Commissioner of Income Tax vs Honest Publicity

M.R. Shah, J.—The present tax appeal has been preferred by the Revenue challenging the impugned judgment and order dt. 18th May, 2012 passed by the Tribunal, Ahmedabad in ITA No. 2758/Ahd/2009 with respect to the asst. yr. 2006-07 [reported as ITO vs. Honest Publicity ] by which the Tribunal has dismissed the said appeal preferred by the Revenue confirming the order passed by the CIT(A) deleting the addition made on account of disallowance under s. 40(a)(ia) of the IT Act amounting to Rs. 29,78,272 by the AO. The facts leading to the present tax appeal in a nutshell are as under.

The assessee was engaged in the business of advertising working as an agent in some newspapers. During the assessment proceedings with respect to the assessment year in question, the AO observed that the assessee claimed the advertisement expenses of Rs. 1,07,12,129 to various parties including media. The assessee was asked to furnish complete details in respect of the aforesaid payment. On verification of the details furnished by the assessee, it was found that the assessee has paid/credited Rs. 29,78,272. On verification it was observed by the AO that the assessee has not deducted TDS from the above-mentioned amount of Rs. 29,78,272 as per the provisions of s. 194C of the IT Act. As the assessee could not furnish the details of the TDS on the aforesaid amount, the AO was of the opinion that the assessee has violated the provisions of TDS by not deducting the same under s. 194C of the Act and, therefore, he disallowed the expenses i.e. Rs. 29,78,272 and added to the income of the assessee under s. 40(a)(ia) of the Act.

Being aggrieved and dissatisfied with the order passed by the AO in disallowing the aforesaid expenses and adding to the income of the assessee under s. 40(a)(ia) of the Act, the assessee preferred appeal before the CIT(A) and the CIT(A) by order dt. 16th July, 2009 allowed the appeal by observing in para 4.2 as under:

I have considered the facts of the case, arguments advanced by the Authorised Representative of the appellant as also the observation of the AO. The appellant has clearly made his case for the reasons narrated as above in as much as appellant is acting as an agent for advertisement and publicity and has to act as an agent of the media who in turn allow to collect advertisement and in turn collect the advertisement on their behalf directly and pass on to them on commission basis. Further it may be noted that in certain cases they are appointed as sub-agent of media/newspaper and they have to act as sub-agent of different advertisement agencies to whom the appellant has to transfer the advertisements so received directly from the clients who deduct TDS from the payments of such advertisement. As is clear from the above, the appellant acting as sub-agent is not supposed to deduct TDS from the payments so made to various advertising agencies as the provisions of s. 194C of the Act are not attracted. In the given facts and circumstances, I am of the view that the AO was not justified in disallowing the claim of the appellant under s. 40(a)(ia) of the IT Act, 1961. Hence, I am of the view that the AO was not justified in making the addition on this count. The AO is accordingly directed to delete the addition of Rs. 29,78,272 made on this count. Thus, this ground of appeal is allowed.

Being aggrieved and dissatisfied with the impugned order passed by the CIT(A) in directing to delete the addition of Rs. 29,78,272 under s. 40(a)(ia) of the IT Act, the Revenue preferred appeal before the Tribunal and by impugned judgment and order the Tribunal has dismissed the appeal confirming the order passed by the CIT(A).

Having heard Shri Parikh, learned counsel appearing on behalf of the Revenue and considering the fact that with respect to the aforesaid amount of Rs. 29,78,272 the assessee acted as sub-agent and whatever amount was received from the client the same was paid to the aforesaid five agencies, who in fact deducted the TDS from the payment, both the CIT(A) as well as Tribunal have rightly held that the assessee acting as sub-agent was not supposed to deduct TDS from the payment so made to various advertising agencies as per the provisions of s. 194C of the Act. As stated hereinabove and even the finding given by the CIT(A) as well as the Tribunal, various advertisement agencies of whom the assessee worked as sub-agent deducted the TDS from the payment of such advertisement. In view of the above, we see no reason to interfere with the impugned judgment and order passed by the Tribunal. No question of law much less substantial question of law arises in the present appeal. Hence, the present appeal deserves to be dismissed and is accordingly dismissed.