2015 (10) TMI 247 - AT - Income Tax

TDS liability on advertisement - falls within the purview of section 194C and not section 194I? - Held that - t it is an undisputed fact that assessee has entered into a contract with M/s Portland India Outdoor Advertising Pvt Ltd and Poster Publicity Division of Media-edge (CIA India Pvt Limited) (payee firms) for display of advertisement of its clients. These payee firms in turn obtained display services for displaying advertisement on hoardings sites etc., taken from the hoarding contractors/service providers/Municipal Corporation etc. There is no contract between the assessee and these two payee firms for providing any space/land/building, machinery etc. so as to fall in the realm of rent as stated in section 194I. Here it is a pure case of advertising contract for which TDS has rightly been deducted u/s 194 C. The finding of the CIT(A) as recorded above are based on correct appreciation of facts, law and the clarification issued by the CBDT and accordingly same is affirmed. Thus grounds raised by the revenue are dismissed in both the years. - Decided in favour of assessee.

Summary

Issues:
Interpretation of the definition of rent under section 194I for payments made for advertisement; Deletion of additions made under section 201(1) and 201(1A) by relying on CBDT circulars; Classification of payment for advertisement on hoardings under section 194C instead of section 194I; Deletion of interest under section 201(1A) on payments made for display of advertisement; Deletion of demand without proper appreciation of facts and legal matrix.

Analysis:
The appeals and Cross Objections involved disputes over the interpretation of tax deduction provisions related to payments made for advertisement services. The Assessing Officer contended that TDS should have been deducted at a higher rate under section 194I as the payee firms were deemed to have sublet hoarding sites to the assessee. However, the assessee argued that the payments were for advertising services and not for lease or sub-lease of space, falling under the definition of 'Works Contract' as per the Explanation to section 194C.

The CIT(A) agreed with the assessee's position, emphasizing that the nature of the contract was for advertising work and not for rent. He referenced CBDT Circular No. 715 to support his decision, stating that contracts for hoardings are covered under section 194C. The CIT(A) highlighted that the appellant did not have exclusive possession or control of the hoarding sites, thus the payments were not considered as rent under section 194I.

The Tribunal affirmed the CIT(A)'s findings, noting that the contracts were purely for advertising services and not for renting space. The Tribunal emphasized that the payee firms obtained display services from other providers and there was no direct contract for space/land/building with the assessee. Therefore, the correct TDS deduction provision was under section 194C for works contract, not section 194I for rent. The Tribunal dismissed the revenue's appeals and upheld the Cross Objections by the assessee in support of the CIT(A)'s decision.

In conclusion, the Tribunal upheld the CIT(A)'s order, emphasizing the distinction between payments for advertising services and rent, leading to the dismissal of the revenue's appeals and the allowance of the Cross Objections by the assessee.