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TMI Blog2017 (3) TMI 427X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - ITA No. 1352/Mum/2014 & ITA No. 5227/Mum/2014 - - - Dated:- 11-1-2017 - Mahavir Singh (Judicial Member) And Ashwani Taneja (Accountant Member) For the Revenue : Vishwas Mundhe (DR) For the Respondent : Mayur Kisnadwala (AR) ORDER Ashwani Taneja (Accountant Member) These appeals have filed by the Revenue pertaining to the same assessee for different years involving identical issues. Therefore, these were heard together and being disposed of by this common order. 2. During the course of hearing, arguments were made by Shri Mayur Kisnadwala, Authorised Representatives (AR) on behalf of the Assessee and by Shri Vishwas Mundhe, Departmental Representative (DR) on behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 194H. Therefore, he issued show cause to the assessee in this regard. In response, it was explained by the assessee that there is no principal-agent relationship between the assessee and the advertisement agency companies, therefore no agency commissions was paid and thus no TDS was required to be deducted on the payment made by the assessee to the said companies. The relevant part of the reply dated 15.03.2013 is reproduced hereunder: Entertainment network (India) Limited(ENIL) raises invoice on the agencies for the sale of airtime spots in its radio, after allowing discount at the rates mutually agreed upon Generally 15%on the Gross Amount) plus the applicable service tax. The service tax4is levied only on the amount net of discount, The Net amount billed after allowing discount in shown as sales in the Profits and Loss account. The Agency pays ENIL the amount billed after deduction of TDS @2% u/s.194C of Income Tax Act. The billing done to the agency by ENIL is in the form of principal to principal relationship. The Agency raises invoice on the ultimate clients' (advertiser) for the amount billed by ENIL (Net of Discount) plus the applicable servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent basis. Hence, it was held that the payments by the assessee-company-to accredited advertising agencies could not be termed as payments of commission. 4.3. But AO was not satisfied with the submissions of the assessee and it was held by him that TDS was required to be deducted by the assessee on the amount of disallowance to be allowed to the advertising agencies. Therefore, AO worked out the liability of the assessee u/s 201(1) 201(1A) by observing as under: 8. In the instant case the assessee company is engaged, in running Radio FM services in different cities of the country. The company's principal revenue stream is advertising. Adverting revenues are generated through the sale of airtime of the company's FM Radio 'broadcasting stations. For the sale of Air Time the assessee company bills the agency/client after allowing, the deduction of15%, which is mutually agreed upon. This '15% amount is retained by the agency on account of the services provided to the principal (assessee) and the rest 85% is paid to the assessee. The 15% commission retained by the agencies as mentioned in the list provided is for the services provided in the form of bringi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aneously to deduct tax on the same transactions, as it will lead to double deduction of tax at source on the same amount. 4.5. It was also alternatively submitted by the assessee that in any case non-deduction of tax was under bona fide belief. Under these circumstances, assessee should not be deemed as assessee in default in view of judgment of Hon ble Supreme Court in the cases of Hindustan Coca-cola Beverages (P.) Limited 293 ITR 226 (SC) and judgment of Hon ble Bombay High Court in the case of CIT v. Kotak Securities Ltd 340 ITR 333 (Bom). Ld. CIT(A) considered observations made by the AO as well as detailed submissions of assessee and also considered the judgments available on this issue, and held that the amount of discount offered by the assessee could not partake the character of commission as envisaged u/s 194H and therefore assessee was not required to deduct tax at source u/s 194H on the said amount. Detailed findings of Ld. CIT(A) are reproduced below: 5.3 I have considered the fats of the case the submission, of the appellant and the order of the AO. The dispute before me is whether the amount shown as 15% trade discount is discount or commission and whether tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me has entered into two types of transactions. One it sells directly to the advertiser and the other it sells to advertiser through the advertising agency. To both it is giving a discount of 15% as per its tariff card which is normally accepted prevailing practice in the industry. 5.3.6 When the airtime is sold directly to the advertiser and discount of is given which, in my considered opinion, cannot be held, as commission. This is due to the reason that no middlemen agent or intermediary is; involved. The sale is directly made from seller to the buyer: Therefore the agency is, count credit aggregating ₹ 58,69,73/- provided to clients (i.e. advertisers) directly, cannot be treated as commission provided-for in the form of bringing advertisement revenue to the appellant. The A.O. is accordingly directed to' not' trade the, assessee in default on this amount and delete the addition u/s.201(1) on this amount of ₹ 58,69,793/-. 5.4 The other type of transaction corresponds to airtime sold to advertisers' through advertising agency. In this transaction to the appellant has given 15% discount on the tariff amount as per industry practice. The appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advertising agency nor the appellant has-, given the advertising agency any commission on purchase/sale of airtime. Therefore, no amount is transacted between the appellant and advertising agency which partakes the character of commission. Hence the application of section 194 H is not satisfied. 5.4.2 Section 194H talks about the payment to a recipient which is the income by way of commission or brokerage. The commission under the Explanation (I) to section 194H is defined in an inclusive manner. 'Commission under the definition includes payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any service in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing (not being securities). It takes into account a situation where a person renders service to another person for which the person rendering service either receives or is entitled to receive, directly or indirectly; payment from that another person to whom the service is rendered. 5.4. 3. Adverting to the fact in the instant case and from fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a reported in 17 ELT 607 wherein the, Honble Apex Court has applied the aforesaid principles and observed that; The trader discounts given to the dealers by @ie manufacturer were held to be liable to be deducted from the price charged to 'the dealers for the purpose of arriving at the excisable value of the goods; but the comrnissions given to the agents were held to be, not deductible from the price-for the 'purpose of arriving at the excisable value of the goods. 5.4.8 It is clear from the various decisions as considered by-the Hon'ble Gujarat' High Court that. a discount, is given from the gross price and it occurs at the instance of sale and purchase between the owner and 'the buyer, Whereas the commission is in the nature of refund or compensation for, performing some task or business by one person on behalf of the other. 5.4.9 In the case in hand, the undisputed fact is that the amount of discount has been reduced from the value of price charged by the assessee from the advertising agency on sale of airtime. 5..1O ' The Honble Delhi High Court in the case of Commissioner of Income- tax vs. M/s.Idea Cellular Ltd. reported in 325 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of airtime does not partake the character of commission. 5.4.14 The Hon'ble Allahabad High court in the case of Jagran Pakashan has held that t is clear that no foundational facts exists on the ba~5is of which any inference can be drawn that advertising agencies are agent of the petitioner and further advertising agencies render any service to the newspaper The SLP filed by the department against the decision is dismissed by the Supreme Court Hence this judgment has attained finality. 5.4.15 In the instant case also, there is, no evidence on record to show that the advertising agencies were agents of the appellant directly or indirectly and they have received any remuneration from the appellant to sell of their airtime. The discount given by the appellant as per prevailing industry practice which the appellant was giving to any person who was buying airtime from them i.e. direct advertisers or the advertising agency. 5.4.16 In view of the aforesaid discussion, the legal and factual matrix of the case, I am of the considered opinion that appellant is not liable to deduct TDS on agency discount under section 194H of the I.T. Act, the addition made by AO is accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t while TDS under section 194C (as work contract) will be applicable on the first type of payment, there will be no TDS under section 194C on the second type of payment e.g. payment by advertising agency to the media company. 3. However, another issue has been raised in various cases as to whether the fees/charges taken or retained by advertising companies from media companies for canvasing/booking advertisements (typically 15% of the billing) is 'commission' or 'discount'. It has been argued by the assessees that since the relationship between the media company and the advertising company is on a principal-to principal basis, such payments are in the nature of trade discount and not commission and, therefore, outside the purview of TDS under section 194H. The Department, on the other hand, has taken the stand in some cases that since the advertising agencies act on behalf of the media companies for procuring advertisements, the margin retained by the former amounts to constructive payment of commission and, accordingly, TDS under section 1 94H is attracted. 4. The issue has been examined by the Allahabad High Court in the case of Jagran Prakashan Ltd and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts were in the nature of salary, therefore TDS should have been deducted u/s 192 of the Act. 5.1. During the course of assessment proceedings, it was noted by the AO that assessee company had made payments of ₹ 2.26 crores during the year under consideration to Radio Jockey s (RJ s) and deducted TDS on this payment @ 10% u/s 194J considering its as payment of professional/consultancy charges. The AO examined the terms of the agreement made with RJs and inferred that there was an employer-employ relation between the assessee and RJ, therefore payments of RJ should have been subjected to deduction of TDS u/s 192 by treating is as salary and not u/s 194J by treating is as professional/consultancy charges. Accordingly, he issued show casus notice to the assessee. The assessee submitted detailed reply analyzing various clauses of the agreement in detail to argue that contents of the agreement with the RJ clearly suggest that these are exclusive professional contract. It was also submitted that RJs have raised invoices on the assessee company for the service rendered by them. Finally, the assessee summarized its arguments on this issue as under: 5. We wish to clarify the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the RJs suggest that there was no relations of employer and employee between the assessee and RJs. Radio jockeys were not regulated by employee rule They were not eligible for retirement benefits They were not exclusively rendering services to ENIL Annual performance incentive plan - the radio jockeys were incentivezed on the basis of popularity. Limited liability - Radio jockeys were solely responsible for their acts. Full indemnification by the radio jockeys for injuries to ENIL No probation period Restriction on use of logo, trademark, personality name, etc. Limitation of ENIL's liability for any damages Relationship of independent contractors on a principal to principal basis. No breakup of compensation into basic, allowances, etc. 5.4. It was also submitted by the assessee that RJ s are free to take assignments elsewhere (except with any other Radio Broadcasting Company). Ld. CIT(A) considered observations of the AO as well as submissions made by the assessee and also examined copies of agreements put forth before him. It was concluded by him that there was no employer-employee relationship between assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ists, he placed reliance upon the following Judgments: 1. ACIT (TDS) v. Fortis Healthecare Ltd. ITA No. 296, 297,649 650/Chd/2015 2. DCIT v. Yashoda Super Speciality Hospital [2010] 133 TTJ 17 (Hyd) 3. CIT (TDS) v. Yashoda Super Speciality Hospital [2014] 365 ITR 356 (AP) 4. ITO v. Calcutta Medical Reasearch Institute [2000] 75 ITD 484 (Calcutta) 5. CIT v. Mrs. Durga Khote [1952] 21 ITR 22 (Born) 6. Godhra Electricity Co. Ltd. v. CIT [1997] 225 ITR 746 (SC) 7. ACIT v. Ushodaya Enterprises (P.) Ltd. [2012] 23 taxrnann.com 258 (Hyd.) 5.7. We have gone through the orders passed by the lower authorities, copies of agreement and other evidences shown to us and also judgment placed before us. It is noted by the us at the very outset that it has been pointed out by the assessee that the impugned payments have been shown as part of professional income by the RJs in their respective returns and have been accepted as such by their respective AO s. Nothing has been brought on record by the AO or by the Ld. DR before us to contradict this aspect to show whether in any case the said income has been treated as income under the head of salaries. It is also not the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the assessee under section 201 and section 201(1A) of the Income-tax Act ? 2. Whether, on the facts and in the circumstances of the case, the finding of the Appellate Tribunal that there existed no relationship of employer and employee between the assessee and the consult - octprs, employed in the hospital, can be said to be based on material on record ? 5.10. The main issue involved before Hon ble High Court was whether Doctors were employees of the assessee hospital or not, and if yes payments made to the doctors were to be treated as payment of the salary so as to attract provisions of section 192 of the Act. Hon ble High Court examined the agreement between hospital and Doctors, which was on identical facts and circumstances as between assessee and RJ, and observed as under: The learned Tribunal as well as the Commissioner of Income-tax (Appeals), on facts and on examining the document agreement of engagement of the consultant doctors by the assessee, found that there is no relationship of employer and employee. After examining the agreement and various terms and conditions, it was found that the doctors are not administratively controlled or managed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of the assessee, while the doctors on retainership basis are only debarred from not getting in similar or any capacity for any other company engaged in a business similar to that of the assessee. The difference between this clause in two types of agreements itself goes to prove that doctors who are engaged on retainership basis are not the servants of the assessee since they are allowed to do whatever they want except joining the similar business while other doctors who are on the pay roll of the assessee are debarred from doing any other activity apart from that of the assessee. 21. From the perusal of all the material placed before us as well as the judicial pronouncements cited, we see that no relationship of master and servant exists between the assessee and the retainer doctors. 5.12. Turning back to the facts of the case before us, it is noted that actually 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) is perfectly in accordance with law and fact of this case. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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