The main legal point established in the judgment is that the nature of transactions and the clarifications provided by the CBDT in its circulars significantly influence the applicability of TDS under Section 40(a)(ia) of the Income Tax Act, 1961.

JUDGMENT

M. S. Sonak, J. - Heard the learned Counsel for the parties.

2. This appeal was admitted on 18th October 2016 on the following substantial questions of law:

A. Whether the Hon'ble ITAT was right in completely ignoring the decision of the Hon'ble ITAT, Kolkata in ACIT V/s. Bharati Cellular Ltd, 105 ITD 129 and Hindustan Coca Cola Beverages (P) Ltd. V/s. ITO (ITAT, Jp) while deleting addition made on the payment made by the assessee towards the commission paid to news paper vendors without deduction of TDS u/s. 40 (a) (ia) of I.T. Act, 1961?

B. Whether the Hon'ble ITAT was right in not appreciating the CBDT circular no.715 dated 08/08/1995 and CBDT circular No.619 dated 04/12/1991 while deleting the addition made to Rs.2,76,00,979/- towards payments of commission to Advertising Agents where TDS was not deducted under section 40(a)(ia) r.w. s.194C, wherein it was clarified that when commission or brokerage is retained by the agents and not remitted to the principal, it amounts to constructive payments of the same to him by principal and TDS needs to be made from such amount?

3. The Respondent-Assessee is engaged in the business of publishing and selling newspapers. For the Assessment Year 2011-12, the Assessee filed an e-return declaring a total income of Rs.6,96,80,950/-. The case was selected for scrutiny under CASS. The assessment was finalised vide order dated 28/11/2013 in which the Assessing Officer (AO) held that the Assessee had paid commission to the newspaper vendors to the extent of Rs.1,36,43,978/- to advertisement agents to the extent of Rs.2,76,00,979/- aggregating to Rs.4,12,44,957/- and since, the Assessee had not deducted TDS from such payments, the AO disallowed the deduction of the said amount relying upon the provisions of Section 40(a)(ia) of the Income Tax Act, 196.

4. The Assessee appealed to the Commissioner of Income-Tax (Appeals) who, by his order dated 17/11/2014 reversed the AO's order holding that the relation between the Assessee and the newspaper vendors or the advertisement agents was on a principal-to-principal basis and, therefore, there was no requirement of deducting tax at source on the trade discount extended by the Assessee to them. The Commissioner (Appeals) relied upon the decision of the Income Tax Appellant Tribunal (Cuttack) in case of ACIT vs. Samaj,2001 77 ITD 358 (Cuttack) wherein it was held that sale of newspapers at a discounted price to the newspaper vendors amounts to discount and not commission.

5. The Revenue appealed to the Income Tax Appellate Tribunal (ITAT) which has, by its order dated 7/10/2015, dismissed the Revenue's appeal and upheld the order made by the Commissioner (Appeals). Hence, the present appeal on the aforesaid substantial questions of law.

6. Ms. Linhares, the learned Counsel for the Revenue submits that the view taken by the Commissioner (Appeals) and the ITAT, is contrary to the law laid down by the Kolkota Bench of the ITAT in ACIT vs. Bharti Cellular Ltd, 105 129 (Kolkota) and Jaipur Bench of the ITAT in Hindustan Coca Cola Beverages P. Ltd. vs. Commissioner of IncomeTax, (2018) 402 ITR 539 (Raj) . In these decisions, it has been held that any payment made by the Assessee towards commission to the newspaper vendors or advertising agents without deduction of tax at source under Section 40(a)(ia) of the Income Tax was not liable to a deduction. She submits that the decision of the Kolkota Bench of the ITAT has even been affirmed by the High Court Calcutta in Bharati Cellular Ltd. vs. ACIT,2011 12 Taxmann.com 30 (Calcutta). She further submits that the first substantial question of law, as framed, is, therefore, required to be answered in favour of the Revenue and against the Assessee.

7. Ms. Linhares further submits that the Commissioner (Appeals), as well as the ITAT, have not appreciated the CBDT Circular No.715 dated 8.8.1995 and CBDT Circular No.619 dated 4/12/1991 in the context of payment of commission to the advertising agents. She submits that wh