2016 (5) TMI 1535 - AT - Income Tax

TDS u/s 194C - advertising charges - payments made by the respondent-assessee-company to M/s.Bennet, Coleman Co., for procurement of advertisement agency - Whether advertisement between the assessee and the media (Bennet Coleman) as agent and media and not client and media? - HELD THAT - Though most of the advertisements belong to respondent-assessee-company s own business, payments are made in the capacity of an advertisement agency to M/s.Bennet, Coleman Co., Therefore, circular No.715 dated 8/8/1995 as well as circular No.5 of 2016 dated 29/2/2016 are squarely applicable. No TDS is attracted on payments made by television channels/newspaper companies to the advertising agency for booking or procuring of or canvassing for advertisements. It is also further clarified that 'commission' referred to Question No. 27 of the Board's Circular No. 715 dated 8.8.95 does not refer to payments by media companies to advertising companies for booking of advertisements but to payments for engagement of models, artists, photographers, sportspersons, etc. and, therefore, is not relevant to the issue of TDS referred to in this Circular. It is needless to mention that CBDT circulars are binding on the authorities employed for execution of the provisions of the Income-tax Act so long as they are beneficial to the assessee. The said circular is squarely applicable to the facts of the case as impugned payments were made in the capacity of agent to the publisher of newspaper. The mode of discharge of liability has no bearing on the applicability of TDS provisions. Therefore, we do not find fault with reasoning of CIT(A). - Decided against revenue.

Summary

Issues:
1. Whether the provisions of sec.194C are applicable to payments made by the respondent-assessee-company to M/s.Bennet, Coleman & Co. for procurement of advertisement agency.

Analysis:
The appeal was filed by the revenue against the order of the CIT(A) for the assessment year 2012-13. The revenue raised multiple grounds of appeal, including the treatment of the contract for advertisement between the assessee and the media as agent and media, the applicability of TDS u/s.194C on the payment made by the deductor, and the failure to deduct taxes from payments made to the deductee on account of advertisement. The respondent-assessee company argued that it was an agent for procurement of advertisement to M/s.Bennet, Coleman & Co., and therefore, not liable to deduct tax at source under sec.194C. The TDS Officer treated the respondent-assessee-company as an assessee in default for not deducting tax at source and demanded TDS under sec.201(1) of the Act. The CIT(A) held that the payments were made in the capacity of an agent to M/s.Bennet, Coleman & Co., and there was no liability to deduct tax at source in view of Circular No.715 dated 8/8/1995.

The revenue contended that the impugned payments were made as advertisement charges to the publisher house, and Circular No.715 was not applicable. On the other hand, the respondent-assessee company referred to Circular No.5 of 2016, which reiterated the non-applicability of TDS u/s.194C on payments made by the agent to television channels or newspaper agencies. The circular clarified that there was no relationship of principal and agency between advertising agency and the television channel or newspaper company, and therefore, the question of deducting tax at source did not arise. The issue raised was whether sec.194C was applicable to payments made by the respondent-assessee-company to M/s.Bennet, Coleman & Co. for procurement of advertisement agency.

The Tribunal examined the circulars issued by the CBDT, particularly Circular No.5 of 2016, which clarified the applicability of TDS provisions on payments made by television channels or media houses to advertising agencies for procuring advertisements. The circular emphasized the principal-to-principal relationship between media companies and advertising agencies, stating that no TDS was attracted on such payments. The Tribunal held that the CBDT circulars were binding on the authorities and beneficial to the assessee. As the impugned payments were made in the capacity of an agent to the publisher of the newspaper, the Tribunal found no fault with the reasoning of the CIT(A) and dismissed the appeal filed by the revenue.