- (1.) The Assessing Officer was of the opinion that the assessees had violated the provisions of Chapter 17B of the I.T. Act in not deducting tax at source on the amount of Rs. 1,20,84,768/- paid to Malhotra Global Eximp Pvt. Ltd. and therefore the amount was disallowed under section 40(a)(ia) of the I.T. Act. The reasoning advanced by the Assessing Officer is as follows: The assessee's Authorised Representative stated during the proceedings dated 03.12.2007 that M/s. Malhotra Global Eximp Pvt. Ltd. is a group concern and is getting the advertisements done from J.J. Communications on behalf of the assessee company. The argument that Malhotra Eximp Pvt. Ltd. is a group company and the advertisements are arranged from J.J. Communications by this company on behalf of the assessee company does not exempt the assessee from deduction of tax at source while making payments or while crediting the amounts to Malhotra Global Eximp Pvt. Ltd. From the documents enclosed with the submission dated 10.122007, it cannot be concluded that the payments are mere reimbursements. It is a fact that M/s. Malhotra Global Eximp Pvt. Ltd. is an independent entity and is not a unit of the assessee company. It is also not established by the assessee by sufficient evidence as to why Malhotra Global Eximp Pvt. Ltd. would carry out some work on behalf of the assessee company without a profit motive. When the entities are separate and independent, the transactions have to be viewed in terms of normal business transactions with a profit motive.
(2.) Aggrieved by the order, the assessee appealed before the CIT (Appeals). The CIT (Appeals) reversed the order of the Assessing Officer. Ultimately, the matter reached before the Tribunal at the instance of the revenue. The Tribunal opined as follows: Therefore, these expenses cannot be disallowed to the assessee if MGEPL has deducted and paid TDS on behalf of the assessee without violating the condition mentioned in section 40(a)(ia). Since in this case the assessee has proved that amount of Rs. 1,20,84,768/- was paid on behalf of the assessee by its agent. Under these circumstances, we do not find any infirmity in the order of the learned Commissioner of Income-tax (Appeals) in allowing Rs. 1,12,84,318/- out of total disallowance of Rs. 1,20,84,768/- u/s. 40(a)(ia) of the Act made by the Assessing Officer. We uphold the order of the learned Commissioner of Income-tax (Appeals).
(3.) The revenue has once again come up in appeal.;