Whether the amount retained by accredited agencies is in the nature of commission to attract the provisions of section 194H
It may be noted that CBDT has, vide Circular no. 5/2016 dated 29.02.2016, clarified that TDS u/s 194H is not attracted on retention by an advertising agency (for booking or procuring of or canvassing for advertisements) from payments remitted to television channels/newspaper companies. The CBDT has issued this clarification on the basis of the Allahabad High Court ruling in “Jagran Prakashan Ltd.’s” case and Delhi High Court ruling in “Living Media Ltd.’s” case that the relationship between the media company and advertising agency is that of a “Principal to Principal”.
However, Supreme Court, in case of Director, Prasar Bharti V. CIT (2018) 403 ITR 161 (SC), has distinguished from the Allahabad High Court ruling on the basis of the fact that an agreement has been entered into by Doordarshan with the accredited agencies specifically appointing them as agents, and agreement also contain specific clause for TDS on trade discount, which is in the nature of commission.
Accordingly, the Supreme Court held the the relationship between Doodarshan and its accredited agencies is that of “Principal and Agent”.
Therefore, the applicability or otherwise of the CBDT circular will depend on the facts of the specific case i.e. whether the relationship between parties to contract are of Principal to Principal or Principal and Agent in nature.