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TMI Blog2022 (9) TMI 1519X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no agency relation between appellant and advertising agencies, accordingly, invoking section 40(a)(ia) of the Act was also not in accordance with law. 1.1 That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in not holding that on the given facts, that advertorial space, was finally and exclusively sold by appellant company in metro supplements, published by its holding company wherein under an arrangement, no consideration was to be paid by the appellant company to the holding company for such sale of advertorial space, as such appellant was acting in the capacity of a media house, though not a publisher, accordingly the relevant judgments and board circular are applicable to the appellant. 1.2 That the learned Commissioner of Income Tax (Appeals) has also erred in not holding that figure adopted by the learned Assessing Officer for making as erroneous disallowance included discount of Rs. 5,83,93,313/-given to direct advertiser/ client was included in the total amount in which case the discount offered by appellant company to its customer is direct between the seller and buyer and by no stretch of imagination under the law the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraphs of the assessment order submitted that the assessee adopted a colourable device to avoid rigour of section 40 (a) (ia) of the Act at the time of preparing invoices wherein agency commission has been deducted from the total amount and the net of agency commission amount has been shown in the P & L account, therefore, impugned first appellate order may kindly be set aside by restoring that of the AO. 6. Replying to the above the Ld. Counsel for the assessee submitted that right from A.Y. 2006-07 to A.Y.2018-19. The AO never ever made disallowances u/s. 40 (a) (ia) of the Act on the 15% discount given by the assessee to its advertising agencies except present A.Y.2009-10 by wrongly appreciating the factual circumstances of the case and by ignoring CBDT Circular No.5/2016 and various pronouncement of Hon'ble Jurisdictional High Court of Delhi including judgment in the case of CIT Vs. Living Media Private Limited (supra). 7. The Ld. Counsel also contended that the facts and circumstances of 15% discount are identical and similar to all assessment years from A.Y.2006-07 to 2018-19 and the department has been consistently allowing the same without any disallowance but only fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and then to determine the nature of the contract. This we think is incorrect. 8 On a reading of the contract as well as the order passed by the CIT(A) and the Tribunal, we find that the two authorities below have held it to be a principal to principal contract. That being so, by is very definition, the payment made by the Assessee to the advertising agency cannot be classified as commission. The payment may be called a trade discount or may be described as a concession but since Rule 32 of the INS Rules describes it as a trade discount, we have to proceed on that basis and by merely describing the trade discount as commission, the Revenue cannot seek to invoke the provisions of Section 194 H of the Act. 9. There is a concurrent finding of the CIT(A) as well as the Tribunal that the contract was a principal to principal contract and in terms of that contract what was given by the Assessee to the advertising agency was a trade discount as per Rule 32 of the INS Rules. 10. Under the circumstances we are of the view that the Tribunal was not in error in coming to the conclusion that commission was not paid by the Assessee to the advertising agency and, therefore, the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso observe that the AO has not brought on record any adverse or positive material to show that there was agreement between payer assessee with payee advertising agencies establishing relation of principal to agent. Thus, ratio of the judgment of Hon'ble Supreme Court in the case of Jagran Prakashan (supra) is squarely applicable in favour of the assessee. We also note that the impugned payment may be called a trade discount or may be described as concession but since rule 32 INS rules describes the same as trade discount, then we have to proceed on that basis and by merely describing the trade discount as commission, as attempted by the AO, the AO cannot press into service provision of section 194 H of the Act and to make disallowance u/s 40(a)(ia) of the Act. Under above facts and circumstances we are of the view that the AO was not correct in coming to the conclusion that the impugned amount of trade discount attracts the provision of 194H of the Act. 17. Per contra the CIT(A) was right in drawing the conclusion that issue is covered in favour of the assessee by the judgment of Hon'ble Jurisdictional High Court of Delhi in the case of CIT Vs. Living Medial India Pvt. Ltd. (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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