The Principal Commissioner Of Income Taxaaykar Bhavan,Patto, Panaji, Goa v. M/S. Dempo Industries Pvt. Ltd.,Dempo House, D.b. Marg,Campal, Panaji, Goa. …

1 TXA NO.67-2016 Santosh IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 67 OF 2016 The Principal Commissioner of Income TaxAaykar Bhavan,Patto, Panaji, Goa. …... Appellant Versus M/s. Dempo Industries Pvt. Ltd.,Dempo House, D.B. Marg,Campal, Panaji, Goa. ….... Respondent. Ms. Susan Linhares, Standing Counsel for the Appellant. Mr. Mihir Naniwadekar with Ms. Vinita Palyekar, Advocates for theRespondent. Coram:- M. S. SONAK & DAMA SESHADRI NAIDU, JJ.th Reserved on:- 7January 2021th Pronounced on:- 14January 2021. JUDGMENT : (Per M. S. Sonak, J.): Heard the learned Counsel for the parties. 2.This appeal was admitted on 18th October 2016 on thefollowing substantial questions of law: 2 TXA NO.67-2016 A. Whether the Hon'ble ITAT was right in completelyignoring the decision of the Hon'ble ITAT, Kolkata in ACITV/s. Bharati Cellular Ltd.(105) ITD 129 and Hindustan Coca Cola Beverages (P) Ltd. V/s. ITO (ITAT, Jp) while deleting addition made on the payment made by the assessee towards the commission paid to news paper vendors without deduction of TDS u/s. 40 (a) (ia) of I.T. Act, 1961? B. Whether the Hon'ble ITAT was right in not appreciatingthe CBDT circular no.715 dated 08/08/1995 and CBDTcircular No.619 dated 04/12/1991 while deleting theaddition made to Rs.2,76,00,979/- towards payments of commission to Advertising Agents where TDS was not deducted under section 40(a)(ia) r.w. s.194C, wherein it was clarified that when commission or brokerage is retained by the agents and not remitted to the principal, it amounts to constructive payments of the same to him by principal and TDS needs to be made from such amount? 3.The Respondent-Assessee is engaged in the business ofpublishing and selling newspapers. For the Assessment Year 2011-12,the Assessee filed an e-return declaring a total income ofRs.6,96,80,950/-. The case was selected for scrutiny under CASS. Theassessment was finalised vide order dated 28/11/2013 in which theAssessing Officer (AO) held that the Assessee had paid commission tothe newspaper vendors to the extent of Rs.1,36,43,978/- toadvertisement agents to the extent of Rs.2,76,00,979/- aggregating toRs.4,12,44,957/- and since, the Assessee had not deducted TDS fromsuch payments, the AO disallowed the deduction of the said amount 3 TXA NO.67-2016 relying upon the provisions of Section 40(a)(ia) of the Income Tax Act,196. 4.The Assessee appealed to the Commissioner of Income-Tax(Appeals) who, by his order dated 17/11/2014 reversed the AO's orderholding that the relation between the Assessee and the newspapervendors or the advertisement agents was on a principal-to-principalbasis and, therefore, there was no requirement of deducting tax atsource on the trade discount extended by the Assessee to them. TheCommissioner (Appeals) relied upon the decision of the Income TaxAppellant Tribunal (Cuttack) in case of ACIT vs. Samaj1 wherein it washeld that sale of newspapers at a discounted price to the newspapervendors amounts to discount and not commission. 5.The Revenue appealed to the Income Tax Appellate Tribunal(ITAT) which has, by its order dated 7/10/2015, dismissed theRevenue's appeal and upheld the order made by the Commissioner(Appeals). Hence, the present appeal on the aforesaid substantialquestions of law. 6.Ms. Linhares, the learned Counsel for the Revenue submitsthat the view taken by the Commissioner (Appeals) and the ITAT, iscontrary to the law laid down by the Kolkota Bench of the ITAT in1(2001) 77 ITD 358 (Cuttack) 4 TXA NO.67-2016 5.The Revenue appealed to the Income Tax Appellate Tribunal(ITAT) which has, by its order dated 7/10/2015, dismissed theRevenue's appeal and upheld the order made by the Commissioner(Appeals). Hence, the present appeal on the aforesaid substantialquestions of law. 6.Ms. Linhares, the learned Counsel for the Revenue submitsthat the view taken by the Commissioner (Appeals) and the ITAT, iscontrary to the law laid down by the Kolkota Bench of the ITAT in1(2001) 77 ITD 358 (Cuttack) 4 TXA NO.67-2016 2ACIT vs. Bharti Cellular Ltd. and Jaipur Bench of the ITAT inHindustan Coca Cola Beverages P. Ltd. vs. Commissioner of Income-Tax3. In these decisions, it has been held that any payment made by theAssessee towards commission to the newspaper vendors or advertisingagents without deduction of tax at source under Section 40(a)(ia) ofthe Income Tax was not liable to a deduction. She submits that thedecision of the Kolkota Bench of the ITAT has even been affirmed bythe High Court Calcutta in Bharati Cellular Ltd. vs. ACIT[4]. Shefurther submits that the first substantial question of law, as framed, is,therefore, required to be answered in favour of the Revenue and againstthe Assessee. 7.Ms. Linhares further submits that the Commissioner(Appeals), as well as the ITAT, have not appreciated the CBDTCircular No.715 dated 8.8.1995 and CBDT Circular No.619 dated4/12/1991 in the context of payment of commission to the advertisingagents. She submits that whenever the TDS is not deducted underSection 40(a)(ia), read with Section 194(C) of the Income Tax Act,then such amount cannot be deducted from taxable income of theAssessee. Based on the CBDT circulars, she submits that the second 2 105 ITD 129 (Kolkota) 3 [2018] 402 ITR 539 (Raj). 4 (2011) 12 Taxmann.com 30 (Calcutta) 5 TXA NO.67-2016 substantial question of law is also required to be answered in favour ofthe Revenue and against the Assessee. 8.Mr. Naniwadekar, the learned Counsel for the Assessee, atthe outset, pointed out that the decision of Jaipur Bench of the ITATin Hindustan Coca Cola Beverages P. Ltd.(supra) has been reversed bythe Rajasthan High Court in the case of Hindustan Coca Cola5Beverages Pvt. Ltd. vs. Commissioner of Income-Tax. He submits thatthe view of the Kolkata Bench of the ITAT in ACIT vs. Bharti CellularLtd. (supra) is at variance with the view taken by the Karnataka HighCourt in the case of Bharti Airtel Ltd. vs. Deputy CIT[6]. He submitsthat the view taken by the Karnataka High Court has been acceptedand followed by this Court in CIT (TDS), Pune vs. M/s. Vodafone78Cellular Ltd. and The CIT (TDS) Pune vs. M/s. Idea Cellular Ltd..He submits that in any case, the view taken by the Commissioner(Appeals) and the ITAT, is quite consistent with the law laid down bythe Gujarat High Court in the case of Ahmedabad Stamp VendorsAssociation vs. Union of India9 which, in turn, is based on the rulingof the Hon'ble Supreme Court in Bhopal Sugar Industries Ltd. vs. 5[2018] 402 ITR 539 (Raj). 6 [2015] 372 ITR 33 (Karn). 7 ITA Nos.1152, 1274 & 1995 of 2017 with ITA Nos. 571 & 1266 of 2018 decided on 27/1/2020.on 27/1/2020. 8ITA No.1129/2017 decided on 13/1/2020. 9 [2002] 257 ITR 202 (Guj HC). 6 TXA NO.67-2016 STO[10]. Mr. Naniwadekar, therefore, submits that the first substantialquestion of law is required to be decided against the Revenue and infavour of the Assessee. 5[2018] 402 ITR 539 (Raj). 6 [2015] 372 ITR 33 (Karn). 7 ITA Nos.1152, 1274 & 1995 of 2017 with ITA Nos. 571 & 1266 of 2018 decided on 27/1/2020.on 27/1/2020. 8ITA No.1129/2017 decided on 13/1/2020. 9 [2002] 257 ITR 202 (Guj HC). 6 TXA NO.67-2016 STO[10]. Mr. Naniwadekar, therefore, submits that the first substantialquestion of law is required to be decided against the Revenue and infavour of the Assessee. 9.Mr. Naniwadekar submits that even the second substantialquestion of law is required to be decided against the Revenue and infavour of the Assessee given the decision of the Allahabad High Courtin Jagran Prakashan Ltd. vs. Deputy CIT (TDS)11. He pointed out thatthe view taken in this decision has been expressly accepted by theRevenue, as is evident from the CBDT Circular No.5/2016 dated 29[th]February 2016 which, according to him, supersedes or, in any case,clarifies the CBDT Circulars No.715 and 619 relied upon by theRevenue in the present matter. He relies on K.P. Varghese vs. ITO,Ernakulum and anr.12 to submit that the CBDT circulars bind theRevenue and the Revenue cannot, therefore, assert some positioncontrary to the position clarified by the CBDT Circular No.5/2016 onthe status of trade discount extended to the advertisement agencies. 10.Mr. Naniwadekar submits that the material on record veryclearly establishes that the relation between the Assessee and thenewspaper vendors or the advertising agencies was on a principal-to- 10 (1977) 3 SCC 147 11 [2012] 345 ITR 288 (All) 12 (1981) 131 ITR 597 (SC) 7 TXA NO.67-2016 principal basis. He submits that the terminology employed to describethe parties, is hardly relevant and emphasis has to be on the real natureof transactions. He submits that the Commissioner (Appeals) and theITAT have recorded concurrent findings of fact that the Assessee didnot pay any commission to the newspaper vendors or the advertisingagencies, but what was extended was only the trade discount, quiteconsistent with the industry practice in such matters. He submits thatthere is no perversity in the findings of fact recorded concurrently bythe two authorities and no substantial question of law has been framedon the aspect of any alleged perversity. He submits that this is yetanother reason as to why the present appeal may be dismissed. 11. The rival contentions now fall for our determination. 12.Ms. Linhares, in support of her contention that the firstsubstantial question of law is required to be answered in favour of theRevenue and against the Assessee, has relied upon the decisions inBharti Cellular Ltd. (supra) and Hindustan Coca Cola Beverages P.Ltd. (supra). However, there is no dispute that the decision of theITAT in Hindustan Coca Cola Beverages P. Ltd. (supra) has expresslybeen reversed by the Rajasthan High Court in Hindustan Coca ColaBeverages Pvt. Ltd. (supra). 8 TXA NO.67-2016 13.Further, we find that the ITAT, in the present case, has reliedupon the decision of the Karnataka High Court in Bharti Airtel Ltd.vs. DCIT (supra), which takes a view contrary to the view taken by theITAT in Bharti Cellular Ltd. (supra) or the Calcutta High Court inBharti Cellular Ltd. vs. ACIT (supra). This Court in the case ofVodafone Cellular Ltd. (supra) and Idea Cellular Ltd. (supra), hasapproved the view taken by the ITAT by following the decision of theKarnataka High Court in Bharti Airtel Ltd. (supra). Accordingly, it willnot be proper for us to follow the decision of the Kolkata Bench inBharti Cellular Ltd. (supra) and answer the first substantial question oflaw in favour of the Revenue and against the Assessee, in the facts andcircumstances of the present case. 13.Further, we find that the ITAT, in the present case, has reliedupon the decision of the Karnataka High Court in Bharti Airtel Ltd.vs. DCIT (supra), which takes a view contrary to the view taken by theITAT in Bharti Cellular Ltd. (supra) or the Calcutta High Court inBharti Cellular Ltd. vs. ACIT (supra). This Court in the case ofVodafone Cellular Ltd. (supra) and Idea Cellular Ltd. (supra), hasapproved the view taken by the ITAT by following the decision of theKarnataka High Court in Bharti Airtel Ltd. (supra). Accordingly, it willnot be proper for us to follow the decision of the Kolkata Bench inBharti Cellular Ltd. (supra) and answer the first substantial question oflaw in favour of the Revenue and against the Assessee, in the facts andcircumstances of the present case. 14.Besides, we note that in the present case, the Commissioner(Appeals), as well as the ITAT, have recorded concurrent findings offact that the transactions or the dealings between the Assessee and thenewspaper vendors were on a principal-to-principal basis. There was nocommission paid by the Assessee to the newspaper vendors, but theAssessee merely extended a trade discount to the newspaper vendors.The newspaper vendors were, thus, not agents of the Assessee in thefacts and circumstances of the present case. The circumstance that theAssessee would repurchase the unsold papers, was not sufficient toconclude that there was no concluded sale in the favour of the 9 TXA NO.67-2016 newspaper vendors, in the first instance. The findings of fact on thisaspect, as concurrently recorded, do not suffer from any perversity, toraise any substantial question of law and warrant interference with thesame. 15.This is yet another reason as to why the first substantialquestion of law cannot, in the facts and circumstance of the presentcase, be decided in favour of the Revenue and against the Assessee. 16.In so far as the second substantial question of law isconcerned, we find that the view taken by the Commissioner (Appeals)and the ITAT is consistent with the ruling of the Allahabad HighCourt in Jagran Prakashan Ltd. (supra). The CBDT CircularNo.5/2016 dated 29/2/2016 takes express cognizance of the rulings ofAllahabad High Court in Jagran Prakashan Ltd. (supra) and DelhiHigh Court in CIT vs. Living Media India Ltd. ITA No.1264 of 2007and proceeds to clarify that no TDS is attracted on payments made bytelevision channels/newspaper companies to the advertising agency forbooking or procuring of or canvassing for advertisements. The CBDTcircular further clarifies that ‘commission’ referred to in questionNo.27 of the Board's Circular No.715 dated 8.8.95, does not refer topayments by media companies to advertising companies for booking ofadvertisements, but to payments for engagements of models, artists, 10 TXA NO.67-2016 photographers, sportsperson, etc. and therefore, is not relevant to theissue of TDS referred to in this Circular. 17.The aforesaid means that the Circular No.715 dated8.8.1995 cannot be interpreted in the manner suggested by Ms.Linhares, any longer. The CBDT itself has clarified the position in itssubsequent Circular No.5/2016 dated 29/2/2016 and suchclarification is binding upon the Revenue which cannot now take upsome contrary position in the matter. 18.Besides, both the Commissioner (Appeals), as well as theITAT, have concurrently recorded findings of fact that the dealingsbetween the Assessee and the advertising agencies were on a principal-to-principal basis and, therefore, there was no element of commissioninvolved. Since there was no element of commission involved or paidby the Assessee to such agencies there was no question of anydeduction of tax at source on such amounts. No perversity was pointedout in such concurrent findings of fact, to warrant any interferencewith the same in this appeal. Therefore, even the second substantialquestion of law is required to be answered against the Revenue and infavour of the Assessee in this matter. 11 TXA NO.67-2016 18.Besides, both the Commissioner (Appeals), as well as theITAT, have concurrently recorded findings of fact that the dealingsbetween the Assessee and the advertising agencies were on a principal-to-principal basis and, therefore, there was no element of commissioninvolved. Since there was no element of commission involved or paidby the Assessee to such agencies there was no question of anydeduction of tax at source on such amounts. No perversity was pointedout in such concurrent findings of fact, to warrant any interferencewith the same in this appeal. Therefore, even the second substantialquestion of law is required to be answered against the Revenue and infavour of the Assessee in this matter. 11 TXA NO.67-2016 19. Resultantly, both the substantial questions of law are answered against the Revenue and in favour of the Assessee. 20.The Appeal is, accordingly, dismissed. There shall be no order as to costs. DAMA SESHADRI NAIDU, J. M. S. SONAK, J. Digitally signed by SANTOSH S SANTOSH S MHAMALMHAMAL Date: 2021.01.14 16:50:51 +05'30'