The Income Tax Appellate Tribunal (ITAT), Delhi Bench that TDS on advertisement charges should be deducted under section 194C at the 2% and not 194J at the rate of 10%.
The assessee, Perfect Probuild P. Ltd is a private limited company engaged in the business of construction. Assessee had a lease agreement with Noida Authority executed on 04/06/2010 whereby the assessee is a lessee and paid lease rent to the Noida Authority. Assessee did not deduct TDS on such payment made for annual lease rent on the basis of a letter given by the Noida Authority. So also during the year, assessee made certain payments in respect of advertisement expenses and the assessee deducted TDS at 2% u/s. 194C of the Income-tax Act, 1961.
The two member bench of Judicial Member K.Narasimha Chary and Accountant Member R.K.Panda noted that a reading of section 194C with Explanation (iv) thereof makes it clear that any person responsible for paying any sum to any resident for carrying out the work of advertising, broadcasting and telecasting shall deduct an amount equivalent to 1% where the payment is being made to an individual and at 2% in other cases. Learned Assessing Officer was of the view that the provisions of section 194J are applicable because there is no contract between the assessee and the advertising agency in this case and therefore, such payments have to be treated as payments by way of fee for professional services.
“It could be seen that the word “advertising” has been clarified by CBDT in Circular No. 714 dated 03/08/1995 while stating that according to the amended provisions, tax has to be deducted @ 1% in case of advertising and at 2% in other cases. It is further stated in Circular No. 714 that fee for professional or technical services to be formed u/s. 194J would mean the services rendered by a person 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 section 194J. This circular makes it clear that the tax will be deducted at source u/s. 194J from the payments made for professional services, when the advertising agency makes payment for professional services to a film artist such as an actor, a cameraman, a director etc., in which case the tax will be deducted at 5%,” the ITAT added.
The Tribunal while directing the assessing officer to delete the addition observed that a contract need not always be in writing and could be implied also. In the circumstances, we find that the payment made by the assessee for advertisement in connection with their business falls within the ambit of section 194C and not section 194J.
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