2016 (1) TMI 986 - AT - Income Tax

Non deducting of TDS on payment to non-media entity - CIT(A) deleted the addition - Held that - In the payment which the assessee is making to Radiant Media, the profit element is only in 1% of the payment and if at all the tax is to be deducted it should be deducted on that amount. The assessee has given the details of all the bills filed before the CIT(A) which show that out of the payment of ₹ 8,64,572/- paid by the assessee to the Radiant Media, the Radiant Media earned profit of ₹ 46,266/-. Therefore the assessee should have deducted tax on the amount which has the element of income, which worked out. The Assessing Officer action in treating the whole amount which was paid by the assessee to Radiant Media was not justified as it has already been subjected to deduction of tax at first level by the client and now it is in the form of reimbursement of payment to Radiant Media. The payment in which there is an income element only in the commission of 1% which is part of the payment made by the assessee to the Radiant Media. Accordingly, the disallowance made by the Assessing Officer was rightly restricted by the CIT(A). Therefore, the CIT(A) was justified in deleting the amount made on account of non-deduction of TDS on payment to non-media entity. This reasoned findings of the CIT(A) need no interference from our side. - Decided in favour of assessee.

Summary

Issues: Appeal against the order of the Commissioner of Income Tax (Appeals) regarding the addition made on account of non-deduction of TDS on payment to a non-media entity for Assessment Year 2005-06.

Analysis:
1. Issue 1 - Addition of Non-Deduction of TDS:
The appeal filed by the Revenue challenged the deletion of the addition of Rs. 9,66,024 made on account of non-deduction of TDS on payment to a non-media entity. The brief facts revealed that the assessee, an advertising agency, was engaged in advertising and marketing in the print media. The Assessing Officer disallowed Rs. 10,12,290 on this account. The CIT(A) restricted the disallowance to Rs. 46,266. The Departmental Representative argued against the deletion of the addition, emphasizing that the original amount had already been subjected to tax deduction. The Tribunal examined the payment flow between the client, the assessee, and Radiant Media Convergence Pvt. Ltd., concluding that the profit element subject to tax deduction was only 1% of the payment to Radiant Media. The Tribunal upheld the CIT(A)'s decision to delete the amount of Rs. 9,66,024, as the profit element had already been taxed at the first level. The Tribunal found the CIT(A)'s reasoning sound and dismissed the appeal of the Revenue.

2. Conclusion:
The Tribunal upheld the decision of the CIT(A) to delete the addition of Rs. 9,66,024 made on account of non-deduction of TDS on payment to a non-media entity. The Tribunal reasoned that the profit element subject to tax deduction was only 1% of the payment to Radiant Media, which had already been taxed at the first level. Therefore, the CIT(A) was justified in restricting the disallowance to Rs. 46,266, and the Tribunal found no reason to interfere with the CIT(A)'s reasoned findings. As a result, the appeal of the Revenue was dismissed.