Case: THE DIR. PRASAR BHARATI Vs. COMMISSIONER OF INCOME TAX, THIRUVANANTH

4. In order to appreciate the issue involved in these appeals, it is necessary to set out the facts hereinbelow.5. The appellant is known as "Prasar Bharati Doordarshan Kendra". It functions under the Ministry of Information and Broadcasting, Government of India. The dispute in this case relates to theIn terms of the agreement, the advertising agency (hereinafter referred to as "the Agency") was required to make an application to the appellant to get the "accredited status" for their Agency so as to enable them to do business with the appellant of telecasting the advertisements of several consumer products manufactured by several companies on theDoordarshan TV Channel.9. The agreement, inter alia, provided that the appellant would pay 15% by way of commission to the Agency. The Agency was to retain the commission/remuneration earned and not to part the same either directly or indirectly with any other person, advertiser or representative of any advertiser for whom it may be acting or has acted as an advertising agency. The agreement also provided the manner, mode and the time within which the payment was to be made by the Agency to the appellant. The failure to make the payment was to result in losing the accredited status by the Agency. The Agency was to give minimum annual business of Rs.6 Lakhs to the appellant in a financial year failing which their accredited status was liable to be withdrawn. The Agency was to furnish a bank guarantee for a sum of Rs.3 Lakhs. There are other clauses also in the agreement but they are not relevant for the purpose of disposal of these appeals.10. The appellant is an assessee under the Income Tax Act (hereinafter referred to. In the assessment yearto 31.03.2002) and(01.04.2002 to 31.03.2003), the appellant paid a sum of Rs.2,56,75,165/to various accredited Agencies, with whom they had entered into the aforementioned agreement for telecasting the advertisements given by these Agencies relating to products manufactured by several consumer companies. The amount was paid by the appellant to the Agencies towards the commission in terms of the agreement.11. The question arose before the Assessing Officer (AO) in the assessment proceedings as to whether the provisions of Section 194H of the Act, which came into force with effect from 01.06.2001, are applicable to the payments in question made by the appellant to the Agencies and, if so, whether the appellant deducted "tax at source" as provided under Section 194H of the Act from the amount paid by the appellant to the Agencies.12. The AO made the assessment vide its order dated 22.09.2003. Insofar as the aforementioned question was concerned, the AO was of the view that the provisions of Section 194H of the Act are applicable to the payments made by the appellant to the Agencies because the payments were made in the naturedefined in Explanation appended to Section 194H of the Act. The AO held that the appellant, therefore, committed default thereby attracting the rigor of Section 201(1) of the Act because they failed to deduct the "tax at source" from the amount paid to various advertising agencies during the Assessment Years in question as provided under Section 194A of the Act.13. On quantification, the AO found that during the Assessment Yearthe appellant had paid a sum of Rs.2,56,75,165/towards the commission to the Agencies and on this sum, they were required to deduct tax amount to Rs.16,34,283/and a sum of Rs.3,80,611/towards interest for delayed payment under Sectionof the Act and during the Assessment Yearthe appellant had paid a sum of Rs.2,29,65,922/towards the commission to the Agencies and on this sum, they were required to deduct tax amounting to Rs.11,15,944/and a sum of Rs.1,54,050/towards interest for delayed payment under Sectionof the Act.14. The appellant felt aggrieved and filed appeals before the Commissioner of Income TaxThiruvanathapuram. By order dated 04.03.2005, the Commissioner concurred with the reasoning and conclusion arrived at by AO and accordingly dismissed the appeals.15. The appellant felt aggrieved and filed appeals before the Tribunal. By order dated 28.03.2007, the Tribunal following its earlier order allowed the appeals and set aside the orders passed by AO and CIT (Appeals).16. The Revenue (Income Tax Department), felt aggrieved by the order passed by the Tribunal, filed appeals under Sectionof the Act in the High Court. By impugned judgment, the High Court allowed the appeals and while setting aside theorder restored the order of CIT (Appeals) and AO.17. The High Court was of the opinion that the provisions of Section 194H are applicable to the payments made by the appellant to the Agencies during the period in question because the payments made were in the natureto the Agencies as defined in Explanation appended to Section 194H of the Act and since the appellant failed to deductle making these payments to the Agencies in terms of the agreement in question, they committed default ofof Section 194H resulting in attracting the provisions of Section 201 of the Act.18. The appellant (assessee) felt aggrieved and filed these appeals by way of special leave in this Court.

Court's reasoning:
24. Having heard the learned counsel for the parties and on perusal of the record of the case, we find no merit in these appeals.Keeping in mind the requirements of Section 194H when we examine the transaction in question, we are of the considered view that the reasoning and the conclusion arrived at by the AO, CIT (Appeals) and the High Court appears to be just and proper and does not call for any interference.30. In other words, in our considered view, the High Court was right in holding that the provisions of Section 194H are applicable to the appellant because the payments made by the appellant pursuant to the agreement in question were in the nature of payment made by way of "commission" and, therefore, the appellant was under statutory obligation to deduct the income tax at the time of credit or/and payment to the payee.31. The aforementioned conclusion of the High Court is clear from the undisputed facts emerging from the record of the case because we notice that the agreement itself has used the expression "commission" in all relevant clauses; Second, there is no ambiguity in any clause and no complaint was made to this effect by the appellant; Third, the terms of the agreement indicate that both the parties intended that the amount paid by the appellant to the agencies should be paid by wayit was for this reason, the parties used the expression "commission" in the agreement; Fourth, keeping in view the tenure and the nature of transaction, it is clear that the appellant was paying 15% to the agencies by waynot under any other head; Fifth, the transaction in question did not show that the relationship between the appellant and the accredited agencies was principal to principal rather it was principal and Agent; Sixth, it was also clear that payment of 15% was being made by the appellant to the agencies after collecting money from them and it was for securing more advertisements for them and to earn more business from the advertisement agencies; Seventh, there was a clause in the agreement that the tax shall be deducted at source on payment of trade discount; and lastly, the definition of expression "commission" in the Explanation appended to Section 194H being an inclusive definition giving wide meaning to thethe transaction in question did fall under the definition ofthe purpose of attracting rigor of Section 194H of the Act.32. For all these reasons, we find no difficulty in holding that the payment in question was in the nature of "commission" paid by the appellant to the advertisement agencies to secure more business for the appellant.33. Once it is held that the provisions of Section 194H apply to the transactions in question, it is obligatory upon the appellant to have deducted the income tax while making payment to the advertisement agencies. Theof Section 194H by the assessee attracts the rigor of Section 201 which provides for consequences of failure to deduct or pay the tax as provided under Section 194H of the Act.34. In our view, the provisions of Section 201 were, therefore, rightly invoked in this case against the appellant by the assessing authority once having held that the appellant failed to comply with the provisions of Section 194H of the Act.35.Learned counsel for the appellant (assessee) placed reliance on the decision of the Allahabad High Court in Jagran Prakashan Ltd vs. Deputy Commissioner of Income Tax(TDS), (2012)345 ITR 288 in support of his submission.On perusal of the said judgment, we find that the law laid down by the Allahabad High Court is not applicable to the facts of the case at hand and the learned Judges rightly distinguished the case at hand with the facts involved in the Allahabad case.In our opinion, the Allahabad High Court very rightly noticed the distinction between the facts in the case of Jagaran Prakashan Ltd. (supra) and the case with which we are concerned in these appeals and held that it depends upon the facts of each case to decide as to what is the nature of payment made by the party concerned. Their Lordships rightly noticed that the case before them (Jagaran Prakashan Ltd.) did not have any agreement like the one in this case wherein in terms of the agreement, it is unmistakably proved that the payment was being made by the appellant (assessee) to the agencies by wayIn our view, therefore, the decision of the Allahabad High Court is of no help to the case of the appellant for taking a different view.In the light of the foregoing discussion, we concur with the reasoning and the conclusion arrived at by the High Court and find no merit in these appeals.