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Income Tax Appellate Tribunal, DELHI BENCH “H” NEW DELHI
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “H” NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI : JUDICIAL MEMBER Asstt. Yr: 2010-11 ACIT Central Circle-8, Vs. Zoom Communication Ltd., New Delhi. B-10, Greater Kailash, Enclave-I, New Delhi-48. PAN: AAACZ 0080 E ( Appellant ) (Respondent) Appellant by : Sh. M.K. Jain Sr. DR Assessee by : None Date of hearing : 18/04/2016. Date of order : _____/04/2016. O R D E R PER S.V. MEHROTRA, A.M:
This is revenue’s appeal against the order dated 22.10.2013, passed by the ld. CIT(A)-XXXII, New Delhi in appeal no. 135/ 2013-14, relating to A.Y. 2010-11.
None put in appearance on behalf of the assessee at the hearing. The notice of hearing sent to assessee at the address furnished in column no. 11 of form no. 36 has been returned unserved with the postal remarks “no such firm”. Under these circumstances we proceed to dispose of the departmental appeal, ex parte, qua the assessee and in that process we have heard ld. DR and perused the material available on record.
Brief facts of the case are that assessee had filed return declaring income of Rs. 26,91,30,450/-. The assessee company, in the relevant assessment year carried on the business of service provider and was engaged in providing of events and programmes meant for broadcasting. The assessee used its own equipment and employees to provide these services and mainly to T.V. channels. During the year under consideration the AO noticed that assessee company had made certain payments and no TDS had been deducted thereon. He, therefore, made a disallowance u/s 40(a)(ia) of Rs. 4,25,300/-. Further he noted that assessee had debited an amount of Rs. 55,63,143/- under the head “Interest on delayed payments”. The assessee’s explanation was as under: 'Interest on delayed payments includes interest on late deposit of Income Tax, TDS, Service Tax and penalty for late filing of service tax return paid voluntary. Interest on income Tax and on late deposit of tax deducted at source amounting to Rs. 9,43, 795/ - and penalty for late filing of service tax return paid voluntarily of Rs. 7,434/ - has been added back in the computation of Total income. Reference in this regard may also be made to clause 17(f) of form 3CD for the relevant assessment year, filed already vide our submission dated 20.10.2011”.
The assessee further explained vide its reply dated 12.3.2013 as under:
Interest on delayed payments of service tax and penalty for belated filing of returns) both of which are automatic and mandatory levies, required to be discharged before filing of the statutory service tax return
The AO, however, did not accept the assessee’s contention and made a disallowance of Rs. 46,11,914/-, inter alia, observing that assessee itself had admitted that it had committed fault of late filing the service tax return and late deposits of TDS, Income tax and service tax.
Ld. CIT(A) partly allowed the assessee’s appeal. Being aggrieved the department is in appeal before us and has taken following grounds of appeal:
“1. That the Commissioner of Income Tax (Appeals) erred in law and on facts of the case in deleting the addition of Rs. 4,25,300/- made by AO on account of disallowance u/s 40(a)(ia) of the I.T.Act,1961.
2. That the Commissioner of Income Tax (Appeals) erred in law-and on facts of the case in deleting the addition of Rs. 46,11,914/- made by the AO on account of interest on delayed payment of service tax. 3. (a) The order of the CIT(A) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any/ all of the grounds of appeal
before or during the course of the hearing of the appeal.
7. Apropos ground no. 1, ld. CIT(A) after detailed examination of facts and written submissions, reproduced in his order in para 6, has pointed out that the impugned payments were made to Camera attendants who were hired on ad hoc basis and, therefore, TDS provisions were not applicable.
8. After hearing ld. DR and considering the nature of activities carried on by assessee, we do not find any reason to interfere with the following findings of ld. CIT(A)
I have considered the facts of the case, findings of the Assessing Officer in the assessment order and the written submissions of the appellant. From the findings of the Assessing Officer, it appears that the reason which weigh him to invoke section 40(a)(ia) of the Act was that the payments to some persons exceeded Rs.75,0001- in aggregate in a year and therefore, the same were liable for deduction at source, which was not done by the appellant. On perusal of the written submissions made before the Assessing Officer and filed before me, it is seen at the impugned payments were made to camera attendants. The appellant has explained that these payments were made to camera attendants hired on ad-hoc basis and therefore TDS provisions were not applicable as it was a payment to persons engaged on 'ad-hoc' and 'as and when required' basis. On considering the facts of the case, I agree with the appellant that the payments to the persons engaged on 'ad-hoc' basis do not fall within the expression 'work' for the purposes of section 194C of the I.T. Act, 1961. The appellant has incurred the impugned expenditure on account of engaging some camera attendants on ad-hoc basis i.e. for a day or two or as and when required basis. Obviously, an activity of engaging some camera attendants for using them in the business of providing of video production services would not amount to contract for carrying out of 'work' as contemplated under section 194C of the I.T. Act, 1961. There is no material on record to demonstrate that the impugned payments constituted payments for carrying out of any work within the meaning of section 194C. of the Act. The Assessing Officer has not asserted that there was any contract between the appellant and the above individuals for providing services as camera attendants. Engaging some persons on 'ad-hoc' basis or 'as and when required' basis, in my view, cannot be equated to a contract contemplated u/s 194C of the I.T. Act, 1961. Therefore, considering the facts and circumstances of the case, I hold that the AO was not justified invoking section 40(a)(ia) and making impugned disallowance. Accordingly, the addition of Rs 4,25,300/- made by the Assessing Officer is deleted Ground fails.
9. Apropos ground no. 2, we find that the sole controversy is whether the impugned sum of Rs. 46,11,914/- was compensatory or penal in nature. The payment of interest for delayed payments of certain types of taxes and imposts i.e. cess, purchase tax, sales-tax etc. is definitely compensatory in nature, as it is calculated with reference to the period for which delay in deposit of the same has been committed. We are in agreement with the following observations made by ld. CIT(A) in para 10 of his order:
“10. I have considered the facts of the case, finding given by the Assessing Officer in the assessment order and the written submissions of the appellant. I have also perused the case laws relied upon by the appellant in support of its case and case laws cited by the Assessing Officer in favour of his finding. It ,has been now been well settled that the interest paid for delayed payments of certain types of taxes and imposts e.g. cess, purchase tax, sales tax etc. is a deductible item of expenditure. On considering the facts of appellant's case in the light of the various case laws relied upon by it, I find that the expenditure in respect of payments of interest on late deposit of service tax is an allowable business expenditure incurred by the appellant for the purpose of carrying on its business. The interest on delayed payments of service tax is certainly compensatory in nature and hence allowable as deduction as it is not in the nature of penalty. The facts of the cases cited by the Assessing Officer are completely different from the facts of the instant case as they relate to non-compliance of specific provisions of Income-tax Act and payment of penalty for non- payment/delayed payment of sales-tax. Penalty and interest are two different things and thus cannot be equated. The penalty is an impost for an infraction/violation of any law whereas interest is an impost of a compensatory nature for holding the statutory dues for a period longer than as stipulated by the relevant law. Therefore, considering the facts and circumstances of the case and respectfully following the various case laws relied upon by the appellant, I hold that that the interest claimed on delayed payment of service-tax is an allowable expenditure u/s 37(1) of the I.T. Act, 1961. Accordingly, the addition of Rs.46, 11,914/- made by the Assessing Officer is deleted. This ground of appeal is also allowed”.
10. As nothing has been brought on record by the department to controvert the findings of ld. CIT(A), we uphold the same. Ground fails.
11. In the result revenue’s appeal is dismissed.
Order pronouncement in open court on 26/04/2016.