2017 (3) TMI 427 - AT - Income Tax

Tribunal upholds assessee's TDS deductions, dismisses Revenue's appeals

ITO (TDS) (OSD) 1 (2), Mumbai Versus Entertainment Network (I) Ltd., Mumbai

ITO (TDS) (OSD) 1 (2), Mumbai Versus Entertainment Network (I) Ltd., Mumbai - TMI Issues Involved:1. Liability to deduct TDS on agency discount under Section 194H of the Income Tax Act.2. Correctness of TDS deduction under Section 194J for payments made to Radio Jockeys.3. Deletion of interest under Section 201(1A) of the Income Tax Act.Issue-wise Detailed Analysis:1. Liability to Deduct TDS on Agency Discount under Section 194H:The Revenue challenged the decision of the CIT(A) that the assessee company was not liable to deduct TDS on agency discounts under Section 194H. The assessee, engaged in FM Radio broadcasting, provided discounts to clients and advertising agencies, which the AO deemed as commission, necessitating TDS deduction. The assessee argued that the relationship with advertising agencies was principal-to-principal, not principal-agent, thus no commission was paid, and no TDS was required.The CIT(A) upheld the assessee's view, distinguishing between trade discount and commission, emphasizing that discounts were given directly to advertisers and advertising agencies without an intermediary role. The CIT(A) cited various legal precedents, including the Allahabad High Court's decision in Jagran Prakashan Ltd. and the CBDT Circular No. 5/2016, clarifying that no TDS is required on payments made by media companies to advertising agencies for procuring advertisements. The Tribunal affirmed the CIT(A)'s decision, noting that the issue was settled in favor of the assessee by the Board's circular and relevant court judgments.2. Correctness of TDS Deduction under Section 194J for Payments Made to Radio Jockeys:The AO contended that payments to Radio Jockeys (RJs) should be treated as salary, thus requiring TDS under Section 192, not Section 194J. The assessee argued that RJs were independent professionals, not employees, and detailed various agreement clauses supporting this position, such as the absence of employee benefits and the freedom to take other assignments.The CIT(A) agreed with the assessee, noting that RJs were not entitled to employee benefits like provident fund and gratuity, and their agreements did not indicate an employer-employee relationship. The Tribunal upheld the CIT(A)'s decision, emphasizing that the RJs' income was treated as professional receipts in their tax returns, and no evidence suggested otherwise. The Tribunal also referenced similar cases, including CIT v. Yashoda Super Speciality Hospital, where doctors were deemed independent professionals, not employees.3. Deletion of Interest under Section 201(1A):The CIT(A) deleted the interest under Section 201(1A), which was consequential to the deletion of the primary tax liability. The Tribunal dismissed this ground as it was dependent on the outcome of the primary issues.Conclusion:The Tribunal dismissed both appeals filed by the Revenue, affirming the CIT(A)'s decisions that the assessee was not liable to deduct TDS on agency discounts under Section 194H and had correctly deducted TDS under Section 194J for payments to Radio Jockeys. The deletion of interest under Section 201(1A) was also upheld.