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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Shri Rajpal Yadav & Shri Amarjit Singh
PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This assessee’s appeal for A.Y. 2005-06, arises from order of the Principal CIT, Vadodara-1, Vadodara dated 30-03-2017, in proceedings under section263 r.w.s. 254 of the Income Tax Act, 1961; in short “the Act”.
The brief fact of the case is that in this case return of income declaring total loss of Rs. -29,82,540/- was filed on 28th October, 2005. I.T.A No. 1314/Ahd/2017 A.Y. 2005-06 Page No 2 Subsequently, the assessment u/s. 143(3) r.w.s. 147 of the act was made on 31st December, 2008 determining total loss at Rs. -27,58,480/-. Thereafter, the Principal CIT has passed order u/s. 263 of the act on 25th May, 2010 and held that aforesaid assessment made by the assessee was erroneous and prejudicial to the interest of revenue on the ground that assessee has not deducted TDS on the amount of Rs. 87,92,136/- paid as subscription charges to the TV channels. In pursuance to order u/s. 263 of the act, the assessing officer has passed assessment order u/s. 143(3) r.w.s 263 of the act on 8th June, 2010 and disallowed the amount of Rs. 87,92,136/- u/s. 40(a)(ia) as the assessee has not deduced tax as per provision of section 194C of the act.
Aggrieved assessee has filed appeal before the ITAT. The ITAT vide order dated 11th July, 2014 in ITA No. 2345/Ahd/2010 has justified the invoking of provisions of section 263 of the act by the Principal Commissioner. However, it has remanded the issue pertaining to investigate the nature of payment and examination of agreement executed by the assessee with TV network. The relevant part of the order of ITAT is reproduced as under:- “6.1 In view of the above, considering the directions of learned Commissioner, we are of the view that those directions were devoid of certain basic facts. Learned Commissioner was expected to investigate the nature of the payment and for that he was also expected to examine the agreements executed by the assessee with few TV networks as listed above. On the basis of the language of the agreements only it was possible to know the exact nature of the payment in the light of the terms and conditions executed therein. Even for the applicability of the circular no.715 of CBDT dated 8.8.1995 it is necessary to examine whether the payments were made directly to print or electronic media. For the purpose of the applicability of Section 194C as per Explanation-III the expression "work" shall include broadcasting and telecasting including production of programmes for such broadcasting or telecasting. What we have noted that neither the AO nor learned CIT have examined the issue in the light of the provisions of Section 194C to be read along with Explanation-III(b) of IT Act. Therefore, the main grievance of the appellant is that the view was taken without appreciating the terms of the payment as incorporated in the agreements executed with various telecasting networks; hence, an opportunity deserves to be granted by the learned Commissioner, if so directed.
I.T.A No. 1314/Ahd/2017 A.Y. 2005-06 Page No 3
2 In view of the above discussion, two things emerges, one that the revisional powers invoked by learned Commissioner appears to be corrected because the AO has not examined the applicability of the provisions of Section 194C to be read with Section 40(a)(ia). The assessment order being silent on this aspect; hence, under the powers prescribed to learned Commissioner the matter can be examined by him. But the second aspect is whether the learned Commissioner has examined all those aspects before directing the AO to disallow the claim. In other words, learned Commissioner is expected to investigate all relevant facts and only thereupon must direct the AO to do the needful required under the circumstances. We have noted that the aspects as discussed hereinabove were not examined by the learned Commissioner based upon certain fundamental evidences such as nature of payment and the contract between the parties. In this situation, we have noted that few Hon'ble High Courts have approved the action of the ITAT remanding the matter back to learned Commissioner directing to pass afresh order after further investigation, viz., Martin Burn Ltd., 114 ITR 939 (Calcutta). That order had gone before Hon'ble Apex Court as cited in 199 ITR 606 (SC). It was held that the High Court has rightly approved the order of the Tribunal wherein instead of disposing of the appeal, the matter was remanded to the Commissioner for passing a fresh order. We, therefore, direct that the assessee should file requisite information and the agreements before learned Commissioner and fully co-operate in the proceedings. Side by side learned Commissioner is also expected to pass a detailed order considering the relevant provisions of the IT Act in the light of the evidences on record. Since, the matter is restored back for afresh adjudication; hence, the grounds raised by the assessee can only be treated as allowed for statistical purpose only.” Thereafter as per direction of the ITAT, the Principal CIT, Baroda has passed order u/s. 263 r.w.s. 254 of the act wherein he held that the assessee company failed to produce original documentary evidence and could not substantiate its claim that TDS on payment made by it was not deductible. The relevant part of the order passed u/s. 263 r.w.s. 254 of the act is reproduced as under:- “3. In view of the afore stated directions by the Hon'ble Tribunal, notice u/s. 263(1) of the IT Act, dated 29.09.2015 was issued fixing hearing on 08.10.2016, however, none attended, nor any submissions were made. Further opportunities were granted to the assessee vide letters dated 12/01/2016 and 03/03/2016 issued by this office. Again, no response was received from the assessee. Thereafter, another opportunity was. granted to the assessee vide letter dated 06/01/2017 by refixing the hearing on 19/01/2017. Shri Rashmi Acharya, C.A. and authorized representative of the assessee attended and furnished part details on 19/01/2017 and sought fifteen days time to furnish remaining details. Therefore, the hearing was adjourned to 06/02/2017. On 06/02/2017, Shri Venus Patel director of the Assessee company attended and furnished the copy of ledger A/c. only provided by Star India Pvt. Ltd, for the period 01/04/2004 to 31/03/005 and requested to give more time for submission of details on the plea that desired documents as claimed & desired before the Hon'ble Tribunal were not with him and efforts were being made to procure them from the concerned parties. Hence, the hearing 'was adjourned to 21/02/2017 as per the request of the assessee company's Director. On 21/02/2017, Shri Venus Patel and Shri Kirti Patel, Directors of the assessee company attended with Rashmi Acharya, C.A. and Authorized Representative and again submitted copy of agreement with Set Discovery Pvt. Ltd. only which had earlier been submitted on 19/01/2017. Nothing more was submitted in documentary form. Further, during the course of hearing, the ;assessee admitted vide order sheet noting dated 21/02/2017 that TDS as per provision of Section 194c was applicable and there was lapse on their part to deduct TDS. Further, it was pleaded that I.T.A No. 1314/Ahd/2017 A.Y. 2005-06 Page No 4 subscription expenses amounting to Rs.87,92,136/- may not be disallowed u/s. 40a(ia) of the Act. The assessee vide his reply dated 28/02/2017 which was filed on 01/03/2017 submitted as follows: "We accept there is lapse on our part to deduct TDS. As this was our ftrst year of operation, we were unaware of provisions of law and missed to deduct the tax. There was no intention on our part to evade the tax. We have shown payments in our books. We sincerely request your honour not to disallow subscription expenses u/s. 40(a)(ia) of Income Tax, as tax has not been deducted u/s. 194C of I.T. Act. For mere 2% of TDS non deduction, expenses to the tune of 100% shall not be disallowed. It will not be out of place to mention that companies must have paid income tax on receipt of subscription charges. We were unable to get confirmation in this respect, but we request your honour to use your good office to get cross verification. In case if expenses are disallowed in our hands and tax liability is raised, then there will be double taxation." The assessee in his aforementioned reply attached copies of Bank statement, account ledgers, receipts, invoices and summary of subscription of - 'paid by' assessee to various satellite television broadcasting company for its TV channels like ZEE, Star, B4U. However, copies of agreement claimed to have made between assessee and the distributor have not been furnished by the assessee (neither in original nor Xerox copies) in the reply except in the case of Set Discovery Pvt. Ltd. Thereafter, the assessee vide his reply dated 14/03/2017 furnished copy of ledger account and customer statement of Zee Turner Ltd. evidencing the payments of Rs.19,70,916/- on various dates during the period 01/04/2004 to 31/03/2005. However, copy of agreement claimed to have made between assessee and the distributor has not been furnished by the assessee (neither in original nor Xerox copy) in the reply.
1 Since the Hon'ble Tribunal has justified the action of invoking provision of Section 263 of the IT Act, no comments are called for in this regard. Hon'ble Tribunal has however, restored the matter back for afresh adjudication by relying upon Hon'ble Kolkata High Court decision in the case of Martin Burn Ltd 114 WR 939, subsequently, upheld by Hon'ble Apex Court, reported at 199 ITR 606 (SC). The premise of restoring the matter; afresh by the Hon'ble Tribunal is by noting that the learned Commissioner is expected to investigate all relevant facts and only thereupon must direct the AO to do the needful required under the circumstances. The then CIT has exercised provisions of Section 263 of the IT Act which empowers the CIT to pass such and order, as the circumstances of the case may justify. In other words, it is a discretionary power of the CIT whether to set-aside with specific directions, or to direct the AO to pass necessary inquiry. Section 263 is unambiguous, which states as under: "263. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing afresh assessment."
2 Further, the very premise of Hon'ble Tribunal in remanding the issue back to the file of CIT by relying upon the Hon'ble Apex Court decision in the case of Martin Burn Ltd (supra) is under misconception, since the issue therein was as to whether the Additional Commissioner was justified in considering the order of the Income-tax Officer which he set aside to be erroneous. However in the instant case the invoking of provisions of Section 263 of the IT Act has been justified by the Hon'ble Tribunal, in the impugned order itself. Moreover, nowhere, the Section 263(1) provides that the Commissioner is expected to investigate all relevant facts and only thereupon must direct the AO to do the needful required under the circumstances. It is the discretionary powers vested upon the CIT. In the instant case, the then CIT had thoroughly discussed the issue and only then he had issued absolute directions. However, notwithstanding to whatever stated above, sufficient opportunities were granted to the assessee to file requisite information and the copies of agreements as directed by the Hon'ble Tribunal in the impugned order. The assessee did not furnish the original copy of Affiliation Agreement and instead
I.T.A No. 1314/Ahd/2017 A.Y. 2005-06 Page No 5 furnished the Xerox copy of the Affiliation Agreement. On perusal of Xerox copy furnished of the same it is seen that authorized signatory of [as agent of Set India Pvt. Ltd. (SIPL) and Discovery Communications India [(DCI)] and Affiliate [Fortune (Baroda) Network Pvt, Ltd,] have signed only on the last page whereas as per the rules, authorized person of both the parties to the agreement were required to put their signature on each and every page of 'the Affiliation Agreement. Therefore, the authenticity of the Affiliation Agreement could not be verified. Further, on thorough perusal of the submissions/ details furnished by the assessee it is noticed that in the agreement between the assessee and the distributor, the distributor is referred to as having power to grant permission to carry or to distribute the services on the system in the Territory during the Term. Further, the agreement referred to the assessee as an 'affiliate' who is required to receive, transmit and distribute Services as part of its Basic Service to Subscribers on the system. Therefore, from the recital of the agreement itself, it is clear that the service, that the assessee was availing of, is the twenty four hour per day, satellite - delivered, aivertiser supported, television services i.e., what the assessee was availing of, was the receipt of 'telecasting signals' from the distributor of the company. Therefore, what the assessee had transacted for with the distributor certainly included within its ambit broadcasting and telecasting facility. The essence of the contract was to obtain broadcasting and telecasting of TV channels and, thereafter, its distribution amongst ultimate customers through the cable network of the assessee. Hence, it can safely be concluded that on the payments so made by the assessee to the distributors, section 194C was attracted. Reliance in this regard can be placed on the judgement/decision given by the Hon'ble High Court of Punjab and Haryana in the case of 'Kurukshetra Darpans (P.) Ltd. vs. Commissioner of Income Tax, Kara-all [2008} 169 Taxman 344 (Punj. & Har.) wherein it was held by the Hon'ble Court that the assessee was required to deduct tax at source in terms of Section 194C of the Act on payments made to the licensor for obtaining TV signals, Cable TV Network owned by the assessee. Further, the assessee, in his aforementioned reply dated 28/02/2016 , accepted that as this was its first year of-operation and it was unaware of provision of law so there was lapse on its part in the deduction of Tax Deduction at Source. As regarding the submission made by the assessee in his aforementioned reply dated 28/02/2017 that for mere 2% of TDS non-deduction, expenses to the tune of 100% should not be disallowed as the companies must have paid income tax on receipt of subscription charges, it is pertinent to mention here done in Section 40 vide Section 11 of Finance Act 2012 is effective from the 1st day of April 2013 and the present case pertains to A.Y. 2005-06 and the order u/s. 143(3) of the Act, in this case was passed on 31/12/2008. In view of the foregoing paras, I am of the opinion that the then CIT was fully justified in issuing absolute directions by interpreting the provisions of section 40(a)(ia) of the IT Act in correct perspective. It is pertinent to mention that the assessee company failed to produce original documentary evidence and could not substantiate its claim that TDS on payments made by it was not deductible. In fact,, vide note sheet dated 21/02/2017 and letter dated 28/02/2017 submitted on 01/03/2017, it has categorically been accepted by the Directors of the assessee company that there was lapse on the part of assessee company to deduct the TDS on the payments made by it.”
During the course of appellate proceedings before us the ld. counsel by referring the section 153(2A) of the act contended that order u/s. 263 r.w.s. 254 of the act passed by the ld. Pr. CIT on 30-03-2017 is bad in law as the same has been passed after the expiry of the time limit as prescribed u/s. 153(2A) of the act. The ld. counsel has not made any submission on merit in I.T.A No. 1314/Ahd/2017 A.Y. 2005-06 Page No 6 departmental representative vehemently contended that as per act the limit prescribed u/s. 153(2A) is not applicable to order passed by the Pr. CIT u/s 263 of the act.
We have heard the rival contention and perused the material on record carefully. We have perused the provisions of section 153(2A) of the act which are reproduced as under:- “ (2A) Notwithstanding anything contained in sub-sections (1), (1A), (IB) and (2), in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh assessment in pursuance of an order under section 250 or section 254 or section 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of one year from the end of the financial year in which the order under section 250 or section 254 is received by the Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner:”
As per the aforesaid provisions of the act, it is very clear that time limit prescribed u/s. 153(2A) of the act is pertained to the finalization of any subsequent assessment in pursuance of an order under section 250, section 254, section 263 or section 264 of the act. It is very clear that such time limit is not applicable for passing order u/s. 263 in pursuance of direction issued by the ITAT u/s. 254 of the Act. The ld. counsel has placed reliance on the judicial pronouncement in the case of Instruments and Control Co. Vs. CCIT 1 & 2 of Hon’ble Gujarat High Court (2012) 25 taxmann.com 16 (Guj) and other cases. However, we have noticed that these judicial pronouncements are pertained to the completion of assessment by the assessing officer in pursuance of remand order issued by the ITAT whereas in the case of the assessee the issue involved is to pass order u/s. 263 of the I.T.A No. 1314/Ahd/2017 A.Y. 2005-06 Page No 7 Act by the Ld. Pr. CIT. We observed that section 153 of the act provide time limit for completion of assessment and re-assessment. The ld. counsel has referred section 153(2A) of the Act. We have perused the aforesaid section and noticed that time limit prescribed therein are pertained to finalization of subsequent assessment order in pursuance of an order under section 250 or section 254 or section 263 or section 264 of the Act. We consider that the aforesaid provisions of section 153(2A) for time limit are not applicable to the revision of orders prejudicial to the revenue under section 263 of the Act. We are of the view that it is very clear from the provisions of section 153(2A) that these are applicable only to kind of assessment and re-assessment as prescribed under these provisions.
Considering the above facts and circumstances, we do not find any force in the contention of the Ld. counsel therefore this ground of appeal of the assessee is dismissed. The ld. counsel has not contested the other grounds of appeal on merit. After considering the material fact that the assessing officer has not examined the applicability of the provisions of section 194 r.w.s. 40(a)(ia) demonstrated in the findings of the Pr. CIT as elaborated supra in this order, we do not find any merit in the appeal of the assessee, therefore, the same are also dismissed.
In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 11-03-2019 (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 11/03/2019
I.T.A No. 1314/Ahd/2017 A.Y. 2005-06 Page No 8 आदेश क" ""त"ल"प अ"े"षत / Copy of Order Forwarded to:-
Assessee
Revenue
Concerned CIT
CIT (A)
DR, ITAT, Ahmedabad
Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील"य अ"धकरण, अहमदाबाद