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2020 (11) TMI 401 - AT - Income TaxTDS u/s 194C - expenditure incurred towards advertisement charges - selling and utilizing the advertisement space on a principal to principal basis in publication of Times of India (kannada edition) owned by BCCL - HELD THAT - AO is not justified in holding that the provisions of Section 194C and Section 40(a)(ia) of the Act are attracted in this case. Since, we have held that the provisions of Sec 194C are not attracted, the alternative contention of the assessee on Form no 26A does not require adjudication. We set aside the order of the CIT(A) and direct the assessing officer to delete the impugned addition and allow the grounds of appeal of the assessee.
Issues Involved:
1. Sustaining the addition of ?6.8 crores due to non-deduction of TDS under Section 194C. 2. Misinterpretation of Section 40(a)(ia) regarding disallowance when the payee has included the amount in its income return. 3. Retrospective application of the second proviso to Section 40(a)(ia). Issue-wise Detailed Analysis: 1. Sustaining the Addition of ?6.8 Crores Due to Non-Deduction of TDS under Section 194C: The assessee contested the addition of ?6.8 crores made by the Assessing Officer (AO) on the grounds that the payment to Bennett, Coleman & Co. Ltd. (BCCL) for advertisement space does not attract the provisions of Section 194C of the Income Tax Act, 1961. The AO had concluded that the agreement between the assessee and BCCL constituted a contract for specific work, necessitating TDS deduction under Section 194C. Consequently, the AO applied Section 40(a)(ia) and disallowed the amount for non-deduction of TDS. The assessee argued that the payment was made on a principal-to-principal basis and referred to CBDT Circular No. 5 of 2016, which clarified that no TDS is required on payments made by agents to newspaper companies for procuring advertisements. The Tribunal, after examining the facts and relevant circulars, concluded that the provisions of Section 194C were not applicable, and hence, the addition made by the AO was unjustified. The Tribunal directed the AO to delete the impugned addition. 2. Misinterpretation of Section 40(a)(ia) Regarding Disallowance When the Payee Has Included the Amount in Its Income Return: The assessee contended that no disallowance under Section 40(a)(ia) was warranted as BCCL had included the said amount in its return of income and paid the requisite taxes, evidenced by a certificate in Form 26A. The Tribunal noted that the second proviso to Section 40(a)(ia) of the Act, which provides relief if the payee has included the amount in its income, should be considered. However, since the Tribunal had already concluded that Section 194C was not applicable, the need to adjudicate on the alternative contention regarding Form 26A did not arise. 3. Retrospective Application of the Second Proviso to Section 40(a)(ia): The assessee argued that the second proviso to Section 40(a)(ia), which is curative and clarificatory in nature, should be given retrospective effect. This proviso stipulates that no disallowance shall be made if the payee has included the sum in its income and paid the tax. The Tribunal, however, did not need to delve into this issue in detail, as it had already determined that the primary issue of Section 194C's applicability did not hold, rendering the discussion on the proviso moot. Conclusion: The Tribunal allowed the appeal of the assessee, setting aside the order of the CIT(A) and directing the AO to delete the addition of ?6.8 crores. The Tribunal's decision was significantly influenced by the CBDT Circular No. 5 of 2016 and the Karnataka High Court's ruling, which clarified that the relationship between the assessee and BCCL was on a principal-to-principal basis, thus not attracting the provisions of Section 194C. Consequently, the Tribunal found that the disallowance under Section 40(a)(ia) was not justified.
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