The Tax Publishers2019 TaxPub(DT) 4768 (Mum-Trib)

INCOME TAX ACT, 1961

Section 40(a)(ia) Section 194H

In view of decision of Supreme Court in Director, Prasar Bharati the taxability of advertising agency and its deduction at source under section 194H had remitted back to decide factual matrix of the case decided by the Supreme Court.

Tax deduction at source - Applicability of provision of section 194H - Advertising agency commission -

AO observed that gross revenue earned by the assessee was Rs. 257.95 crores while agency commission expenses were to the tune of Rs. 27.43 crores which was not separately reflected in the books of accounts and net revenue reflected in its books of account and in P&L Account. The AO observed that the assessee had also not deducted income-tax at source under section 194H on such agency commission paid by assessee to advertising agency. AO observed that provisions of section 194H was clearly applicable on the said payments even if commission was retained by agent/consignee without actual payment from the consignor/principal, and it would be deemed to be 'constructive payment' which is subject to deduction of income-tax at source under section 194H. The AO referred to Circular No. 619 issued by CBDT on 4-12-1991. by invocation of section 40(a)(ia) read with Chapter XVII-B of the 1961 Act for non deduction of income-tax at source under section 194H. CIT(A) after considering submissions of the assessee was pleased to delete the additions as were made by the AO. Held: The assessee had not claimed advertising agency commission expenses as separate expenses in its books of accounts and in P&L account prepared by it. This issue came up before Tribunal for assessment year 2011-12 and 2012-13 in assessee's own case and this Tribunal had observed that the Tribunal in assessee's own case vide common Order, dated 11-1-2017 in ITA No. 1352/Mum/2014 and 5227/Mum/2014 for assessment year 2011-12 and 2012-13 respectively had adjudicated this issue in favour of the assessee wherein the tribunal came to the conclusion that no income-tax was required to be deducted at source by assessee under Chapter XVII-B on these advertising agency commission paid to advertising agencies. Decision of Supreme Court in the case of Director, Prasar Bharati was rendered 3-4-2018 and Supreme Court had held that applicability of provisions of section 194H will depend upon facts and circumstances of each case and hence it was held that there is a need to evaluate the factual matrix of each case before applying provisions of section 194H to advertising agency commissions. The decision of Supreme Court was rendered on 3-4-2018, while Mumbai Tribunal passed an orders in assessee's case for assessment year 2011-12 and 2012-13 vide common Order, dated 11-1-2017, which was pronounced prior to the judgment of Supreme Court. Thus, Tribunal did not had the benefit of judgment of Supreme Court in the case of Director, Prasar Bharati. In fitness of things and in the interest of justice and fairness, this issue needs to be restored to the file of the AO to determine applicability of section 194H.

Followed :Director, Prasar Bharati v. CIT 2018 TaxPub(DT) 1679 (SC) : (2018) 403 ITR 161 (SC)

REFERRED : Order, dated 11-1-2017 in ITA No. 1352/Mum/2014 and 5227/Mum/2014 for assessment year 2011-12 and 2012-13

FAVOUR : Matter remanded.

A.Y. : 2010-11


INCOME TAX ACT, 1961

Section 37(1)

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