Case Law Details
RELEVANT PARAGRAPH
8.1.7. Even on a close reading of the Circular makes it very clear that the term “advertising” has not been defined in the Act. During the course of the consideration of the Finance Bill, 1995, the Finance Minister clarified on the floor of the House that the amended provisions of tax deduction at source would apply when a client makes payment to an advertising agency and NOT when an advertising agency makes payment to the media, which includes both print and electronic media. The present assessee was not a client, but, an advertising agency. Considering Trishul as a media, for an argument-sake, whatever payments made by the assessee to Trishul, no tax need to be deducted at source according to the said Circular since neither the assessee (Sands) was a client nor Trishul a media. The word “work” has not been defined in the Act. The Board in its Circulars had repeatedly stressed that when a client makes payment to an advertisement agency, the client was obliged to effect the TDS. In the case on hand, when a client (the advertiser) made the payment to the advertising agency (the assessee), it had effected the TDS, whereas the assessee – being an advertising agency – reimbursed the advertising charges to Trishul which were neither a client nor a media and, thus, the provisions of s.194C have no role to play.
8.1.8. With due respects, we have carefully perused the ruling of the highest judiciary of the land in the case of Associated Cement Company Limited v. CIT and Another reported in (1993) 201 ITR 435 on which rival parties have placed their faith. In consonance with ITA No. 790–5/Bang/ 09 the finding of the Hon’ble Apex Court, the Board in its circular No.681 dated 8.3.1994 had indicated that –
“5. The Supreme Court has held that ….there is nothing in the subsection which could make us hold that the contract to carry out a work or the contract to supply labour to carry out a work should be confined to `works contract’…… .” their Lordships have further held that `Any work’ means any work and not a `work contract’, which has a special connotation in the tax law….’Work’ envisaged in the sub-section, therefore, has a wide import and covers `any work’ which one or the other of the organisations specified in the subsection can get carried out through a contractor under a contract and further it includes obtaining by any of such organisations supply of labour under a contract with a contractor for carrying out its work which would have fallen outside the `work’ but for its specific inclusion in the sub-section’ .
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THE DECISION IS PERFECTLY CORRECT SINCE AD AGENCY IS ONLY A COLLECTING AGENT OF THE MEDIA AND HE ACTS AS AN AGENT BETWEEN THE MEDIA AND THE CLIENT. HENCE THE AD AGENCY PAYMENTS TO MEDIA IS NOT COVERED U/S 194C OF THE INCOME TAX ACT