ITO, Bangalore V. M/s Confident Projects (India) Limited, Bangalore

ITA 183/BANG/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0361 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 14-09-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 03-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA J
• Assessee Lawyers: PUJA KOTHARI
• Section: 133A; 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, BANGALORE BEFORE S HRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 183 / BANG/2 014 (ASSESSMENT YEAR: 20 12 - 13 ) INCOME - TAX OFFICER (TDS), WARD 16(1), BANGALO RE. VS. APPELLANT M/S.CONFIDENT PROJECTS (INDIA) LTD. NO.574, PARK HOUSE , 80 FEET ROAD, 8 TH BLOCK, KORAMANGALA, BANGALORE. PAN:AACCC7506L RESPONDENT APPELLANT BY : SHRI SUNIL KUMAR AGARWALA, JCIT(DR) RESPONDENT BY : MS. PUJA KO THARI, CA. DATE OF HEARING : 06/05/2016 DATE OF PRONOUNCEMENT : 27 /05/2016 O R D E R PER I NTURI RAMA RAO, AM : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE CIT(A), MYSORE, DATED 24/10/2013 FOR THE ASSESSMENT YEAR 2012 - 13. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. CIT(A) HAS ERRED IN TREATING THE CONTRACT FOR ADVERTISEMENT BETWEEN THE ASSESSEE AND THE ITA NO . 183 /BANG/201 4 PAGE 2 OF 7 MEDIA (BENNET COLEMAN) AS AGENT AND MEDIA AND NOT CLIENT AND MEDIA. 2. CIT(A) HAS ERRED IN NOT APPRECIAT ING THE FACT THAT THE PAYEE M/S.BENNET COLEMAN AND CO, HAS RAISED DIRECT BILLING TO THE EXTENT OF RS.5.50 CRORES ON THE DEDUCTOR FOR ADVERTISING CHARGES IN THE CAPACITY OF CLIENT, THUS PROVING THAT IT WAS AN ADVERTISEMENT CONTRACT. 3. CIT(A) HAS ERRED IN HOL DING THAT THE PAYMENT MADE BY THE DEDUCTOR WAS IN THE CAPACITY OF AGENT OF M/S.BENNET COLEMAN, AND THE PROVISIONS OF TDS U/S.194C WAS NOT APPLICABLE ON SUCH PAYMENT. 4. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT IT IS A CASE OF DEDUCTOR NOT DEDUCTING TAXES FROM PAYMENTS MADE TO DEDUCTEE ON ACCOUNT OF ADVERTISEMENT. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE RAISED DURING THE COURSE OF APPEAL. 3. BRIEFLY, FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT - ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVI SIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF PROPERTIES AS WELL AS AGENCY TO M/S.BENNET, COLEMAN & CO., SURVEY OPERATIONS U/S 133A OF THE INCOME - TAX ACT, 1961 ['THE ACT' FOR SHORT] WAS CONDUCTED IN THE BUSINESS PREMIS ES OF THE RESPONDENT - ASSESSEE - COMPANY BY THE INCOME - TAX OFFICER (TDS), [ TDS OFFICER FOR SHORT ], WARD 16(1), BANGALORE ON 2/8/2012. DURING THE COURSE OF SUCH SURVEY OPERATIONS, TDS OFFICER FOUND THAT THE RESPONDENT - ASSESSEE - COMPANY MADE PAYMENTS TO M/S.B ENNET, COLEMAN & CO., TOWARDS ADVERTISEMENT CHARGES WITHOUT DEDUCTION OF TAX AT SOURCE. IT WAS FURTHER FOUND ITA NO . 183 /BANG/201 4 PAGE 3 OF 7 THAT AN AMOUNT OF RS.9,94,57,554/ - WAS DEBITED TO P&L ACCOUNT TOWARDS ADVERTISEMENT CHARGES OUT OF WHICH AN AMOUNT OF RS.7,36,36,964/ - WAS DEBITED TOWARDS ADVERTISEMENT CHARGES PAID TO M/S.BENNET, COLEMAN & CO., ON ACCOUNT OF ITS OWN ADVERTISEMENT CHARGES. THE ABOVE LIABILITY WAS DISCHARGED BY WAY OF TRANSFERRING VILLAS, APARTMENTS OWNED BY IT TO M/S.BENNET, COLEMAN & CO., THE ARGUMENT OF THE RESP ONDENT - ASSESSEE - COMPANY WAS THAT IT WAS AN AGENT FOR PROCUREMENT OF ADVERTISEMENT TO M/S.BENNET, COLEMAN & CO., AND THEREFORE, IN VIEW OF THE CIRCULAR NO.715 DATED 8/8/1995 THERE WAS NO LIABILITY TO DEDUCT TAX AT SOURCE UNDER THE PROVISIONS OF SEC.194C AS THERE IS NO WORK INVOLVED. THE ABOVE SUBMISSIONS OF THE RESPONDENT - ASSESSEE - COMPANY WERE REJECTED BY THE TDS OFFICER AND TREATED THE RESPONDENT - ASSESSEE - COMPANY AS AN ASSESSEE IN DEFAULT FOR NOT DEDUCTING TAX AT SOURCE AND DEMANDED TDS OF RS.14,72,740/ - UNDER THE PROVISIONS OF SEC.201(1) OF THE ACT. 4. BEING AGGRIEVED BY THIS ORDER, AN APPEAL WAS PREFERRED BEFORE THE CIT(A) , WHO VIDE IMPUGNED ORDER , HELD THAT THE PAYMENTS WERE MADE IN THE CAPACITY OF AN AGENT TO M/S.BENNET, COLEMAN & CO., AND THERE WAS AN AGREEMENT ENTERED INTO BY THE RESPONDENT - ASSESSEE - COMPANY WITH M/S.BENNET, COLEMAN & CO., IN THIS REGARD AND THEREFORE, HELD THAT THERE WAS NO LIABILITY TO DEDUCT TAX AT SOURCE IN VIEW OF THE CIRCULAR NO.715 DATED 8/8/1995 ACCORDING TO WHICH THE PROVISI ONS OF SEC.194C ARE NOT ITA NO . 183 /BANG/201 4 PAGE 4 OF 7 APPLICABLE WHEN ADVERTISEMENT AGENT S MAKES PAYMENT BOTH TO MEDIA OR PRINT MEDIA AND ELECTRONIC MEDIA. 5. BEING AGGRIEVED, REVENUE IS IN APPEAL BEFORE US WITH THE PRESENT APPEAL. 5.1 LEARNED DEPARTMENTAL REPRESENTATIVE ARGUED THAT THE IMPUGNED PAYMENTS WERE MADE AS ADVERTISEMENT CHARGES TO PUBLISHER HOUSE AND THEREFORE, CIRCULAR NO.715 IS NOT APPLICABLE AND THEREFORE, THE CIT(A) OUGHT NOT TO HAVE HELD THAT THE RESPONDENT - ASSESSEE - COMPANY IS NOT IN DEFAULT. 5.2 ON THE OTHER HAND, LEARNED AR OF THE RESPONDENT - ASSESSEE - COMPANY HAD INVITED OUR ATTENTION TO RECENT CIRCULAR BEARING NO.5 OF 2016 DATED 29/2/2016 WHEREIN THE CBDT, WHILE REITERATING THE EARLIER CIRCULAR NO.715 OF 1995 HELD THAT THERE WAS NO LIABILITY OF TDS U/S 194C ON THE PAYMENTS MADE BY THE AGENT TO TELEVISION CHANNELS OR NEWSPAPER AGENCIES. THE SAID CIRCULAR ALSO CLARIFIED THAT IN VIEW OF LAW LAID DOWN BY THE HON BLE ALLAHABAD HIGH COURT IN THE CASE OF JAGRAN PRAKASHAN LTD. VS. DEPUTY CIT (2012)(345 ITR 288)(ALL) AND HO N BLE DELHI HIGH COURT IN THE CASE OF LIVING MEDIA LTD., THERE WAS NO RELATIONSHIP OF PRINCIP A L AND AGENCY BETWEEN ADVERTIZING AGENCY AND THE TELEVISION CHANNEL OR NEWSPAPER COMPANY AND IT IS PURELY A PRINCIPAL TO PRINCIPAL RELATIONSHIP AND THEREFORE, THE QUESTION OF DEDUCTING TAX AT SOURCE EVEN ON COMMISSION PAYMENT DOES NOT ARISE. ITA NO . 183 /BANG/201 4 PAGE 5 OF 7 6. WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT APPEAL, THE ISSUE THAT ARISES FOR CONSIDERATION IS WHETHER PROVISIONS OF SEC.194C ARE APPL ICABLE TO PAYMENTS MADE BY THE RESPONDENT - ASSESSEE - COMPANY TO M/S.BENNET, COLEMAN & CO., FOR PROCUREMENT OF ADVERTISEMENT AGENCY. THOUGH MOST OF THE ADVERTISEMENTS BELONG TO RESPONDENT - ASSESSEE - COMPANY S OWN BUSINESS, PAYMENTS ARE MADE IN THE CAPACITY OF AN ADVERTISEMENT AGENCY TO M/S.BENNET, COLEMAN & CO., THEREFORE, CIRCULAR NO.715 DATED 8/8/1995 AS WELL AS CIRCULAR NO.5 OF 2016 DATED 29/2/2016 ARE SQUARELY APPLICABLE. THE CIRCULAR NO.5 OF 2016 READS AS UNDER: SUB: TAX DEDUCTION AT SOURCE (TDS) ON PAY MENTS BY TELEVISION CHANNELS AND PUBLISHING HOUSES TO ADVERTISEMENT COMPANIES FOR PROCURING OR CANVASSING FOR ADVERTISEMENTS. 1. THE ISSUE OF APPLICABILITY OF TDS PROVISIONS ON PAYMENTS MADE BY TELEVISION CHANNELS OR MEDIA HOUSES PUBLISHING NEWSPAPERS OR MAGAZINES TO ADVERTISING AGENCIES FOR PROCURING AND CANVASSING FOR ADVERTISEMENTS HAS BEEN EXAMINED BY THE BOARD IN VIEW OF REPRESENTATIONS RECEIVED IN THIS REGARD. 2. IT IS NOTED THAT THERE ARE TWO TYPES OF PAYMENTS INVOLVED IN THE ADVERTISING BUSINESS : (I) PAYMENT BY CLIENT TO THE ADVERTISING AGENCY, AND (II) PAYMENT BY ADVERTISING AGENCY TO THE TELEVISION CHANNEL/NEWSPAPER COMPANY THE APPLICABILITY OF TDS ON THESE PAYMENTS HAS ALREADY BEEN DEALT WITH IN CIRCULAR NO. 715 DATED 8.8.1995, WHERE IT HAS BEEN CLARIFIED IN QUESTIONS NO. 1 & 2 THAT WHILE TDS UNDER SECTION 194C (AS WORK CONTRACT) WILL BE APPLICABLE ON THE FIRST TYPE OF PAYMENT, THERE WILL BE NO TDS UNDER SECT ION 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 ITA NO . 183 /BANG/201 4 PAGE 6 OF 7 ADVERTISING COMPANIES FROM MEDIA COMPANIES FOR CANVASSING/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 ME DIA COMPANIES FOR PROCURING ADVERTISEMENTS, THE MARGIN RETAINED BY THE FORMER AMOUNTS TO CONSTRUCTIVE PAYMENT OF COMMISSION AND, ACCORDINGLY, TDS UNDER SECTION 194H IS ATTRACTED. 4. THE ISSUE HAS BEEN EXAMINED BY THE ALLAHABAD HIGH COURT IN THE CASE OF JA GRAN PRAKASHAN LTD AND DELHI HIGH COURT IN THE MATTER OF LIVING MEDIA LIMITED AND IT WAS HELD IN BOTH THE CASES THAT THE RELATIONSHIP BETWEEN THE MEDIA COMPANY AND THE ADVERTISING AGENCY IS THAT OF A 'PRINCIPAL TO PRINCIPAL' AND, THEREFORE, NOT LIABLE FOR TDS UNDER SECTION 194H. THE SLPS FILED BY THE DEPARTMENT IN THE MATTER OF LIVING MEDIA LTD. AND JAGRAN PRAKASHAN LTD HAVE BEEN DISMISSED BY THE SUPREME COURT VIDE ORDER DATED 11.12.2009 AND ORDER DATED 05.05.2014, RESPECTIVELY. THOUGH THESE DECISIONS ARE I N RESPECT OF PRINT MEDIA, THE RATIO IS ALSO APPLICABLE TO ELECTRONIC MEDIA/TELEVISION ADVERTISING AS THE BROAD NATURE OF THE ACTIVITIES INVOLVED IS SIMILAR. 5. IN VIEW OF THE ABOVE, IT IS HEREBY CLARIFIED THAT NO TDS IS ATTRACTED ON PAYMENTS MADE BY TELE VISION CHANNELS/NEWSPAPER COMPANIES TO THE ADVERTISING AGENCY FOR BOOKING OR PROCURING OF OR CANVASSING FOR ADVERTISEMENTS. IT IS ALSO FURTHER CLARIFIED THAT 'COMMISSION' REFERRED TO QUESTION NO. 27 OF THE BOARD'S CIRCULAR NO. 715 DATED 8.8.95 DOES NOT REFER TO PAYMENTS BY MEDIA COMPANIES TO ADVERTISING COMPANIES FOR BOOKING OF ADVERTISEMENTS BUT TO PAYMENTS FOR ENGAGEMENT OF MODELS, ARTISTS, PHOTOGRAPHERS, SPORTSPERSONS, ETC. AND, THEREFORE, IS NOT RELEVANT TO THE ISSUE OF TDS REFERRED TO IN THIS CIRCULAR. IT IS N EEDLESS TO MENTION THAT CBDT CIRCULARS ARE BINDING ON THE AUTHORITIES EMPLOYED FOR EXECUTION OF THE PROVISIONS OF THE INCOME - TAX ACT SO LONG AS THEY ARE BENEFI CIAL TO THE ASSESSEE. THE SAID CIRCULAR IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE AS IMPUGNED PAYMENTS WERE MADE IN THE CAPACITY OF AGENT TO THE PUBLISHER OF NEWSPAPER . THE MODE OF DISCHARGE OF LIABILITY HAS NO ITA NO . 183 /BANG/201 4 PAGE 7 OF 7 BEARING ON THE APPLICABILITY OF TDS P ROVISIONS. THEREFORE, WE DO NOT FIND FAULT WITH REASONING OF CIT(A). 7. IN THE RESULT, AP PEAL FILED BY THE REVENUE IS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH MAY,2016 SD/ - SD/ - (SUNIL KUMAR YADAV) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : BANGALORE D A T E D : 27 /0 5 /2016 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) - II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE