Bombay High Court
Imageads And Communications Pvt. Ltd vs Income Tax Officer 3 (2) (1) on 12 February, 2025
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2025:BHC-OS:2274-DB 27-ITXA-6968-2010.DOC
S.R.JOSHI
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO.6968 OF 2010
M/s. Imageads & Communications Pvt. Ltd.,
103, Mittal Chambers, Nariman Point
Mumbai 400 021. ...Appellant.
Versus
1 Income Tax Officer, 3 (2)(1),
Digitally
signed by
SMITA
Aayakar Bhavan, M. K. Road,
SMITA RAJNIKANT
RAJNIKANT JOSHI Bombay 400 020.
JOSHI Date:
2025.02.12 2 The Commissioner of Income Tax-3
18:36:44
+0530 Aayakar Bhavan, M. K. Road,
Mumbai 400 020. ...Respondents
Ms. Aarti Sathe with Ms. Asawari Kadam and Mr. Anjal Amin i/b. M/s. B.
Amin & Co., for the Appellant.
Mr. Akhileshwar Sharma, for the Respondents.
_______________________
CORAM: G. S. KULKARNI &
FIRDOSH P. POONIWALLA, JJ.
RESERVED ON : 9th OCTOBER, 2024.
PRONOUNCED ON: 12th FEBRUARY, 2025.
_______________________
JUDGEMENT (Per FIRDOSH P. POONIWALLA,J.):
This Appeal is filed under the provisions of Section 260A of the Income Tax Act, 1961 (herein after referred to as "the Act"), challenging an Order dated 20th August, 2010 passed by the Income Tax Appellate Tribunal (ITAT), denying the Appellant credit for Tax Deduction at Source (TDS) amounting to Rs.30,10,549/-.
2 The Appellant was incorporated in the year 1975 and since then has been carrying on the business as advertising agent rendering services to Page 1 of 9 9th October, 2024 ::: Uploaded on - 12/02/2025 ::: Downloaded on - 12/02/2025 22:24:41 ::: 27-ITXA-6968-2010.DOC clients in the filed of marketing, advertising, public relations and publicity. The Appellant's agency is fully accredited by INS, All India Radio and Doordarshan.
3 By an Agreement dated 5th April, 2002, the Appellant transferred the business of advertising and all other related services to M/s. Imageads Services Pvt. Ltd., (ISPL). Although the business relating to advertising and publicity was transferred to ISPL, the business activity of ISPL had to be routed through the Appellant as the accreditation was in the name of the Appellant. Consequently, since the business receipts/ income of ISPL were routed through the Appellant, the tax was also being deducted at source from the said income and TDS Certificates were also issued in the name of the Appellant.
4 As per the arrangement, the entire earnings from the advertising business generated on behalf of ISPL were transferred to ISPL and there was no income left in the hands of the Appellant to be taxed.
5 ISPL had also disclosed in its return of income the profits/ earnings accrued through the business generated by the Appellant and paid the appropriate income tax. The income was transferred to ISPL on gross basis (including the TDS amount) and the same has already been offered for tax in the hands of ISPL. However, neither any credit for the TDS amount can be claimed nor was granted to ISPL as the TDS Certificates stood in the name of the Appellant. In these circumstances, the Appellant had no alternative than to claim the TDS credit in its own return of income, particularly, when the TDS Certificates stood in the name of the Appellant.
6 Accordingly, the Appellant, as in the past, continued to claim the credit for the TDS amount on the basis of TDS Certificates and credit was also given to the Appellant. However, for the Assessment Year 2006-07, the Page 2 of 9 9th October, 2024 ::: Uploaded on - 12/02/2025 ::: Downloaded on - 12/02/2025 22:24:41 ::: 27-ITXA-6968-2010.DOC Assessing Officer (AO) denied the credit of TDS on the ground that the Appellant has transferred its income and it has shown 'Nil' income. The AO had completed the Assessment under Section 143(3) of the Act, determining the income as 'Nil'. By an Order dated 30th December, 2008, the AO while completing the Assessment, did not give credit for TDS amounting to Rs.30,10,549/-.
7 Being aggrieved by the Order dated 30th December, 2008, the Appellant preferred an Appeal to the Commissioner of Income Tax (Appeal) [CIT(A)], Mumbai, on 29th January, 2009. The CIT(A) dismissed Appellant's Appeal by an Order dated 8th October, 2009.
8 Being aggrieved by the said Order dated 8 th October, 2009 of the CIT(A), Mumbai, the Appellant filed an Appeal before the ITAT, Mumbai on 4th January, 2010.
9 The ITAT, by an Order dated 20 th August, 2010 dismissed the Appeal. The Order dated 20th August, 2010 of the ITAT is impugned in the present Appeal.
10 By an Order dated 5th January, 2012 passed by this Court, the Appeal was admitted on the following substantial question of law:-
" On the facts and in the circumstances of the case and in law, whether the Income Tax Appellate Tribunal was right in its interpretation of Section 199 and other related provisions of the Act, so as to confirm the action of the Respondent A.O. and hold that the credit for T.D.S. amounting to Rs.30,10.549/- has been rightly denied to the appellant?"
11 Ms. Sathe, the learned Counsel appearing on behalf of the Appellant, submitted that the ITAT had erred in confirming the action of the AO in denying the credit for the TDS amounting to Rs.30,10.549/-, although the same had been deducted from the income credited to the Appellant and Page 3 of 9 9th October, 2024 ::: Uploaded on - 12/02/2025 ::: Downloaded on - 12/02/2025 22:24:41 ::: 27-ITXA-6968-2010.DOC paid into the Government Treasury by the deductors and Certificates were also issued as accordingly in the name of the deductee-Appellant.
12 Ms. Sathe further submitted that the ITAT erred in confirming the action of the Respondent in denying the credit for the TDS amount although TDS Certificates stood in the name of the Appellant and credit could be given only to the Appellant as the deductee and not to any one else.
13 Ms. Sathe further submitted that there is no dispute that the entire income, as per the arrangement, has been passed on to ISPL, who in turn has already declared the entire income (including TDS amount) in its return of income and paid the tax accordingly.
14 Ms. Sathe further submitted that neither any TDS credit was claimed nor was allowed in the hands of ISPL.
15 Ms. Sathe further submitted that the Appellant had claimed credit for the TDS amount since Assessment Year 2003-04 and the credit for the same was being allowed to the Appellant in the scrutiny Assessment Orders passed under Section 143(3) of the Act for Assessment Years 2003-04, 2004- 05 and 2005-06.
16 In support of her submissions, Ms. Sathe, relied upon the following judgements:-
(a) Transmission Corpn. of A. P. Ltd. v/s. Commissioner of Income Tax 1;
(b) Principal Commissioner of Income Tax-4, Chennai v/s. Kal Comm. (P) Ltd.,2 1 1999 (105 Taxman) 742 (SC) 22021 (127 taxmann.com) 102 (Madras) Page 4 of 9 9th October, 2024 ::: Uploaded on - 12/02/2025 ::: Downloaded on - 12/02/2025 22:24:41 ::: 27-ITXA-6968-2010.DOC
(c) Commissioner of Income Tax v/s. Relcom3; and
(d) Commissioner of Income Tax-1 v/s. Bhooratnam & Co.,4
17 Ms. Sathe, submitted that in these circumstances, the impugned Order be set aside and the Appellant be given credit for the TDS amounting to Rs.30,10,549/-.
18 The Appeal was opposed by Mr. Sharma, the learned Counsel appearing on behalf of the Respondent. Mr. Sharma submitted that TDS was on income/ receipt of an Assessee. TDS is deemed to be income of the Assessee and would form part of the total income after deduction claimed/ allowed. The Assessee i.e. the Appellant was showing its income as 'Nil'. In other words, for the Appellant, the TDS amount is also not income and the claim of the Appellant is contrary to Section 198 of the Act.
19 Mr. Sharma also submitted that Appellant contends that it has transferred its entire receipt to ISPL. Whether ISPL is a loss making entity and the arrangement between the Appellant and the ISPL is a tax avoidance arrangement, cannot be found out in the absence of the accounts/ returns/ Assessment Orders of ISPL. Mr. Sharma submitted that, in these circumstances, the matter be remanded to the ITAT to record factual findings as to whether the entire receipt of the Appellant is to offer to tax by the ISPL.
20 We have heard learned Counsel for the parties and with their assistance we have perused the record. At the outset, we may observe that the Assessing Officer, the Commissioner (Appeals) as also the Tribunal has held against the Appellant in denying the benefits of the TDS amounting to Rs.30,10,549/- as claimed by the Appellant on the amounts as alleged to have been received by it on behalf of ISPL. It is not in dispute that the income 32015 (62 Taxman.com) 190 (Delhi) 42013 (29 taxmann.com) 275 (Andhra Pradesh) Page 5 of 9 9th October, 2024 ::: Uploaded on - 12/02/2025 ::: Downloaded on - 12/02/2025 22:24:41 ::: 27-ITXA-6968-2010.DOC corresponding to the TDS was not offered to tax by the appellant. It is stated to have been offered to tax by ISPL alongwith the TDS. The Appellant has not placed on record as to what was the exact position in respect of the returns of the ISPL qua the said amount and whether the ISPL, in offering the relevant income, has claimed TDS or otherwise.
21 Admittedly, in the present case, the assessee has filed a NIL return. It would not require any elaboration that the TDS is on the income/receipt of the assessee and forms part of the income of the assessee. Thus, when there is no income being offered qua the corresponding TDS and as TDS is part of the assessee's income, the position being taken by the appellant is a position contrary to its returns. There cannot be a situation that the principal income corresponding to the TDS as claimed, is not offered for assessment as a NIL return is filed, however, merely the benefit of TDS income is claimed. This would be contrary to the provisions of Section 198 of the Income Tax Act which provides that the tax deducted at source would be the income received. Admittedly in the present case, for the Assessment Year in question, independent tax returns have been filed by the assessee as also by the ISPL. Thus, such incongruence and a position contrary to the return of the appellant goes contrary to the provisions of Section 198 read with Section 199 of the Income Tax Act.
22 Also, there is much substance in the contention as urged on behalf of the Revenue in regard to the arrangement between the appellant and ISPL and whether such arrangement of appellant in receiving the income and then transferring the income and filing returns as NIL, is any device for avoidance of tax, is another issue. It is in these circumstances, we do not find that there is any infirmity in the view taken by the Tribunal in making the following observations:-
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8. We have considered the rival submissions made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the various decisions cited before us. There is no dispute to the fact that an amount of Rs.30,10,549 has been claimed by the assessee being TDS from advertisement. There is also no dispute to the fact that the corresponding income of Rs.23,10,50,922 has not been reflected in the accounts of the assessee for which the Assessing Officer rejected the claim of credit for TDS of Rs.30,10,549 which has been upheld by the CIT(A).
9. We find the provisions of sections 198 and 199 of the Income-tax Act, 1961 read as under:
"198. All sums deducted in accordance with [the foregoing provisions of this Chapter] shall, for the purpose of computing the income of an assessee, be deemed to be income received:
[Provided that the sum being the tax paid, under sub-section (IA) of section 192 for the purpose of computing the income of an assessee, shall not be deemed to be income received.]
199. (1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be.
(2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made.
(3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in sub-section (1) and sub-section (2) and also the assessment year for which such credit may be given.]"
10. In view of the above provisions and since in the instant case the assessee has not disclosed the income on which tax has been deducted at source, the Revenue authorities, in our opinion, are justified in refusing the credit of TDS amounting to Rs.30,10,549 to the assessee. ... ... ... ....
14. However, in the instant case the assessee has not at all disclosed any such income either in the current year or in the subsequent year either directly or indirectly. Therefore, these decisions are of no help to the assessee. In this view the matter and in view of the detailed reasoning given by the CIT(A), we do not find any infirmity in his order.
Page 7 of 99th October, 2024 ::: Uploaded on - 12/02/2025 ::: Downloaded on - 12/02/2025 22:24:41 ::: 27-ITXA-6968-2010.DOC Accordingly, we uphold the same. The ground raised by the assessee is accordingly dismissed."
23 Insofar as the decisions relied on behalf of the Appellant is concerned, having perused such decisions, in our opinion, in the facts and circumstances of the case, the said decisions are wholly not applicable. We discuss these decisions.
24 In Kal Comm. (supra) the High Court has recorded a clear finding that in the said case the amount received by the assessee was the collection of subscription charges on behalf of the Principal M/s. Sun TV Networks and did not partake the character of income chargeable to tax in their hands. It is the income chargeable to tax was only the commission income and interest income and hence, the subscription charges collected by it on behalf of M/s. Sun TV Networks was chargeable as income only in the hands of M/s.Sun TV Networks and did not partake the character of any expenditure revenue or capital in the hands of the assessee. Such is not the facts in the present case.
25 Further the decision in Relcom (supra) would also not be applicable in the facts of the present case. In the said case, the assessee had fairly admitted throughout the proceedings for its TDS claim that the benefit of such claim has not been availed by one REPL. Therefore, the Revenue, having assessed REPL's income in respect of such TDS claim cannot deny the assessee's claim on mere technical ground that the income in respect of such TDS claim was not that of the assessee. Also it was an admitted position in the said case that the assessee and the REPL were sister concerns and the REPL had not raised any objection with regard to the assessee's TDS claim as made. It is in such context, the High Court had taken a view that the revenue cannot be allowed to retain the TDS without credit being made available to anybody. It was also observed that if the credit of tax was not allowed to the assessee and Page 8 of 9 9th October, 2024 ::: Uploaded on - 12/02/2025 ::: Downloaded on - 12/02/2025 22:24:41 ::: 27-ITXA-6968-2010.DOC the joint venture had not filed a return of income, then credit of TDS cannot be taken by anybody. Thus, the facts are totally in variance to the facts in hand.
26 In this view of the matter, in the facts of the present case, we are of the clear opinion that there is no merit in this appeal. The question of law would be required to be answered in favour of the Revenue and against the Assessee/Appellant.
27 Dismissed. No costs.
(FIRDOSH P. POONIWALLA, J.) (G. S. KULKARNI , J.) Page 9 of 9 9th October, 2024 ::: Uploaded on - 12/02/2025 ::: Downloaded on - 12/02/2025 22:24:41 :::