TDS on hoarding advertisement u/s 194C or 194I?
Under which section TDS will be deducted on hoarding advertisements? Whether it will deducted under section 194C (TDS on payment to contractors) or 194I (TDS on rent) of Income Tax Act 1961?
Logically one can say that as the place is occupied in hoarding advertisement it will be taxable under section 194I (TDS on rent). Further one can also say that there is contract so it will taxable under section 194C.
Let us take a view of Mumbai ITAT judgement in above issue in Percept Ltd, Mumbai vs. Department Of Income Tax.
As per the Mumbai ITAT judgement in case of Percept Ltd, Mumbai vs Department Of Income Tax. TDS on hoarding advertisements is taxable under section 194C of Income Tax Act 1961 and not under section 194I of Income Tax Act 1961. The basis of case is that the assessee had paid the hoarding charges to the hoarding vendors for the contract of setting and displaying the hoarding of the clients given to them for particular period of time, that the assessee was not engaged into acquiring of the hoarding space from the vendors/building owners and sub-letting the same.
Income Tax Appellate Tribunal – Mumbai
Percept Ltd, Mumbai vs. Department Of Income Tax on 29 June, 2016
Revenue by: Shri Ganesh Bare-DR Assessee by: Adjournment Application rejected / Date of Hearing: 24.05.2016 Date of Pronouncement: 29.06.2016
Order u/s.254 (1) of the Income-tax Act, 1961(Act )
PER RAJENDRA, AM-
Challenging the order of the CIT (A)-14, Mumbai, dated 22.04.2014, the Assessing officer (AO) has filed the present appeal. Effective ground of appeal is about allowing the deduction under section 194C of the Act. The assessee company is engaged into the business of outdoor advertising like bill boards advertising, hoarding etc. along with media advertising and communication.
2.Effective ground of appeal is about deleting demand of Rs.1,98,20,316/- raised u/s.201(1) and interest charges of Rs.59,46,095/- raised u/s. u/s. 201(1A) of the Act in respect amounts payable towards hoarding charges.In his order the AO observed that the assessee had debited hoarding charges at Rs.24,77,53,957/- and made TDS u/s.194C.He held that the assessee ought to have deducted tax u/s.194-I(b) for acquiring the hoarding/ display right, that the assessee made payment for the right to use hoarding space and such payment was nothing but “rent” paid as defined u/s. 194-I of the Act.He treated the assessee as “assessee in default” as per the provisions of section 201(1) of the Act.
3.In appeal before the First Appellate Authority (FAA),it was submitted that the assessee had made payment of hoarding charges of Rs.24,77,53,957/- to various hoarding vendors and has deducted TDS u/s. 194C of the Act,that on receipt of the order for advertisement through hoardings from the client it gave the entire description and specifications to the client after having discussions with them regarding place, size etc., that would be best suited/choice for 4446/Mum/2014 Percept Ltd.
efficient advertising of the client’s product through hoarding, that as per the agreed understanding about the specifications of hoardings with the client the assessee would approach the hoarding vendor of the desired locations for setting up and putting up the hoardings for specified period,that it was the hoarding vendors who would enter into an agreement with the building owners/society for acquiring either on ownership basis or on lease the space on terrace building wall etc. for putting up the hoardings, that the hoarding vendors would then put up the hoardings as per the specifications given by the assessee for the client and would charge the assessee for hoarding/publicity, that the assessee would then bills the client for advertising through hoardings, that the assessee had paid the hoarding charges to the hoarding vendors for the contract of setting and displaying the hoarding of the clients given to them for particular period of time, that the assessee was not engaged into acquiring of the hoarding space from the vendors/building owners and sub-letting the same. It relied upon the case of Roshan Publicity Private Ltd.(4 SOT 105). The FAA after perusing the order of the AO,the submission of the assessee and the Circular of CBDT held that the Circular explicitly clarified that if there was a subletting of hoarding the TDS was to be deducted u/s. 194-I,that there was no evidence on record to show that the assessee had indulged in subletting of the hoarding rights acquired by it, that the payments made by the assessee to other parties for display of advertisements of its clients were not in the nature of rent, that payments were towards a work contract, that tax was liable to be deducted u/s.194C of the Act, that the assessee could not be held to be ‘assessee in default.’ The FAA relied upon the cases of Roshan Publicity Pvt. Ltd. (supra), and M/s. Ogilvi & Mather Pvt.Ltd.(ITA/5202/Del/2004 for AY.2002-03 dtd. 23.09.2005)and allowed the appeal of the assessee.
- Before us, the Departmental Representative (DR) supported the order of the AO. The Authorised Representative (AR) relied upon the order of the FAA and stated that it was not a case of sub letting.
We have heard the rival submissions and perused the material before us. We find that the assessee had debited hoarding charges of Rs.24.77 crores and had deducted the tax at source u/s.194C of the Act, that the AO was of the opinion that the assessee should have deducted tax u/s. 194-I(b) of the Act,that the FAA held that provisions of section 194 were applicable . We find that the FAA has given a categorical finding of fact that as per the Circular issued by the CBDT (CIR No.715 dt.8.8.95) TDS had to be made as per provisions of section 194-I if there was subletting, that in the case under appeal there was no sub letting. Therefore, we 4446/Mum/2014 Percept Ltd agree with the FAA that payment made by the assessee for display of advertisement of its clients was not in the nature of rent and that the assessee had to deduct tax as per provisions of the section 194C of the Act. We find that in the cases of Roshan Publicity Pvt. Ltd. (supra) and Ogilvi and Mather Pvt. Ltd. (supra) the issue has been discussed and it has been held that payments made towards holding contracts was subject to tax as per provisions of section 194C of the Act. Respectfully following the above orders, we hold that the order of the FAA does not suffer from any legal or factual infirmity.Therefore, upholding her order we decide effective ground of appeal against the AO.
As a result, appeal filed by the AO stands dismissed.
Order pronounced in the open court on 29th June, 2016
Thus it is concluded that TDS on hoarding advertisements shall be deducted under section 194C of Income Tax Act 1961.