Test Your Knowledge On Tax Deduction In Ad Services

WEEKEND MCQ SELF CHALLENGE

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's challenge is on Special Focus on TDS Deduction in case of advertisement-related services having S MCQs to be self-answered by participants to take a challenge. The detailed answers to these MCQs will be posted by our tax consultant in Gurgaon the next day for the self-assessment of the participants This post shall be of immense use to the participant.

MCQ 17.1: Mr. X engages an advertisement agency for the Promotion of his movie. Advertisement agency further engages a News Channel /Newspaper Company for movie publication & promotion. Is TDS required to be deducted by Mr. X for payment made to the 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 194) for Professional Services

D. No TDS to be Deducted.

MCQ 17.2: In reference to the above question, what will be the 105 implication on Payment made by an advertisement agency to a News Channel Newspaper Company?

A. Yes. u/s 194 Cunder Contract

B. Yes us 194Hfor Commission.

C. Yes, u/s 194for 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 customers, 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 194 for Professional services.

D. None of the About

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

A. Yes u/s 194 C for Contract

B. Yes, u/s 194H for Commission.

C. Yes, u/s 1941 for Professional Services.

D. No TDS to be deducted.

MCQ 17.3 Payment is made by Advertisement Agency for Advertisement to Doordarshan Is TOS required to be deducted? If yes under which section is it to be deducted?

A. Yes, u/s 194 C for Contract

B. Yes, us 194H for Commission.

C. Yes u/s 194) for Professional Services

D. No TDS is to be deducted.

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

A. Yes. u/s 194 C for Contract.

B. Yes, u/s 194H for Commission.

C. Yes, u/s 1941 for Professional Services

D. No TDS to be deducted

MCQ 17.5: Payment made by Advertisement Agency for Advertisement to Doordarshan is TOS 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 1941 for Professional Services

D. No TDS is to be deducted

Answer MCQ Self Challenge #017 Weekend Dhamaka

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

Practical Analysis for MCQ 17.1 & 17.2

CBDT Circular issues clarifications vide Circular no 215 dated 8.8.1995 regarding Issues related to Advertisement services

There are two legs of payments involved in the 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 the CBDT circular TDS will be applicable when a client makes payment to an advertising agency and not when an advertising agency makes payment to the media, which includes both print and electronic media.
• So TDS will be applicable in the first leg and no TDS is required to be deducted under the second leg.
• Moreover, TDS under the first leg is required to be deducted w/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 advertising Broadcasting and telecasting including the production of programs for such broadcasting or telecasting. Damage of goods and passengers by any mode other than railways.

• Hence the advertisement agency has been handed the contract by Mr. Xand hence it is a Work Contract and 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 the Advertising Agency.
• Based on above Correct Answer is 1A) Yes, u/s 194 C under Contract
• Correct answer to MCQ 17.2: D) No 1ds is required to be deducted

Answer to MCQ 17.3:

D) None of the Above.

Practical Analysis for MCQ 17.3

• There have been several issues raised regarding the fees charges taken or retained by advertising companies from media companies for canvassing booking/advertisement is Commission or discount it has been argued by the assesses that since the relationship between the media company and the advertisement company is principal to principal basis, therefore outside the purview of TDS us 194H The tax department, on the other hand, has taken the stand in some cases that since the advertising agencies on behalf of the media companies for procuring advertisements, the margin retained by the former amounts to constructive payment of commission and, accordingly. TDS under Section 194H of the Act is applicable
  
• The issue has been dealt in the case of Allahabad High Court in the case of Jagran Prakashan Ltd. and Delhi High Court in the case of living Media Limited where it has been held that the relationship between the media company and the advertising agency is that of a principal to principal and therefore, the media company is notable for TDS under Section 184H of the Act where the fees/charges taken or retained by advertising companies from media companies for canvass booking/advertisement shall be discounted and not commission, hence no TDS is required to be deducted u/s 194H
  
• Based on the above Correct Answers 17 30) None of the Above
  

Answer to MCQ17.4:

A) Yes, u/s 194C for Contract

Practical Analysis for MCQ 17.4

• CBDT in their circular No 4/2016 dated 29 Feb 2016 clarified the issue of applicability of TDS provisions on payments made by broadcasters/telecasters to the production house for the production of content or program for broadcasting or telecasting
  
• While applying the relevant provisions of TDS on a contract for content production a distinction is required to be made between

1. Payment for the Production of content/program 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 1

Where the content is produced as per the specifications provided by the broadcaster telecaster and the content program also gets the broadcaster telecaster, the CBDT contracts are covered by the work in Section 1940 of the Act

Therefore they are liable for TDS us 194C

Case 2

Where the broadcaster/telecaster acquires only the broadcasting telecasting rights of the content copyright of the already produced by the production house, there transferred to the is no contract for carrying out any work, as clarified that such required by sub-section (1) of Section 1940 of the definition of the term Act Therefore such payments are not liable for TDS under Section 194C of the Act Such payments are not liable for TDS under under other Sections:

• Our question is based on case 1 & hence TDS is liable to be deducted from us 1940
• Based on the above Correct Answer is 4. Yes, u/s 154C for Contract.

Answer to MCQ17.5:

D) No TDS is to be deducted

Practical Analysis for 17.5

• Under Section 196 No TDS is to be deducted if the payee is the central Govt or 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 a change of facts, and the answer may be different Please do not treat this as a professional opinion you can definitely have your own opinion.)

Sincere Regards!

CA Sanjay Kumar Agrawal

Mobile: 9810116321