TMI Blog2018 (4) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... tax as provided under Section 194H of the Act. Thus the provisions of Section 201 were, therefore, rightly invoked in this case against the appellant by the assessing authority once having held that the appellant failed to comply with the provisions of Section 194H of the Act. - Decided against assessee. - Civil Appeal Nos. 3496-3497 of 2018, (Arising out of S.L.P.(C) Nos.3320-3321 of 2011) - - - Dated:- 3-4-2018 - Mr. R.K. Agrawal And Mr. Abhay Manohar Sapre JJ. For the Petitioner(s) : Mr. Rajeev Sharma, AOR For the Respondent(s) : Mrs. Anil Katiyar, AOR JUDGMENT Abhay Manohar Sapre, J. 1. Delay condoned. 2. Leave granted. 3. These appeals are directed against the final judgment and order dated 20.11.2009 passed by the High Court of Kerala at Ernakulam in Income Tax Appeal No.27 of 2009 and Income Tax Appeal No.62 of 2009 whereby the High Court allowed the appeals preferred by the respondent herein and reversed the order dated 28.03.2007 passed by the Income Tax Appellate Tribunal, Cochin Bench in Income Tax Appeal Nos. 926 927/COCH/2005 for the Assessment Years 2002-2003 and 2003-2004 and restored the order dated 04.03.2005 passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 003(01.06.2001 to 31.03.2002) and 2003-2004 (01.04.2002 to 31.03.2003), the appellant paid a sum of ₹ 2,56,75,165/- and ₹ 2,29,65,922/- to various accredited Agencies, with whom they had entered into the aforementioned agreement for telecasting the advertisements given by these Agencies relating to products manufactured by several consumer companies. The amount was paid by the appellant to the Agencies towards the commission in terms of the agreement. 11. The question arose before the Assessing Officer (AO) in the assessment proceedings as to whether the provisions of Section 194H of the Act, which came into force with effect from 01.06.2001, are applicable to the payments in question made by the appellant to the Agencies and, if so, whether the appellant deducted tax at source as provided under Section 194H of the Act from the amount paid by the appellant to the Agencies. 12. The AO made the assessment vide its order dated 22.09.2003. Insofar as the aforementioned question was concerned, the AO was of the view that the provisions of Section 194H of the Act are applicable to the payments made by the appellant to the Agencies because the payments were made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting in attracting the provisions of Section 201 of the Act. 18. The appellant (assessee) felt aggrieved and filed these appeals by way of special leave in this Court. 19. Heard Mr. Rajeev Sharma, learned counsel for the appellant and Mr. Rupesh Kumar, learned counsel for the respondent. 20. Submissions of learned counsel for the appellant (assesse) were two-fold. In the first place, he argued that the payments made by the appellant to the accredited agencies during the assessment years in question were not in the nature of commission. According to learned counsel, the relationship between the appellant and the accredited Agencies was not that of principal and the agent but it was in the nature of principal-to-principal. In other words, the submission was that the accredited agencies were not working as agent of the appellant and nor the appellant was paying them any amount by way of commission. 21. Referring to the terms of the agreement, learned counsel tried to point out that the Agencies, in terms of the agreement, purchased the air time from the appellant and then sold it in the market for advertisement to their customer after retaining 15% commission given to them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid, shall be liable to deduct income-tax under this section. Provided also that no deduction shall be made under this section on any commission or brokerage payable by Bharat Sanchar Nigam Limited or Mahanagar Telephone Nigam Limited to their public all office franchisees. Explanation- For the purposes of this section,- (i) commission or brokerage includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities; (ii) the expression professional services means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as is notifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roper and does not call for any interference. 30. In other words, in our considered view, the High Court was right in holding that the provisions of Section 194H are applicable to the appellant because the payments made by the appellant pursuant to the agreement in question were in the nature of payment made by way of commission and, therefore, the appellant was under statutory obligation to deduct the income tax at the time of credit or/and payment to the payee. 31. The aforementioned conclusion of the High Court is clear from the undisputed facts emerging from the record of the case because we notice that the agreement itself has used the expression commission in all relevant clauses; Second, there is no ambiguity in any clause and no complaint was made to this effect by the appellant; Third, the terms of the agreement indicate that both the parties intended that the amount paid by the appellant to the agencies should be paid by way of commission and it was for this reason, the parties used the expression commission in the agreement; Fourth, keeping in view the tenure and the nature of transaction, it is clear that the appellant was paying 15% to the agencies by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with which we are concerned in these appeals and distinguished it in the following words: 61. Now we come to the judgment of the Kerala High Court in the case of CIT vs. Director, Prasar Bharti reported in (2010) 325 ITR 205(ker.) on which much reliance has been placed by the assessing authority. The Prasar Bharati is fully owned Government of India undertaking engaged in telecast of news, various sports, entertainments, cinemas and other programmes. The advertisements were canvassed through agents under the agreement with them. The advertising agencies and the Director, Prasar Bharati were principal and agent as per the agreement and the Doordarshan provided 15% discount on the basis of which it was contended that no deduction at source was required. The Tribunal held that there was no liability for deduction of tax at source under Section 194H which judgment was reversed by the Kerala High Court. From the facts of the aforesaid case, it is clear that Doordarshan had appointed agents i.e. advertising agencies and there was agreement entered between them. In the aforesaid circumstances, 15% advertisement charges collected and remitted was held to be in the form of commission p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cies by the Doordarshan is for canvassing advertisements on behalf of the respondent. So much so, the payment of 15%, by whatever name called, whether discount or commission, falls within the definition of commission as defined under Explanation (i) to Section 194H of the Act. It is very clear from the above provision that the advertising agency clearly understood the agreement as an agency arrangement and the commission payable by the respondent to such agency is subject to tax deduction at source under the Income Tax Act and so much so the provision in the agreement was for the agent after retaining 15% to give cheque or demand draft for TDS amount which was originally 5% until it was enhanced to 10% by Finance Act 2007 with effect from 1.6.2007. 62. In the aforesaid case, the relationship of principal and agent was fully established since the advertising agency was appointed as agent by written agreement and there was specific clause that tax shall be deductible at source on payment of trade discount. In the said circumstances, the Kerala High Court held that Section 194H of the Income Tax Act was applicable. In the present case, there is no agreement betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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