ACIT Circle 51 (1), V. T.V. Today Network Ltd,

ITA 3943/DEL/2006

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3589 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-07-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 01-12-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C DELHI BEFORE SHRI C.L. SETHI AND SHRI K.G. BANSAL ITA NO. 3943(DEL)/2006 FINANCIAL YEAR: 2002-03 ASSISTANT COMMISSIONER OF M/S TV TODAY NETWORK LTD., INCOME-TAX,TDS CIRCLE 51(1), VS. E- 1, VIDEOCON TOWER, NEW DELHI. JHANDEWALAN EXTENSION, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHIT GARG, SR. DR RESPONDENT BY : S HRI SALIL AGGARWAL, ADVOCATE & SHRI GAUTAM JAIN, C.A. ORDER PER K.G. BANSAL : AM THE FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY IS RUNNING TWO NEWS CHANNELS, NAMELY, -(I) AAJ TAK AND (II) HEADL INES TODAY, IN HINDI AND ENGLISH RESPECTIVELY. THE ASSESSEE RECEIVES A DVERTISEMENTS FOR BROADCAST DIRECTLY OR THROUGH ADVERTISING AGENTS. IN THE COURSE OF ENQUIRY, IT WAS FOUND THAT THE INVOICE RAISED BY THE COMPANY IN RESPECT OF REVENUES RECEIVABLE FROM ADVERTISING AGENTS CONTAINS TWO COLUMNS, NAMELY, (I) GROSS AMOUNT, AND (II) NET AMOUNT. THE NET AMOUN T IS CREDITED TO THE BOOKS OF ACCOUNT. IN OTHER WORDS, THE ADVERTISING A GENTS PAY ONLY THE NET AMOUNT TO THE ASSESSEE COMPANY AND THE DIFFERENC E IS RETAINED BY THEM, ITA NO. 3943(DEL)/2006 2 WHICH IS TERMED AS COMMISSION BY THEM. SUCH COM MISSION NORMALLY WORKS OUT TO 15% OF THE GROSS AMOUNT. IT WAS FURTHER FOUND THAT ON THE COMMISSION SO PAID TO THE ADVERTISING AGENT, T AX WAS NOT DEDUCTED AT SOURCE. THEREFORE, IT WAS REQUIRED TO SHOW CAUS E AS TO WHY IT SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT. IT WAS S UBMITTED THAT THE ASSESSEE IS DEALING WITH THE ADVERTISING AGENTS ON PRINCIPA L TO PRINCIPAL BASIS, THEREFORE, THE COMMISSION PAID TO THEM IS FACTUALL Y THE TRADE DISCOUNT. SUCH DISCOUNT IS NOT EXIGIBLE TO DEDUCTION OF TAX AT SOURCE U/S 194H OF THE INCOME-TAX ACT, 1961. HOWEVER, THE AO DID N OT ACCEPT THE SUBMISSIONS. HE REFERRED TO THE PROVISION CONTA INED IN THE EXPLANATION TO SECTION 194H, WHICH DEFINES COMMISSION OR BROKE RAGE TO INCLUDE WITHIN ITS AMBIT ANY PAYMENT RECEIVED OR RECEIVABLE, D IRECTLY OR INDIRECTLY, BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SER VICES RENDERED (NOT BEING PROFESSIONAL SERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELA TING TO ANY ASSET, VALUABLE ARTICLE OR THING, NOT BEING SECURITIES. ON THE B ASIS OF THIS DEFINITION, IT WAS HELD THAT THE ASSESSEE HAS BEEN MAKING PAYMENT TO THE COMMISSION AGENTS FOR SERVICES RENDERED BY THEM TO IT. FURTHER, H E REFERRED TO BOARD CIRCULAR NO. 619 DATED 4.12.1991. IN PARAGRAPH NO. 6, IT IS MENTIONED THAT A QUESTION MAY ARISE WHETHER THERE WOULD BE DEDUCT ION OF TAX AT SOURCE U/S ITA NO. 3943(DEL)/2006 3 194H WHERE COMMISSION OR BROKERAGE IS RETAINED B Y THE CONSIGNEE/AGENT AND NOT REMITTED TO THE CONSIGNOR/PRINCIPAL WHILE REMITTING THE SALE CONSIDERATION. IT WAS CLARIFIED THAT THE RETENTI ON OF COMMISSION BY THE CONSIGNEE OR AGENT, AMOUNTS TO CONSTRUCTIVE PAYM ENT BY THE CONSIGNOR OR PRINCIPAL. THEREFORE, TAX IS REQUIRED TO BE DEDUC TED FROM THE AMOUNT OF COMMISSION. ON THE BASIS OF THE AFORESAID JURISPR UDENCE, IT HAS BEEN HELD THAT CONSTRUCTIVE PAYMENT OF COMMISSION HAS BEEN MADE BY THE ASSESSEE TO THE ADVERTISING AGENT FOR SERVICES RENDERED BY THEM, WHICH ARE NOT PROFESSIONAL SERVICES ETC. ACCORDINGLY, THE AS SESSEE WAS REQUIRED TO PAY THE AMOUNT OF RS. 99,89,077/-. INTEREST PAYABLE O N THIS AMOUNT WAS WORKED OUT AT RS. 52,82,209/-. THUS, DEMAND OF RS. 1,52,71,286/- WAS RAISED. 2. THE LD. CIT(APPEALS) MENTIONED IN HIS ORDER THA T THE AO TERMS THE AMOUNT AS COMMISSION, WHILE THE COMPANY TERMS IT AS TRADE DISCOUNT. THEREFORE, IN THE OPINION OF THE AO, PROVISIONS OF SECTION 194H ARE APPLICABLE IN RESPECT OF PAYMENTS MADE TO ADVERTIS ING AGENTS. SINCE SUCH PAYMENTS HAVE NOT BEEN MADE, THE ASSESSEE HAS BEEN ASKED TO MAKE GOOD THE PAYMENT OF TAX U/S 201(1) OF THE ACT. IT HAS ALSO BEEN CHARGED WITH INTEREST U/S 201(1A). HE ALLOWED THE RELIEF TO THE ASSESSEE BY MENTIONING ITA NO. 3943(DEL)/2006 4 THAT SIMILAR ISSUE CAME UP BEFORE HIS PREDECESSOR IN RESPECT OF PROCEEDINGS OF FINANCIAL YEAR 2003-04. HE HAD CANCELLED THE ORDER. THEREFORE, RELYING ON THAT ORDER, THIS ORDER WAS ALSO CANCELLED. 3. BEFORE US, THE LD. SR. DR SUMMARIZED THE FAC TS OF THE CASE AND THE FINDINGS OF THE LOWER AUTHORITIES. IT IS SUBMIT TED THAT ACCEPTANCE OF ADVERTISEMENT BY THE ASSESSEE FROM THE ADVERTISIN G AGENTS BRING AN AGREEMENT BETWEEN IT AND THE CLIENTS OF THE AGE NTS INTO EXISTENCE, WHICH CANNOT BE IGNORED. IF THE SAME IS TAKEN INTO ACC OUNT, THE ADVERTISING AGENTS ARE ONLY A VIA MEDIA FOR OBTAINING ADVER TISEMENT FROM THE CLIENTS. THE ASSESSEE HAS ALSO BEEN RECEIVING ADVERTISEME NT DIRECTLY FROM THE CLIENTS. THEREFORE, THE AGENTS ARE RENDERING S ERVICES TO THE ASSESSEE COMPANY FOR WHICH PAYMENT IS MADE TO THEM. THE LD . CIT(APPEALS) HAD ACCEPTED THIS PROPOSITION IN PRINCIPLE. HOWEVER , IT HAS BEEN HELD THAT THE AGREEMENT BETWEEN THE ASSESSEE COMPANY AND THE AGENTS IS ON PRINCIPAL TO PRINCIPAL BASIS , THEREFORE, THE PAYMENTS MADE TO THEM ARE IN THE COURSE OF THE BUSINESS OF THE ASSESSEE AS DISCOUNT. 3.1 IN REPLY, THE LD. COUNSEL FOR THE ASSESSEE S UBMITTED THAT THIS ORDER HAS BEEN PASSED ON THE BASIS OF THE ORDER FOR FINAN CIAL YEAR 2003-04. THAT ITA NO. 3943(DEL)/2006 5 ORDER WAS BASED UPON THE DECISION OF H BENC H OF DELHI TRIBUNAL IN THE CASE OF LIVING MEDIA INDIA LTD. IN ITA NO. 38 07(DEL)/2005 FOR FINANCIAL YEAR 2003-04 PASSED IN MAY, 2007, A C OPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK FROM PAGE NOS. 47 TO 5 3. THE FACTS OF THIS CASE ARE IDENTICAL EXCEPT FOR THE FACT THAT LIVING MED IA INDIA LTD. IS ADVERTISING IN PRINT MEDIA WHILE THE ASSESSEE IS ADVERTISING I N THE ELECTRONIC MEDIA. A REFERENCE WAS MADE TO THE DECISION OF THE TRIBUNA L IN THE CASE OF ALL INDIA RADIO COMMERCIAL BROADCASTING SERVICE/PRASAR BHART I BROADCASTING CORPORATION OF INDIA, (2006) 8 SOT 513. THE ISSU E IN THAT CASE WAS AS TO WHETHER THE ASSESSEE WAS PAYING COMMISSION TO THE ADVERTISING AGENCY OR NOT. ANOTHER ISSUE WAS AS TO WHETHER THE ADVERTIS ING AGENCY WAS RENDERING ANY SERVICES TO DOORDARSHAN COMMERCIAL SERVICES. T HE ISSUE OF RELATIONSHIP BETWEEN DOORDARSHAN COMMERCIAL SERVICES AND ADVERTI SING AGENCY WAS ALSO INVOLVED IN THAT CASE. IT WAS HELD THAT T HE ADVERTISING AGENCY WAS NOT AN AGENT OF ALL INDIA RADIO BROADCASTING SERVICE AND THE AMOUNT DEDUCTED OUT OF THE GROSS PAYMENT WAS NOT THE PAYMENT OF CO MMISSION. THEREFORE, IT WAS HELD THAT THE REQUIREMENT OF TAX DEDUCTION AT SOURCE FROM THE PAYMENT WAS NOT THERE. RELYING ON THIS ORDER, THE TRIBU NAL ALLOWED THE APPEAL OF LIVING MEDIA INDIA LTD. THE LD. DR WAS QUESTIONED WHETHER THE FACTS OF THE TWO CASE ARE IN PARI-MATERIA OR NOT, AND IT WAS SUBMITTED THAT THE FACTS ITA NO. 3943(DEL)/2006 6 ARE THE SAME. IT WAS ALSO FAIRLY CONCEDED TH AT THE DECISION IN THE CASE OF LIVING MEDIA INDIA LTD. REACHED UP TO HONBLE SUPR EME COURT AND THE DECISION OF THE TRIBUNAL WAS UPHELD. 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. ADMITTEDLY, THE FACTS OF THIS CASE A RE IN PARI-MATERIA WITH THE FACTS OF LIVING MEDIA INDIA LTD. IN THAT CASE, TH E ASSESSEE HAS NOT BEEN FOUND LIABLE FOR DEDUCTION OF TAX AT SOURCE. RES PECTFULLY FOLLOWING THE DECISION IN THAT CASE, IT IS HELD THAT THE ASSESS EE IS ALSO NOT LIABLE TO DEDUCT TAX AT SOURCE FROM PAYMENTS MADE TO THE ADVERTISI NG AGENTS. SINCE THERE IS NO DEFAULT COMMITTED BY THE ASSESSEE IN RESPECT OF DEDUCTION OF TAX AT SOURCE, IT IS ALSO NOT LIABLE TO PAY ANY INTEREST . 5. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 1 5 JULY, 2011. SD/- SD/- (C.L. SETHI)) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 15 .07.2011. SP SATIA ITA NO. 3943(DEL)/2006 7 COPY OF THE ORDER FORWARDED TO:- M/S T.V. TODAY NETWORK LTD., NEW DELHI. ACIT, TDS CIRCLE 51(1), NEW DELHI. CIT CIT(APPEALS) THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.