 194I of the Act. Rather, such expenditure is covered under section 194C of the Act and the Assessee has duly deducted tax thereunder. In this regard, attention is invited to the CBDT Circular No. 715 dated 08.08.1995. As per the Circular, the contract for putting up a hoarding is in the nature of advertising contract and provisions of section 194C would be applicable. The relevant portion of the same is as under: "Question 5: Whether a contract for putting up a hoarding would be covered under section 194C or 194-1 of the Act? Answer. The contract for putting up a hoarding is in the nature of advertising contract and provisions of section 194C would be applicable. It may, however, be clarified that if a person has taken a particular space on rent and thereafter sublets the same fully or in part for putting up a hoarding, he would be liable to TDS under section 194-I and not under section 194C of the Act." The Assessee has, in the instant case and in line with the above Circular, deducted TDS under section 194C, wherever applicable. The Assessee, therefore, humbly submits that the AO erred in treating the Assessee as Assessee-in-default with respect to the payments made by the Assessee towards putting up of hoardings and displays and the non-deduction of TDS thereon under section 194I of the Act.
9 ITA NO.1297/MUM/2014 (A.Y: 2010-11) M/s. Laqshya Media Pvt. Ltd., In view of the above, the Assessee submits that the demand raised by the AO basis non-deduction of tax at source on the payments made by the Assessee towards putting up of advertisement hoardings be set-aside.” 12. On the other hand, Ld. DR relied on the order passed by the Assessing Officer.
Considered the rival submissions and material placed on record, we observe from the record that the Assessing Officer misunderstood the transaction carried on by the assessee as payment towards hoarding/display rent charges and spent to the extent of ₹.6,65,73,383/- without deducting TDS. On careful verification, we observe that the assessee was awarded contract to put up hoarding/display boards in the specific places as per the agreement entered with the Corporations. Accordingly, it incurred expenditure on putting up the hoarding/display board in the specified places. The assessee also submitted relevant bills and details of expenditure incurred, which includes capital as well as revenue expenditures. The assessee also submitted the details of the expenditures as well as details of tax deducted on the revenue expenditures and made a submission that the above said expenditure has resulted in creation of capital assets. The expenditure is capital in nature and the assessee has claimed depreciation on the above capital
10 ITA NO.1297/MUM/2014 (A.Y: 2010-11) M/s. Laqshya Media Pvt. Ltd., expenditure as well. On the revenue expenditures, it was submitted that it had deducted TDS considering the rate u/s 194C of the Act wherever applicable and it was also submitted that it is not a rent. However, Assessing Officer did not agree with the above submissions and completely misunderstood the transactions. Accordingly, he held that the assessee is in default.
From the above facts on record, we observe that assessee has acquired rights from public authority and accordingly installed the hoarding/ display boards by spending in Ground leveling and beatification, Material purchase and installation charges and Purchase of wall mounted units. Therefore, as explained in the above paragraphs, the expenditure incurred by the assessee will not fall under the head rent. Hence the provision of section 194I has no application in these transactions. Accordingly, we are inclined to allow the grounds and submissions made by the assessee and Ld CIT(A) has merely remitted this issue back to AO to verify TDS compliance on the revenue expenditures incurred by the assessee. We do not see any reasons to modify the directions given by the Ld CIT(A), at the same time, We observe from the order giving effect to CIT(A) order that AO has verified the expenditures and gave relief to the assessee. Therefore, this matter
11 ITA NO.1297/MUM/2014 (A.Y: 2010-11) M/s. Laqshya Media Pvt. Ltd., has to rest and to be decided in favour of the assessee. Accordingly, the ground no 3 raised by the revenue is dismissed.
In the result, the other grounds viz 1 and 2 are decided in favour of the assessee by Hon’ble High Court and ITAT in the earlier proceedings and hence appeal filed by the revenue is dismissed.
Order pronounced in the open court on 18th January, 2023
Sd/- Sd/- (ABY T. VARKEY) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 18/01/2023 Giridhar, Sr.PS
Copy of the Order forwarded to: 1. The Assessee 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER
(Asstt.Registrar) ITAT, Mum