By TIOL News Service

NEW DELHI, JUNE 29, 2018: THE ISSUE AT HAND BEFORE THE BENCH IS - Whether an assessee is liable to deduct TDS u/s 194H where transactions are entered on a principal to principal basis. NO IS THE ANSWER.

Facts of the case:

The assessee company engaged in news transmission and digital journalism, had filed its return for the relevant AY. During assessment, the AO observed that the assessee had entered into transactions with the advertising agencies and had neither furnished any details regarding the quantum of discount or commission deducted nor had deducted tax on such payments. Hence, the AO made additions of Rs.2,40,96,150/- u/s 40(a)(ia) @ 15% as commission on the press revenue. The AO also made disallowance on account of expenses incurred towards Employee Stock Option Plan (ESOP) stating that such expenses are only notional loss and could not be claimed as expenses under the mercantile system of accounting.

Tribunal held that,

++ this issue in controversy has already been set at rest by Delhi HC in CIT vs. Living Media India Ltd. and the SLP filed by the Revenue against the said order has also been dismissed by the Apex Court. So, following the decisions rendered by Delhi HC in Living Media India Ltd. and the Tribunal in assessee's own case for AY 2009-10, it was held that when the transaction between the assessee and advertising agencies are on principal to principal basis, the assessee was not under obligation to deduct tax u/s 194H. So, there's illegality or perversity found in the disputed order passed by the CIT (A), hence the issue is determined against the Revenue. The issue pertaining to the disallowance of ESOP expenses was remanded to the AO for fresh adjudication by relying on the judgement passed in assessee's own case for AY 2006-07 rendered by the Tribunal. Resultantly, appeal filed by the Revenue is partly allowed for statistical purposes.