2015 (9) TMI 945 - AT - Income Tax

TDS liability - payments made by the assessee for the purpose of display of advertisement of the assessee s clients - whether the ld. CIT(A) was correct in holding that the provisions of section 194C would apply and not the provisions of section 194J? - CIT(A) deleted the interest levied u/s.201(1A) - Held that - Considering all the facts in totality, we find that the assessee has entered into a contract with other parties for display of advertisement of its client and the transaction is purely in the nature of contract for the work of advertising as defined in clause VA of Explanation to section 194C of the Act. We decline to interfere with the findings of the ld. CIT(A) and the appeals filed by the Revenue are accordingly dismissed. Whether the consultancy charges paid by the assessee are in the nature of salaries u/s.192 of the Act or in the nature of fees or professional service attracting the provisions of section 194J ? - Held that - The appointment letter clearly shows that the persons have been appointed as a consultant. Though there is a restrictive clause that during the pendency of agreement with the assessee, the consultants will not take up any other assignment of temporary or permanent nature with any other person. However in our considered opinion, such restrictive covenants are provided in contract to safeguard the interest of the company and to make it sure that the consultants do not give services to the rivals in the same line of business. Merely because of this restrictive covenant, no employer-employee relationship could be established. Further, it is an undisputed fact that the consultants have charged service tax to the assessee and the service tax so collected have been paid to the government. By any stretch of imagination no employee would charge service tax to its employer. Therefore, we do not find any merit in the views taken by the Revenue authorities. The assessee has correctly deducted the tax. We accordingly set aside the findings of the ld. CIT(A) and direct the A.O. to accept the assessee s contention. - Decided in favour of assessee.

Summary

Issues:
1. Justification of deleting interest levied u/s.201(1A) on payments made for display of advertisement.
2. Applicability of section 194C or 194J for TDS on advertisement payments.
3. Nature of consultancy charges - salary under section 192 or professional fees under section 194J.

Analysis:
1. The appeals by the Revenue and cross objections by the assessee were against the same order of the ld. CIT(A)-14, Mumbai for A.Y. 2010-11 and 2011-12. The main issue was the deletion of interest u/s.201(1A) on payments made for displaying advertisements. The ld. CIT(A) held that the provisions of section 194C, not 194I, applied as the assessee subcontracted work to hoarding contractors, not liable for rent deduction u/s.194I.

2. The Assessing Officer (A.O.) argued that the payments for hiring hoarding sites were liable to TDS u/s.194I, not 194C. The Revenue contended that advertising services fall under professional services for TDS u/s.194J. The Tribunal found that the assessee's role was limited to displaying clients' ads on hoardings, not renting or owning hoarding sites, thus attracting section 194C.

3. Regarding consultancy charges, the A.O. claimed an employer-employee relationship, requiring TDS u/s.192. The ld. CIT(A) upheld this, but the Tribunal disagreed. The consultants were appointed as consultants, not employees, and the restrictive clauses were to protect the company's interests. As the consultants charged service tax and paid it to the government, indicating a professional relationship, the Tribunal ruled in favor of the assessee.

In conclusion, the Tribunal dismissed the Revenue's appeals, upholding the ld. CIT(A)'s order on TDS issues related to advertisement payments. The Tribunal allowed the assessee's cross objections regarding consultancy charges, finding no employer-employee relationship and directing the A.O. to accept the assessee's contentions.