Jugal Kishore, A.M. -
(1.) THIS appeal filed by the assessee is directed against the order passed by the learned Commissioner (Appeals)-XI, Kolkata dated 29-3-2007 for the assessment year 2004-05.
(2.) Vide the above appeal, the assessee has basically disputed the order of learned Commissioner (Appeals) in confirming the action of assessing officer holding that the assessee is to be treated as assessee in default within the meaning of Section 201(1) of the Income Tax Act and in levying tax and surcharge under Section 201(1) of the Income Tax Act at Rs. 1,81,95,979 and interest under Section 201 (1A) of-the Act at Rs. 62,77,612. The assessee against such order of learned Commissioner (Appeals) has come in appeal before us and has preferred the following grounds:
(1) The orders passed by the Assisstant Commissioner, Circle-57, Kolkata and also the Commissioner (Appeals)-XI, Kolkata are arbitrary, unreasoned, illegal and based on incorrect and improper appreciation and interpretations of facts and law.
(2) Both the Assisstant Commissioner, Circle-57, Kolkata and also the Commissioner (Appeals)-XI Kolkata erred in holding that the advertising agents are the agents of the Newspaper and are rendering services on behalf of the Newspaper, completely disregarding the fact that actually the relationship between the Newspaper and the advertising agents is on 'principal-to-principal' basis.
(3) Both the Assisstant Commissioner, Circle-57, Kolkata and also the Commissioner (Appeals)-XI, Kolkata erred in holding that the amount retained by the advertising agents at 15 per cent ou tof the amounts paid by the advertisers to the newspaper is a 'commission' and not the 'trade discount' and hence tax was required to be deducted at source there from under the provisions of Section 194H of the Act, thereby disregarding of clear provisions of the 'Rules and Regulations governing accreditation of advertising agencies' of the Indian Newspaper Society (INS), the Circulars issued by the Ministry of Finance and also the judgment of ITAT, Cuttack Bench in the case of ACIT v. Samaj, 77 ITD 358.
(4) On the facts and in the circumstances of the case, the Assisstant Commissioner, Circle-57,Kolkata erred in deeming the assessee to be an 'assessee in default' within themeaning of Section 201(1) of the Income Tax Act, 1961 and in levying tax and surcharge under Section 201 (1) of the Act at Rs. 81,95,979 and interest under Section 201(1A) of the Act at Rs. 62,77,612 and the Commissioner (Appeals)-XI, Kolkata erred in confirming the said levies.
(5) On the facts and in the circumstances of the case, the learned Commissioner (Appeals) having onc eaccepted the claim of the assessee in principle that in as much as the customer, i.e., the advertiser had already deducted tax at source on the gross amount paid to the advertising agency inclusive of alleged commission amount retained by the agency and therefore further deduction of tax by the newspaper on the amount of alleged commission would tantamount to double deduction of tax at source on the same amount and hence the appellant was entitled to relief on this ground, erred in not allowing relief directly but asking the assessing officer to make further examinations and allow relief thereafter.
Brief facts relating to this case are that the assessee is engaged in the business of running several newspapers and magazines and the main source of revenue of the assesses-company is advertisement charges received from advertisers in the newspapers, magazines, etc. Besides receiving advertisements directly from the advertising parties, the assessee also gets advertisement from classified agents who collect advertisements from parties and in return receive commission/trade discount from the assessee-company. The major advertisement income of the assessee comes through advertising agencies (accredited agents), who along with the different newspapers are the members of Indian Newspaper Society (in short INS). The assessing officer in this case has called for information regarding payment of commission to the advertisers vide office letter dated 14-10-2004 and also a reminder dated 1-3-2005, in response to which the assessee filed a submission stating that the advertisers sent their advertisement for publication through advertising agencies both accredited and non- accredited. The assessee has stated that an advertiser engages an advertising agency and the advertising agency in turn approaches the newspapers for publication of the advertisement. The assessee has submitted that there is no direct link between the newspaper and the advertiser. The assessee has also submitted before the assessing officer that when release orders are released by the agencies, the name of the client is always disclosed on it and there is no principal agent relationship between the assessee and the advertising agencies. The assessee has also pointed out that as per the rules of Indian Newspaper Society, i.e., INS, accreditation is awarded by the Society to the advertising agency wherein 15 per cent commission is allowed to them by the print media for bringing the ad vertisement job for publication. The assessee has also placed before the assessing officer that advertising agencies buy space in the newspapers by entering into the transaction on principal-to-principal basis and, therefore, no question arises for deduction of tax by the assessee on account of payment of commission/ trade discount to such advertising agencies.
(3.) THE assessing officer, however, has not accepted the explanation of the assessee and has observed that the payments by the assessee to the advertising agencies is nothing but payment of commission within the meaning of Section 194H of the Act on which the tax was required to be deducted at source in view of the Board's Circular No. 619 dated 4-12-1991and the TDS should have been deposited into the credit of Central Government as per the provision of law and since the assessee has failed to deduct tax at source under Section 194H of the Act, the Assessing Officer has treated the assessee as assessee in default for failure to deduct tax at source and has raised a demand for TDS under Section 201(1) and has further imposed interest under Section 201(1A).;