2019 (3) TMI 393 - HC - Income Tax

TDS u/s 194H - non deduction of tds on commission payment - fee for technical services - passing of make available test - Tribunal deleted the disallowance u/s 40(a)(ia) for non deduction of TDS holding that the payment was not in the nature of commission, but in the nature of income sharing arrangement - HELD THAT - We are fully convinced that the Tribunal, on examination of the factual position, concluded that payments made are not commission, but a sharing of profit with M/s.TQ Services. Apart from that, the Tribunal remanded the matter to the Assessing Officer for verification of the necessary details and as to whether any technical services have been actually provided and also as to whether the same passes the make available test . Thus, there are no grounds to interfere with the order passed by the Tribunal. Revenue contention that the agreement is camouflaged and that the commission is shown to be as if it is a profit sharing is not acceptable on account of the fact that the Tribunal examined the agreement and rendered a factual finding and in this appeal, we do not propose to re-examine the factual issue, which has been concluded by the Tribunal. We are convinced to state that no substantial question of law arises for consideration in this appeal. - Decided against revenue.

Summary

Issues:
Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 2012-13. Substantial questions of law raised regarding deletion of disallowance under Section 40(a)(ia) for non-deduction of TDS on commission payments. Disagreement between the Revenue and the assessee on the nature of payments made to certain companies. Interpretation of agreements and invoices related to profit sharing versus commission payments. Assessment of whether TDS deduction was mandatory under Section 194H. Tribunal's decision to delete the disallowance and remand the issue to the Assessing Officer for further examination.

Analysis:
The case involved an appeal by the Revenue challenging the Tribunal's order regarding the disallowance of commission payments for non-deduction of TDS under Section 40(a)(ia) of the Income Tax Act, 1961 for the assessment year 2012-13. The Revenue contended that the payments made to certain companies were commission and therefore subject to TDS deduction under Section 194H. The assessee argued that the payments were part of a profit-sharing arrangement and not commission, hence TDS deduction was not applicable. The Assessing Officer disagreed with the assessee's interpretation and completed the assessment, leading to an appeal before the Commissioner of Income Tax (Appeals) where the disallowance was confirmed.

Upon further appeal to the Tribunal, it was held that the agreements entered into by the assessee with the companies indicated a sharing of profit rather than commission payments. The Tribunal examined the methodology of demarcation of fees collected and concluded that the payments were not in the nature of commission. The Tribunal also highlighted the absence of evidence regarding the number of days trainers were in India and the provision of technical services, leading to the issue being remanded to the Assessing Officer for re-adjudication.

The High Court dismissed the Revenue's appeal, emphasizing that the Tribunal's factual findings regarding the nature of payments were conclusive. The Court declined to re-examine the factual issues already settled by the Tribunal and found no substantial question of law to consider. The decision affirmed the Tribunal's ruling that the payments were profit-sharing and not subject to TDS deduction under Section 194H. The matter was remanded to the Assessing Officer for further verification, with no grounds identified for interference with the Tribunal's order.