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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI G.S. PANNU & SHRI PAWAN SINGH
The captioned are three appeals filed by the same assessee for different assessment years and involve certain common issues, therefore, they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
The solitary common issue in the captioned appeals arises from the action of the income-tax authorities in holding that tax was liable to be deducted at source u/s 194-I of the Act in respect of display charges paid by the assessee as against the stand of the assessee that the tax was liable to be deducted in terms of Sec. 194C of the Act on such payments.
We may take-up for discussion the facts in relation to appeal for the Assessment Year 2003-04 wherein the Assessing Officer noted that assessee paid display charges to private parties amounting to Rs.8,34,65,260/-, and as per the Assessing Officer, tax was required to be deducted at source u/s 194-I of the Act as the charges were paid for taking hoarding space on rent. On being asked to explain, assessee pointed out that there are specific contracts made with service providers for the list of services to be provided and that assessee provides various services to its clients which were not possible without taking the hoarding space. The Assessing Officer noted that charges were paid to private parties who have sub-let their hoarding space to the assessee-company for display of advertisements of assessee’s clients during the period of their advertisement campaigns. According to him, such payments would fall within the meaning of ‘rent’ for the purposes of Sec. 194-I of the Act and accordingly, the tax deducted at source by the assessee u/s 194C of the Act was not correct. In coming to such a conclusion, the Assessing Officer has also referred to a sample copy of the work order, which according to him, justifies the inference that the display charges relate to a specific hoarding site for a specified period and, therefore, it was to be understood as ‘rent’ for the purposes of Sec. 194-I of the Act. Accordingly, as per the Assessing Officer, the tax deductible at source was Rs.1,75,27,705/- as against tax deducted at source by the assessee of Rs.8,34,652/- thereby resulting in a shortfall of Rs.1,66,93,052/-. Together with interest chargeable u/s 201(1A) of the Act of Rs.2,25,35,621/-, the Assessing Officer held the assessee in default for a sum of Rs.3,92,28,673/- u/s 201(1) and 201(1A) of the Act.
When the matter was carried in appeal before the CIT(A), assessee assailed the stand of the Assessing Officer in law and also on facts. The claim of the assessee was that the payments in question were in terms of specific contracts made with the respective parties and assessee was providing specific services to its clients as per the Service Agreements which were not possible merely by taking the space on rent. The CIT(A) noted that assessee did not furnish specific agreements or contracts with the concerned parties and he proceeded on the basis of the finding of the Assessing Officer that the payments in the name of ‘display charges’ made to private parties was for sub-letting space for display of advertisements of the clients of the assessee. In the aforesaid situation, CIT(A) referred to the CBDT Circular no. 715 dated 08.08.1995 to say that the display charges paid to private parties, who had sub-let the hoarding space to the assessee for display of advertisements of assessee’s clients, was ‘rent’ within the meaning of Sec. 194-I of the Act. However, following the ratio of the judgment of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages Private Limited vs CIT, [2007] 163 Taxman 355, the CIT(A) directed the Assessing Officer to consider the evidences to be furnished by the assessee that the concerned parties have disclosed the relevant receipts in their respective returns of income and have paid taxes thereon, and further directed the Assessing Officer to provide necessary relief to the extent of the taxes paid by the recipients, but so far as the liability to pay interest u/s 201(1A) of the Act was concerned, the levy was affirmed upto the date of payment of taxes by the deductee. Not being satisfied with the order of the CIT(A), assessee is in further appeal before us.
Before us, the learned representative for the assessee has referred to the following decisions of our co-ordinate Benches to contend that the payments in question would fall within the purview of Sec. 194C of the Act and not under Sec. 194-I of the Act as canvassed by the Revenue :- i) DCIT vs Bright Outdoor Media Pvt. Ltd., to 7050/Mum/2012 (Mum.); ii) DCIT vs Bright Outdoor Media Pvt. Ltd., ITA No. 4008/Mum/2015 (Mum.); iii) ITO vs Roshan Publicity Pvt. Ltd., [2005] 4 SOT 105 (Mum.); iv) DCIT vs Madison Communication Pvt. Ltd., [2015] 152 ITD 759 (Mum.); v) Ogilvy & Mather Pvt. Ltd. vs ITO, [2015] 155 ITD 475 (Mum.); and, vi) DCIT vs Group M Media India Pvt. Ltd., ITA No. 7055/Mum/2012 (Mum.)
The learned representative vehemently pointed out that the contracts in question have been undertaken with concerns who are engaged in the activity of advertising and, therefore, it is not a case where assessee has contracted with site-owners for obtaining sub-letting of hoarding so as to fall within the purview of Sec. 194-I of the Act. The learned representative referred to page 1 of the Paper Book, wherein is placed the work contract for display charges with one, M/s. Bright Outdoor Media Pvt. Ltd., which has been referred to by the Assessing Officer in the impugned order. Firstly, it is pointed out that the said contract is not for the relevant period under consideration inasmuch as the same is dated 01.01.2011. The learned representative explained that during the assessment proceedings only a sample contract was called for and, in response, assessee submitted the same. On the contrary, reference has been made to pages 2-3 of the Paper Book, wherein is placed vendor invoices and their corresponding purchase orders for display charges incurred by the assessee during the period relevant to the assessment years under consideration. On the basis of the aforesaid, it was contended that if one is to look at the contracts for the relevant period, though in some cases the expression “rental” has been used, but in effect the terms and conditions do not suggest that the hoarding space has been merely taken on rent, because the recipients are not the owners of the hoarding sites. In fact, referring to the contract with M/s. Bright Outdoor Media Pvt. Ltd., the learned representative pointed out that the said concern is engaged in advertising activities and not for letting of hoardings and, for that matter, referred to the decision of the Tribunal in the case of the said assessee dated 24.06.2016 (supra), wherein similar payments made have been held to be exigible for deduction of tax u/s 194C of the Act.
On the other hand, the ld. DR relied upon the orders of the authorities below and pointed out that on the basis of material before the Assessing Officer, it stood established that the payment was for taking the hoarding space on rent and thus, Sec. 194-I of the Act was rightly invoked.
We have carefully considered the rival submissions. As per our aforesaid discussion, the basic point of difference between the assessee and the Revenue is the applicability of Sec. 194C vis-a-vis Sec. 194-I of the Act. The appellant before us is a concern which is engaged in advertising and publicity, including organising advertisement of its clients on hoardings. The dispute pertains to the tax that is required to be deducted at source on payments made under the head ‘display charges’. The stand of the Assessing Officer is that the display charges paid to private parties are nothing but payments for taking the hoarding space on rent from the payees. On the contrary, the stand of the assessee is that it has not contracted with the parties who were owning the hoarding site and rather, the payments are to parties who are otherwise engaged in rendering advertising and publicity services. Our co-ordinate Bench in the case of M/s. Bright Outdoor Media Pvt. Ltd. (supra) was also considering the nature of similar payments in the context of requirement of deduction of tax at source. The stand of the assessee therein was that tax was deductible at source u/s 194C of the Act whereas the stand of the Revenue was that the applicable section was Sec. 194-I of the Act, the payments being in the nature of rent. In this context, the Tribunal in its order dated 24.06.2016 (supra) referred to CBDT Circular no. 715 dated 08.08.1995 (supra), wherein the CBDT has addressed the controversy as to whether a contract for putting-up a hoarding would be covered under Sec. 194C or Sec. 194-I of the Act. As per the CBDT, a contract for putting-up a hoarding is in the nature of advertising contract and the provisions of Sec. 194C of the Act would be applicable. However, it is further clarified that if a person has taken a particular space on rent and thereafter sub-lets the same, fully or in part, for putting-up a hoarding, such payments would be liable for tax deduction at source u/s 194-I of the Act and not u/s 194C of the Act. In our view, the aforesaid clarification by the CBDT clearly brings out that what is of essence is to examine the nature and terms and conditions of the agreement in pursuance to which the questioned payments have been made by the assessee. In that context, we find that the Assessing Officer has gone by a sample contract, which is dated 01.01.2011 and is clearly not relevant to the period under dispute. Therefore, the reference and reliance on such contract by the Assessing Officer is of no avail to adjudicate the controversy in question for the period under consideration. In this background, the learned representative in the course of hearing submitted that the matter may be sent back to the file of the Assessing Officer who may examine the nature of the payments on the basis of the contracts relevant to the period under consideration. The sample invoices for the relevant period has been placed before us at pages 2-30 of the Paper Book. In our considered opinion, the aforesaid approach would meet the ends of justice inasmuch as before applying the applicable legal position, it is essential that the appropriate facts are brought-out, which are germane to decide the controversy. Therefore, in this view of the matter, we set-aside the order of CIT(A) and direct the Assessing Officer to re-decide the controversy based on the material assessee may furnish before him and only thereafter the Assessing Officer shall decide the issue in accordance with law.
In the result, appeal of the assessee for Assessment Year 2003-04 is allowed, as above.
It was a common point between the parties that the facts and circumstances in the appeals of assessee for Assessment Years 2004-05 and 2005-06 are pari materia to those considered by us in the appeal for Assessment Year 2003-04, therefore, our decision therein shall apply mutatis mutandis in the said appeals also.
Resultantly, the captioned appeals of the assessee are allowed, as above.
Order pronounced in the open court on 13th April, 2018.