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TaxTMI 
TaxTMI 
TaxTMI 
2014 (12) TMI 1326
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....nd related accessories. The return of income was filed on 30.09.2009 declaring income at Rs. 1,09,64,130/-under the normal provisions of Income-tax Act, 1961. The Assessing Officer finalized assessment at Rs. 6,86,81,034/- on 29.12.2011. The addition of Rs. 5,77,16,904/- was made by invoking the provisions of section 40(a)(ia) of the Act. The CIT (A) has dealt this issue in his order at para 3.7 which read as under :- "3.7 The applicability of the provisions of section 194C in the case of advertising has been extensively dealt with in Circular no.715 dated 08.08.1995. In response to question number 1, it has been stated that the Finance Minister had clarified that the amended provisions of tax deduction at source would apply when a client....
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....or the person who is actually making payment to the person who has executed the work to deduct TDS. Never the less, it is noted that this position of law cannot be allowed to be taken as an excuse to structure arrangements whereby payment are routed through third parties only to circumvent the liability for making TDS. The assessee cannot absolve itself from the vicarious liability of ensuring TDS from such payments as these have been made wholly and inclusively on its behalf. Therefore, in the case under consideration, the assessee is directed to produce before the AO proof/evidence to the effect that the parties to whom reimbursement had been made had actually deducted TDS while making payments to the final recipients. To the extent such ....
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.... CBDT's circular no. 715 dated 08.08.1995. Moreover, any conduct of recipients can not absolve the payer assessee from its liability to deduct TDS if once it is held liable to deduct TDS on payment made by it. 3. That the appellant craves leave to add, modify and/or delete any round(s) of appeal. 4. In the facts and circumstances of the case, the order of the Commissioner of Income Tax (Appeals) may be set aside and that of the A.O. restored." The grounds of cross objection read as under :- "1. That the CIT(A) erred on facts and in law in not holding that the assessee was not required to withhold tax under section 194C of the Income Tax Act, 1961 ("the Act") from the amount reimbursed towards advertisement expenditure incur....
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....form the regional distributors on sample basis had been submitted by stating that the regional distributors has duly complied the provisions of Chapter XVII-B of the Act while making the payments to the advertisement agencies / advertisers. Before us, it was canvassed that since the assessee reimbursed advertisement expenses to the regional distributors, therefore , it was not liable to deduct TDS as per the provisions of section 194C of the Act. It was pleaded that Section 194C is applicable on payments made for carrying out any work in pursuance of contract between the contractor and specified person. Since there was no contract between the assessee and the regional distributors for carrying out work for advertisement, no TDS was deductib....
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....(All.) (xii) Hindustan Coca Cola Beverages (P) Ltd. Vs. CIT - 293 it 226 (SC) 5. On the other hand, ld. DR relied on the order of the Assessing Officer and submitted that the advertisement was not made for the shops of the distributors, however, it was made for the brand of assessee. The payment liability was of the assessee as the bills were also raised in the name of assessee itself which is evident from page 16 of the paper book. The bill has been raised in the name of Spice Communication Limited and the client name is also Spice Communication Ltd., New Delhi. The SPG Distributors, one of assessee's distributors has stated that it has paid the whole amount by cheque no.136282 of Rs. 2,24,795/-. This is equal to the amount mentioned in....
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....- and asked for reimbursement. Thus, the bill raised by the advertisement agency was not in the name of distributor. This fact itself shows that there was a structure arrangement to avoid the TDS provisions. The assessee himself has submitted letters from various regional distributors that they have complied with the provisions of TDS under the Act. Such confirmations are placed at pages 42 to 45 of the paper book. Certain bills raised by the advertisement agencies are in the name of distributors. Whether these persons have made TDS or not is not clear from the records. Keeping all these facts in view, we find that CIT (A) was justified in directing the assessee to produce the evidences before Assessing Officer to establish that the parties....