2013 (8) TMI 967 - AT - Income Tax

Summary

Issues involved:
The judgment involves the issue of disallowance u/s.40(a)(ia) for non-deduction of tax u/s.194H on sales incentives treated as commission.

Summary:

The Appellate Tribunal ITAT Ahmedabad heard an appeal by the Revenue against the order of the CIT(A)-XVI, Ahmedabad for the assessment year 2008-2009. The Revenue contested the deletion of an addition of Rs. 1,81,23,420/- made on account of disallowance u/s.40(a)(ia) for non-deduction of tax u/s.194H on sales incentives treated as commission. The Revenue argued that TDS should have been deducted u/s.194H, while the assessee maintained that the payment was not in the nature of brokerage or commission as per the provision of Section 194H. The Tribunal examined the nature of the payment of sales incentives to dealers and whether it fell under the purview of section 194H of the Act.

Upon review of the submissions and orders of the AO and the CIT(A), it was found that the assessee was a distributor of a company for a specific state and had paid sales incentives to dealers of that company. The key issue was determining whether these payments constituted commission or brokerage under section 194H. The Tribunal observed that the distributorship was on a principal-to-principal basis, not as an agent of the company. The Tribunal noted that the payments were incentives for achieving sales targets, not commissions to third parties. Citing precedents, the Tribunal held that the payments did not fall under section 194H and upheld the CIT(A)'s decision to delete the addition under section 40(a)(ia) of the Act.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision that the payments made by the assessee were not subject to TDS under section 194H and were not in the nature of commission. The Tribunal found the CIT(A)'s order to be well-reasoned and upheld the deletion of the addition under section 40(a)(ia) of the Act.

The appeal of the Revenue was dismissed, and the order was pronounced in Open Court as per the date mentioned.