2017 (7) TMI 1076 - RAJASTHAN HIGH COURT

TDS u/s 194H and/or 194J - arrangement worked out between the assessee company and the distributor (Agency) - withhold tax at source under S. 194H in respect of sales to its distributors, which are on principal to principal basis and wherein property in the goods is transferred to the distributor - Held that:- Section 194H pre-supposes the payment to be made to the third party namely, Distributor or the Agency and if on a close scrutiny of Section 182, Distributor is not an agent, therefore, in our considered opinion, the provisions of Section 194H have wrongly been invoked, and therefore, the first issue is answered in favour of assessee and against the Department.

Tribunal justification in ignoring the statutory books of accounts, the auditors report and the certificate issued by the auditors and merely relying on the internal Management Information System records in coming to the conclusion on the nature of the dealings with the distributors - Held that:- Management Information System was not a part of their books of accounts nor could have been relied upon by the Income Tax Authorities. The basis on which the proceedings were initiated, in our considered opinion, the Statutory Audit Report is final conclusion over the authorities under the Income Tax Act, therefore, the second issue is required to be answered in favour of the assessee.