2018 (6) TMI 442 - AT - Income Tax

TDS u/s 194H - Disallowance of commission paid in relation to security transactions - addition u/s 40(a)(ia) - Held that - The said payment was made by the assessee in relation to the security transactions carried out by him in the capacity of sub-broker and accordingly the said payment would not be liable for deduction of tax at source in terms of Explanation to section 194H of the Act. This finding was not controverted by the revenue before us - Decided against revenue

Summary

Issues:
1. Disallowance of commission paid without deduction of tax at source under section 194H of the Income Tax Act, 1961.

Analysis:
The appeal by the Revenue challenged the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of commission paid without deduction of tax at source. The only issue to be decided was whether the Commissioner was justified in deleting the disallowance of commission paid. The assessee, a sub-broker registered with SEBI, paid commission to Remisiers without deducting TDS. The Revenue contended that the payment violated section 194H of the Act. The assessee argued that the payments were related to security transactions and hence not subject to TDS. The Commissioner, relying on precedents, deleted the disallowance, stating that the payment was in relation to securities transactions and exempt from TDS under the Explanation to section 194H.

The assessee further submitted that similar payments had been accepted in previous years' assessments and that the accounts were audited without any TDS violations reported. The assessee's business solely revolved around being a sub-broker and dealing in securities. The Commissioner, considering the nature of the payments and past decisions, granted relief to the assessee, noting that the payments were commissions related to securities transactions and not liable for TDS under section 194H. The Revenue appealed this decision.

During the appeal, the Revenue did not contest the finding that the payments were made in relation to security transactions by the assessee acting as a sub-broker. The Tribunal noted that a similar issue had been decided in favor of the assessee in a previous case. As the Revenue failed to challenge the Commissioner's finding and considering the precedent, the Tribunal upheld the decision to delete the disallowance. The Tribunal found no fault in the Commissioner's order and dismissed the Revenue's appeal, affirming that the commission payments were not subject to TDS under section 194H.

In conclusion, the Tribunal upheld the Commissioner's decision to delete the disallowance of commission payments made by the assessee, as they were related to securities transactions and exempt from TDS under the Explanation to section 194H. The appeal by the Revenue was dismissed, and the order was pronounced on 25.05.2018.