KINETIC ADVERTISING INDIA PVT. LTD.,MUMBAI vs. ACIT-7(3)(1), MUMBAI

The assessee is engaged in providing outdoor advertising and related information consultancy. During the year under consideration, assessee declared income from business at Rs. 4,49,70,675/- and income from other sources such as interest income on IT refund and deposits shown at Rs. 66,98,082/-. The total taxable income shown at Rs. 5,16,68,757/- and the income under MAT provision u/s 115JB has been shown at Rs. 5,05,59,600/-.

During assessment proceedings, AO observed that TDS amount in respect of companies to the extent of Rs. 1,35,411/- is paid on 04.12.2014 after the due date u/s 139(1), therefore he

In response, assessee also submitted letter dated 05.03.16 with the confirmation that assessee has paid the TDS amount alongwith interest and relied on the following case laws:-

After considering the above submission of assessee, AO rejected the submission of the assessee and confirmed the disallowance u/s 40(a)(ia) of the Act of Rs. 67,70,550/-.

Aggrieved with the above order, assessee preferred the appeal before Ld. CIT(A) and submitted before him that assessee had paid to M/s Times Innovative Media Ltd of Rs. 8,22,37,744/- on account of media bookings. During this year, M/s Times Innovative Media Ltd has submitted a certificate u/s 197 for 4 I.T.A. No. 3194/Mum/2019 Kinetic Advertising India Pvt. Ltd. deducting lower deduction @ 0.1% from the payment made to the above party.

The assessee accordingly made deduction from payments made to M/s Times Innovative Media Ltd on all payments made in that year. However, assessee received short deduction notice in F.Y. 2014-15 wherein, it was stated that due to having exceeded limit in lower deduction certificate, the assessee had to pay the shortfall of TDS along with interest. Therefore, the assessee paid the shortfall of Rs. 1,35,411/- alongwith interest of Rs. 40,623/- during the F.Y. 2014-15. The assessee submitted before Ld. CIT(A) that since there is no non-deduction of TDS, no disallowance can be made u/s 40(a)(ia) of the Act. In support of its arguments, assessee relied on the following decisions:-

Further it submitted that assessee deducted tax at source as per the certificate issued u/s 197 up to the approved limit of Rs. 7,51,10,831/- and paid to the credit of the government. After the limit of Rs. 7,51,10,831/- was over, the assessee continued to deduct tax at source @ 0.1% on mistaken belief that the same rate would be valid even in the balance amount.

After considering the submission of the assessee and taking note of the facts in this case, Ld. CIT(A) observed that the assessee continued to deduct tax at source @ 0.1% even after the payment exceeded the limit of Rs. 7,51,10,831/-. The assessee was required to deduct tax at source at the rate of 2% u/s 194C of the Act in respect of payment exceeding the limit approved in certificate issued u/s 197. The assessee stated that after receipt of 6 I.T.A. No. 3194/Mum/2019 Kinetic Advertising India Pvt. Ltd. a short deduction notice in F.Y. 2014-15, the assessee had paid shortfall of TDS along with interest during F.Y. 2014-15. He rejected the contention of the assessee that its case will not fall under section 40(a)(ia) of the Act and other case laws relied by the assessee. Ld. CIT(A) further observed that he is not in agreement with the submission of the assessee that the decision in these cases are applicable to the facts of the case of assessee. In all these cases relied by the assessee, the assessee had deducted the tax at source under one provision of the Act whereas the AO was of the view that the tax was required to be deducted in some other provisions of the Act at a higher rate. In these circumstances, the Hon’ble Courts/Tribunals were of the opinion that it was a bona fide case of mistake on part of the appellant because the appellant was of the belief that tax was deductible under same provisions of the Act under which it was deducted. Since the case of the appellant was bona fide, it was held that no disallowance was called for under section 40(a)(ia) of the Act because it was not a case of non-deduction of tax at source rather it was a case of deduction of tax at source under some other provisions at a lower rate. However, he observed that 7 I.T.A. No. 3194/Mum/2019 Kinetic Advertising India Pvt. Ltd. it can be seen that in the present case, it was the negligence on the part of the assessee due to which it continued to deduct tax at source at a rate of 0.1% even after the limit of Rs.7,51,10,831/- prescribed as per certificate issued u/s 197 of the Act. In this case, the tax was deductible under section 194C of the Act at the rate of 2%, however actually the tax was deducted at the rate of 0.1%. Accordingly, he rejected the contentions of the assessee and sustained the disallowance made by the AO.

Aggrieved with the above order, assessee is in appeal before us on the grounds mentioned below:-

The Ld. CIT (A) in the facts and circumstances of the case and in law erred in:-

At the time of hearing, Ld. AR appearing on behalf of the assessee brought to our notice the certificate issued u/s 197 of the Act which is placed at page no. 4 of the paper book. As per the certificate, assessee was supposed to deduct the tax @ 0.1% up to the value of Rs. 7,51,10,831/- approved in the name of Portland India Outdoor Advertising Pvt. Ltd. (old name of the assessee). Assessee submitted that during this year, he has made total payment to M/s Times Innovative Media Ltd to the extent of Rs. 8.22 crores with the bonafide belief that the applicable TDS rate is 0.1%. Subsequently, assessee has received short deduction

On the other hand, Ld. DR relied on the orders passed by the revenue authorities.

Considered the rival submission and material placed on record. We notice from the record that assessee had made the payment to M/s Times Innovative Media Ltd to the extent of Rs. 8,22,37,744/- and deducted TDS @ 0.1%. However, we noticed that M/s Times Innovative Media Ltd has submitted the short deduction certification issued u/s 197 and as per the certificate, the approved limit of short deduction is Rs. 7,51,10,831/-, but assessee continued to deduct the tax at the concessional rate beyond the certificate limit of Rs. 7,51,10,831/- instead of deducting the TDS @ 2%. However, in the subsequent financial year, assessee was brought to the notice of short deduction by the department and assessee has remitted the shortfall amount alongwith interest. However, AO and Ld. CIT(A) has sustained the disasllowance u/s 40(a)(ia) for the above said default on the part of the assessee. Since the facts of the case are similar to the 11 I.T.A. No. 3194/Mum/2019 Kinetic Advertising India Pvt. Ltd. facts of the case titled ‘Tata Communications Ltd. Vrs. DCIT’ (ITA No. 7084 & 7085/Mum/2017). For the sake of clarity, which is reproduced below:-

We have heard considered rival submissions and perused material on record. We have also carefully examined the decision relied upon by the learned Counsel for the assessee. Insofar as the factual aspect of the issue is concerned, there is no dispute that in terms with section 197(2) of the Act r/w rule 28AA, the Assessing Officer had issued certificates in respect of three parties permitting deduction of tax at source at lower rate. It is a fact on record, in these certificates issued in Form no.13, the Assessing Officer has specified the payment which is subject to deduction of tax at lower rate. Admittedly, the assessee has deducted tax at the rates specified in the certificates issued in Form no.13, for the entire payment made to the concerned parties during the year under consideration even in respect of payments made in excess of amount specified in Form no.13. The issue before us is, whether for deducting tax at lower rate on the payments exceeding the amounts specified in the certificates issued in form no.13, r/w section 197(2) and rule 28AA, the assessee can be treated as assessee in default for short deduction of tax. In this regard, the specific contention of the assessee is, as per section 197 of the Act, the 12 I.T.A. No. 3194/Mum/2019 Kinetic Advertising India Pvt. Ltd. certificate to be issued by the Assessing Officer under sub–section (2) is person specific and not income specific. It is observed, the Tribunal, Kolkata Bench, in 21st Century Securities Ltd. (supra), after interpreting the provisions of section 197 of the Act as well as rule 28AA has held that neither under section 197 of the Act nor in rule 28AA, there is reference to any income to be specified in the certificate to be issued for deduction of tax at lower rate. The Tribunal has held that the statutory provisions providing for deduction of tax at source at lower rate is person specific and cannot be extended to the amounts specified by the recipients of the payment while making application for grant of certificate in Form no.13, in terms of section 197 of the Act. Thus, the Tribunal has ultimately held that in such circumstances, if the assessee continues to deduct tax at the rate specified in the certificate, even, in respect of payment made over and above the sum specified in the certificate, it cannot be treated as assessee in default for short deduction of tax. In our view, the aforesaid decision of the Co–ordinate Bench squarely applies to the facts of the present case. In the absence of any contrary decision having been brought to our notice by learned Departmental Representative, we are inclined to follow the decision of the Co– ordinate Bench referred to above and hold that the assessee cannot be treated as assessee in default for short deduction of tax. Accordingly, we

Therefore, respectfully following the above decision of Coordinate Bench of ITAT which is applicable mutatis mutandis in the present case, we are inclined to accept the submission of Ld. AR. Accordingly, the grounds raised by the assessee are allowed.

In the net result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 07.10.2020. (C. N. Prasad) (S. Rifaur Rahman) न्याययकसदस्य / Judicial Member लेखासदस्य / Accountant Member म ंबई Mumbai;यदनांकDated : 07.10.2020 Sr.PS. Dhananjay