Payment by Media Companies to Advertising Companies for Advertisement Booking  doesn't Amount to Commission: Calcutta HC [Read Order]

The Calcutta High Court has held that the ‘Commission’ does not refer to payments by Media Companies to advertising companies for booking of advertisements.

The issue was whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in law in holding that the trade discount allowed by the assessee,  ABP Private Limited to INS accredited Advertising Agent was not in the nature of Commission and therefore not subjected to TDS under the provision of Section 194H of the Income Tax Act, 1961.

Mr Tilak Mitra, standing counsel appeared for the appellant/revenue and Mr J.P. Khaitan, senior counsel assisted by Mr Agnibesh Sengupta, advocate appeared for the respondent/assessee.

It was argued that in the case of CIT Vs. Living Media India Limited, it was held that “the respondent/assessee in various advertising agencies and the control exercised by the Indian Newspaper Society (INS) and held that no tax need to be deducted at source under the provisions of Section 194H of the Act.”

In the case of Principal Commissioner of Income Tax Vs. Dempo Industries (P.) Ltd., wherein the Court held that the trade discount given by the assessee, engaged in the business of publishing and selling newspapers, to newspaper vendors and advertising agencies, was not in the nature of the commission and no TDS was to be deducted under Section 194H on same.

The applicability of TDS on these payments has already been dealt with in Circular No.715 dated 8-8-1995, where it has been clarified in Questions Nos.1 & 2 that while TDS under section 194C (as work contract) will be applicable on the first type of payment, there will be no TDs under section 194C on the second type of payment e.g. payment by an advertising agency to the media company.

A two-judge bench comprising Chief Justice T S Sivagnanam and Justice Hiranmay Bhattacharyya viewed that it has been clarified by the Board that no TDS is attracted on payments made by television channels/newspaper companies to the advertising agency for booking or procuring of or canvassing for advertisements.

It has been further clarified that the word ‘commission’ does not refer to payments by media companies to advertising companies for the booking of advertisements but to pay for the engagement of models, artists, photographers, sportspersons, etc. and, therefore, is not relevant to the issue of TDS referred in this Circular.

“There is no principal and agent relationship between the newspaper and the advertising agency. Thus, both on facts as well as in law, the respondent/assessee has to succeed and the revenue has to fail.”, the Tribunal held.

As a result, the appeal filed by the revenue got dismissed.

To Read the full text of the Order CLICK HERE

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