2005-VIL-359-ITAT-MUM
Equivalent Citation: [2005] 4 SOT 105 (MUM.)
Income Tax Appellate Tribunal MUMBAI
IT APPEAL NOS. 1277 TO 1279 (MUM.) OF 2001
Date: 13.05.2005
INCOME-TAX OFFICER, TDS WARD I (CENT. I & II)
Vs
ROSHAN PUBLICITY (P.) LTD.
BENCH
S.R. CHAUHAN AND D.K. SRIVASTAVA, JJ.
JUDGMENT
S.R. Chauhan, Judicial Member - I.T. Appeal Nos. 1277, 1278 & 1279/Mum./2001 are appeals by revenue for the assessment years 1997-98, 1998-98 and 1999-2000 respectively and are directed against three separate orders of ld. CIT(A), Mumbai, each dated 16-12-2000; in fact the impugned appellate order in assessment years 1997-98 and 1999-2000 are just formal orders of two lines each wherein the impugned common consolidated order for all the above three assessment years rendered in assessment year 1998-99 has been adopted/followed, and it is the said common consolidated order, which actually is a speaking order.
2. We have heard the arguments of both the sides and have also perused the records.
3. In all the above three appeals, the revenue has raised sole common ground, which is as under :
"On the facts and in the circumstances of the case and in law, ld. CIT(A)-XXV, Mumbai erred in holding that payments made by the advertising agents to the hoarding owners fall under the provisions of section 194C of the Income-tax Act, 1961 and not under the provisions of section 194-I as held by the Assessing Officer."
4. The ld. DR has contended that the crucial issue involved in all these three appeals is as to whether in the facts of the case pertaining to assessee-company the provision of section 194C is applicable or the provision of section 194-I in respect of making of TDS from the payments made by the assessee. The ld. DR has contended that the Assessing Officer has applied the provision of section 194-I treating the payment of charges made by assessee, the advertiser, to the payee as rent and holding the assessee liable for making TDS from the said payment treating the same as rent payment under section 194-I as against the plea of assessee that the said payment is not rent payment but is a sort of payment made to contractor/sub-contractor falling under section 194C. He has contended that the assessee thus made short TDS due to the same having been made under section 194C and so the Assessing Officer treated the assessee in default under section 201 and, accordingly, levied interest under section 201(1A) of the Income-tax Act, 1961. He has contended that in Mumbai generally BMC is the owner of hoardings and so also some Societies or other private individuals/parties; and these owners of the hoardings give the hoardings or the hoarding sites for advertisement on hire/rent to others generally for a period of one year or so. He has, accordingly, contended that the payment of charges made by assessee for the hoarding sites to the hoarding owners/holders had rightly been treated by Assessing Officer as falling within ‘rent’ under section 194-I. He has contended that the assessee having made the TDS from the said payment of hoarding site charges @ 1% treating the same to be falling under section 194C, the assessee had committed default of making short TDS as the payment made by assessee fell within the purport of section 194-I, which provided for a higher rate of TDS. he has contended that the Assessing Officer, accordingly, rightly treated the assessee in default under section 201 and, in turn, rightly levied the interest under section 201(1A). He has contended that the assessee’s case is that the assessee has right to display on hoarding site and the assessee has no property right. He has contended that the assessee took the right of display on hoarding site from the owners of hoarding sites. He has contended that the payment made by assessee to the owners/holders of the hoarding/hoarding sites for taking the hoarding sites for advertisement from them is in the nature of rent/hire liable to the making of TDS under section 194-I. He has also referred to CBDT’s Circular No. 715, dated 8-8-1995 and contended that the same is explanatory. He has also contended that the person who takes hoarding on rent from BMC is practically owner of that hoarding for a year or so. He has thus supported the order of Assessing Officer.
5. The assessee’s plea together with facts relevant thereto, as mentioned in the statement of facts, furnished on record, are as under :
5.1 "During the year under consideration the appellant had made payments to various parties in consideration of the right to advertise on various hoardings acquired by the appellant. The appellant had deducted tax at source under section 194C @ 1% and deposited the same with the Government as required by the Act. The ld. ITO however has held that tax ought to have been deducted at source @ 20% under section 194-I instead of @ 1% under section 194C. The ld. ITO took the view that (page 6 of his order) ‘The advertisement contract liable for TDS at 1% is in respect of advertisement in newspapers, periodicals, radio, television, etc. The amounts paid by the assessee to hoarding site owners cannot be treated as advertisement payments made.’ The ld. ITO failed to appreciate that all types of advertisement contracts including advertisement in respect of hoardings would clearly fall within the purview of section 194C of the Income-tax Act. It is the appellant’s contention that there is absolutely no justification in excluding advertisement on hoardings from the scope of section 194C and restricting the applicability of section 194C merely to advertisement in newspapers, periodicals, radio, television, etc. There is nothing in section 194C to even remotely suggest that its applicability is confined only to advertisement in newspapers, periodicals, radio, television, etc."
5.2 "The ld. ITO further goes on to state that (page 6 of his order) ‘The payments made to each party on which TDS deducted is at 1% is not for the space taken for a day or two, but it runs into for several months’. Once again the ld. ITO failed to appreciate that merely because the contract was effective for a longer period does not mean that the payment ceases to be towards an advertising contract."
5.3 "Without prejudice to the above it is the appellant’s contention that the Circulars of the CBDT are not in any way binding on the appellate authorities or for that matter on the assessee. In this regard, reliance is placed on the decisions in the cases of Keshavji Ravji & Co. v. CIT [1990] 183 ITR 1, 17 (SC) and Hero Cycles (P.) Ltd. [1997] 228 ITR 463, 469 (SC). Hence, the assessee’s obligation to deduct tax will depend on the provisions of law relating thereto and not on the view, which may have been expressed in the said Circular. As already stated above in view of the clear provisions of the Act, section 194C clearly applies in the present case and further as stated above the provisions of section 194-I are clearly inapplicable in the present case."
5.4 "Without prejudice to the above it is the appellant’s contention that all the payees in the present case have already considered/included the amounts received by them from the appellant in their respective Income-tax returns and have paid dues taxes thereon and hence tax cannot again be recovered from the appellant under section 201 of the Income-tax Act, 1961. In this regard the appellant places reliance on the following decisions :
l CIT v. Manager, Madhya Pradesh State Co-operative Development Bank Ltd. [1982] 137 ITR 230 (MP)
l CIT v. Divisional Manager, New India Assurance Co. Ltd. [1983] 140 ITR 818 (MP)
l Gwalior Rayon Silk Co. Ltd. v. CIT [1983] 140 ITR 832 (MP)
l CIT v. Shri Synthetics Ltd. [1985] 151 ITR 634 (MP)
l CIT v. Kannan Devan Hill Produce Co. Ltd. [1986] 161 ITR 477 (Ker.)
l CIT v. Life Insurance Corporation of India [1987] 166 ITR 191 (MP)
l CIT v. MP Agro Morarji Fertilizers Ltd. [1989] 176 ITR 282 (MP)
l CIT v. Hindustan Steel Ltd. Taxation 73(3) - 153 (MP).
Consequently it also follows that where section 201(1) itself is not applicable, the question of charging interest under section 201(1A) does not arise. Further interest under section 201(1A) cannot be levied on the appellant especially in view of the fact that the payees (recipients of the income) have already paid the taxes on time (& in case of delay, if any, the interest for the delay has been paid by the payees concerned). Hence, interest would not be payable by the appellant under section 201(1A). In this regard, reliance is placed on the decisions in the case of ITO v. Sood Enterprises [1992] 41 ITD 234 (Delhi). Munak Investment (P.) Ltd. v. ITO [1995] 55 ITD 429 (Chd.) and Viswapriya Financial Services & Securities Ltd. v. ITO [1997] 60 ITD 401 (Mad.)."
6. As against the contentions of ld. DR, the ld AR of assessee has contended that in the instant case section 194-I will not apply. Referring to the above-mentioned Board’s Circular No. 715 she has contended that the Circular cannot override law. Referring to Explanation (i) to section 194-I, which defines ‘rent’ she has contended that ‘hoarding site’ does not fall within ‘any land or any building’, and in, turn, the payment made by assessee to the holders/owners of hoarding sites for taking from them the right of displaying advertisement thereon does not fall within ‘rent’. She has contended that the provision of section 194-I, accordingly, does not apply in the instant case. She has cited Gulf Oil India Ltd. v. ITO [2000] 75 ITD 172 (Mum.) in her support. She has contended that the individual or Society, owner of building/land, puts up the hoarding on the building/land appurtenant thereto or otherwise; and the hoardings, so erected/put up, are owned by them and either they themselves display the advertisements on their hoarding sites or they give the right of display on their hoarding sites to other advertising agents. She has contended that the assessee has taken the right of display on the hoarding site and this right of display may be for a month or so. She has contended that this display right is for displaying the advertisements of the products of others on hoarding sites belonging to others in respect of which the display right is taken by assessee for some period. She has contended that the assessee is not taking the space on hire/rent but is only taking the right of displaying advertisement, which falls under section 194C and not under section 194-I. She has supported the impugned order of ld. CIT(A). She has also contended that the payments made by assessee to the parties are assessed as business income in the hands of those parties.
7. In rejoinder, the ld. DR has contended that the assessee is not directly displaying but is subletting the right of display. He has contended that the earlier person will fall within the purview of section 194-I and it is the last person who is actually displaying who will fall within the purview of section 194C. He has contended that the term ‘sublet’ arises from letting out.
8. We have considered the rival contentions, relevant material on record as also the cited decision. In Gulf Oil India Ltd. v. ITO [2000] 75 ITD 172 (Mum.), it was held that section194-I is inapplicable when plant is taken on hire and hire charges are paid. It was also held that the storage tanks taken on hire for storing base oil did not qualify either as land or as building within the meaning of section 194-I so as to require the assessee to deduct tax at source from such hire charges under section 194-I.
9. From the perusal of record we find that the ld. CIT(A) has made ample, and no less appropriate, elaboration of the issue in his impugned appellate order. After considering all the facts and circumstances of the case as also the elaborate discussion made by ld. CIT(A), we find that the persons involved in the process of advertisement on hoardings may be categorized as under :
I.Landlords - i.e., the owners/holders of buildings or lands on which the hoardings are erected.These landlords may either themselves put up/erect the hoardings on their building/land or may let out, the space in their building/land to others to put up/erect hoardings; and in the latter situation the building/land belongs to the landlord- lessor while the hoarding belong to the lessee, who has taken the space on lease on payment of rent for the space taken on lease, to erect hoarding thereon.
II.Advertising agents being hoarding holders - These advertising agents are the owners of hoarding sites. They may either themselves display the advertisements on their hoarding sites or they may give the right of display on their hoarding rights to others on payment of charges for a specific period may be a month or so or otherwise.
III.Advertising agents having display rights - These are the persons who do not hold/own hoardings of their own. They take the right of display on hoarding sites from others on payment of charges to whom the hoardings belong.
IV.Marketing agents - These are the persons who market the products of various manufacturers. They contact advertising agents having display right on hoardings, whether the hoardings belong to them or to others, for advertising the products they are marketing.
10. Section 194-I provides that a person who is responsible for paying to any person any income by way of rent shall deduct income-tax thereon at the rate prescribed therein. Explanation (i) to section 194-I defines rent to mean any payment by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building together with furniture, fittings and land appurtenant thereto. In the case before us,the assessee has taken and acquired only the right of displaying advertisement to hoarding sites belonging to others. It is, therefore, clear that what is being used by the assessee in the case before us is only the right of displaying the advertisement. In other words, the use of hoarding site is to facilitate display of advertisement. The amount is paid for commercial exploitation of display rights and not for using hoarding sites under any lease, sub-lease, tenancy, etc. In our view, section 194-I is more appropriately applicable to a case where rent is paid in consideration for the use of any land or building, etc., under any lease, sub-lease, tenancy, etc. In other words, there should be a live link between payment of compensation known as rent and the use of land or building and this live link is by the lease, sub-lease, tenancy, etc. This live link is absent in the case before us. We are, therefore, unable to say that the charges, which were paid by the assessee, were paid in consideration of mere use of any land or building. It was paid for commercial exploitation of display rights. In this view of the matter, the order of ld. CIT(A) is confirmed.
11. All the three appeals filed by the revenue are, therefore, dismissed.
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