2018 (7) TMI 1852 - AT - Income Tax

TDS u/s 194H - non-deduction of tax at source on the commission payment made by assessee as wholesaler of SIM cards / mobile phones etc to retailers / sub-dealers - Held that - We note that the Coordinate Bench of this Tribunal in case of M/s Chocopack Enterprises vs. ITO (2018 (2) TMI 424 - ITAT JAIPUR) has dealt with this issue of disallowance U/s 40(a)(ia) for want of deduction of TDS U/s 194H in respect of the commission paid to the retailer/sub-dealer wherein held The determination of sale price of recharge coupons is in the sole domain of the service provider and the assessee is no role in determining the retail price at which the retailer is selling the recharge coupons to the customer or end user of the service. Accordingly, when the assessee is not directly and indirectly in deciding the quantum of alleged commission/discount as well as determining the retail price at which the recharge coupons is sold to the customer then the provisions of section 194H cannot be applied on the assessee. - Decided in favour of assessee. Disallowance made on account of under reporting of commission by the assessee - difference of more than ₹ 10 lacs in the commission receipt credited in the profit and loss account and commission payment shown by the mobile/cellular operating companies - Held that - Now we find that the assessee has explained the difference in the amount due to service tax reimbursement and commission directly paid to the retailer by the companies. The amount of commission as shown in show notice ₹ 55,73,370/- Excess commission shown by us ₹ 7,531/-. Since, these details and relevant recorded have not been examined by the AO, therefore, we remit this issue to the record of the Assessing officer for verification and considering the reconciliation furnished by the assessee. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Disallowance under Section 40(a)(ia) for non-deduction of TDS under Section 194H on commission payment.
2. Addition due to alleged under-reporting of commission income.
3. Addition due to discrepancy in interest on Income Tax refund.

Issue-wise Detailed Analysis:

1. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS under Section 194H on Commission Payment:

The assessee, a wholesale dealer of SIM cards and mobile accessories, was disallowed ?28,22,036/- by the AO for not deducting TDS on commission payments to retailers/sub-dealers as required under Section 194H. The assessee contended that mobile companies had already deducted TDS on behalf of the assessee for commissions paid directly to retailers/sub-dealers. The assessee argued that the commissions were directly paid by telecom companies, with the assessee merely recording these transactions in its books for accounting purposes. The Tribunal referenced the case of M/s Chocopack Enterprises vs. ITO, where it was held that if the commission was directly paid by the telecom company and the assessee only recorded the entries, the provisions of Section 194H would not apply to the assessee. Following this precedent, the Tribunal deleted the disallowance under Section 40(a)(ia), concluding that the assessee, acting merely as an intermediary, was not required to deduct TDS on the commission amounts directly paid by the telecom companies.

2. Addition Due to Alleged Under-Reporting of Commission Income:

The AO found a discrepancy between the commission income reported by the assessee (?45,46,072/-) and the amount shown by the mobile companies (?55,73,310/-), leading to an addition of ?10,27,298/-. The assessee explained that the difference arose due to service tax reimbursement (?3,73,953/-) and commission directly paid by the companies to retailers (?6,60,876/-). The Tribunal noted that these details were not considered by the AO and remitted the issue back to the AO for verification of the reconciliation provided by the assessee. The AO was directed to re-examine the records and make a decision after giving the assessee an appropriate opportunity for a hearing.

3. Addition Due to Discrepancy in Interest on Income Tax Refund:

The assessee contested an addition of ?2,234/- made by the AO, who calculated the interest on an Income Tax refund as ?9,434/- instead of the actual ?7,200/- received. At the hearing, the assessee chose not to press this ground, and the Tribunal dismissed this ground as not pressed.

Conclusion:

The appeal was partly allowed. The Tribunal deleted the disallowance under Section 40(a)(ia) and remitted the issue of alleged under-reporting of commission income back to the AO for verification. The ground concerning the discrepancy in interest on the Income Tax refund was dismissed as not pressed. The Tribunal's order was pronounced in the open court on 19/07/2018.