Prasar Bharti brought an issue of taxation before the Apex Court before the Bench comprising of Hon’ble Mr. Justice R.K. Agrawal, Hon’ble Mr. Justice Abhay Manohar Sapre by way of Special Leave Petition. Prasar Bharti was represented by Mr. Rajeeev Sharma and counsel for Commissioner of Income Tax, Thiruvananthapuram was Mr. Rupesh Kumar.
Prasar Bharti Doordarshan Kendra has its Regional Branch at Trivandrum. The Prasar Bharti’s channel, Doordarshan, in the course of their business, regularly telecasted advertisements of several consumer companies. Prasar Bharti entered in agreement with advertising agencies in which these agencies had to make an application to Prasar Bharti to get the accredited status for their Agency so as to enable them to do business with the Prasar Bharti of telecasting the advertisements of several consumer products manufactured by several companies on the Prasar Bharti’s Doordarshan TV Channel. It also provided that the appellant would pay 15% by way of commission to the Agency. The agreement also provided the manner, mode and the time within which the payment was to be made by the Agency to the appellant. The failure to make the payment was to result in losing the accredited status by the Agency. The Agency was to give minimum annual business of Rs.6 Lakhs to the appellant in a financial year failing which their accredited status was liable to be withdrawn. The Agency was to furnish a bank guarantee for a sum of Rs.3 Lakhs.
Prasar Bharti was an assessee under Income Tax Act, 1963 in the assessment year 2002-2003 and 2003-2004, Prasar Bharti paid a sum of Rs.2,56,75,165/- and Rs.2,29,65,922/- to various accredited Agencies, with whom they had entered into the aforementioned agreement as commission for telecasting the advertisements given by these Agencies relating to products manufactured by several consumer companies.
The issue which arose before Assessing Officer (AO) that whether Section 194H of the Income Tax Act was applicable to the payments made by Prasar Bharti, if so, whether the Prasar Bharti deducted “tax at source” as provided under Section 194H of the Act from the amount paid by the Prasar Bharti to the Agencies. Assessing Officer was of that Section 194H was applicable and thus channel failed to deduct the tax at source thereby attracting the provisions of Section 201(1) of the Act during the Assessment years 2002-2003 and 2003-2004.
Aggrieved with the order of Assessing Officer, Prasar Bharti appealed to the Commissioner of Income Tax (Appeals)-II (CIT Appeals), Thiruvanathapuram. The appeal was dismissed. The matter went to the Tribunal which set aside the orders passed by AO and CIT (Appeals).
The appeal was made by Revenue (Income Tax Department) to High Court of Kerala at Earnakulam under Section 260-A of the Income Tax Act. The High Court restored the order of CIT (Appeals) and AO, as Prasar Bharti committed default of non-compliance of Section 194H resulting in attracting the provisions of Section 201 of the Act.
The counsel for Prasar Bharti submitted that the accredited agencies were not working as agent of the appellant and nor the appellant was paying them any amount by way of commission. He pointed out that the Agencies, in terms of the agreement, purchased the air time from Prasar Bharti. It was, therefore, his submission that such transaction cannot be regarded as being between the principal and agent and nor the payment can be regarded as having been made by way of commission so as to attract the rigor of Section 194H and Section 201 of the Act.
The counsel for Prasar Bharti relied on the case of Jagran Prakashan Ltd vs. Deputy Commissioner of Income Tax(TDS), (2012)345 ITR 288 in support of his submission. The Apex court did not accept the precedent cited as the facts of the precedent cited did not match with the present instance.
In reply, learned counsel for the respondent supported the impugned judgment and contended that the order passed by the AO, CIT (Appeals) and the impugned judgment deserve to be upheld as all the three orders are based on proper reasoning calling no interference.
Having heard the learned counsel for the parties and on perusal of the record of the case, we find no merit in these appeals. Therefore, Prasar Bharti failed to comply with the provisions of Section 194H of the Act.
