Income Tax Appellate Tribunal - Delhi
Acit Spl. Range-9, New Delhi vs Times Internet Ltd., New Delhi on 27 June, 2022
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'B', NEW DELHI
Before Sh. A. D. Jain, Vice President
Dr. B. R. R. Kumar, Accountant Member
ITA No. 3226/Del/2019 : Asstt. Year : 2015-16
Addl. CIT, Vs M/s Times Internet Ltd.,
Special Range-9, 10, Daryaganj,
New Delhi New Delhi-110002
(APPELLANT) (RESPONDENT)
PAN No. AABCT1559M
ITA No. 3347/Del/2019 : Asstt. Year : 2015-16
M/s Times Internet Ltd., Vs Addl. CIT,
Ecstasy IT Park, Plot-391, Special Range-9,
Phase-III, Udyog Vihar, New Delhi
Gurugram, Haryana-122016
(APPELLANT) (RESPONDENT)
PAN No. AABCT1559M
Assessee by : Sh. Mukesh Gupta, CA &
Ms. Neha Gupta, CA
Revenue by : Sh. K. A. Manu, Sr. DR
Date of Hearing: 11.05.2022 Date of Pronouncement: 27.06.2022
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeals have been filed by the Revenue as well as the assessee against the orders ld. CIT(A)-9, New Delhi dated 25.01.2019.
2. The assessee company is engaged in the business of publishing its weekly financial newspaper viz. Financial Times, as well as distribution of newspapers and other publications of Bennett, Coleman & Co. Ltd. and has also earned rental income 2 ITA Nos. 3226 & 3347/Del/2019 Times Internet Ltd.
from subletting of premises. The assessee company is also providing manpower services and has also earned capital gains arising from sale of investment.
ITA No. 3347/Del/2019: A.Y. 2015-16 (Assessee's appeal)3. The ld. CIT(A) confirmed the disallowance made by the AO in respect of consultancy charges paid by the assessee to the Advocate holding it to be capital in nature. The ld. CIT(A) further confirmed the disallowance made by the AO in respect of consultancy charges to paid to E&Y holding that the services were not in relation to regular business of the assessee. During the year, the assessee claimed an amount of Rs.10.55 crores on account of consultancy fee, out of which an amount of Rs.98.37 lacs has been disallowed by the AO pertaining to the amount paid for legal and professional services. The AO held that since the expenses were incurred for various projects and share acquisition which shall result in enduring benefit to the assessee and hence not allowable as revenue expenditure. The ld. CIT(A) deleted the additions except the amount paid for professional services for project ADONIS. The ld. CIT(A) while upholding the addition opined that the fee has been paid towards review of project ADONIS transaction document, legal & intellectual property right, due diligence, negotiation and such other services taken up in connection with acquisition of strategic investment in a company by the name of "Coupon Duniya" which is hosting a website that is strategically important for the assessee to grow its business and increase traffic and profits. The ld. CIT(A) held that in effect the consultancy charges have been paid towards documentation and 3 ITA Nos. 3226 & 3347/Del/2019 Times Internet Ltd.
advice on acquisition of shares in the said company. Before us, the ld. AR submitted that the assessee has paid professional fee for various composite services including drafting of various documentations, meetings, consultations, discussion, legal and IPR due diligence and closure of deal for acquisition of strategic investment in a company by the name of Coupon Dunia which is hosting a website that is strategically important for assessee to grow its business and increase traffic, copies of engagement letter, invoice and copy of voucher showing deduction of TDS and deposit of service tax on reverse charge basis is enclosed. It is further submitted that assessee company is engaged in the business of hosting of the website and is one of the largest website in India, with a view to continue to grow its revenue as also to protect company from various liabilities, it is business compulsion of the assessee to make strategic investments in other businesses with a view to control their policies which shall be beneficial for the existing business of the assessee. Such expenses have been incurred by assessee to seek the advice from the best professionals, this on account of business considerations', such expenses should not be viewed as having an enduring benefit and capital in nature. That the amount spent on the consultancy in seeking advice, drafting of documentation, and related search work is revenue in nature as no enduring benefit has been driven out of this nor any new asset has been created out of such expenses Incurring such sums is necessary to continue to do the business in efficient and profitable manner as such, such expenses incurred are revenue in nature.
4 ITA Nos. 3226 & 3347/Del/2019Times Internet Ltd.
4. The ld. DR relied on the order of the ld. CIT(A).
5. We find that the expenses are intricately connected with the ongoing business of the assessee and to enhance the profitability. The expenses do not pertain to any creation of new business entity or its operation. Hence, we hold that the expenses on account of consultancy charges are allowable.
6. With regard to the expenses paid to E&Y, we find that the amount has been incurred in course of regular business activity in seeking advice with respect to the website Zigwheel in relation to the project walk. Since, the nature of advice sought is in relation to the conduct of regular business, we hold that the amounts are allowable as revenue expenses.
ITA No. 3226/Del/2019: A.Y. 2015-16 (Revenue's appeal)7. The appeal of the revenue relates to sale of contents, consultancy fees, disallowance u/s 14A of the Income Tax Act, 1961.
Disallowance u/s 14A:
8. The assessee company has made certain investments in shares/mutual funds/bonds etc. out of the funds either borrowed by the assessee or from company own sources. Since, these investments have yielded or may yield income in the form of dividend, long term capital gain, tax free interest etc. which does not form part of income of the assessee. The expenditures are required to be disallowed under the provisions of Section 14A of the Income Tax Act, 1961. The AO disallowed an amount of Rs.15,43,253/- against the expenditure disallowed by the 5 ITA Nos. 3226 & 3347/Del/2019 Times Internet Ltd.
assessee of Rs.44,643/-. This issue has been dealt by the Co- ordinate Bench of ITAT in assessee's own case in ITA No. 3124/Del/2018 for A.Y. 2014-15 wherein it was held as under:
"4. During the year, the assessee earned dividend fro m mutual fund of Rs.1,03,60,745/- and suo moto disallowe d an amount o f Rs.5,57,215/- u/s 14A . The AO by resorting the provisions o f Rule 8D( 2)(ii) compute d disallo wance to Rs.96,28,052/-.
5. The ld. CIT (A) directed the AO to recompute the disallowance u/s 14A by co nsidering the investments from which dividend has been earned by the appellant company and re lying on the o rder o f the Special Bench of ITAT in the case of CIT Vs V ire et Investments Pvt. Ltd. 82 Taxm an 415, we here by direct that only the investments which yie lde d the exempt income be considere d for computatio n of disallo wance u/s 14A r.w. Rule 8D."
9. In the absence of any material change and legal proposition, we hereby direct that only the investments which yielded the exempt income be considered for disallowance u/s 14A.
Sale of Content:
10. This issue has been adjudicated by the Co-ordinate Bench of Tribunal for A.Y. 2006-07, A.Y. 2007-08, A.Y. 2008-09 and by the ld. CIT(A) for A.Y. 2009-10, A.Y. 2010-11, A.Y. 2011-12, A.Y. 2012-13, A.Y. 2013-14 and A.Y. 2014-15 in favour of the assessee. The appeal of the revenue has been dismissed by the Hon'ble Delhi High Court confirming the order of the ITAT in ITA No. 724, 716 &753/Del/2017 dated 06.09.2017. For the sake of 6 ITA Nos. 3226 & 3347/Del/2019 Times Internet Ltd.
ready reference, the finding of the Tribunal is reproduced as under:
"Gro und no .1 of the Re venue's appeal is against the dele tio n of disallo wance o f Rs. 16,12,31,000/-.T he facts apro pos this gro und are that the A O obse rved that the assessee declared reve nue rece ipts of Rs. 112.97 crore for the current year as against the re venue rece ipts of Rs124.67 Cro re s for the immediate preceding ye ar. The assessee was fo und to have incurred e xpe nditure during the instant year at Rs. 130.02 crore as against the expenditure o f Rs. 94.80 cro re in the preceding year. On the pe rusal o f details it was observed that the assessee has not shown any income during the year in respect of (i) Mediane t:(ii)conte nt se lling; and( iii) sale o f standalo ne publicatio n. On being calle d upon to explain the reasons fo r not showing income from these so urce s, the assessee stated that the Mediane t business consisted o f a PR brand which was manage d by the assessee company o n be half of its ho lding co mpany, Be nnett Coleman and Co. Ltd till 30.09.2004. The holding co mpany withdrew this right from the assessee co mpany from 30.09.2004 and handed o ver this business to a ne w group company called Optimal Media solutions Ltd. After the te rmination o f this line of business in the immediate ly preceding year, the assessee claimed not to have been engage d in rende ring any services re lating to Mediane t Business. The assessee also furnishe d particulars of income earned by ne w company, M/s Optimal Media Solutio ns Ltd., from the business. Similarly, re garding the sale o f contents, the assesse e submitted that this business hitherto entruste d to the assesse e by its holding company was withdrawn w.e.f.1.10.2004.Necessary communications withdrawing the abo ve business from the assessee were also furnished to the AO. In this backdrop of the facts, the AO noticed that albe it such business were not carrie d on by the assessee during the year, the overall expenses o f the assessee were still on no rthwards sojourn. This was held on the strength of the percentage o f the expense store venueat62.8% fo r theAY2004- 0 whe n the assessee was having these business, during the assessment ye ar2005- 06 when these businesses remaine d with the assessee fo r a part o f the ye ar, the perce ntage o f expenses we nt upto 73.5%; and during the year unde r consideration when these businesses were not at all carried on by the assessee , the pe rcentage o f expense s increased to 107.8%. The AO inferred that though "there is no income o n the A CCOUNT OF THESE TWO Businesses to the assessee, but, still, it is incurring expenses fo r these two busine sses. "Applying the pe rcentage o f expe nses at 7 ITA Nos. 3226 & 3347/Del/2019 Times Internet Ltd.
62.8% as relevant for the AY 2004- 05, the AO made disallo wance for the remaining expenses of Rs.16,12,31,000/-. This disallowance delete d in the first appeal. The revenue is agree d against such deletion.
15. having he ard the rival submissions in the light of the mate rial place d on reco rd, it is o bserved that the AO made the disallowance by re taining the percentage o f expenses to the re venue at 62.8%. This was done in accordance with the pe rcentage of expe nses incurre d by the assessee for the AY 2004- 05 when the assessee was having these businesses from its holding company. Such businesses were withdrawn by the ho lding co mpany from the assessee w.e .f. 1.10.2014. T he opinio n of the AO that though the re was no income to the assessee from these busine sses, still it was incurring e xpenses for them, e ach unfounded. On a specific query, the I d. DR failed to draw our attentio n towards any spe cific expe nditure incurred by the assessee qua these busine sses withdrawn by the ho lding company. The AO made disallo wance of Rs. 16.12 cro res simply by means o f mathematical exe rcise carried out by him if he found the expenditure Incurred by the assessee to be o n higher side, it was incumbent upon him to spe cifically point out to which expe nses were not incurre d for the purposes o f busine ss. No such exe rcise worth the name has been carrie d out. In our conside red o pinion, the Ld. CIT(A) was fully justifie d in de leting this addition made by the AO on adhoc basis. This ground is therefo re, no t allo wed:"
11. Since, the matter stands adjudicated, we decline to interfere with the order of the ld. CIT(A).
Consultancy Fee:
12. This issue is in relation to the grounds taken up by the assessee. We have gone through the reasons given by the ld. CIT(A) giving the remission of Rs.48.74 lacs out of the total disallowance of Rs.98.37 lacs made by the AO out of the amount of Rs.10.55 crores claimed by the assessee. Since, all the expenses are found to be incurred in connection with the regular course of business and no enduring benefit has been 8 ITA Nos. 3226 & 3347/Del/2019 Times Internet Ltd.
achieved by the assessee, we decline to interfere with the order of the ld. CIT(A).
13. In the result, the appeal of the assessee is allowed and Revenue is dismissed.
Order Pronounced in the Open Court on 27/06/2022.
Sd/- Sd/-
(A. D. Jain) (Dr. B. R. R. Kumar)
Vice President Accountant Member
Dated: 27/06/2022
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR