TaxTMI 
TaxTMI 
2016 (7) TMI 105
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....ating to Rs. 2,64,86,490/-. According to the AO, the assessee was liable to deduct tax at source from the said payment as per Clause (k) of section 194C(1) of the Act and since there was failure on the part of the assessee to comply with the said requirements, she was called upon by the AO to explain as to why the payment made to advertising agencies should not be disallowed under section 40(a)(ia) of the Act. 4. In reply, it was submitted by the assessee that arrangement was made with accredited advertising agency mainly to channelize her advertising materials through them to the print media and since no specific work was assigned to advertising agencies, mere routing of the advertising material invented by the assessee through advertising agencies did not produce any work so as to attract the provisions of section 194C. This plea of the assessee was not found acceptable by the AO for the following reasons given in the assessment order. "The provision of section 194C of the LT. Act is as under:- (i) "any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract between the Contractor and person as specified in (a) to (k) sh....
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....n a client makes a payment to n Advertising Agency, tax is liable to be deducted, and not when the Advertising Agency makes payment to the Print or Electronic media, directly. So, it is vividly mentioned in the Circular that payment made to the Print or Electronic media by an Advertising Agency, is exempted from deduction of tax. In the instant case, pursuant to the above Circular, the assessee being an Advertising Agent, had made payment to the Print Electronic Media amounting to Rs. 1,42,86,110/- that may be exempted from deduction of tax, but the payment made to the Advertising Agency as a client amounting to Rs. 2,64,86,490/- are not subjected to non-deduction of tax at source, so, as per provision of Section 194C of the I.T. Act, the assessee was liable to deduct tax at source against such sub-contract payment. As per provision of CBDT's Circular No.714 dated 03-08-1995, there is also provision of deduction of tax at source against the payment made to print or electronic media for advertising including production of programme for such broadcasting and telecasting to be used in such advertising. As per CBDT's Circular No.715 dated 08-08-1995, there is also a provi....
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...., it is seen that the payments were made to the advertising agency against the placement of work. So, the advertising agency had earned income against such order placed by the assessee. It is not the case that the advertising agency had done the work at free of cost. So, as per provision of the Act, tax is deductible at source by the assessee against such income earned by the advertising agency." 5.1 For the reasons given above, the AO held that the payments made by the assessee to the advertising agencies were covered by the provision of section 194C and since no tax at source was deducted by the assessee from the said payments as required by section 194C, the amount of Rs. 2,64,86,490/- paid by the assessee to advertising agencies was disallowed by the AO by invoking the provision of section 40(a)(ia). 6. The disallowance of Rs. 2,64,86,490/- made by the AO under section 40(a)(ia) on account of payments made to advertising agencies was challenged by the assessee in the appeal filed before the ld. CIT(A) and after considering the submissions made by the assessee and the material available on record, the ld. CIT(A) deleted the said disallowance for the following reasons given....
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....kes payment for advertising either to media directly or to advertising agencies and not when advertising agencies make payment to the media. It was contended by the assessee that BCCL is not doing any work for it and they are only buying the advertisement space in bulk from BCCL for entering into onward agreement to advertise with their clients. Therefore, the provisions of withholding of tax are not attracted on the payments made by the assessee to BCCL. In support of its contentions, the assessee cited and placed reliance, inter alia, on the following :- (i) CBDT Circular NO.714 dt.3.8.1995 and CBDT Circular No.715 dt.8.8.1995; (ii) The decision of the co-ordinate bench of the Bangalore Tribunal in the case of Sands Advertising Communication (P) Ltd V DCIT (37 SOT 179) (Bang). 6.2 In the decisions cited by the assessee, the scope and meaning of work is explained in detail and there is no dispute on this score. In terms of clause (iv) of Explanation to section 194C of the Act, advertising is also an activity which falls within the ambit of "Work". This, in the context of the case on hand, is the work which the media does for a client for a certain consideratio....
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....e same, the assessee is at liberty to sell the space to anyone and BCCL has no role or part in that regard. In this factual matrix, the inevitable conclusion that follows is that the assessee has purchased the advertisement space for itself and not on behalf of any specific clients in the capacity of an advertising agency. Therefore, it is clear from the agreement that at the time of purchasing the bulk advertisement space, the assessee is merely a client to the media, BCCL in this case. In this view of the matter, it can be inferred from the CBDT Circular No.715 of 1995 that the assessee was liable to deduct tax at source on the payments of Rs. 7,20,00,000 in the impugned assessment years. 6.5 The assessee has also placed reliance on the decision of the co-ordinate bench of this Tribunal in the case of Sands Advertising Communications (P) Ltd. (supra). On perusal thereof, we find that the facts of the cited case are distinguishable. In the case of Sand Advertising Communication (P) Ltd. (supra), the assessee was an advertising agency involved in activity of advertising in the print media. It's sister concern was in similar business, but was an accredited agency. The assessee ex....
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....sub-clause (ia) of clause (a) of section 40 by the Finance Act, 2012, w.e.f. 1.4.2013 which is applicable retrospectively. In support of this alternative contention, the ld. Counsel for the assessee has relied on the decision of the Coordinate bench of this Tribunal in the case of New Alignment in IT Appeal No.504/Kol/2014 dated 6th April, 2016, wherein the similar alternative prayer made on behalf of the assessee was accepted by the Tribunal and the matter was restored to the file of the AO for deciding the same afresh in the light of second proviso to section 40(a)(ia) inserted by the Finance Act, 2012, w.e.f. 1.4.2013 holding that the same was applicable retrospectively. We, therefore set aside the impugned order of the ld. CIT(A) giving relief to the assessee on this issue and restore the matter to the file of the AO for the limited purpose of deciding the same in the light of second proviso to section 40(a)(ia) which is applicable retrospectively as held by the Coordinate bench of this Tribunal in the case of New Alignment (supra). Ground no.1 of the Revenue's appeal is treated as allowed for statistical purposes. 8. In ground no.2, the Revenue has challenged the action of ....