2025-VIL-1300-DEL-ST
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SERVICE TAX High Court Cases

Service Tax - Advertising Agency, Taxability of Performance Incentives under BAS – Respondent-assessee is an advertising agency that provides services to clients and books advertising space and slots in print and electronic media - Dept issued notice alleging that the performance incentives received by the respondent from media houses constitute a ‘Business Auxiliary Service’ and are therefore liable to service tax - Whether the performance incentives received by the advertising agency from media houses are liable to service tax - HELD - The advertising agency merely renders services to its clients as per their approved advertising plans and does not render any additional service to the media houses. Achieving revenue targets or benchmarks is part of the existing service and does not constitute a separate or additional service - The advertising agency has no agreement with the media houses to meet any target, nor is there any obligation on the media houses to provide incentives or discounts. The advertising agency clients are the advertisers who decide and approve the media plans suggested by the agency. Therefore, the advertising agency cannot have any obligation to the media houses. The incentives paid by the media houses are merely for achieving a particular target while carrying out the business for its clients – Further, the CBEC Circular No. 214/1/2023-ST clarified that for Section 66E(e) of the Finance Act, 1994 to apply, there must be a contractual agreement where one party agrees to do or abstain from doing something in exchange for consideration from the other party. In the present case, the advertising agency does not have any such independent contractual arrangement with the media houses - The concurrent findings of the lower authorities that the performance incentives received by the advertising agency are not liable to service tax, is upheld – The Revenue appeal is dismissed
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