2023 (3) TMI 1058 - HC - Income Tax

TDS u/s 194H - trade discount allowed by the assessee to INS accredited Advertising Agent - Whether not in nature of Commission and therefore not subjected to TDS? - HELD THAT - The substantial question of law which has been framed for consideration has been answered in favour of the respondent/assessee in several decisions. CBDT issued Circular being No.5 of 2016 dated 29th February, 2016 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. Thus, the legal position as understood by the CBDT is clearly in favour of the respondent/assessee. Tribunal correctly held that it is clear that there is no principal and agent relationship between the newspaper and the advertising agency. Thus, both on facts as well as in law, the respondent/assessee has to succeed and the revenue has to fail.

Summary

Issues involved:
The judgment involves the interpretation of Section 194H of the Income Tax Act regarding the treatment of trade discounts given by the assessee to an INS accredited Advertising Agent. The main issue is whether the trade discount should be considered as commission and subjected to TDS.

Interpretation of Section 194H:
The Court considered the applicability of TDS provisions on payments made by television channels or media houses to advertising agencies for procuring advertisements. It examined whether the fees retained by advertising companies from media companies for canvassing advertisements constitute commission or trade discount. The CBDT Circular clarified that no TDS is attracted on such payments, as the relationship between media companies and advertising agencies is on a principal-to-principal basis.

Precedents and Decisions:
The Court analyzed previous decisions favoring the respondent/assessee, including cases from the High Courts of Delhi, Allahabad, and Bombay. These decisions emphasized that the trade discount given by the assessee to advertising agencies was not in the nature of commission, aligning with the principal-to-principal relationship between media companies and advertising agencies.

Distinguishing Case Law:
The revenue sought to rely on a decision from the High Court of Kerala, affirmed by the Supreme Court, but the Court found it distinguishable based on the facts of the present case. The CBDT Circular further supported the respondent/assessee's position, stating that no TDS is attracted on payments made for procuring advertisements.

Analysis and Conclusion:
After examining the Tribunal's order and relevant clauses from the Indian Newspaper Society's rules and regulations, the Court concluded that there was no principal-agent relationship between the newspaper and the advertising agency. Therefore, both factually and legally, the respondent/assessee succeeded, leading to the dismissal of the revenue's appeal and the substantial question of law being answered against the revenue.