2019 (12) TMI 1333 - AT - Income Tax

TDS u/s 194H - disallowing expenditure in the nature of discount u/s 40(a)(ia) - Assessee argued that expenditure was in the nature of discount given to distributors working on a principal to principal basis for early/advance payment and not in the nature of commission for provision of any service and therefore did not warrant tax deduction u/s 194H - HELD THAT - As decided in own case 2018 (6) TMI 547 - ITAT MUMBAI TDS provisions are applicable u/s 194H in case it is held that the nature of the transaction entered into between the assessee and the distributor is that of commission but in case if it is decided that the nature of transaction is not commission but discount given on sales it cannot be regarded to be commission which is hit by the provisions of Section 194H. We therefore in the interest of justice and fair play to both the parties set aside this issue and restore it to the file of the AO with the direction that the AO shall re-decide this issue afresh in accordance with law after going though the agreement which the assessee has entered into with the distributor as well as the sample subscription application form whether the amount represents the expenditure incurred by the assessee towards commission.- Appeal allowed by assessee.

Summary

Issues Involved:
Appeal against disallowance of expenditure under section 40(a)(ia) for non-deduction of tax under section 194H - Identical orders for AY 2014-15 & 2015-16 - Nature of discount given to distributors - Applicability of TDS on commission payments - Judicial consistency - Appeal against CIT(A) order.

Analysis:

Issue 1: Disallowance of Expenditure under Section 40(a)(ia)
The assessee, engaged in DTH and satellite services, faced disallowance of commission charges of ?65,12,63,900 for failure to deduct TDS under section 194H. Assessee argued that discounts given to distributors for early payments were not commission under 194H. AO and CIT(A) disagreed, leading to the disallowance. Assessee contended that the issue was similar to earlier years where ITAT decisions favored them. The DR supported the CIT(A) order due to divergent high court views. ITAT considered prior cases and set aside the issue to the AO for fresh adjudication in line with earlier tribunal findings.

Issue 2: Nature of Discount vs. Commission
Assessee's argument centered on the nature of discounts given to distributors, contending they were not commission under 194H. The Tribunal emphasized the importance of examining agreements and transaction details to determine if the payments constituted commission or discounts. The Tribunal directed the AO to reevaluate the issue considering the nature of the transaction and the applicable legal provisions.

Issue 3: Applicability of TDS on Commission Payments
The core issue revolved around whether the payments to distributors qualified as commission under section 194H, necessitating TDS deduction. The Tribunal emphasized the need for a thorough examination of agreements and transaction details to ascertain the true nature of the payments. The matter was remanded to the AO for a fresh decision based on the Tribunal's directions from earlier years.

Issue 4: Judicial Consistency and Appellate Review
The assessee raised concerns regarding judicial consistency and cited favorable ITAT decisions from prior years. The Tribunal acknowledged these precedents and decided to follow the same approach, setting aside the matter for fresh adjudication by the AO in line with earlier tribunal directives.

In conclusion, the ITAT allowed the appeals for AY 2014-15 and 2015-16 for statistical purposes, remanding the issue to the AO for a fresh decision based on the Tribunal's directions from earlier years. The judgment underlined the importance of analyzing transaction details to determine the nature of payments and the applicability of TDS under section 194H.