2013 (9) TMI 960 - HC - Income Tax

Sub-agent to deduct TDS Deduction of TDS to be made u/s 194C of the Income Tax Act - Assessee was engaged in the business of advertising working as an agent in some newspapers Disallowance of the expenses i.e. Rs.29,78,272/- and added to the income of the assessee under Section 40(a)(ia) of the Act Held that - Assessee acted as sub agent and whatever amount was received from the client the same was paid to the five agencies, who in fact deducted the TDS from the payment - Assessee acting as sub agent was not supposed to deduct TDS from the payment so made to various advertising agencies as per the provisions of Section 194C of the Act - Various advertisement agencies of whom the assessee worked as sub agent they deducted the TDS from the payment of such advertisement Decided against the Revenue.

Summary

Issues:
Challenge to the addition made under Section 40(a)(ia) of the Income Tax Act amounting to Rs.29,78,272 by the Assessing Officer.

Analysis:
The Tax Appeal was filed by the revenue against the ITAT's decision affirming the CIT(A)'s order deleting the addition made under Section 40(a)(ia) of the Income Tax Act. The Assessing Officer disallowed expenses of Rs.29,78,272 as the assessee did not deduct TDS as required by Section 194C of the Act. The CIT(A) allowed the appeal, stating that as the appellant was acting as a sub-agent for advertisement, TDS deduction was not applicable. The ITAT upheld this decision.

The Assessing Officer observed that the assessee, engaged in advertising business, did not deduct TDS from Rs.29,78,272 paid to various parties, including media, for advertisement expenses. The AO disallowed this amount under Section 40(a)(ia) due to non-compliance with TDS provisions. The CIT(A) noted that as a sub-agent, the appellant was not obligated to deduct TDS under Section 194C, as the main advertising agencies deducted TDS.

The CIT(A) emphasized that the appellant, acting as a sub-agent, was not required to deduct TDS from payments to advertising agencies, as these agencies deducted TDS themselves. The ITAT concurred with this view, leading to the dismissal of the revenue's appeal. The court found no legal issue warranting interference, resulting in the dismissal of the appeal.

Therefore, the High Court upheld the decisions of the CIT(A) and ITAT, ruling in favor of the assessee and dismissing the revenue's appeal challenging the addition under Section 40(a)(ia) of the Income Tax Act.