Income Tax Appellate Tribunal - Pune
M/S. Tao Publishing Pvt. Ltd.,, vs Deputy Commissioner Of Income-Tax,, on 11 November, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
SMC BENCH, PUNE
ी आर. के. पांडा, लेखा सद य के सम
BEFORE SHRI R.K. PANDA, AM
आयकर अपील सं. / ITA No.1139/PN/2016
नधारण वष / Assessment Year : 2005-06
M/s. Tao Publishing Pvt. Ltd., .......... अपीलाथ /
17, Koregaon Park, Appellant
Pune 411001
PAN : AAACR8224J
बनाम v/s
DCIT, Circle-7, Pune .......... यथ /
Respondent
अपीलाथ क ओर से / Appellant by : Shri M.C. Naniwadekar
यथ क ओर से / Respondent by : Shri Suhas Kulkarni
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing :09.11.2016 Date of Pronouncement: 11.11.2016
आदे श / ORDER
PER R.K.PANDA, AM :
This appeal filed by the assessee is directed against the order dated 25-02-2016 of the CIT(A)-V, Pune relating to Assessment Year 2005-06.
2. Disallowance of Rs.15 lakhs u/s.40(a)(ia) of the Act for violation of provisions of section 194I by the Assessing Officer and upheld by the CIT(A) is the only issue raised in the grounds of appeal.
3. Facts of the case, in brief, are that the assessee is a company carrying on the business of printing and publishing of magazines and books and trading in books and CDs. It filed its return of income on 30-10-2005 declaring total loss of Rs.5,34,230/-. During the course of assessment proceedings the Assessing Officer observed that assessee 2 ITA No.1139/PN/2016 company has debited an amount of Rs.32,34,652/- under the head Advertising and Publicity. On verification of the same he observed that an amount of Rs.15 lakhs has been paid as sponsorship to Shunyo Foundation for maintenance of Nala Park Garden, viz. Osho Teerth Garden where advertising boards of the assessee company are displayed. The Assessing Officer asked the assessee to explain as to why such expenditure should not be disallowed du/s.40(a)(ia) of the Act as no tax has been deducted on the said amount. The assessee submitted its reply which has been reproduced by the Assessing Officer in the body of the assessment order and which reads as under :
"Garden Sponsorship Expenses :
The company has paid an amount of Rs. 15,00,000/- to Shunyo Foundation for maintenance of the famous public Park known as Osho Teeth Garden located at Koregaon Park, Pune. The said garden is a famous tourist place and every day hundreds of people visit the said Garden. Shunyo Foundation, Poona is looking after the maintenance the said Garden. The day to day expenses for upkeep, beautification and maintenance of the Osho Teerth Park is incurred by Shunyo foundation. The company has sponsored an amount of Rs. 15,00,000/- to the said foundation to meet the maintenance expenses of the above park. The company has incurred the said expenditure as social responsibility, as the benefit of the same is availed by hundred's of people who visit the said park on daily basis. Copy of the ledger account for payment made to Shunyo foundation is enclosed herewith for your honour's kind reference and record.. We further would like to inform your honour that shunyo Foundation is responsible to maintain the Park and the payment to labour contractors are made by Shunyo Foundation and not by the company. Shunyo foundation has deducted tax at source from payments made to Labour Contractors and deposited the same with tile Government authority. Copy of the TDS Annual Return Form No. 26. filed by Shunyo Foundation for the F.Y.2004-05 is enclosed herewith for your honour's kind consideration and record."
We draw your honour's kind attention to clause nos. B-25 & C-55 of the Memorandum of Association of the company, authorizing the Board of Directors to incur such expenditure. We enclose herewith the copy of the relevant pages of the Memorandum of Association containing the above clauses for your honour's kind consideration and record. Further, the company gets the benefit of displaying every month the Osho Times Magazine (Monthly Issue) and Books that are printed and published by the company."
3ITA No.1139/PN/2016
4. However, the Assessing Officer was not satisfied with the explanation given by the assessee. He observed that the assessee company has admitted that it gets benefit of displaying every month the Osho Time Magazine (monthly issue) and books that are printed and published by the company. It is therefore clear that the assessee company has been using Nala Park Garden/Osho Teerth Garden belonging to Osho Ashram for displaying Magazines and books for which compensation of Rs.15 lakhs has been made through Shunyo Foundation which incurs the same on maintenance of that park. Therefore, the assessee company was liable to deduct tax u/s.194I of the Act. Since the assessee has failed to do so the Assessing Officer, invoking the provisions of section 40(a)(ia), made disallowance of Rs.15 lakhs and added the same to the total income of the assessee.
5. Before the CIT(A) the assessee more or less reiterated the same arguments. However, the CIT(A) also was not impressed by the arguments advanced by the assessee and upheld the action of the Assessing Officer by observing as under :
"4.6 I have perused the material on record and the submissions made by the appellant carefully. I find from the submission made and the documents presented during the course of appeal hearing, that a nallah on the land belonging to the Collector, was converted into an ecological garden open to the public, which was maintained by Shunyo Foundation. Perusal of the documents, submitted before me also indicate the proposal by the Shunyo Foundation requesting the appellant company to contribute to the maintenance of the park and the appellant company informing the Shunyo Foundation of putting up this request before the Board of Directors of the appellant company. From the facts on records, it is seen that the board of directors finally agreed to contribute to the maintenance of the ecological park. Both the Shunyo Foundation and the appellant company propagate the Osho philosophy. It was seen by the AO, that the advertisement board of assessee company was displayed on the nallah park garden i.e. the Osho Teerth Garden. From the submission of the appellant company made before the AO, the AO found that the appellant company gets benefit of displaying, every month, the Osho Times Magazine (Monthly Issue) and Books that are printed and published by the company. On perusal of the above, I tend to agree with the findings of the AO. The appellant company had itself debited the said expenditure of Rs. 15,00,000/- under the head 'advertisement and publicity', and has also admitted before the AO that it displayed advertisement boards, books etc. on the said nallah park. Though an attempt has been made 4 ITA No.1139/PN/2016 by the appellant company, to use the nomenclature of maintenance to the said payment, by producing documents and letters between Shunyo Foundation and the appellant company, this does not change the nature of the purpose for which the payment and the head under which, it is made. The documents produced are between two closely related entities, though, legally may be separate entities, working with the same purpose of propagating the philosophy of Osho, and hence, the documents cannot be relied on to decide on the nature of the payments, when facts indicate otherwise. In view of the above, the AO has thereby correctly held that the appellant company is required to deduct tax u/s. 1941 of the Act which it failed to do. I, therefore, uphold the disallowance made by the AO u/s. 40(a) of the IT Act, by treating the payment as payment made for displaying magazines and books and for which, a compensation of Rs. 15,00,000/- has been made to the Shunyo Foundation, which incurs the same on maintenance of the park. Accordingly Ground no. 2 (a) & 2 (b) are dismissed."
5.1 Aggrieved with such order of CIT(A) the assessee is in appeal before the Tribunal.
6. The Ld. Counsel for the assessee submitted that the Garden is open to the public and there is no charge that the assessee has exclusive access to the garden. Referring to the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Maharashtra State Electricity Distribution Company Ltd. reported in 375 ITR 23 he submitted that the Hon'ble High Court in the said decision has held that the expression "rent" would entail the element of possession. The person using it has some degree of possessory control, at least momentarily, although it cannot entrust the user title to the subject matter of the charge. Even the mere right to use is vested with an element of possessory control over the subject matter. However, in the instant case there is no such possession by the assessee and the garden is free to the public at large. Merely because the assessee has displayed its advertisement boards the amount paid for maintenance of the public garden cannot be treated as rent under the provisions of section 194I. Referring to the provisions of section 194I the Ld. Counsel for the assessee drew the attention of the Bench to the Explanation to the provisions of section 194I and submitted that for the purpose of this section rent means any payment 5 ITA No.1139/PN/2016 by whatever name called under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building, land appurtenant to a building etc. Therefore, the provision of section 194I is not applicable. The payment of Rs.15 lakhs has been paid to Shunyo Foundation for beautification and maintenance of the park which is used by the people at large. He accordingly submitted that the order of the CIT(A) should be set aside and the ground raised by the assessee should be allowed.
7. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A).
8. I have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. The only dispute in the appeal filed by the assessee is regarding the applicability of provisions of section 194I on the amount of Rs.15 lakhs paid to Shunyo Foundation for maintenance of Nala Park Garden/Osho Teerth Garden where advertisement board of the assessee company are displayed. It is the case of the Assessing Officer that the assessee company has been using Nala Park Garden/Osho Teerth Garden belonging to Osho Ashram for displaying Magazines and books published by it for which compensation of Rs.15 lakhs has been paid through Shunyo Foundation which incurs the same on maintenance of the park. Therefore, the company is required to deduct tax at source u/s.194I of the I.T. Act. Since the assessee failed to do so the Assessing Officer, invoking the provisions of section 40(a)(ia), made addition of Rs.15 lakhs which has been upheld by the CIT(A). It is the submission of the Ld. Counsel for the assessee that the amount of Rs.15 lakhs paid to Shunyo Foundation for maintenance of the garden and therefore the 6 ITA No.1139/PN/2016 same is for commercial expediency. Since the assessee does not have any possessory control over the land which is used by the public at large as a tourist spot, therefore, the provisions of section 194I are not applicable to the facts of the present case.
9. I find some force in the above argument of the Ld. Counsel for the assessee. I find the Hon'ble Bombay High Court in the case of CIT Vs. Maharashtra State Electricity Distribution Company Limited (Supra) while deciding the applicability of provisions of section 194I has held as under :
"37. In our view, the expression rent would also entail an element of possession. In each of the instances contemplated by the explanation to Section 194-1, we see in them an element of possession, be it land, building (including factory building), land appertaining to a building, plant" equipment, furniture or fittings. The person using it has some degree of possessory control, at least momentarily, although it cannot entrust the user title to the subject matter of the charge. Even the mere right to "use" is vested with an element of possessory control over the subject matter. In the present case, WT charges are bereft of such possessory control and hence in our view, completely outside the purview of the Explanation to Section 194-1."
10. Since in the instant case the assessee has paid an amount of Rs.15 lakhs to Shunyo Foundation for maintenance of Nala Park Garden which belongs to Osho Ashram and the park is open to the public at large and since the assessee does not have any possessory control over the said land, therefore, the provisions of section 194I, in my opinion, is not applicable to the facts of the present case. The amount of Rs.15 lakhs paid by the assessee is for publicity and is an allowable expenditure on account of commercial expediency. Merely because the assessee has displayed the said advertisement board to display the Osho Time Magazines and books that are printed and published by the assessee, the same in my opinion cannot be a ground to invoke the provisions of section 194I for the amount paid to Shunyo Foundation, which incurs the expenditure for maintenance of that park. The 7 ITA No.1139/PN/2016 Assessing Officer, in my opinion, has wrongly invoked the provisions of section 194I to the amount of Rs.15 lakhs paid to Shunyo Foundation for maintenance of Nala Park Garden and the CIT(A) was also equally wrong in upholding the action of the Assessing Officer. In view of the above discussion, I set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition. Ground raised by the assessee is accordingly allowed.
11. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 11-11-2016.
Sd/-
(R.K. PANDA) ACCOUNTANT MEMBER पण ु े Pune; दनांक Dated : 11 November, 2016.
th सतीश आदे श क त"ल#प अ$े#षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. The CIT(A)-5, Pune
4. The Pr.CIT,-4, Pune
5. $वभागीय %त%न*ध, आयकर अपील य अ*धकरण, "SMC Bench" पण ु े / DR, ITAT, "SMC Bench" Pune;
6. गाड2 फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, स या$पत %त / True Copy // // True Copy // व&र'ठ %नजी स*चव / Sr. Private Secretary आयकर अपील य अ*धकरण, पुणे / ITAT, Pune