2012 (5) TMI 706 - AT - Income Tax

Summary

Issues involved: Revenue's appeal against deletion of addition made on account of disallowance u/s 40(a)(ia) for assessment year 2006-07.

Summary:
The revenue appealed against the deletion of an addition made under Section 40(a)(ia) by the Assessing Officer. The assessee, an advertising agency acting as an agent for newspapers, had not deducted TDS from payments made to various agencies. The Assessing Officer disallowed expenses of Rs. 29,78,272 and added it to the assessee's income u/s 40(a)(ia) for non-compliance with Section 194C of the ITI Act. The assessee contended that as a sub-agent on commission basis, TDS deduction was not required. The ld. CIT(A) accepted the assessee's argument and deleted the addition. The revenue's appeal was dismissed by the ITAT Ahmedabad, upholding the CIT(A)'s decision based on CBDT circular and judicial precedents.

The Assessing Officer found that the assessee failed to deduct TDS u/s 194C from payments to advertising agencies, resulting in the addition of Rs. 29,78,272 to the income u/s 40(a)(ia). The assessee argued that as a sub-agent on commission basis, TDS deduction was not mandatory, citing a CBDT circular and a judicial decision. The ld. CIT(A) agreed with the assessee's position and deleted the addition.

The ITAT Ahmedabad upheld the CIT(A)'s decision, stating that the assessee, acting as an agent for media, was not obligated to deduct TDS u/s 194C on payments to advertising agencies. The ITAT relied on the CBDT circular and a previous ITAT decision to support the conclusion that the provisions of Section 40(a)(ia) did not apply in this case. Consequently, the revenue's appeal was dismissed.