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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI NABIN KUMAR PRADHAN
This appeal by the Department is directed against the common order dated 14th July 2014, passed by the learned Commissioner (Appeals)–3, Mumbai, for the A.Y. 2010–11 and 2011–12. However, in the present appeal, we are concerned with A.Y. 2010–11 only.
The only issue raised by the Department in the present appeal is in relation to the decision of learned Commissioner (Appeals) allowing TDS credit of ` 14,14,841.
2 M/s. Digi JPR Network Pvt. Ltd.
Brief facts are, the assessee is a subsidiary of D.G. Cable Network Pvt. Ltd. and is engaged in the business of cable television distribution and other related service. During the assessment proceedings, the Assessing Officer noticed that the assessee had paid certain amount towards CAS division which were reimbursed by the holding company. He further found that the holding company while reimbursing payments to the assessee, had deducted tax at source @ 2% and the assessee had claimed credit of such TDS in the return of income. The Assessing Officer, however, observed that the receipt from the holding company was not credited to the Profit & Loss account of the assessee. He, therefore, concluded that as the reimbursement expenses had not been offered for taxation in terms of section 199 of the Act, no credit could be given for the tax deducted at source on such amount. Accordingly, the Assessing Officer disallowed assessee’s claim of TDS credit for both the assessment years 2010–11 and 2011–12. Being aggrieved of the disallowance of TDS credit, the assessee preferred appeals for both the assessment years. The learned Commissioner (Appeals), vide impugned order, allowed assessee’s claim by relying upon certain judicial precedents. Observations of the learned Commissioner (Appeals), in this regard is as under:–
“2.6 The AC is also incorrect in holding that the assessee has not offered for taxation the impugned receipts from MIs. Digicable. The fact of the matter is that vide an agreement between the appellant and M/s. Digicahie, dated 01.04.2009, M/s. Digicable was required
3 M/s. Digi JPR Network Pvt. Ltd. to reimbursed to the appellant the Pay channel charges payable to broadcasters relating to CAS area. Accordingly, in the books of accounts, the appellant has debited the Broadcaster Payout - Digtal 'account with the fee paid to the TV channels and credited the account with the amount reimbursed by Digicable. Therefore, for the F.Y. 2009-10, the total debit and credit comes to R6.49 crores and for F.Y. 2010-11, U comes to Rs.6.26 crores. In other words, in both the years, the account stands squared up. As a result, the balance to be carried to the P& L account on account of broadcaster payout for CAS area would be nil. This is not the some as saying that the amounts reimbursed have nO been offered for taxation. If, as per the terms of agreement, M/s. Digicable was not obliged to reimburse the broadcaster CAS expenses, these expenses would have been reduced from the profits of, the appellant. In other words, the CAS reimbursement has gone to reduce the total expenses of the appellant debited in the P & L account. In the circumstances, the AO is incorrect in denying credit of TDS amounting to Rs.13,7,800/- for A.Y.201 1-12 and Rs.14,14,841/- for A.Y. 2010--1 1. The AO is therefore, directed to allow the said credits”
We have considered the submissions of the parties and perused the material available on record. At the outset, the Counsels appearing for both the parties submitted before us that the issue in dispute has been decided in favour of the assessee by the Tribunal in assessee’s own case while deciding the appeal preferred by the Department against the order of the learned Commissioner (Appeals) in assessment year 2011–12. On a perusal of the order of the Tribunal in ITA no.6070/Mum./2014 dated 4th August 2015, we have noted that the Tribunal has upheld the decision of the learned Commissioner (Appeals) with the following observations:–
At the time of hearing, the Ld D.R placed strong reliance on the assessment order. The Ld A.R, besides supporting the order passed by Ld CIT(A), also placed reliance on the decision rendered by the 4 M/s. Digi JPR Network Pvt. Ltd.
Mumbai bench of Tribunal in the case of Arvind Murjani Brands (P) Ltd Vs. ITO (2012)(137 ITD 173), wherein the Tribunal held as under:- “The position is, therefore, crystal clear that the amount of tax deducted at source has to be necessarily allowed credit somewhere. It cannot be a case that the amount of such tax deducted and paid to the exchequer is not to be refunded, if the tax due on the amount of income received is either lower than the amount of tax deducted or there does not exist any liability to tax in respect of the amount received. We may fruitfully refer to Article 265 of the Constitution of India, which provides that : „No tax shall be levied or collected except by authority of law‟. From the above discussion it follows that the amount of tax deducted at source needs to be adjusted against some tax liability of the payee and in case there is no such liability, it has to be refunded to payee because of the very mandate of section 199 as per which such amount is treated as payment of tax on behalf of the person from whose income the deduction was made, that is the payee….. The AO has unequivocally held that the amount is not chargeable to tax in the hands of the assessee. The finding of the AO is not that such receipt is liable to tax in the hands of the assessee in a later or an earlier year. Rather it is that the amount received by the assessee is not at all chargeable to tax either in the current year or in an earlier or a later year. If the AO had held that the amount received by the assessee as chargeable to tax in a later or an earlier year, then of course, the assessee could not have validly claimed the credit for tax deducted at source against its income for the current year. As the amount on which tax was deducted at source is not at all chargeable to tax, then the command of section 199 will have to be harmoniously and pragmatically read as providing for allowing credit for the tax deducted at source in the year of receipt of the amount, on which tax was deducted at source. If the view point canvassed by the Revenue is accepted and the assessee is not allowed credit for the tax deducted at source, an arduous situation will arise. The amount of tax deducted at source will remain in limbo. The Revenue will never be in position to allow credit for such tax because the amount is not chargeable to tax in the hands of the assessee and it cannot retain such amount with it in contravention of Article 265 of the Constitution of India. To Circumvent such a situation, the only possible solution is to allow credit for the tax deducted at source to the payee of the amount in the year for which such tax was deducted and the amount was paid after deduction of tax at source.”
5 M/s. Digi JPR Network Pvt. Ltd.
Thus, the division bench of Mumbai Tribunal has examined the provisions of sec.199 of the Act and has rendered its decision by considering the Article 265 of the Constitution also.
On facts, I have noticed earlier that the Ld CIT(A) has given a clear finding that there was no revenue impact, since the payments made by the assessee has been fully reimbursed during the year under consideration, meaning thereby, if the profit and loss account is recast by including the payments and reimbursements as its expenditure and income respectively, then the provisions of sec. 199 of the Act read will Rule 37BA would stand complied with.
Since the Ld CIT(A) has followed the decision rendered by the Delhi bench of Tribunal in the case of Escorts Ltd (supra) and since the said view also finds support from the decision rendered by the Mumbai bench of Tribunal in the case of Arvind Murjani Brands (P) Ltd (supra) and further since the entries passed by the assessee do not have any revenue impact, I do not find any reason to interfere with the order passed by Ld CIT(A).
No contrary decision having been brought to our notice by the learned Departmental Representative agreeing with the view expressed by the single bench of the Tribunal, in assessee’s own case under identical facts and circumstances for the assessment year 2011– 12, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground raised.
In the result, Department’s appeal is dismissed. Order pronounced in the open Court on 24.08.2016