2017 (3) TMI 427 - AT - Income Tax

Deduction of TDS u/s 194H - agency discount allowed by the assessee - assessee is in the business of operating FM Radio broadcasting stations - Held that - The issue of obligation of deduction of tax at source by the Television Channels or Media Companies upon the payments made to advertising agencies has been settled by the board in its circular No.5/2016 dated 29th February 2016. Thus, from the above circular it is clear that this issue is now settled in favour of the assessee on the basis of judgments in the case of Jagran Prakashan Ltd. 2014 (5) TMI 482 - ALLAHABAD HIGH COURT and T.V. Today Network Ltd. 2014 (1) TMI 1405 - DELHI HIGH COURT taken a clear stand that no TDS is required to be deducted on the impugned payments made by the assessee to the advertising agency. - Decided in favour of assessee TDS u/s 194J OR 192 - payments made to Radio Jockey(ies) - Held that - On examination of various clauses of the agreement, it is noted that neither it is mentioned anywhere that RJ would be employee of the assessee, nor it can be concluded on the basis of holistic reading of the entire agreement that there was any employer-employee relationship between assessee and RJs. Thus as there was no relationship of master and servant between the assessee and RJ. Nothing has been brought before us by the AO or by Ld. DR to establish any such relationship between the two. Under these circumstances, we find that the order of Ld. CIT(A) holding that the assessee company has rightly deducted the tax at source u/s 194J is perfect. - Decided against revenue

Issues Involved:
1. Liability to deduct TDS on agency discount under Section 194H of the Income Tax Act.
2. Correctness of TDS deduction under Section 194J for payments made to Radio Jockeys.
3. Deletion of interest under Section 201(1A) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Liability to Deduct TDS on Agency Discount under Section 194H:

The Revenue challenged the decision of the CIT(A) that the assessee company was not liable to deduct TDS on agency discounts under Section 194H. The assessee, engaged in FM Radio broadcasting, provided discounts to clients and advertising agencies, which the AO deemed as commission, necessitating TDS deduction. The assessee argued that the relationship with advertising agencies was principal-to-principal, not principal-agent, thus no commission was paid, and no TDS was required.

The CIT(A) upheld the assessee's view, distinguishing between trade discount and commission, emphasizing that discounts were given directly to advertisers and advertising agencies without an intermediary role. The CIT(A) cited various legal precedents, including the Allahabad High Court's decision in Jagran Prakashan Ltd. and the CBDT Circular No. 5/2016, clarifying that no TDS is required on payments made by media companies to advertising agencies for procuring advertisements. The Tribunal affirmed the CIT(A)'s decision, noting that the issue was settled in favor of the assessee by the Board's circular and relevant court judgments.

2. Correctness of TDS Deduction under Section 194J for Payments Made to Radio Jockeys:

The AO contended that payments to Radio Jockeys (RJs) should be treated as salary, thus requiring TDS under Section 192, not Section 194J. The assessee argued that RJs were independent professionals, not employees, and detailed various agreement clauses supporting this position, such as the absence of employee benefits and the freedom to take other assignments.

The CIT(A) agreed with the assessee, noting that RJs were not entitled to employee benefits like provident fund and gratuity, and their agreements did not indicate an employer-employee relationship. The Tribunal upheld the CIT(A)'s decision, emphasizing that the RJs' income was treated as professional receipts in their tax returns, and no evidence suggested otherwise. The Tribunal also referenced similar cases, including CIT v. Yashoda Super Speciality Hospital, where doctors were deemed independent professionals, not employees.

3. Deletion of Interest under Section 201(1A):

The CIT(A) deleted the interest under Section 201(1A), which was consequential to the deletion of the primary tax liability. The Tribunal dismissed this ground as it was dependent on the outcome of the primary issues.

Conclusion:

The Tribunal dismissed both appeals filed by the Revenue, affirming the CIT(A)'s decisions that the assessee was not liable to deduct TDS on agency discounts under Section 194H and had correctly deducted TDS under Section 194J for payments to Radio Jockeys. The deletion of interest under Section 201(1A) was also upheld.

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