In ITA/458/2008 -CAL HC- Trade discount by ABP Private Limited to INS accredited advertising agent not subject to TDS under Section 194H of Income Tax Act, rules Calcutta High Court
Justice T.S. Sivagnanam & Justice Hiranmay Bhattacharyya [20-03-2023]

Read Order: Commissioner of Income Tax V. ABP Private Limited

Chahat Varma

New Delhi, June 20, 2023: The Calcutta High Court has ruled that the trade discount allowed by the ABP Private Limited (assessee) to Indian Newspaper Society (INS) accredited advertising agent was not in the nature of Commission and therefore not subjected to TDS under the provision of Section 194H of the Income Tax Act.

In the matter at hand, the issue revolved around whether the trade discount provided by the assessee to INS accredited advertising agent should be considered as commission and subjected to TDS under Section 194H of the Income Tax Act.

The bench comprising of Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya placed reliance on Principal Commissioner of Income Tax Vs. Dempo Industries (P.) Ltd. [LQ/BomHC/2021/3245], wherein the Bombay High Court held that the trade discount given by the assessee, engaged in business of publishing and selling newspaper, to newspaper vendors and advertising agencies was not in the nature of commission and no TDS was to be deducted under Section 194H on same.

The bench also considered Circular No. 5 of 2016 issued by CBDT on 29.02.2016. The circular clarified that no TDS was applicable to payments made by television channels/newspaper companies to advertising agencies for the purpose of booking or procuring advertisements. The circular further clarified that the term 'commission' does not include payments made by media companies to advertising agencies for advertisement bookings, but rather refers to payments made for engaging models, artists, photographers, sportspersons, etc.

“We find that the Tribunal deeply examined the factual position more importantly, the various clauses as contained in the rules and regulations prescribed by the Indian Newspaper Society of which clauses 20, 23 and 25 were referred to and after analysis of those clauses, the learned Tribunal held that it is clear that there is no principal and agent relationship between the newspaper and the advertising agency. Thus, both on facts as well as in law, the respondent/assessee has to succeed and the revenue has to fail,” said the bench.