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2016 (7) TMI 105 - ITAT KOLKATA

2016 (7) TMI 105 - ITAT KOLKATA - TMI - TDS u/s 194C - payment made to advertising agency without deduction of tax at source - 2nd proviso to section 40(a)(ia) inserted by the Finance Act, 2012, w.e.f. 1.4.2013 applicable retrospectively - Held that:- Assessee accepting the tds liability has raised an alternative contention that the issue may be restored to the file of the AO for the limited purpose by considering the same in the light of second proviso inserted in sub-clause (ia) of clause (a) .....

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d proviso to section 40(a)(ia) inserted by the Finance Act, 2012, w.e.f. 1.4.2013 holding that the same was applicable retrospectively. We, therefore set aside the impugned order of the ld. CIT(A) giving relief to the assessee on this issue and restore the matter to the file of the AO for the limited purpose of deciding the same in the light of second proviso to section 40(a)(ia) which is applicable retrospectively - Decided in favour of revenue for statistical purposes. - TDS u/s 194H or 19 .....

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e however has raised an alternative contention by relying on the second proviso to section 40(a)(ia) as done in respect of issue involved in ground no.1 with a request to restore the matter to the file of the AO for the limited purpose of deciding the same afresh in the light of the said proviso. We, therefore set aside the impugned order of the ld. CIT(A) giving relief to the assessee on this issue and restore the matter to the file of the AO for the limited purpose. - Appeal filed by the .....

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in deleting the disallowance of ₹ 2,64,86,490/- made by the AO under section 40(a)(ia) on account of payment made to advertising agency without deduction of tax at source. 3. The assessee in the present case is an individual who is engaged in the business of rendering advertising services. The return of income for the year under consideration was filed by her on 22.09.2009 declaring total income of ₹ 10,80,110/-. During the course of assessment proceedings, it was noticed by the AO t .....

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as submitted by the assessee that arrangement was made with accredited advertising agency mainly to channelize her advertising materials through them to the print media and since no specific work was assigned to advertising agencies, mere routing of the advertising material invented by the assessee through advertising agencies did not produce any work so as to attract the provisions of section 194C. This plea of the assessee was not found acceptable by the AO for the following reasons given in t .....

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ce is required to be made from the payment of any s um to resident Contractor/Sub-contractor for 'carrying out any work' at the time of payment or credit of such sum to the account of such person. It is embedded in the provision of Secton194C that 'any' person responsible for paying 'any' sum to any resident contractor /Subcontractor for 'carrying out any work ..... ' The expression 'Contract for carrying out any work' implies that the Contractor/Sub-contr .....

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only routing agencies and not entrusted with the publication of the advertisements, they could not be regarded as sub-contractor. In support of its contention, reliance was placed by the assessee on CBDT circulars no.715 dated 08.08.1995 andd 714 dated 03.08.1995 clarifying that the provisions of section 194C should be applicable only when a client makes a payment to an advertising agency and it would not be applicable when the advertising agency makes a payment to the media. This contention of .....

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e had made contract with the advertising agencies for placement of work. As per provision of Circular No.715 dated 08-08-1995, it is mentioned that when a client makes a payment to n Advertising Agency, tax is liable to be deducted, and not when the Advertising Agency makes payment to the Print or Electronic media, directly. So, it is vividly mentioned in the Circular that payment made to the Print or Electronic media by an Advertising Agency, is exempted from deduction of tax. In the instant ca .....

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ion of CBDT's Circular No.714 dated 03-08-1995, there is also provision of deduction of tax at source against the payment made to print or electronic media for advertising including production of programme for such broadcasting and telecasting to be used in such advertising. As per CBDT's Circular No.715 dated 08-08-1995, there is also a provision of deduction of tax at source when a client makes payment to an advertising agency. Only the Advertising Agencies, who makes direct payment to .....

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/electronic media would be exempted from deducting tax at source. The assessee in her submission had also admitted that she is an unaccredited agent. She had made with contract with the advertising agencies for performance of work against the payment made to the advertising agency and the work may be related to the publication of any advertisement in print/electronic media or to the souvenir or any payment to any other advertising activities that may not be restricted to printing of advertisemen .....

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y for publication of advertisement in print media. Moreover, since the assessee is an unaccredited agent, so the assessee is treated as client, when she makes payment to an advertising agency. Since, as there is no provision of exemption of non-deduction of tax at source by an unaccredited agent to his/her payment to the advertising agent, so, the assessee's contention of 'routing through' the advertising agency is not acceptable. As well as the assessee's contention of 'reim .....

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ee of cost. So, as per provision of the Act, tax is deductible at source by the assessee against such income earned by the advertising agency. 5.1 For the reasons given above, the AO held that the payments made by the assessee to the advertising agencies were covered by the provision of section 194C and since no tax at source was deducted by the assessee from the said payments as required by section 194C, the amount of ₹ 2,64,86,490/- paid by the assessee to advertising agencies was disall .....

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lly considered the assessment order and the submissions of the appellant. I am of the considered view that the facts of the present case are identical to the facts of Premlata Maheswari. I find that on these facts, the case is directly covered by the above said decisions of the Hon ble ITAT Bench, Bangalore, in the case of M/s. Sands Advertising Communication Pvt. Ltd. cited supra and ITAT bench, Kolkata, in the case of Premlata Maheswari Vs. ITO, Ward-32(2), Kolkata, cited supra. In the present .....

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(ia) are not attracted on the facts of the instant case. Accordingly, disallowance of ₹ 2,64,86,490/- is not justified and it is deleted. Hence, Ground No. 2 (a) of the appeal is allowed. 7. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that a similar issue involving identical facts and circumstances has been decided by the Bangalore Bench of this Tribunal against the assessee vide its order dated 06.02.2015 passed .....

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ontract with BCCL related to the purchase and sale of bulk advertisement space is not a contract for work . As per the assessee, the term advertising only includes payments made by clients to advertising agency and not payments made by the advertising agency to the print media and the TDS provisions are applicable only when the client makes payment for advertising either to media directly or to advertising agencies and not when advertising agencies make payment to the media. It was contended by .....

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e co-ordinate bench of the Bangalore Tribunal in the case of Sands Advertising Communication (P) Ltd V DCIT (37 SOT 179) (Bang). 6.2 In the decisions cited by the assessee, the scope and meaning of work is explained in detail and there is no dispute on this score. In terms of clause (iv) of Explanation to section 194C of the Act, advertising is also an activity which falls within the ambit of Work . This, in the context of the case on hand, is the work which the media does for a client for a cer .....

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g the advertisement space, BCCL is not concerned about whom the advertisement is intended for. It s only requirement is that the advertisement should comply with the laws in force at that time. Therefore, it follows that the payment made by the assessee to BCCL is for advertisement, which is unambiguously included in the provisions of section 194C of the Act. 6.3 The assessee has placed reliance on CBDT s Circular No.714 dt.3.8.1995 to contend that the transaction in question would not fall unde .....

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clude advertising. 6.4 In CBDT Circular No.715 of 1995, cited by the assessee, the scope of advertising contract was clarified in Answer to Question 1 as under :- The term advertising has not been defined in the Act. During the course of consideration of the Finance Bill, 1995, the Finance Minister clarified on the floor of the House that the amended provisions of tax deduction at source would apply when a client makes payment to an advertising agency and not when an advertising agency makes pay .....

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. In this factual matrix, the inevitable conclusion that follows is that the assessee has purchased the advertisement space for itself and not on behalf of any specific clients in the capacity of an advertising agency. Therefore, it is clear from the agreement that at the time of purchasing the bulk advertisement space, the assessee is merely a client to the media, BCCL in this case. In this view of the matter, it can be inferred from the CBDT Circular No.715 of 1995 that the assessee was liable .....

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dia. It s sister concern was in similar business, but was an accredited agency. The assessee extend into an agreement with the sister concern under which all advertisements created / developed by the assessee for its clients were to be released to the print media through the sister concern, for which certain consideration was to be paid to it. The Assessing Officer was of the view that the provisions of section 194C of the Act was applicable, while the contention of the assessee was that the sis .....

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t makes outright purchase of advertising space and exercises exclusive control over the space. It has the right to sell the space or retain it with itself. Further, this is not a case of payment made by an advertising agency to the print media. There is a transfer of advertisement space from BCCL to the assessee, who in turn sells it to other parties. In this factual matrix, we are of the view that the reliance placed on the CBDT Circular no.715 of 1995 and the decision in the case of Sands Adve .....

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the assessee and the impugned order of the ld. CIT(A) giving relief to the assessee on this issue is liable to be set aside by following the said decision of the Coordinate bench of this Tribunal. 7.2 At the time of hearing, the ld. Counsel for the assessee also has not disputed this position. He however has raised an alternative contention that the issue may be restored to the file of the AO for the limited purpose by considering the same in the light of second proviso inserted in sub-clause ( .....

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e same afresh in the light of second proviso to section 40(a)(ia) inserted by the Finance Act, 2012, w.e.f. 1.4.2013 holding that the same was applicable retrospectively. We, therefore set aside the impugned order of the ld. CIT(A) giving relief to the assessee on this issue and restore the matter to the file of the AO for the limited purpose of deciding the same in the light of second proviso to section 40(a)(ia) which is applicable retrospectively as held by the Coordinate bench of this Tribun .....

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