2015 (7) TMI 1292 - AT - Income Tax

Addition u/s 40(a)(ia) - assessee has not paid the TDS and deposited to the govt. account before the due date of filing of return of income u/s. 139(1) - Held that - As relying on COMMISSIONER OF INCOME TAX, KOL-XI, KOL VERSUS VIRGIN CREATIONS 2011 (11) TMI 348 - CALCUTTA HIGH COURT the issue stands covered in favour of the assessee and against the revenue we direct the AO to allow the deduction of commission payments because the assessee has paid the TDS and deposited to the govt. account before the due date of filing of return of income u/s. 139(1) of the Act i.e. on 14.07.2009. Accordingly this issue of assessee s appeal is allowed. TDS u/s. 194H - non deduction of tds on commission payment - invoking the provision of section 40(a)(ia) - Held that - According to the assessee, this is not commission but incentive on collection of money from different places by various persons as per the direction of the team employed by the assessee company. This incentive includes travelling allowance also. We find that this incentive is not given at a fixed rate for payments which is known in the trade as incentive for actual collection and this incentive is in the nature of discount and not commission. Once this is in the nature of discount or can be called as incentive but not commission then the assessee is not liable to deduct TDS on this and accordingly we direct the AO to delete the disallowance. - Decided in favour of assessee

Summary

Issues involved:
1. Disallowance of deduction of commission payment for non-deduction of TDS under section 194H.
2. Disallowance of deduction of commission for non-deduction of TDS under section 194H.

Issue 1: Disallowance of deduction of commission payment for non-deduction of TDS under section 194H:
The appeal was against the order confirming the disallowance of deduction of commission payment for non-deduction of TDS under section 194H, invoking section 40(a)(ia) of the Income Tax Act. The assessee had paid commission to various parties during the relevant financial year but paid TDS after the due date of filing the return under section 139(1) of the Act. The Assessing Officer disallowed the commission amount as TDS was deposited after the due date, leading to the CIT(A) confirming the addition. However, the Tribunal referred to a similar case where the High Court had ruled in favor of the assessee, stating that TDS paid before the due date of filing the return should be allowed as a deduction. As the issue was covered in favor of the assessee by the High Court decision, the Tribunal directed the AO to allow the deduction of commission payments.

Issue 2: Disallowance of deduction of commission for non-deduction of TDS under section 194H:
The second issue involved the disallowance of deduction of commission for non-deduction of TDS under section 194H, invoking section 40(a)(ia) of the Act. The assessee company had made payments on account of commission and incentive to various agents, out of which TDS was deducted on some payments but not on others. The AO disallowed the amount for non-deduction of TDS under section 40(a)(ia). The CIT(A) upheld the AO's decision, stating that TDS should have been deducted on payments exceeding a certain threshold. However, the Tribunal found that the payments in question were incentives for actual collection and not commission, hence not liable for TDS deduction. As the payments were in the nature of discount or incentive and not commission, the Tribunal directed the AO to delete the disallowance, allowing the appeal of the assessee.

In conclusion, the Tribunal allowed the appeal of the assessee in both issues, directing the AO to allow the deduction of commission payments and deleting the disallowance for non-deduction of TDS on incentives for actual collection.