Whether the amount retained by the accredited agencies is in the nature of commission to attract the provisions of section 194H.?


1.The assessee, Prasar Bharati Doordarshan Kendra, runs the television channel called Doordarshan.

2.For the purpose of telecasting advertisements of consumer companies on its channel, the assessee entered into agreements with advertising agencies. The agencies were required to make an application to the assessee to get the "accredited status" for their Agency so as to enable them to do business with the assessee.

3.The agencies were to give minimum annual business of Rs.6 lakhs to the assessee in a financial year. The agreement provided that the accredited agencies would retain 15% by way of commission out of the amount collected from customers and paid to the assessee. The agencies were not allowed to part commission with an person.

4.The AO was of the view that such retention by the agencies were in the nature of “commission” u/s 194H, and the assessee was in default u/s 201(1) as it had failed to deduct tax at source on such commission retained.

5.The assessee, however, contended that its relationship with agencies were on “principal-to-principal” basis since the agencies purchased airtime from the assessee
and then sold it in the market for advertisement to their customer after retaining 15% of the said


1)Sec.194H provides that deduction of tax at source @ 5% on commission paid.

2)Explanation (i) to Sec. 194H defines Commission as "commission or brokerage" includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset.


1) Inclusive definition of ‘commission’ u/s 194H SC observed that the definition of “commission or brokerage” u/s 194H is inclusive and covers any payment received or receivable directly or indirectly by a person acting on behalf of another person for the services rendered.

2) Agreement itself used word ‘commission’ The agreement itself uses the expression “commission” in all relevant clauses. The payment clause is free of ambiguity and the terms of the agreement indicate that both parties intended that the amount to be paid/retained is in the nature of commission. It is for this reason that the parties used the expression “commission” in the agreement. Keeping in view the tenure and the nature of transaction, SC held that it is clear that the assessee was paying 15% to the agencies by way of “commission” but not under any other head

3) It was agency arrangement for securing advertising business from the agencies. SC noted that it was also clear that payment of 15% was being made by the assessee to the agencies after collecting money from them and it was for securing more advertisements for them and to earn more business from the advertisement agencies. The relationship in question was a pure agency arrangement because the agency acted on behalf of the assessee and the actions of the agency were binding on the assessee. The agreement also contained a specific clause for deduction of tax at source on trade discount, which is in the nature of commission

The Supreme Court, thus, held that the amount retained by the accredited advertising agencies is commission and consequently, the provisions of tax deduction at source u/s 194H are attracted. Consequently, for failure to deduct tax at source u/s 194H, the assessee would be treated as an assessee-in-default


1)It may be noted that the CBDT has, vide Circular No.5/2016 dated 29.2.2016, clarified that TDS under section 194H is not attracted on retentions 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”.

2)However, the Supreme Court, in this case, 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 the agreement also contains a specific clause for deduction of tax at source on trade discount, which is in the nature of commission.

3)Accordingly, the Supreme Court held that the relationship between Doordarshan and its accredited agencies is that of a principal and agent, consequent to which TDS provisions u/s 194H would get attracted in respect of retentions by accredited advertising agencies from payments remitted to Doordarshan.

4)Therefore, the applicability or otherwise of the CBDT Circular will depend on the facts of the specific case.

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