Payment for Purchase of Advertisement Materials would not attract TDS: ITAT [Read Order]

The Income Tax Appellate Tribunal, Kolkata bench in its recent order proclaimed that Payment for purchase of advertisement materials would not attract TDS under the provisions of the Income Tax Act, 1961.

The sole issue was that the assessee is the proprietor of M/s TT Industries which is the owner of TT Brand well-known brand in hosiery and undergarments both in India and around the globe and assessee gets royalty for use of the said TT Brand from its franchisees.

In order to increase the sales and earns higher royalty the assessee distributes advertisement materials and also allow the dealers target achievement gifts like TV, ginnis, silver coins, etc. for brand promotion. As a result of this assessee incurred advertisement expense and purchase advertisement material.

During the assessment proceedings, it was clarified by the assessee that the Finance Act, 1995, has enlarged the scope of income tax deduction at source by making various amendments.

The bench analysed a circular issued by the central board of direct taxes clarifying the queries regarding the changes introduced in Finance Act, 1995. The AO during the assessment proceeding asked the assessee that why TDS has not been deducted on advertisement material. However AO was not satisfied with the contention of assessee. The AO observed that it is important to categorically look into the nature of expenses and how they are treated as job work and why TDS u/s 194C should be deducted.

Aggrieved by the addition made by AO against advertisement material, u/s 40(a)(ia) of the I.T. Act, 1961, the assessee filed an appeal before the CIT(A), who has deleted the addition.

Not being satisfied with the order of CIT (A), the Revenue is in appeal before the tribunal. The tribunal bench comprising of judicial member Shri A. T VARKEY and accountant member A.L.SAINI noted that the assessee had claimed that the expenditure was not consideration for works contract but were for purchase of various materials to be used in advertising activity.

The bench ordered that following the decision of the Coordinate Bench in assessee`s own case, (supra), in the immediately preceding assessment year 2009-10, whereby the issues were decided in favour of the assessee company, as set out above and hold that no disallowance under section 40(a)(ia) of the Income Tax Act should be made, therefore the bench confirm the order passed by CIT(A).