Advertising agency commission forms part of taxable value when it is included in the gross amount charged for advertisement services.

Commission earned by an advertising agency is includible in the value of taxable service when it forms part of the gross amount charged for services in relation to advertisements. The statutory value under Section 67(d) of the Finance Act, 1994 covers the gross amount charged by the agency for making, preparing, displaying, exhibiting, or selecting media for advertisements. A departmental circular that merely clarifies this statutory position is valid and does not override or enlarge the Act. On that basis, the circular was treated as within power and the commission was rightly included in taxable value.

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Issues: Whether the impugned circular clarifying that the commission received by an advertising agency is includible in the value of taxable service was contrary to Section 67(d) of the Finance Act, 1994 and beyond the power of the Central Government.

Analysis: The value of taxable service under Section 67(d) is the gross amount charged by the advertising agency from the client for services in relation to advertisements. An advertising agency's service includes making, preparing, displaying, exhibiting, and selecting or locating media for advertisements. Commission earned by the agency forms part of the gross amount charged when it is connected with such services. The circular merely clarified this position and did not enlarge or contradict the statutory provision. A departmental circular cannot override the Act, but it is valid where it only explains the statutory scheme.

Conclusion: The circular was not ultra vires, and commission received by the advertising agency was rightly treated as includible in the taxable value.

Final Conclusion: The appeal failed and the dismissal of the writ petition was affirmed, with no order as to costs.

Ratio Decidendi: Where an advertising agency's commission is part of the gross amount charged for services in relation to advertisements, it is includible in the value of taxable service, and a departmental circular that merely clarifies this statutory position is valid.

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