TMI Blog2022 (7) TMI 1054X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. Social Kinnect. We find from the perusal of the agreement with Social Kinnect and scope of services defined therein, Social Kinnect would engage various professional artists for preparation and execution of the advertisement content and Social Kinnect would provide ultimate advertisement content on behalf of the assessee in digital platform We find that there is no direct connection or direct agreement between assessee company and the professional artists who had assisted in advertisement content. The agreement with professional artists are only with the advertisement agency i.e. Social Kinnect and not the assessee. Hence, Social Kinnect while making payments to those professional artists, would be liable for TDS @10% u/s.194J of the Act as those professional artists are rendering professional services to Social Kinnect. The assessee had merely taken the services only from Social Kinnect. It is not the look out of the assessee to understand the source from where the Social Kinnect obtains its professional services. Once the advertisement content is provided by Social Kinnect in a digital platform, the assessee is bound to make payments to Social Kinnect for that advertiseme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n power services and infrastructure services. Survey u/s.133A(2A) of the Act was conducted on 04/10/2018. During the course of survey, it was found that assessee had made certain payments to certain parties which were not in compliance with provisions of Chapter XVIIB of the Act. The survey revealed that certain payments made by the assessee were not subjected to deduction of tax at source or tax was deducted at a lesser rate, as the case may be. Accordingly, an order u/s.201/201(1A) was sought to be passed in the hands of the assessee treating the assessee as assessee in default u/s.201 of the Act by raising TDS demand and charging interest thereon u/s.201(1A) of the Act on the assessee. 3.1. The issue in dispute before us is with respect to payments made by the assessee company to Social Kinnect. We find that assessee company had entered into an agreement with Social Kinnect (vendor) whereby vendor would act as digital media agency for the assessee company. The said agreement envisaged provision of various services by Social Kinnect to the assessee such as e-mail services, web management, online media buying and management fees. During the year under consideration, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. Social Kinnect. We find from the perusal of the agreement with Social Kinnect and scope of services defined therein, Social Kinnect would engage various professional artists for preparation and execution of the advertisement content and Social Kinnect would provide ultimate advertisement content on behalf of the assessee in digital platform. We find that there is no direct connection or direct agreement between assessee company and the professional artists who had assisted in advertisement content. The agreement with professional artists are only with the advertisement agency i.e. Social Kinnect and not the assessee. Hence, Social Kinnect while making payments to those professional artists, would be liable for TDS @10% u/s.194J of the Act as those professional artists are rendering professional services to Social Kinnect. The assessee had merely taken the services only from Social Kinnect. It is not the look out of the assessee to understand the source from where the Social Kinnect obtains its professional services. Once the advertisement content is provided by Social Kinnect in a digital platform, the assessee is bound to make payments to Social Kinnect for that advertisement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of carrying on legal, medical, engineering or the profession of accountancy or technical consultancy or interior decoration or advertising or such activity as is notified by the Board for the purpose of section 44AA or of this section. 3. Representations have been received regarding the scope and meaning of the term advertising used in section 194C(1), where tax deduction at source has to be made at the rate of 1 per cent as against rate of 2 per cent in the other cases. It is clarified that advertising may be in print or electronic media, i.e., in newspapers, periodicals, radio, television, etc. In such cases the tax will be deducted at the rate of 1 per cent of the payment made for advertising including production of programmes for such broadcasting and telecasting to be used in such advertising. In all other cases of work of broadcasting and telecasting including production of programmes for such broadcasting and telecasting, where advertising is not involved, tax will be deducted at the rate of 2 per cent of the sum. 4. It is also clarified that the tax will be deducted at source under section 194J from payments made for professional services. Thus, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The advertising agencies shall have to deduct tax at source at the rate of 5 per cent under section 194J while making payments to artists, actors, models, etc. If payments are made for production of programmes for the purpose of broadcasting and telecasting, these payments will be subjected to TDS @ 2 per cent. Even if the production of such programmes is for the purpose of preparing advertisement material, not for immediate advertising, the payment will be subject to TDS at the rate of 2 per cent. (emphasis supplied by us) 3.5. Further we find the case of the assessee is also covered by the Co-ordinate Bench decision of Delhi Tribunal in the case of Perfect Probuild P. Ltd., vs. DCIT in ITA No.1034/Del/2018 for A.Y.2011-12 dated 05/08/2021. The facts before the Delhi Tribunal which are relevant for the dispute before us are as under:- 6. Similarly, in respect of advertisement expense, learned Assessing Officer was of the opinion that the TDS was to be deducted at 10% u/s. 194J, but not at 2% u/s. 194C, inasmuch as there was no contract for providing advertisement services. On that account, he raised a demand of Rs.9,47,429/- u/s. 201(1) and interest at Rs. 5,08,213/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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