No TDS on payments made to ‘advertising agencies’ for procuring and canvassing for advertisements

[Vivek Jalan]

The issue of applicability of TDS provisions on payments made by television channels or media houses publishing newspapers or magazines to advertising agencies for procuring and canvassing for advertisements has been examined by the Board in view of representations received in this regard.  The issue is whether the fees/charges taken or retained by advertising companies from media companies for canvassing/booking advertisements (typically 15% of the billing) is ‘commission’ or ‘discount’.

Two types of payments are involved in the advertising business viz. Payment by client to the advertising agency, and Payment by advertising agency to the television channel/newspaper company. TDS under section 194C (as work contract) will be applicable on the first type of payment, there will be no TDs under section 194C on the second type of payment e.g. payment by advertising agency to the media company. In CBDT Circular 05 of 2016 dated 29th February, 2016 it is clarified by the Board that 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 has been further clarified that the word ‘commission’ referred to Question No.27 of the Board’s Circular No.715 dated 8th August, 1995 does not refer to payments by media companies to advertising companies for booking of advertisements but to payment for engagement of models, artists, photographers, sportspersons, etc. and, therefore, is not relevant to the issue of TDS referred in this Circular.

It has thus been held by The Hon’ble High Court at Calcutta in the case of COMMISSIONER OF INCOME TAX, TDS, KOLKATA VERSUS ABP PRIVATE LIMITED - 2023 (3) TMI 1058 - CALCUTTA HIGH COURT that since the relationship between the media company and the advertising company is on a principal-to-principal basis, such payments are in the nature of trade discount and not commission and, therefore, outside the purview of TDS under section 194H.