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2012 (10) TMI 472 - AT - Income TaxDisallowance of discount paid/given to advertising consultants - Appellant has paid a sum of ₹ 49,93,84,045/- towards agents commission for sale of space for advertisements in newspapers and time slots for television broadcasting. Held that:- The relationship between advertising consultant and the appellant, is on principal to principal basis, and not as an agent and principal for the reason that the advertising consultant neither act on the directions of the appellant nor rendered any services on behalf of the appellant to the advertisers. This is evident from fact that advertising consultant has to pay the bills of the publisher/broadcaster irrespective of the collections from their clients. As no services are rendered by the advertising consultant to the appellant, and further no payment/credit is made by the appellant, who is the publisher/broadcaster, to the advertising agency, the appellant is not liable for making any TDS and therefore, no disallowance can be made u/s. 4O(a)(ia) of the Act, for the said amount of ₹ 49,93,84,045 allowed towards discount to the advertising consultants.therefore, the payment by the assessee- company to accredited advertising agencies could not be terms as payment of commission and, therefore, the provisions of section 194H were not applicable to the instant case - against revenue. payment of data circuit rentals to BSNL - Assessee had incurred an amount of ₹ 8,68,80,460/- towards data circuit lines charges, which was paid to BSNL. The AO disallowed the said amount applying the provisions of section 40(a)(ia) on the ground that the assessee had not deducted any tax (TDS) on such payments. On appeal, the CIT(A) deleted the disallowance made by the AO observing that though in the assessment the AO has mentioned that the said payment made by the assessee to BSNL towards contractual obligation, he has not clarified as to how there is a contractual obligation for the said payment. Held that:- U/s 194C, tax is required to be deducted when an assessee as contractee, makes payment to another person/party, which is a contractor, for execution of work. Since in this case there is no contract involved, provisions of section 194C are not applicable to the said payment made by the assessee to BSNL. There is no evidence to show that borrowed funds were used for the purchase of assets which had not been put to use. Therefore, we do not find any ground to interfere with the order of the CIT(A) and the same is hereby upheld - ground of appeal of the revenue is dismissed.
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