IMPORTANT POINT
Amount paid by Doordarshan to Advertising agencies is commission.

JUDGMENT

Abhay Manohar Sapre, J.

1. Delay condoned.

2. Leave granted.

3. These appeals are directed against the final judgment and order dated 20.11.2009 passed by the High Court of Kerala at Ernakulam in Income Tax Appeal No.27 of 2009 and Income Tax Appeal No.62 of 2009 whereby the High Court allowed the appeals preferred by the respondent herein and reversed the order dated 28.03.2007 passed by the Income Tax Appellate Tribunal, Cochin Bench in Income Tax Appeal Nos. 926 & 927/COCH/2005 for the Assessment Years 2002-2003 and 2003-2004 and restored the order dated 04.03.2005 passed by the Commissioner of Income Tax(Appeals)-II, Thiruvananthapuram and the order dated 22.09.2003 passed by the Assessing Officer.

4. In order to appreciate the issue involved in these appeals, it is necessary to set out the facts hereinbelow.

5. The appellant is known as "Prasar Bharati Doordarshan Kendra". It functions under the Ministry of Information and Broadcasting, Government of India. The dispute in this case relates to the appellant's Regional Branch at Trivandrum.

6. The appellant, in the course of their business activities, which include the running of the TV channel called "Doordarshan", has been regularly telecasting advertisements of several consumer companies.

7. With a view to have a better regulation of the practice of advertising and to secure the best advertising services for the advertisers, the appellant entered into an agreement with several advertising agencies (Annexure-P-12).

8. In terms of the agreement, the advertising agency (hereinafter referred to as "the Agency") was required to make an application to the appellant to get the "accredited status" for their Agency so as to enable them to do business with the appellant of telecasting the advertisements of several consumer products manufactured by several companies on the appellant's Doordarshan TV Channel.

9. The agreement, inter alia, provided that the appellant would pay 15% by way of commission to the Agency. The Agency was to retain the commission/remuneration earned and not to part the same either directly or indirectly with any other person, advertiser or representative of any advertiser for whom it may be acting or has acted as an advertising agency. The agreement also provided the manner, mode and the time within which the payment was to be made by the Agency to the appellant. The failure to make the payment was to result in losing the accredited status by the Agency. The Agency was to give minimum annual business of Rs.6 Lakhs to the appellant in a financial year failing which their accredited status was liable to be withdrawn. The Agency was to furnish a bank guarantee for a sum of Rs.3 Lakhs. There are other clauses also in the agreement but they are not relevant for the purpose of disposal of these appeals.

10. The appellant is an assessee under the Income Tax Act (hereinafter referred to as “the Act”). In the assessment year 2002-2003(01.06.2001 to 31.03.2002) and 2003-2004 (01.04.2002 to 31.03.2003), the appellant paid a sum of Rs.2,56,75,165/- and Rs.2,29,65,922/- to various accredited Agencies, with whom they had entered into the aforementioned agreement for telecasting the advertisements given by these Agencies relating to products manufactured by several consumer companies. The amount was paid by the appellant to the Agencies towards the commission in terms of the agreement.

11. The question arose before the Assessing Officer (AO) in the assessment proceedings as to whether the provisions of Section 194H of the Act, which came into force with effect from 01.06.2001, are applicable to the payments in question made by the appellant to the Agencies and, if so, whether the appellant deducted "tax at source" as provided under Section 194H of the Act from the amount paid by the appellant to the Agencies.

12. The AO made the assessment vide its order dated 22.09.2003. Insofar as the aforementioned question was concerned, the AO was of the view that the provisions of Sectio