My advertising agency bills the advertiser, remits the money to me, and I pay it fifteen per cent back as its margin. The agreement calls it commission. Is that section 194H?
Yes, on these facts. The Supreme Court held that the fifteen per cent paid to accredited advertising agencies under Doordarshan's agreements was commission within section 194H, so tax had to be deducted on it. What decided the case was the arrangement, not the label on the ledger: the agreement called the sum commission throughout, it was paid over after the appellant had collected the money from the agencies, and the relationship was one of principal and agent rather than principal to principal. Read it against Ahmedabad Stamp Vendors and Bharti Cellular, where the same section did not apply because the distributor bought on its own account.
Decided by the Supreme Court (Supreme Court of India — R.K. Agrawal J and Abhay Manohar Sapre J) on 2018-04-03, reported as (2018) 7 SCC 800; Civil Appeals Nos. 3496-3497 of 2018. It bears on section 194H, section 201, section 393 (Act of 2025), section 398 (Act of 2025) of the Income Tax Act 1961, in TDS Defaults matters.
Almost every media buying arrangement in the country has the same shape, and the agency's fifteen per cent is treated as its own margin rather than as a payment made to it. That is exactly why the deduction gets missed. Here the money did move — the agencies collected from the advertisers, remitted to the broadcaster, and the broadcaster paid the fifteen per cent back — and the agreement called it commission throughout. If yours does the same, the obligation runs on the whole of it.
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Prasar Bharati's Trivandrum branch ran the Doordarshan channel and, to regulate the business of advertising on it, entered into agreements with accredited advertising agencies. Under those agreements the agencies took airtime and placed advertisements on it, and were paid fifteen per cent of the billing after the appellant had collected the money from them. For assessment years 2002-03 and 2003-04 the appellant did not deduct tax on that fifteen per cent. The Assessing Officer held that it was commission within section 194H, that tax should have been deducted on it, and raised demands for the short deduction together with interest. The Commissioner (Appeals), by an order of 4 March 2005, agreed with the Assessing Officer and dismissed the appeals. The Tribunal then decided in the appellant's favour. The Kerala High Court allowed the Revenue's appeals, set the Tribunal's order aside and restored the orders of the Commissioner (Appeals) and the Assessing Officer, holding that the payment was commission as the section defines it. The appellant came to the Supreme Court.
The appeals were dismissed and the High Court's view was affirmed. The fifteen per cent paid to the accredited agencies was commission within section 194H, and once that is so it was obligatory upon the appellant to have deducted income tax while making payment to the advertising agencies.
The Court began with the Explanation to section 194H, which defines commission or brokerage. It is an inclusive definition and takes in any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered, other than professional services, or for any services in the course of buying or selling goods, or in relation to any transaction relating to any asset, valuable article or thing other than securities. It then gave eight reasons for holding that the section applied. The agreement used the expression "commission" in all the relevant clauses; there was no ambiguity in any clause and no complaint to that effect from the appellant; the terms showed that both parties intended the payment to be by way of commission, which is why they used that word; the tenure and nature of the transaction made it clear that the fifteen per cent was paid as commission and not under any other head; the transaction did not show a principal-to-principal relationship but one of principal and agent; the fifteen per cent was paid over after the appellant had collected the money from the agencies, and was paid to secure more advertisements and more business from them; there was a clause in the agreement providing that tax shall be deducted at source on payment of trade discount; and the inclusive definition in the Explanation gives the word a wide meaning into which the transaction fell. The appellant's reliance on the Allahabad High Court's decision in Jagran Prakashan Ltd v Deputy Commissioner of Income Tax (TDS), (2012) 345 ITR 288, did not help it. On reading that judgment the Court found the law laid down there inapplicable to these facts, and said the learned Judges below had rightly distinguished it.
the transaction in question did not show that the relationship between the appellant and the accredited agencies was principal to principal rather it was principal and Agent
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Handle my notice → Ask a CA on WhatsAppYes, on these facts. The Supreme Court held that the fifteen per cent paid to accredited advertising agencies under Doordarshan's agreements was commission within section 194H, so tax had to be deducted on it. What decided the case was the arrangement, not the label on the ledger: the agreement called the sum commission throughout, it was paid over after the appellant had collected the money from the agencies, and the relationship was one of principal and agent rather than principal to principal. Read it against Ahmedabad Stamp Vendors and Bharti Cellular, where the same section did not apply because the distributor bought on its own account. This was decided by the Supreme Court (Supreme Court of India — R.K. Agrawal J and Abhay Manohar Sapre J) and bears on section 194H, section 201, section 393 (Act of 2025), section 398 (Act of 2025) of the Income Tax Act 1961. It is reported as (2018) 7 SCC 800; Civil Appeals Nos. 3496-3497 of 2018. Almost every media buying arrangement in the country has the same shape, and the agency's fifteen per cent is treated as its own margin rather than as a payment made to it. That is exactly why the deduction gets missed. Here the money did move — the agencies collected from the advertisers, remitted to the broadcaster, and the broadcaster paid the fifteen per cent back — and the agreement called it commission throughout. If yours does the same, the obligation runs on the whole of it. If it applies to you, the first step is this: Read your agreement before you read your invoice. The Court went first to what the document itself calls the payment and whether anything in it contradicts that.
Prasar Bharati's Trivandrum branch ran the Doordarshan channel and, to regulate the business of advertising on it, entered into agreements with accredited advertising agencies. Under those agreements the agencies took airtime and placed advertisements on it, and were paid fifteen per cent of the billing after the appellant had collected the money from them. For assessment years 2002-03 and 2003-04 the appellant did not deduct tax on that fifteen per cent. The Assessing Officer held that it was commission within section 194H, that tax should have been deducted on it, and raised demands for the short deduction together with interest. The Commissioner (Appeals), by an order of 4 March 2005, agreed with the Assessing Officer and dismissed the appeals. The Tribunal then decided in the appellant's favour. The Kerala High Court allowed the Revenue's appeals, set the Tribunal's order aside and restored the orders of the Commissioner (Appeals) and the Assessing Officer, holding that the payment was commission as the section defines it. The appellant came to the Supreme Court. The matter was decided on 2018-04-03 by the Supreme Court (Supreme Court of India — R.K. Agrawal J and Abhay Manohar Sapre J). On those facts the Supreme Court held as follows. The appeals were dismissed and the High Court's view was affirmed. The fifteen per cent paid to the accredited agencies was commission within section 194H, and once that is so it was obligatory upon the appellant to have deducted income tax while making payment to the advertising agencies.
The Court began with the Explanation to section 194H, which defines commission or brokerage. It is an inclusive definition and takes in any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered, other than professional services, or for any services in the course of buying or selling goods, or in relation to any transaction relating to any asset, valuable article or thing other than securities. It then gave eight reasons for holding that the section applied. The agreement used the expression "commission" in all the relevant clauses; there was no ambiguity in any clause and no complaint to that effect from the appellant; the terms showed that both parties intended the payment to be by way of commission, which is why they used that word; the tenure and nature of the transaction made it clear that the fifteen per cent was paid as commission and not under any other head; the transaction did not show a principal-to-principal relationship but one of principal and agent; the fifteen per cent was paid over after the appellant had collected the money from the agencies, and was paid to secure more advertisements and more business from them; there was a clause in the agreement providing that tax shall be deducted at source on payment of trade discount; and the inclusive definition in the Explanation gives the word a wide meaning into which the transaction fell. The appellant's reliance on the Allahabad High Court's decision in Jagran Prakashan Ltd v Deputy Commissioner of Income Tax (TDS), (2012) 345 ITR 288, did not help it. On reading that judgment the Court found the law laid down there inapplicable to these facts, and said the learned Judges below had rightly distinguished it. In the words reproduced by the source cited on this page: "the transaction in question did not show that the relationship between the appellant and the accredited agencies was principal to principal rather it was principal and Agent"
It was decided by the Supreme Court on 2018-04-03 and is reported as (2018) 7 SCC 800; Civil Appeals Nos. 3496-3497 of 2018. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 194H, section 201, section 393 (Act of 2025), section 398 (Act of 2025), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The appeals were dismissed and the High Court's view was affirmed. The fifteen per cent paid to the accredited agencies was commission within section 194H, and once that is so it was obligatory upon the appellant to have deducted income tax while making payment to the advertising agencies. It arises in TDS Defaults matters, on section 194H, section 201, section 393 (Act of 2025), section 398 (Act of 2025) of the Income Tax Act 1961, and was decided by Supreme Court of India — R.K. Agrawal J and Abhay Manohar Sapre J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Ask whether the agency is selling your airtime or its own. If it collects from the advertiser on your behalf and is paid a slice of what it collects, that is agency and section 194H is in play; if it has bought from you and resells at its own risk, you are in Ahmedabad Stamp Vendors and Bharti Cellular territory. Do not rely on relabelling commission as trade discount. In this case the agreement itself provided for deduction on payment of trade discount, and that clause counted against the assessee. Fix the moment, not the cash flow. The obligation arises on the earlier of the event of credit or payment, so a credit to the agency's account or to a suspense account starts it running even before a cheque is written. Check the rate and threshold for your year, not this one. The rate here was the rate then in force; it is two per cent for a credit or payment from 1 October 2024, on an annual aggregate threshold of twenty thousand rupees from 1 April 2025. If you have already failed to deduct, go to the payee's return. Section 201 and its first proviso, and the second proviso to section 40(a)(ia), are the exits — and interest still runs. For a credit or payment on or after 1 April 2026 read serial number 1(ii) of the Table to section 393(1) of the Income-tax Act, 2025, and section 398 of that Act for the default.
Still good law. Approved and applied since. The Supreme Court referred to it in Bharti Cellular Ltd v Assistant Commissioner of Income Tax, decided 28 February 2024, recording at paragraph 13 that this Court had observed that the Explanation appended to section 194H defining "commission or brokerage" is an inclusive definition giving the expression a wide meaning, and citing it as (2018) 7 SCC 800. That reference is also the independent check on the text of this judgment used here. The result in Bharti Cellular went the other way, and the two are not in conflict. There the cellular operator sold starter kits and recharge vouchers to its distributors at a discount on a principal-to-principal basis, so the distributor's margin was a trade discount and there was nothing to deduct; the same reading is in CIT v Ahmedabad Stamp Vendors Association, where the discount to a licensed stamp vendor was held to be a cash discount on a sale. The line between them is the fifth of the eight reasons given in this judgment. Where the intermediary acts on your behalf and is paid out of what it has collected for you, section 194H applies; where it has bought from you and sells at its own risk, it does not. Nothing found doubts this decision, and no citator service was consulted. What has changed since is the arithmetic, not the construction. The rate under section 194H was five per cent when these years were assessed and is two per cent for a credit or payment from 1 October 2024, and the threshold is an annual aggregate of twenty thousand rupees from 1 April 2025. The 1961 Act was repealed on 1 April 2026 by section 536(1) of the Income-tax Act, 2025 and continued by section 536(2) for proceedings about any tax year beginning before that date, so this judgment still decides live cases. For a credit or payment on or after 1 April 2026, the corresponding provision is serial number 1(ii) of the Table to section 393(1) of the 2025 Act, at the same two per cent and the same twenty thousand rupees, with section 398 taking the place of section 201. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment was read in its own text. The eight reasons summarised here are the Court's own, in paragraph 31, and the definition summarised before them is paragraph 28; the key quote is the fifth of the eight. The cross-check is a later Supreme Court judgment quoting this one: Bharti Cellular Ltd v Assistant Commissioner of Income Tax, 28 February 2024, at paragraph 13, which reproduces the inclusive-definition point and gives the citation (2018) 7 SCC 800 — which is where the citation printed above comes from, a citation string inside a judgment rather than anyone's headnote. The case name matters here. The appellant was the Director, Prasar Bharati, and the respondent was the Commissioner of Income Tax, Thiruvananthapuram; it is not a Revenue appeal, and citing it the other way round will send a reader to the wrong record. The bench was R.K. Agrawal and Abhay Manohar Sapre JJ, the appeals were Civil Appeals Nos. 3496-3497 of 2018, and judgment was delivered on 3 April 2018. The assessment years were 2002-03 and 2003-04. Three things this judgment is not. It is not authority that every margin an intermediary earns is commission: the Court reached its conclusion on the terms of these agreements, including a clause that itself provided for deduction on payment of trade discount. And it is not authority on a net settlement. The money moved here: the agencies collected from the advertisers, remitted to the appellant, and the appellant then paid the fifteen per cent over, which is the sixth of the Court's eight reasons. An arrangement in which the intermediary keeps its margin and nothing is ever paid across is a different case, and this judgment does not decide it. Nor is it authority on how much can be recovered from a deductor who has failed to deduct. That is the subject of section 201 and of the library's page on Hindustan Coca Cola Beverage, where tax already paid by the payee cannot be recovered twice while interest survives. The Allahabad High Court decision the appellant relied on, Jagran Prakashan, was held inapplicable rather than wrong; the point is not closed against a reader on the other side of it. On the arithmetic. The rupee sums are in the judgment at paragraphs 10 and 13 and are not reproduced on this page. The tax worked out on them does not come to the five per cent the section then prescribed, and comes to a different percentage in each of the two years; the judgment gives nothing that explains the difference, and a figure that does not close is worse than no figure. Nothing in the holding turns on them, and a reader who needs them should take them from the report. The rupee sums are in the judgment at paragraphs 10 and 13 and are not reproduced here. The tax worked out on them does not come to the five per cent the section then prescribed, and comes to a different percentage in each of the two years; the judgment gives nothing that explains the difference, and a figure that does not close is worse than no figure. Nothing in the holding turns on them. The judgment as read does not set out the agreement clause by clause, so whether a differently worded agency agreement would produce the same answer is a question of the next agreement's terms. No later decision distinguishing this case on its own facts was traced. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeals were dismissed and the High Court's view was affirmed. The fifteen per cent paid to the accredited agencies was commission within section 194H, and once that is so it was obligatory upon the appellant to have deducted income tax while making payment to the advertising agencies.
TaxSphere, “Director, Prasar Bharati v CIT”, https://taxnotice.vittsphere.com/caselaw/case/director-prasar-bharati-v-cit-194h-on-the-agency-discount/ (validity last checked 2026-09-23)
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