ITO, NEW DELHI vs. M/S. OGAAN PUBLICATION PVT. LTD., NEW DELHI

The present appeal has been filed by the Revenue against the order of the ld. CIT(A)’s-XVI, New Delhi vide his order dated 27/12/2013 for A.Y. 2010-11 on the following grounds:

The facts of the case as noted by the ld. Assessing Officer are as under: The assessee company is engaged in the business of publication of a magazine and it sell space for advertisements to various parties through advertising agencies. The assessee company raised bills in the name of advertising agencies indicating cost of the space and deducted the agency commission towards commission to the advertising agencies. This clearly indicates that the space was purchased from the assessee company on the basis of specifications by the actual party and the agency acted as an agent for the assessee company. There is no doubt that the same is being paid to the agencies for their services only and it cannot be termed as a discount as the benefit of that advertisement does not go to the agency. The agency on their part is getting the reimbursement of the entire amount from the customer to whom the real benefit of the advertisement accrues. Thus, the advertisement agency is in fact working for the assessee for providing them ads for the space for which they are being given commission. The agent canvasses advertisement on behalf of the magazine (assessee) and advertisement charges recovered from the customers in accordance with the tariff prescribed by the magazine. Thus, there is a clear cut relationship of Principal and agent and tax is deductible u/s 194H.”

The Ld.AO observed that the assessee did not deduct the tax, it has violated the relevant provisions of TDS. The fact that the assessee employed two different mechanisms to account for agency commission, indicates that the activities of the assessee were not bonafide and this entire exercise of having two separate types of transactions were to bypass the provision of TDS law. The ld. AO thus, held that the assessee company is liable to deduct the tax in the amount of Rs. 1,61,18,029/- on account of agency commission.

Aggrieved by the order of the ld. Assessing Officer the assessee preferred an appeal before the ld. CIT(A). 5. Considering the orders passed by the Tribunal in the previous years in assessee’s own case the ld. CIT(A) held as under: 4.3 “Identical additions were made by the Assessing Officer in AY 2006-07, 2007-08 & 2008-09 by making disallowance u/s 40(a)(ia) of Rs. 1.20 crores, Rs. 1.70 crores and Rs. 1.84 crores respectively on account of agency commission as he held that the relationship with the parties to whom the discount was given was based on principal to agent relationship. The additions made in the above years were deleted by the Hon’ble ITAT Delhi in its decisions in 3741/Del/2011 & 5050/Del/2011 respectively for the above assessment years where it is held by the Hon’ble Tribunal that transactions are based on principal to principal relationship. It was held by Hon’ble ITAT: “The perusal of both the above mentioned transactions will reveal that assessee is giving discount with respect to volume as well as agency commission irrespective of the fact that whether the advertisement is booked by the advertiser itself or through advertising agency. The assessee did not collect gross amount and from gross amount itself straightway deduction has been granted to the person who has booked the advertisement on account of volume discount as well as agency commission. It may be seen that in the case of Moon River (M.G. Inds.) the advertisement has not been booked by advertising agency even then amount of Rs. 11,250/- has been reduced on account of agency commission. Therefore, it will clearly demonstrate that assessee is concerned only with the amount to be realized finally which is the same in both type of transactions. Therefore, the nature of amount agency commission is only a discount though it has been described as “agency commission”. Both the transactions are on principal to principal basis. The case law relied upon by the assessee before CIT(A) and before us supports the case of the assessee. Therefore, we are of the opinion that ld. CIT(A) is right in holding that disallowance could not be made as assessee was not under an obligation to deduct tax u/s 194H. We decline to interfere. This ground of the Revenue for both the years is dismissed.” 4.4 On further appeal by the department against above ITAT decision, Hon’ble Delhi High Court in & 182/2012 in its decision dt. 16/03/2012 have dismissed the departmental appeal by holding that no substantial question of law arises from the decision of ITAT. Following the above decisions, identical additions made in AY 2009-10 was also deleted by me in appeal No. 379/11-12 dt. 15.02.2013. 4.5 The facts and circumstances of the issue in appeal is identical to the issue decided in AY 2006-07 to AY 2009-10. In view of the above factual and legal position, it is held that transactions between the appellant and the Ad Agencies are based on principal to principal basis. Therefore, appellant was not under any obligation to deduct tax u/s 194H. As such the disallowance of Rs. 1,61,18,029/- made by the Assessing Officer u/s 40(a)(ia) cannot be sustained. The appeal is allowed in ground nos. 2 & 3 of appeal.”

Aggrieved by the order of the ld. CIT(A) the Revenue is in appeal before us.

At the outset the ld. AR submitted that the identical issue has been considered by this Tribunal for A.Y. 2009-10 vide order dated 19/11/2013 in wherein the Hon’ble Tribunal held as under: 6. “We have heard both the sides, considered the material on record and find that since the issue is squarely covered in favour of the assessee by the jurisdictional High Court’s decision, in which Tribunal’s order in assessee’s own case have been confirmed, therefore, we do not find any justifiable reason to interfere in the order passed by the ld. CIT(A) which is confirmed and appeal of the revenue being devoid of any merit is dismissed.”

The ld. AR further submitted that against the order of the Tribunal for A.Y. 2006-07 & 2007-08 the Department had preferred an appeal before the Hon’ble Jurisdictional High Court which has also been dismissed vide order dated 16/03/2012. The Hon’ble High Court held as under: 4. “Before us the copy of the agreement between the respondent-assessee and the advertising concerns has not been placed. It is not shown and stated how and on what basis it is stated that the finding recorded by the Tribunal that the transactions were between principal and principal is not correct and the contention that the transactions were between a principal and an agent is urged. The advertising concern had purchased the space in the publication and had sold the same to the third parties. The factual finding recorded by the Tribunal is that amount treated and given nomenclature of commission was a discount and what was received by the assessee was the net amount. The description/deduction given in the bill was in fact and de facto not commission. In the case of Director, Prasar Bharti (supra), the finding of the High Court was that the transactions were between a principal and an agent and the Court had referred to the agreement entered into by the Doordarshan and its agencies. The Kerala High Court in the said case, distinguished Ahmedabad Stamp Venders Association vs. UOI, (2002) 257 ITR 202 (Guj.) and the ground that they related to discounted prices.”

On the contrary the ld. DR relied upon the order passed by the ld. Assessing Officer.

We have perused the records and the relevant orders passed by this Tribunal as well as the Hon’ble Jurisdictional High Court in assessee’s own case. 10.1 It is observed that identical additions have been deleted by the Tribunal for A.Y. 2006-07, 2007-08 and 2009-10 in assessee’s own case. Further the Hon’ble High Court in A.Y. 2006-07 & 2007-08 has upheld the order passed by this Tribunal and has dismissed the appeal filed by the Department. The ld. DR could not bring out any material on record or any findings of the authorities below, which could distinguish the facts in the present case from that of the previous years. We therefore respectfully following the decisions passed by the Hon’ble High Court and this Tribunal in the assessee’s own case, uphold the findings of the ld. CIT(A). Accordingly, the grounds raised