The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the advertisement charges paid to an agency which is a franchisee of a newspaper would attract TDS under section 194 of the Income Tax Act, 1961.
The assessee, Harsha Agencies, is a franchisee of ‘The Hindu’, paid a certain amount to “The Hindu” newspaper for advertising for hiring staff. While completing the assessment proceedings against the assessee, the Assessing Officer held that the said payment was not made by the assessee directly to ‘The Hindu’, but instead, it was made to Harsha Agencies which is a franchisee of ‘The Hindu’ and accordingly, the assessee was liable to deduct tax at source under section 194C of the Act thereon.
The assessee claimed that the payment is made to “The Hindu” newspaper for advertising for hiring staff and this payment was in the nature of one-time payment and no contract exists with the newspaper and accordingly, the provisions of Section 194C of the Act would not be applicable.
Upholding the orders of the lower authorities, the Tribunal found that the said payment was made towards advertisement charges to Harsha Agencies which is a franchisee of ‘The Hindu’.
“On a bare reading of provisions of Section 194C of the Act, we find that any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract shall deduct tax at source thereon. Explanation to Section 194C of the Act defines the term ‘work’ to include ‘advertising’. Hence, the very fact that assessee had given the advertisement material to M/s. Harsha Agencies constitutes a contract entered into by assessee and Harsha Agencies. Hence, all the ingredients of Section 194C of the Act get squarely attracted in the instant case. Hence, we hold that assessee is indeed liable for deduction of tax at source on the said payment of Rs.56,997/-. Accordingly, is justified in making disallowance u/s.40(a)(ii) of the Act for the said sum for violation of TDS provisions,” the Tribunal said.
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