TaxTMI 
TaxTMI 
2015 (2) TMI 1175
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....Act') and the case was subsequently taken up for scrutiny. The assessment was completed under Section 143(3) of the Act vide order dt.6.12.2010 wherein the income of the assessee was determined at Rs. 27,52,10,290, as against the returned income of Rs. 20,32,10,289, in view of the Assessing Officer making a disallowance of Rs. 7,20,00,000 under Section 40(a)(ia) of the Act. In the course of assessment proceedings, the Assessing Officer observed that the assessee had debited an amount ofRs.7,20,00,000 under the head 'cost of advertisement space', on which there has been no deduction of tax at source at the time of payment of this amount. The Assessing Officer was of the view that this payment came within the ambit of the provisions of section 194C of the Act and the assessee was therefore liable to deduct tax at source thereon. Since the assessee had not made any deduction of tax at source on this payment, the Assessing Officer held that the provisions of section 40(a)(ia) of the Act were attracted and therefore disallowed the same. 2.3 For Assessment Year 2009-10, the assessee filed its return of income on 24.9.2009 declaring income of Rs. 40,06,99,810. The return was pro....
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....the appellant should be deemed to be treated as having deducted and paid such taxes and hence, there is no question of directing to disallow the payments made to BCCL towards the purchase of bulk advertisement space. 4. Erred in not appreciating that the provisions of section 40-(a)(ia) of the Act can be invoked only to disallow expenditure which remains payable as on the date of the balance sheet and it cannot be invoked to disallow the expenditure which was actually paid within the previous year." From a perusal of the grounds raised (supra), Grounds Nos.1 & 2 challenges the decision of the authorities below that the assessee is liable to deduct tax at source under Section 194C of the Act. Grounds at S.Nos.3 & 4 challenge the decision of the Assessing Officer in invoking the provisions of section 40(a)(ia) of the Act to disallow the expenditure of Rs. 7,20,00,000 which was already paid before the end of the concerned previous years i.e. 31st March. 5.1 The facts of the case are that the assessee is in the business of printing and publishing of newspapers. It had entered into an agreement with Benett Coleman & Company Ltd. ('BCCL') another media company for purchase and u....
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.... to disallow this expenditure of Rs. 7,20,.00,000 on payments made by the assessee to BCCL for both Assessment Years 2008- 09 & 2009-10. 6. Ground Nos. 1 & 2 : Liability to deduct tax at source u/s. 194C of the Act on payments to BCCL. 6.1 The main contention of the assessee is that it is not liable to deduct tax at source on the payments of Rs. 7,20,00,000 to BCCL in both assessment years concerned. It is the contention of the assessee that the provisions of section 194C of the Act apply only to "contract for work" and not to "contract of sale". According to the assessee, the contract with BCCL related to the purchase and sale of bulk advertisement space is not a "contract for work". As per the assessee, the term "advertising" only includes payments made by clients to advertising agency and not payments made by the advertising agency to the print media and the TDS provisions are applicable only when the client makes 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 bu....
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....n this section would include advertising. 6.4 In CBDT Circular No.715 of 1995, cited by the assessee, the scope of advertising contract was clarified in Answer to Question 1 as under :- "The term "advertising" has not been defined in the Act. During the course of consideration of the Finance Bill, 1995, the Finance Minister clarified on the floor of the House that the amended provisions of tax deduction at source would apply when a client makes payment to an advertising agency and not when an advertising agency makes payment to the media, which includes both print and electronic media...." In the case on hand, various terms of the Agreement between the assessee and BCCL indicate that the assessee has not entered into the agreement in the capacity of an advertising agency. The terms of the Agreement indicate that the assessee purchased bulk advertisement on principal-to-principal basis. After purchasing the 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 specifi....
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....he rescue of the assessee. 6.6 In view of the discussion of the facts and circumstances of the case from paras 6.1 to 6.5 of this order, we are of the considered view that the payment made by the assessee to BCCL is towards advertisement and the assessee was liable to deduct tax at source under Section 194C of the Act. In view of the assessee's failure to deduct tax at source as required, the provisions of section 40(a)(ia) of the Act are attracted in the facts of the case and the payments of Rs. 7,20,00,000 by the assessee to BCCL for both assessment years 2008- 09 and 2009-10 are liable to be disallowed thereunder. We, consequently, uphold the finding of the authorities below in this regard and dismiss the grounds raised at S.Nos.1 & 2 for both assessment years 2008-09 and 2009-10. 7. Ground Nos. 3 & 4 : Section 40(a)(ia) of the Act cannot be invoked to disallow expenditure that was actually paid within the previous year. 7.1 The assessee has raised alternate grounds that the provisions of section 40(a)(ia) of the Act cannot be invoked to disallow expenditure which was actually paid within the previous year. In support of this proposition, the assessee has, inter ....