Held by Hon’ble Income Tax Appellate Tribunal, Delhi Bench in the matter of
Perfect Probuild P.Ltd, New Delhi vs Dcit
(ITA No. 1034/Del/2018, Assessment Year: 2011-12)
In the given case, the petitioner is engaged in a business of construction services. During the year, The Appellant made payment of Lease rent to Noida Authority. As per letter provided by Noida Authority, the appellant did not deduct any TDS on such payment. Further, the Appellant also made payment of advertising expenses and deduct TDS on the same u/s 194C @ 2%. Ld. A.O. passed an impugned order and determined that the Appellant is Liable to deduct TDS on lease rent and also TDS on advertisement expenses should be deducted @ 10% u/s 194J in absence of any contract between the appellant and advertising agency.
With respect to TDS on Lease Rent, Hon’ble ITAT referred the matter back to Ld. AO to determine whether NOIDA has payments of the basic TDS liability along with the interest. If after verification, it is found that the basic TDS liability and interest thereon has already been paid by the NOIDA, then no such liability shall be raised on the assessee.
Further, with respect to payment for advertisement expenses, as per a circular issued by CBDT, there is a difference between payment to advertisement agencies and payment made by advertising agencies to professionals. If payment is made to the advertising agency then TDS should be deducted u/s 194C @ 1%/2% irrespective of written contract. However, when an advertising Agency makes payment to professionals such as Cameraman, Film Artist etc. then TDS should be deducted u/s 194J. Therefore, demand to the extent of additional TDS liability on advertisement charges is liable to be set aside.
1. Brief facts of the case
- M/s Perfect Probuild P. Ltd. (“The Appellant”) is engaged in the construction business.
- The appellant has obtained a land on lease from Noida Authority for which payment of lease rent is made to Noida Authority.
- As per letter issued by Noida Authority, the Appellant did not deduct TDS on payment of lease rent.
- Also during the year, the Appellant received advertisement services and TDS @ 2% on such payment under section 194C of Income Tax Act.
- Ld. Assessing officer issued notice u/s 201(1) and 201(1A) of Income Tax Act, 1961 issued demand order on following grounds:
- TDS on lease Rent: The Appellant is liable to deduct TDS on lease rent u/s 194J and therefore, determined demand of INR .8,15,656/- alongwith interest liability of INR 4,81,237/- for non-deduction u/s. 201(1A) of the Act.
- TDS on Advertisement Charges: The Appellant is liable to deduct TDS on advertisement Expenses u/s 194J @ 10% and not u/s 194C @ 2% because as there was no written contract for advertisement service. Therefore, Ld. AO raised a demand of additional TDS amount u/s 201(!) and interest thereon under section 201(1A) of the Income Tax Act.
- Aggrieved by this order, the appellant filed an appeal before ld. Commissioner of Income Tax (Appeals).
2. Verdict of Hon’ble Commissioner of Income Tax (Appeals)
Hon’ble CIT(A) held:
- CIT (A) deleted the demand on account of non-deduction of TDS on lease rent by relying on a decision of Hon’ble Jurisdictional High Court in the case of Rajesh Projects (India) Ltd. vs. CIT (2017) 78 taxmann.com 263 (Delhi).
- However, interest liability u/s. 201(1A) was confirmed holding that assessee is not to be treated as assessee in default but it does not absolve the assessee from interest liability u/s. 201(1A) of the Act.
- Therefore, directed the learned AO to re-compute the interest upto the date of filing the return of the deductee.
- However, CIT (A) confirmed the demand on account of short deduction of TDS on advertisement charges and held that TDS on advertisement charges should be deducted u/s 194J.
Aggrieved by the order of CIT(A), the Appellant filed an appeal before Hon’ble Income Tax Appellate Tribunal.
3. Matter of dispute before ITAT
- The Revenue has not disputed the decision of Ld. CIT(A) on deletion of TDS liability on payment of lease rent. Therefore, matter to be considered by interest liability u/s 201(1A) and finding that even if the assessee is not to be treated as an assessee in default, it does not absolve the assessee from interest liability u/s. 201(1A) of the Act.
- Correctness of additional TDS liability on advertisement charges and interest thereon.
4. Submission made by the Appellant
The appellant contented:
- With respect to TDS on Lease rent, The appellant placed reliance on order of jurisdictional High court in the case of Rajesh Projects (supra) to the effect that GNoida was ensured that the reimbursement is made to compensate the petitioner’s excess payments.
- The income tax authorities shall not pursue any coercive methods for recovery of the amounts, penalty, once the basic liability (with interest to be paid by GNoida) is satisfied and decided the issue in favour of the assessee.
5. Submission made by the Respondent
The Revenue contended that:
- With respect to TDS on Lease rent, the Learned DR places reliance on the findings of the authorities.
- With respect to TDS on advertisement charges, the Ld. DR was of the view that TDS is deductible u/s 194J because there is no written contract between the Assessee and the Advertising Agency.
- Therefore, payment of advertisement charges is to be considered as payment of Professional Fee.
6. Findings of Hon’ble ITAT
The Hon’ble ITAT made following interpretations:
- With respect to TDS on Lease rent, Hon’ble ITAT relied on precedence in case of Prateek Buildtech (supra), wherein it was held that once the liability of reimbursement by G.Noida is made, the authority shall not pursue any coercive method.
- Considering the same, the matter was referred back to Ld. AO to verify whether liability of payment of TDS and interest thereon lies on G.Noida authority on not. If, it is found that the basic TDS liability and interest thereon has already been paid by the NOIDA, then no such liability shall be raised on the assessee.
- With respect to TDS on Advertisement expenses, ITAT referred to the explanation (iv) to 194C of Income Tax Act wherein it is clarified that any payment made to any resident for carrying out the work for advertising, broadcasting and telecasting then TDS shall be deducted @ 1% when payment is made to Individual or HUF or @ 2% in other cases.
- Further, the word “Advertising” has been clarified by CBDT in Circular No. 714 dated 03/08/1995. It is clarified that “Fee for Professional Service or Technical Service” under section 194J means service provided in course of carrying on legal, medical, engineering or profession of accountancy or technical consultancy or interior decoration or advertising or such activity as is notified by the Board for the purpose of section 44AA or section 194J.
- TDS u/s 194J shall be deducted when an advertising agency makes payment to professionals such as film artist, actors, cameraman etc.
- Circular also clarifies that there is a difference between ‘person making payments to advertising agencies’ and ‘advertising agencies making payment to television channels or newspaper companies etc.’
- Conclusively the payment made here by a person to an advertising agency is covered under the section 194C and payment made by advertising agencies to film artist, cameraman etc. are covered u/s 194J.
- Further, a contract need not always be in writing and could be implied also.
7. Decision of Hon’ble ITAT
- With respect to TDS on Lease Rent, matter was referred back to Ld. AO to determine whether NOIDA has payments of the basic TDS liability along with the interest. If after verification, it is found that the basic TDS liability and interest thereon has already been paid by the NOIDA, then no such liability shall be raised on the assessee.
- TDS on advertisement expenses are to be deducted u/s 194C not 194J irrespective of the fact that there is no contract in writing.