The Kolkata Income-Tax Tribunal has held that payment made by an assessee company to accredited advertising agencies could not be termed as payment of commission, and accordingly no TDS is required to be deducted under the provisions of section 194-H of the Income-Tax Act, 1961.

In the relevant case, the assessee was publishing newspapers and magazines and its main source of income was advertisement charges. The major advertisement income of the assessee came through accredited advertising agencies (accredited agents). The accredited agents got advertisement orders directly from the advertisers, who thereafter placed order to the assessee, on which they received trade discount. The assessee paid trade discount to the advertising agent without deducting TDS. The assessing officer contended that the payment was in nature of ‘commission’ and liable to TDS under section 194-H of the Act.

The tribunal held that the advertising agency was placing orders for advertisement to various newspapers and was being taxed on the profits so made by it, and hence the transactions between the assessee-company and the accredited advertising agencies were on a principalto-principal basis and not on a principalto-agent basis. Hence, it was held that the payment by the assessee-company to accredited advertising agencies could not be termed as payment of commission.

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