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Income Tax Appellate Tribunal, BANGALORE BENCHES “ C ” BENCH: BANGALORE
Before: SHRI B.R. BASKARAN & SHRI PAVAN KUMAR GADALE
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “ C ” BENCH: BANGALORE BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA. No.1679/Bang/2016 (Assessment Year: 2010-11) Metropolitan Media Company Limited, No.40, Jaya Sai Towers, Sajjan Rao Road, V.V. Puram, Bangalore-560 004 ….Appellant PAN AABCV 6912C Vs. Dy. Commissioner of Income Tax, Circle 3(1), Hubli. ……Respondent. Assessee By: Shri S. Sundar Raman, CA(Written submissions) Revenue By: Shri Pradeep Kumar, CIT (D.R)
Date of Hearing : 26.06.2020 Date of Pronouncement : 29.07.2020
O R D E R PER SHRI PAVAN KUMAR GADALE, JM : The assessee has filed an appeal against the order of Commissioner of Income Tax (Appeals)-7, Bangalore passed under Section 143(3) and 250 of the Income Tax Act, 1961 (the Act). 2. The assessee has raised the following grounds of appeal :
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The Brief facts of the case are that the assessee is engaged in the business of printing and publishing of newspaper and filed the Return of Income on 1.10.2010 with total income of Rs.63,24,26,535/- and the return was processed under Section 143(1) of the Act. Subsequently, Notice under Section 143(2) and 142(1) of the act were issued. In compliance the learned Authorized Representative of the assessee appeared from time to time and furnished the details. The Assessing Officer found that the assessee is engaged in business of printing and publication of newspaper, and has entered into an Agreement with Bennett, Coleman & Co. Ltd. (BCCL) for selling and utilizing advertisement space in publication of Times of India (kannada) owned by BCCL. As per the terms and conditions of agreement, the assessee has paid the sum for purchase of saleable advertising space in the
3 ITA No.1679/Bang/2016 publication. Whereas, both the companies BCCL and assessee company are in the business of printing and publication of newspaper and the advertisements are the main source of income and also the agreement entered by the assessee with BCCL is in the nature of contract for specific work . The Assessing Officer observed that, the provisions of Section 194C of the Act shall be attracted for specific contracts between Assessee Company and BCCL for usage of sale of advertisement and dealt on the clauses of agreements and finally concluded that, the assessee company has not deducted TDS under Section 194C of the Act, and applied the provisions of Section 40(a)(ia) of the Act and disallowed an amount of Rs.6,80,00,000/-.Similarly A.O. made addition in respect of data circular expenses for non deduction of TDS, disallowance under Section 14A r.w. Rule 8D, TDS credits not accounted and assessed the total income of Rs.71,55,32,440/- and passed order under Section 143(3) of the Act dt.06.02.2013. Aggrieved by the order, the assessee has filed an appeal with the CIT(Appeals), whereas the CIT(Appeals) has considered the submissions and findings of the AO, and has concurred with the action of Assessing officer and dismissed the assessee appeal. Aggrieved by the CIT(A) order, the assessee has filed an appeal with the Tribunal. 4. The learned Authorized Representative submitted that the CIT(A) has erred in sustaining the addition made by the Assessing Officer for non-deduction of TDS under Section 194C of the Act, where the amount was paid to BCCL for purchase of cost of entire advertisement space in Times of India(Kannada Edition)and relied
4 ITA No.1679/Bang/2016 on circular no 5 of 2016 dated 29-02-2016 of CBDT, were no tax need to be deducted on the payment made to a newspaper company by the agent for procuring and canvassing advertisements. Further relied on the second proviso to Section 40(a)(ia) of the Act. Where the payee, BCCL has included the said amount in their Income Tax Returns for the relevant assessment year and paid the taxes evident by certificate in Form26A.The learned Authorized Representative supported his arguments with circulars, written submissions, Paper Book and judicial decisions and prayed for allowing the appeal. Contra, the learned Departmental Representative supported the orders of learned CIT(A) and filed written submissions. 5. We heard the rival contentions and perused the material on record. The sole matrix of the disputed issue as envisaged by the learned Authorized Representative that the assessee company has entered into an Agreement with BCCL for selling and utilizing the advertisement space on a principal to principal basis in publication of Times of India (kannada edition) owned by BCCL.The assessee has paid Rs6.80crores to BCCL towards purchase of saleable advertisement space in the publication. The Assessing Officer observed that, the expenditure incurred towards advertisement charges shall attract the provisions of Section 194C of the Act. Since, the assessee has not deducted TDS on advertisement charges, the provisions of Section 40(a)(ia) of the Act are applicable and disallowed the claim. We consider it appropriate to deal on the contentions of the assessee that the
5 ITA No.1679/Bang/2016 CBDT has issued Circular No.5 of 2016 in respect of Tax deduction on payments by TV channels, publication houses to advertisement companies for procuring and canvassing the advertisements, which is read as under:
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The learned Authorized Representative emphasized that as per the Agreements, the assessee is given a right to canvas the advertisement for entire advertisement space and become sole selling agent of BCCL and the payment made by the assessee to the sole selling agent is one made by agent to newspaper company and as per the Circular No.5 of CBDT Dt.29.02.2016, no tax need to be deducted on payments. In the alternative, it was submitted that the BCCL(Payee) has included these sums in their income tax return for the relevant Assessment year and paid taxes and filed the Certificate issued by Chartered Accountant in Form No.26A referred at page 15&16 of the submissions. The learned Authorized Representative also relied on catena of judgments and in particular the Hon'ble High Court of Karnataka, Dharwad Bench decision in ITA No.274 of 2013 Dt.17.10.2019 in assessee own case, Times VPL Ltd. Vs. CIT Hubli. We consider it necessary to refer to the observations of the Hon'ble High Court of Karnataka at page 13 to 16, Para 13 to 16 which is read as under :
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We found the co-ordinate Bench of tribunal in ITA No.183/Bang/2014 Dt.27.05.2016 in ITO (TDS) Vs. Confident Projects (India) Ltd. has considered the Circular No.5 of 2016 of CBDT and observed on non-applicability of
10 ITA No.1679/Bang/2016 provisions of Section 194C of the Act at page 5 Para 5 to 7 of the order, which is
read as under :
“ 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-assesseecompany 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 Hon’ble Delhi High Court in the case of Living Media Ltd., there was no relationship of principal 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.
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 applicable 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 payments by television channels and publishing houses to advertisement companies for procuring or canvassing for advertisements.
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.
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 section 194C on the second type of payment e.g. payment by advertising agency to the media company.
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 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-toprincipal 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
11 ITA No.1679/Bang/2016 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 Jagran 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 in 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 television 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 needless 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 beneficial 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 bearing on the applicability of TDS provisions. Therefore, we do not find fault with reasoning of CIT(A). 7. In the result, appeal filed by the revenue is dismissed.”
Considering the facts and circumstances, provisions and the decisions relied by the
learned Authorized Representative and the Hon'ble jurisdictional High Court
decision dt.17.10.2019.We find that the Assessing Officer is not justified in
holding that the provisions of Section 194C of the Act and Section 40(a)(ia) of the
Act are attracted in this case. Since, we have held that the provisions of Sec194C
are not attracted, the alternative contention of the assessee on Form no 26A does
not require adjudication. Accordingly, we set aside the order of the CIT(A) and
direct the assessing officer to delete the impugned addition and allow the grounds
of appeal of the assessee.
12 ITA No.1679/Bang/2016 6. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 29th July, 2020.
Sd/- Sd/- (B.R. BASKARAN) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 29.07.2020. *Reddy GP Copy to
The appellant 2. The Respondent 3. CIT (A) 4. Pr. CIT 5. DR, ITAT, Bangalore. 6. Guard File
By order
Assistant Registrar Income-tax Appellate Tribunal Bangalore