Don’t miss the latest developments in business and finance.

Newspapers' ad payments liable to be taxed

Image
BS Reporter New Delhi
Last Updated : Jan 28 2013 | 7:26 PM IST
The Central Board of Direct Taxes has informed the Indian Newspaper Society that Tax Deducted at Source (TDS) is liable to be deducted by newspapers on payments made by them to advertising agencies.
 
The CBDT has written to the INS following a clarification sought by the latter on whether TDS was deductible on payments made by them to advertising agents.
 
The contention of INS was that such payments are not in the nature of a commission but a discount. Since the payment was actually a discount, no TDS was liable on such payments, it had said.
 
However, revenue department officials said the CBDT was of the view that such payments were covered by the definition of the term 'commission or brokerage' given in Section 194H of the Income Tax Act and hence liable to TDS.
 
Section 194H defines 'commission or brokerage' as 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, valuable article or thing, not being securities.
 
"The board examined the contention of the INS that such payment is in the nature of a discount. A discount is given on sale or purchase of an article in which there is no agreement between the seller and the buyer. The board found that the INS granted accreditation to the advertising agencies and usually the newspapers would enter into an agreement with the agencies. Hence, the newspapers and the agencies were not acting independently and the agency was in fact an agent of the newspaper and was being paid a commission for the services rendered," an official said.
 
It was also observed by the board that the agency did not book ad space from the newspapers and sell the space, in turn, to the advertisers, the officials said.
 
"The model used by the newspapers is that the agency informs the newspapers about the advertisement and then the paper slots the advertisement. Hence, once again, the agency is merely being paid for the services it renders, which is why such payment is liable to TDS," the official added.

 
 

Also Read

First Published: Oct 31 2006 | 12:00 AM IST

Next Story