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Weekend MCQ Self Challenge – Special Focus on Tds Deduction in case of Advertisement Related Services

 

Special Focus on Tds Deduction in case of Advertisement Related Services

 

Dear Professional Seniors & Friends,
Welcome to this wonderful weekend MCQ self challenge!

This weekend challenge is on Special Focus on Tds Deduction in case of advertisement related services having 5 MCQs to be self answered by participants to take self challenge. The detailed answer of these MCQs shall be posted on Monday for the self assessment of the participants. This post shall be of immense use of the participant.

MCQ 17.1: Mr X engages a advertisement agency for Promotion of his movie. Advertisement agency further engages a News Channel /Newspaper Company for movie’s publication & promotion. Is Tds required to be deducted by Mr X for payment made to advertisement agency. If yes under which section is it to be deducted

A. Yes, u/s 194 C under Contract.
B. Yes, u/s 194H for Commission.
C. Yes, u/s 194J for Professional Services.
D. No Tds to be Deducted.

MCQ 17.2: In reference to the above question, what will be the TDS implication on Payment made by advertisement agency to a News Channel /Newspaper Company?

A. Yes, u/s 194 Cunder Contract.
B. Yes, u/s 194Hfor Commission.
C. Yes, u/s 194Jfor Professional Services.
D. No Tds to be Deducted.

MCQ 17.3: Payment is made by TV Channel/Newspaper Co to Advertisement Agency for booking/procuring/canvassing for Advertisement from various customer.Is TDS required to be deducted.If yes under which section is it to be deducted –

A. Yes, u/s 194 C for Contract.
B. Yes, u/s 194H for Commission.
C. Yes, u/s 194J for Professional services.
D. None of the Above.

MCQ 17.4: What will be the TDS implications on payments made by broadcasters/telecasters to production house for production of content or programme for broadcasting or telecasting?

A. Yes, u/s 194 C for Contract.
B. Yes, u/s 194H for Commission.
C. Yes, u/s 194J for professional Services.
D. No tds to be deducted.

MCQ 17.5: Payment is made by Advertisement Agency for Advertisement to doordarshan. Is TDS required to be deducted.If yes under which section is it to be deducted?

A. Yes, u/s 194 C for Contract.
B. Yes, u/s 194H for Commission.
C. Yes, u/s 194J for Professional Services.
D. No tds is to be deducted.

Sincere Regards

CA Sanjay Kumar Agrawal
Mobile: 9810116321

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Answer MCQ Self Challenge #017 Weekend Dhamaka

 

Dear Professional Seniors & Friends,

Warm Greetings!

 

This post of MCQ is on the provisions relating to applicability of TDS provisions in case of advertisement services.

 

Answer to MCQ17.1: A) Yes, u/s  194 C under Contract.

Answer to MCQ17.2: D) No tds is required to be deducted.

Answer to MCQ17.3: D) None of the Above.

Answer to MCQ17.4: A) Yes, u/s 194C for Contract.

Answer to MCQ17.5: D) No Tds is to be deducted.

 

Practical Analysis for MCQ 17.1 &17.2  :-

 

CBDT Circular issuesd clarifications vide Circular no 715 dated 8.8.1995 regarding Issues related to Advertisement services

There are  two legs of payments involved in advertisement business :-

  • Payment made by client to advertisement agency(MCQ 17.1)
  • Payment made by advertisement agency to Television channel / newspaper company(MCQ 17.2)
  • According to CBDT circular TDS will be applicable when a client makes payment to an advertising agency and not when advertising agency makes payment to the media, which includes both print and electronic media.
  • So TDS will be applicable in first leg and no TDS is required to be deducted under second leg.
  • Moreover, TDS under first leg is required to be deducted u/c 194C as Sec 194C provides for deduction of tax from payment of works contract made to contractor or sub-contractor. Any person carrying out any work in pursuance of a contract between a specified person and the resident contractor is required to deduct tax at source.It includes advertisingBroadcasting and telecasting including production of programmes for such broadcasting or telecasting, Carriage of goods and passengers by any mode other than railways.

 

  • Hence,Herethe advertisement agency has been handed the contract by Mr. Xand hence it is a Work Contract & Hence TDS is required to be deducted u/s 194C. In the Second leg as the advertising agency is acting as an Agent on behalf of Mr X,no TDS is required to be deducted by Advertising Agency.
  • Based on above Correct Answer is 1: A) Yes ,u/s  194 C under Contract.

 

  • Correct answer to MCQ 17.2 : D) No tds is required to be deducted.

 

 

Practical Analysis for MCQ 17.3

  • There has been several issues raised regarding the fees/charges taken or retained by advertising companies from media companies for canvassing booking/advertisement is ‘Commision or discount’ . It has been argued by the assesses that since the relationship between the media company and the advertisement company is principal to principalbasis, therefore outside the purview of TDS u/s 194H.The taxdepartment, on the other hand, has taken the standin some cases that since the advertising agenciesact on behalf of the media companies for procuringadvertisements, the margin retained by the formeramounts to constructive payment of commissionand, accordingly, TDS under Section 194H of theAct is applicable.
  • The issue has been dealt in the case of Allahabad High Court in the case of JagraPrakashan Ltd. and Delhi High Court in the case ofLiving Media Limited where it has been held thatthe relationship between the media company andthe advertising agency is that of a ‘ principal to principal ‘ and, therefore, the media company is notliable for TDS under Section 194H of the Act where the fees/charges taken or retained by advertising companies from media companies for canvassing booking/advertisement shall be discount and not commission, hence no TDS is required to be deducted u/s 194H.
  • Based on above Correct Answer is 17.3D) None of the Above

 

Practical Analysis for MCQ 17.4

  • CBDT in their circular No. 4/2016 dated 29th Feb, 2016 clarified the issue of applicability of TDS provisions on payments made by broadcasters/telecasters to production house for production of content or programme for broadcasting or telecasting.

 

  • While applying the relevant provisions of TDS on contract for content production , a distinction is required to be made between

 

  1. Payment for Production of content/programme as per the specifications of the Broadcaster /telecaster.
  2. Payment for acquisition of Broadcasting/telecasting rights of the content already produced by the production House.
Case 1Case 2
Where the content is produced as per the specifications provided by the broadcaster/telecaster and the copyright of the content programme also gets transferred to the broadcaster/telecaster, the CBDT clarifies that such contracts are covered by the definition of the term ‘work’ in Section 194C of the Act.where the broadcaster/telecaster acquires only the broadcasting/telecasting rights of the content already produced by the production house, there isno contract for ‘carrying out any work’, as required by sub-section (1) of Section 194C of the Act.Therefore, such payments are not liable for TDS under Section 194C of the Act.
Therefore they are  liable for TDS u/s 194C.Such payments are not liable for TDS under Section 194C of the Act and they may be liable under other Sections.
  • Our question is based on case 1 & hence TDS liable to be deducted u/s 194C.
  • Based on above Correct Answer is 4  Yes , u/s 194C for Contract.

 

Practical Analysis for 17.5

 

  • Under Section 196 No Tds is to be deducted if payee is central Govt , state govt. , RBI , Statutory Corporation or any Mutual Fund.
  • Doordarshan being a Government Agency Tds is not Deductible.
  • Correct Answer on Basis of Above is 5 :D)No Tds is to be deducted.

 

(Disclaimer: The objective of the MCQ post is just to discuss the concept, it may happen, by change of facts, the answer may be different. Please do not treat this as professional opinion; you can definitely have your own opinion.)

 

Sincere Regards!

 

CA Sanjay Kumar Agrawal

Mobile: 9810116321

 

To access MCQ posts regularly, please Join Telegram Channel:
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