Tata Sky Limited Vs ACIT (ITAT Mumbai)
Assessee made year-end provisions in respect of sale promotion, legal and professional fees, interest and programming costs. Further, these provisions were debited to the profit and loss account and not added back to the computation of total income by the assessee. Once, the assessee has claimed these expenses by debiting into profit and loss account, it needs to deduct TDS on such expenditure, even if not credited to respective parties account. Since, the assessee has not deducted TDS, the expenses claimed are liable to be disallowed under section 40(a)(ia) of the Act, because as per the provisions of chapter XVII-B of the Act, TDS needs to be deducted either at the time of payment or at the time of credit to the party account. Further, even in a case where credit into the suspense account is subject to TDS under the provisions of the Act. Therefore, we are of the considered view that there is no merit in the argument of the assessee that TDS provisions are not applicable when year-end provisions are made without crediting to respective parties account. To this extent, we are fully subscribed to the findings recorded by the learned AO as well as learned CIT(A). As regards to the claim of the assessee that in subsequent Financial Year year-end provisions have been either reversed or paid subject to deduction of TDS, does not alter the legal position in so far as disallowance of expenses under section 40(a)(ia) of the Act for non-deduction of Tax at source. The law is very clear as per which TDS is required to be deducted when credit or payment whichever is earlier. As regards various case laws referred by the assessee, we find that all those cases are contrary to the provisions of chapter XVII-B r.w.s.40(a)(ia) of the Act, and hence are not followed. Therefore, considering facts and circumstances of the case, we are of the considered view that there is no error in findings recorded by the lower authorities in disallowing year-end provisions for non-deduction of TDS under respective provisions of the Act. Accordingly, we reject the ground taken by the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These cross appeals, by the assessee and by revenue, are arising out of the orders of Commissioner of Income Tax (Appeals)-13, Mumbai [in short CIT(A)], in appeal Nos. CIT(A)-13/Rg.7(3)/AP-269/11-12 and 127/12-13 dated 03.03.2014. The Assessments were framed by the Asst. Commissioner of Income Tax & Dy. Commissioner of Income Tax, Circle-7(3), Mumbai (in short ‘ACIT/DCIT/ AO) for the AY 2009-10 and 201011 vide different orders dated 31.12.2011 and 06.02.2013 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The first common issue in these two appeals of assessee for AYs 2009-10 and 2010-11 in ITA Nos. 3214 & 3215/Mum/2014 is as regards to the order of CIT(A) confirming the action of the AO in making disallowance of discount and various other expenses like discount on sale of set-top box and hardware, discount on sale of recharge coupon vouchers, disallowance of bonus or credit provided by the assessee to subscribers, disallowance of sale promotion expenses and disallowance of channel support expenses for non-deduction of TDS by invoking the provision of section 40(a)(ia) of the Act.
3. The facts and circumstances of both the years are identical as admitted by Ld. Senior Counsel for the assessee as well by Ld. CIT-DR. Hence, we will take the facts from AY 2009-10 and decide the issues raised by the assessee in this year. For this, assessee has raised the following grounds in AY 2009-10: –
“1. On the facts and in the circumstances of the case and in law, the Hon’ble Commissioner of Income-tax (Appeals) – 13. Mumbai [C1T(A)] erred in upholding the disallowance of discount on sale of Set-top box & hardware aggregating to Rs. 23.50,51.772 (Rs. 1338,81.648 and Rs. 10,11,70,124 respectively) under Section 40(a)(ia) of the Act.
2. On the facts and in the circumstances of the case and in law, the Hon’ble 01(A) erred in upholding the disallowance of discount on sale of recharge coupon vouchers of Rs. 38,80,6 I .901 under Section 40(a)(ia) of the Act.
3. On the facts and in the circumstances of the case and in law, the Hon’ble CIT(A) erred in upholding the disallowance of bonus or credit provided by the Appellant to subscribers of Rs. 1,54,24,104 under Section 40(a)(ia) of the Act.
4. On the facts and in the circumstances of the case and in law, the Hon’ble CIT(A) erred in upholding the disallowance of sales promotion expenses of Rs. 1,30,37,124 under Section 40(a)(ia) of the Act.
5. On the facts and in the circumstances of the case and in law, the Hon’ble CIT(A) erred in upholding the disallowance of distribution channel support expenses of Rs. 10,81,11,728 under Section 40(a)(ia) of the Act.”
4. Briefly stated facts are that the assessee has given discount on the sale of Set-top Boxes and Recharge Coupon Vouchers, which is referred to as a primary discount. As a part of its sale promotion the assessee also provides additional discounts like a festival discount, quantity discount, etc. to the distributors to encourage them to purchase and in turn sell higher quantities of products. This additional discount is referred to as a secondary discount. The secondary discounts are recognized by the Assessee as Sale promotion expense or distribution channel support expenses. The AO during assessment of TDS had passed the order under sections 201 and 201(1A) of the Act for AY 2009-10 & AY 2010- 11, wherein the primary discount and secondary discount were held to be subject to provisions of section 194H of the Act. However, the Mumbai Tribunal has held that the primary discount and secondary discount provided by the assessee is not in the nature of commission and not subject to TDS under section 194H of the Act. In this regard, the Ld. Counsel for the assessee SH JD Mistry stated that the Tribunal has relied on the decisions of the Hon’ble Bombay High Court in the case of Piramal Healthcare Ltd (230 Taxman 505), Qatar Airways Ltd (332 ITR 253) and Intervet India (P.) Ltd (49 taxmann.com 14/3M ITR 238). Ld. Counsel filed a chart before us in regard to the issues decided by the Tribunal, which reads as under: –
Summary chart for AY 2009-10
