2011 (7) TMI 1095 - AT - Income Tax

Summary

Issues involved: Determination of tax liability u/s 194H for payments made to advertising agents.

Summary:

1. The assessee, a company running news channels, received advertisements through agents. The agents retained a commission from the gross amount paid by clients, leading to a dispute on tax deduction u/s 194H. The AO held the assessee liable for tax deduction on the commission paid to agents, resulting in a demand of Rs. 1,52,71,286.

2. The CIT(A) noted the disagreement between the AO and the company regarding the nature of payments to agents. Citing a previous order, the CIT(A) canceled the tax demand based on the principle of trade discount rather than commission.

3. The Sr. DR argued that the agents facilitated agreements between the assessee and clients, making them service providers entitled to payment. However, the CIT(A) viewed the transactions as principal-to-principal, qualifying the payments as business discounts.

4. The assessee's counsel referenced a previous case involving a similar issue, where the Tribunal ruled in favor of the assessee. The Tribunal, following precedent, concluded that the assessee was not obligated to deduct tax at source from payments to agents, absolving it from tax liability and interest.

5. The Tribunal upheld the decision, dismissing the appeal on 15 July 2011.