2015 (5) TMI 155 - AT - Income Tax

TDS u/s 194H - Payment made to TSPs commission or brokerage - non deduction of tds - whether there is a principal and agent relationship between the assessee company and TSPs? - CIT(A) allowed relief to assessee - Held that - The TSPs are agents of the assessee company who are allowed to collect necessary charges, from its clients, for collecting samples and delivery test report. The arrangement has been made by the assessee to expand its business throughout the country The sharing of testing charges between the assessee and such TSPs/collectors/aggregators is so arranged to give it colour distinguishable from commission or brokerage as envisaged in section 194H of the Act. In trading of goods, the title to the goods passes from the manufacturer to the wholesaler and from the wholesaler to the retailer and then from the retailer to the ultimate consumers, i.e., each of the parties mentioned above become owners of the goods in their independent capacities and they are entitled to deal with the goods in any manner as he likes. However, in the case of lab results, the TSPs/ collectors / aggregators are not going to be benefited by the test results and it is the patient who is going to be benefitted by the lab results. Hence, we are of the view that the traders of the goods cannot be compared with the TSPs/collectors/aggregators, as they provide only agency services as explained earlier. In our view, the assessing officer should exhaustively examine the relationship between the parties in the light of discussions made supra. The assessee is also directed to extend full co-operation to the assessing officer. In view of these facts, the Assessing Officer is directed to examine the issues afresh, collect the details from such TSPs/collectors/aggregators/assessee and if necessary examine them and decide the issue in accordance with law. We are of the view that the assessee has certainly not discharged the burden and the ld. Commissioner of Income Tax (Appeals) granted relief to the assessee ignoring the true facts and observation made in the assessment order, therefore, the impugned orders are set aside. The Assessing Officer is directed to examine the case afresh with different angles. The assessee be given opportunity of being heard, so that no grievance is caused to either side. - Decided in favour of revenue for statistical purposes.

Summary

Issues Involved:
1. Principal-Agent Relationship
2. Nature of Payments as Commission or Brokerage
3. Deletion of Interest Levied under Section 201(1A)

Issue-wise Detailed Analysis:

1. Principal-Agent Relationship:
The Revenue argued that the relationship between the assessee company and the Thyrocare Service Providers (TSPs) is that of a principal and agent. This is based on the terms and conditions set forth by the assessee company, the complete control over the TSPs' day-to-day functioning, and the obligations imposed on TSPs. The assessee contended that TSPs are independent entities operating their own businesses and that there is no principal-agent relationship. The Tribunal found that the TSPs act as agents of the assessee company in collecting samples and delivering test reports. The arrangement allows the TSPs to collect charges from clients, and the sharing of testing charges is structured to appear different from commission or brokerage.

2. Nature of Payments as Commission or Brokerage:
The Revenue claimed that the payments made to TSPs are in the nature of commission or brokerage, supported by affidavits, application forms for appointment as TSPs, and statements recorded during the survey. The assessee argued that the payments are for services rendered by TSPs and not commission or brokerage. The Tribunal noted that the TSPs are billed at B2B rates, and the catalogue prices are set to control high charges. The Tribunal also observed that TSPs are incentivized for achieving targets and that the payments to TSPs are structured to avoid being categorized as commission or brokerage under Section 194H.

3. Deletion of Interest Levied under Section 201(1A):
The Revenue contested the deletion of interest levied under Section 201(1A) by the Commissioner of Income Tax (Appeals). The Tribunal found that neither the Assessing Officer nor the Commissioner of Income Tax (Appeals) had thoroughly examined the nature of the payments and the relationship between the assessee and TSPs. The Tribunal directed the Assessing Officer to re-examine the issues, collect details from TSPs, and decide the matter in accordance with the law. The Tribunal emphasized that the assessee had not satisfactorily discharged the burden of proof and that the Commissioner of Income Tax (Appeals) had overlooked critical facts.

Conclusion:
The Tribunal set aside the impugned orders of the Commissioner of Income Tax (Appeals) and directed the Assessing Officer to re-examine the case, considering the observations made. The appeals of the Revenue were allowed for statistical purposes, and the Assessing Officer was instructed to provide an opportunity for the assessee to be heard, ensuring no grievance is caused to either side.