THE DIRECTOR, PRASAR BHARATI versus COMMISSIONER OF INCOME TAX, THIRUVANTHAPURAM

Citation: [2018] 3 S.C.R. 287 · Decided: 03-04-2018 · Supreme Court of India · Bench: R.K. AGRAWAL · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

A
B
C
D
E
F
G
H
287
[2018] 3  S.C.R. 287
287
THE DIRECTOR, PRASAR BHARATI
v.
COMMISSIONER OF INCOME TAX, THIRUVANTHAPURAM
(Civil Appeal Nos. 3496-3497 of 2018)
APRIL 03, 2018
[R. K. AGRAWAL AND ABHAY MANOHAR SAPRE, JJ.]
Income Tax Act, 1961: s. 194H Explanation – Payment of
Commission or brokerage – Applicability of s. 194H – Appellant-
assessee entering into an agreement with several advertising
agencies – Payment made by appellant to the agencies, towards
commission in terms of agreement – Assessment order by the
Assessing Officer that provisions of s. 194H are applicable to the
payments made by the appellant to the Agencies and since the
appellant failed to deduct the “tax at source” from the amount paid
to the agencies, the appellant committed default thereby attracting
the rigor of s. 201(1) – Said order upheld by CIT(Appeals), however,
set aside by the tribunal – In appeal, the High Court upheld the
order of CIT(Appeals) and AO – On appeal, held: Provisions of s.
194H are applicable to the appellant because the payments made
by appellant pursuant to the agreement were in the nature of payment
made by way of  “commission” – In view thereof, the appellant was
under statutory obligation to deduct the income tax at the time of
credit or/and payment to the advertisement agencies – Non-
compliance of s.194H by the assessee attracts the rigor of s. 201
which provides for consequences of failure to deduct or pay the tax
as provided u/s. 194H – Thus, the provisions of s. 201 rightly invoked
against the appellant by the assessing authority.
Dismissing the appeals, the Court
HELD: 1.1 Section 194H of the Income Tax Act, 1961
provides that any person other than individual or HUF,
responsible for paying any income by way of “commission” (not
being insurance commission as specified in Section 194D) or
“brokerage” to any person shall at the time of credit of such
income to the account of payee or at the time of payment of such
income in cash or by cheque or draft or any other mode will deduct
A
B
C
D
E
F
G
H
288
SUPREME COURT REPORTS
[2018]  3 S.C.R.
income tax thereon at the rate of 5%. The first proviso specifies
the limit. The second proviso makes the individual or HUF liable
to deduct the income tax, if they exceed the limit specified therein.
The third proviso exempts payment of commission or brokerage
when made to BSNL and MTNL to their public call office
franchisees.  The Explanation appended to s.194H defines the
expression “commission or brokerage”. It is an inclusive
definition and includes therein any payment received or
receivable, directly or indirectly by a person acting on behalf of
another person for services rendered (not being professional
services) or for any services in the course of buying or selling of
goods or in relation to any transaction relating to assets, valuable
article or thing not being securities. Clause (ii) defines
professional services; clause (iii) defines securities; and clause
(iv) provides a deeming fiction for treating any income so as to
attract the rigor of the Section for ensuring its compliance.[Paras
27-28] [295-F-G, H; 296-A-B]
1.2 The reasoning and the conclusion arrived at by the AO,
CIT (Appeals) and the High Court appears to be just and proper
and does not call for any interference. The High Court was right
in holding that the provisions of Section 194H are applicable to
the appellant because the payments made by the appellant
pursuant to the agreement in question were in the nature of
payment made by way of “commission” and, therefore, the
appellant was under statutory obligation to deduct the income
tax at the time of credit or/and payment to the payee. [Paras 29,
30] [296-C-D]
1.3 The conclusion of the High Court is clear from the
undisputed facts emerging from the record of the case because
the agreement itself has used the expression “commission” in
all relevant clauses; Second, there is no ambiguity in any clause
and no complaint was made to this effect by the appellant; Third,
the terms of the agreement indicate that both the parties intended
that the amount paid by the appellant to the agencies should be
paid by way of “commission” and it was for this reason, the parties
used the expression “commission” in the agreement; Fourth,
keeping in view the tenure and the nature of transaction, it is
A
B
C
D
E
F
G
H
289
clear that the appellant was paying 15% to the agencies by way of
“commission” but not under any other head; Fifth, the transaction
in question did not show th

Excerpt shown. Read the full judgment & AI analysis in Lexace.