Commissioner Of Income Tax, Tds,Kolkata v. Abp Private Limited

O - 40 IN THE HIGH COURT AT CALCUTTASpecial Jurisdiction (Income Tax)ORIGINAL SIDE ITA/458/2008 COMMISSIONER OF INCOME TAX, TDS,KOLKATA -Versus- ABP PRIVATE LIMITED Appearance:Mr. Tilak Mitra, Adv....for the appellant. Mr. J.P. Khaitan, Sr. Adv.Mr. Agnibesh Sengupta, Adv.Mr. S. Datta, Adv.Ms. Anupa Banerjee, Adv.. . . for the respondent. BEFORE: The Hon’ble JUSTICE T.S. SIVAGNANAM -And- Date : 20[th] March, 2023 The Hon’ble JUSTICE HIRANMAY BHATTACHARYYA The Court : This appeal filed by the revenue underSection 260A of the Income Tax Act (the ‘Act’ in brevity) isdirected against the order dated 31[st] January, 2008 passed by theIncome Tax Appellate Tribunal, B - Bench, Kolkata (the ‘Tribunal’)in ITA No.1332/Kol/2007 for the assessment year 2004-05. This appeal was admitted on 8[th] September, 2008 for the following substantial question of law: “Whether on the facts and in the circumstances of thecase the Income Tax Appellate Tribunal was justified inlaw in holding that trade discount allowed by theassessee to INS accredited Advertising Agent was not inthe nature of Commission and therefore not subjected toTDS under the provision of Section 194H of the Income TaxAct” We have heard Mr. Tilak Mitra, learned standing counselappearing for the appellant/revenue and Mr. J.P. Khaitan, learnedsenior counsel assisted by Mr. Agnibesh Sengupta, learned advocateappearing for the respondent/assessee. The substantial question of law which has been framed forconsideration has been answered in favour of therespondent/assessee in several decisions. We note the followingdecisions which refers in favour of the respondent/assessee. Firstof the decision was in the case of CIT Vs. Living Media IndiaLimited in ITA No.1264 of 2007 passed by the High Court of Delhidated 6[th] May, 2008. The Court analysed an identical arrangement ofthe respondent/assessee in various advertising agencies and thecontrol exercise by the Indian Newspaper Society (INS) and heldthat no tax need to be deducted at source under the provisions ofSection 194H of the Act. The second decision which will enure infavour of the respondent/assessee is the decision of the HighCourt of Allahabad in Jagran Prakashan Ltd. Vs. Deputy Commissioner of Income Tax (TDS), reported in (2012) 345 ITR 288(All.). The third decision is of the High Court of Bombay in thecase of Principal Commissioner of Income Tax Vs. Dempo Industries(P.) Ltd., reported in (2021) 126 taxmann.com 112 (Bom.) whereinthe Court held that the trade discount given by the assessee,engaged in business of publishing and selling newspaper, tonewspaper vendors and advertising agencies was not in the natureof commission and no TDS was to be deducted under Section 194H onsame. The revenue seeks to place reliance on the decision of HighCourt of Kerala in the case of CIT Vs. Director, Prasar Bharati,reported in (2010) 325 ITR 205 (Ker.) which was affirmed by theHon’ble Supreme Court in Director, Prasar Bharati Vs. Commissionerof Income Tax, reported in (2018) 403 ITR 161 (SC). On goingthrough the decision in the case of Prasar Bharati (supra) we findthat the case is clearly distinguishable on facts. In fact, thedecision of the Kerala High Court reported in (2010) 325 ITR 205(Ker.) considered by the High Court of Allahabad in the case ofJagran Prakashan Ltd. Vs. Deputy Commissioner of Income Tax (TDS),reported in (2012) 345 ITR 288 (All.) and the decision wasdistinguishable. When the matter travelled upto the Hon’bleSupreme Court, at the instance of Prasar Bharati, in paragraph 37of the judgement reported in (2018) 403 ITR 161 (SC) the Hon’bleSupreme Court noted the decision of the Allahabad High Court in Jagran Prakashan and held that the facts of the said case areentirely different. Therefore, the decision and the case of PrasarBharati is clearly distinguishable and not applicable to the factsand circumstances of the case on hand. More importantly after thedecision of Jagran Prakashan and the decision of Living MediaIndia Limited, the CBDT issued Circular being No.5 of 2016 dated29[th] February, 2016. For better appreciation, the entire Circularis quoted hereunder : “The issue of applicability of TDS provisions onpayments made by television channels or media housespublishing newspapers or magazines to advertising agenciesfor procuring and canvassing for advertisements has beenexamined by the Board in view of representations received inthis regard. 2. It is noted that there are two types of paymentsinvolved in the advertising business :(i)Payment by client to the advertising agency, and(ii)Payment by advertising agency to the televisionchannel/newspaper company. The applicability of TDS on these payments has alreadybeen dealt with in Circular No.715 dated 8-8-1995, whereit has been clarified in Question Nos.1 & 2 that whileTDS under section 194C (as work contract) will beapplicable on the first type of payment, there will beno TDs under section 194C on the second type of paymente.g. payment by advertising agency to the media company.3.However, another issue has been raised in variouscases as to whether the fees/charges taken orretained by advertising companies from media 4. 5. companies for canvassing/booking advertisements(typically 15% of the billing) is ‘commission’ or‘discount’. It has been argued by the assesseesthat since the relationship between the mediacompany and the advertising company is on aprincipal-to-principal basis, such payments are inthe nature of trade discount and not commissionand, therefore, outside the purview of TDS undersection 194H. The Department, on the other hand,has taken the stand in some cases that since theadvertising agencies act on behalf of the mediacompanies for procuring advertisements, the marginretained by the former amounts to constructivepayment of commission and, accordingly, TDS undersection 194H is attracted. The issue has been examined by the Allahabad HighCourt in the case of Jagran Prakashan Ltd. AndDelhi High Court in the matter of Living MediaLimited and it was held in both the cases that therelationship between the media company and theadvertising agency is that of a ‘principal-to’-principal’ and, therefore, not liable for TDS undersection 194H. The SLPs filed by the Department inthe mater of Living Media Ltd. And Jagran PrakashanLtd. Have been dismissed by the Supreme Court videorder dated 11-12-2009 and order dated 5-5-2014,respectively. Though these decisions are in respectof print media, the ratio is also applicable toelectronic media/television advertising as theboard nature of the activities involved is similar.In view of the above, it is hereby clarified thatno TDS is attracted on payments made by television channels/newspaper companies to the advertisingagency for booking or procuring of or canvassingfor advertisements. It is also further clarifiedthat ‘commission’ referred to in Question No.27 ofthe Board’s Circular No.715 dated 8-8-1995 does notrefer to payments by media companies to advertisingcompanies for booking of advertisements but topayments for engagement of models, artists,photographers, spotspersons, etc. and, therefore,is not relevant to the issue of TDS referred to inthis Circular.” channels/newspaper companies to the advertisingagency for booking or procuring of or canvassingfor advertisements. It is also further clarifiedthat ‘commission’ referred to in Question No.27 ofthe Board’s Circular No.715 dated 8-8-1995 does notrefer to payments by media companies to advertisingcompanies for booking of advertisements but topayments for engagement of models, artists,photographers, spotspersons, etc. and, therefore,is not relevant to the issue of TDS referred to inthis Circular.” In terms of the above Circular, it has been clarified by theBoard that no TDS is attracted on payments made by televisionchannels/newspaper companies to the advertising agency for bookingor procuring of or canvassing for advertisements. It has beenfurther clarified that the word ‘commission’ referred to QuestionNo.27 of the Board’s Circular No.715 dated 8[th] August, 1995 doesnot refer to payments by media companies to advertising companiesfor booking of advertisements but to payment for engagement ofmodels, artists, photographers, sportspersons, etc. and,therefore, is not relevant to the issue of TDS referred in thisCircular. Thus, the legal position as understood by the CBDT is clearlyin favour of the respondent/assessee. On going through the orderpassed by the Tribunal, we find that the Tribunal deeply examinedthe factual position more importantly, the various clauses ascontained in the rules and regulations prescribed by the Indian Newspaper Society of which clauses 20, 23 and 25 were referred toand after analysis of those clauses, the learned Tribunal heldthat it is clear that there is no principal and agent relationshipbetween the newspaper and the advertising agency. Thus, both onfacts as well as in law, the respondent/assessee has to succeedand the revenue has to fail. In the result, the appeal filed by the revenuestands dismissed and the substantial question of law is answeredagainst the revenue. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.) S.Das/K. BanerjeeAR