2019 (9) TMI 200 - HC - Income Tax

TDS u/s 194H - addition u/s 40(a)(ia) - commission involved in selling its product through SBPL - HELD THAT - Tribunal has on facts come to the conclusion that the sale of goods to Sandu Brothers Private Limited was on principal-to-principal basis and not through an agent. Thus no amount of the discount aggregating to ₹ 7.27 crores can be classified as commission. Therefore, section 194H of the Act calling for deduction of tax of such a commission would have no application to the present facts. The Appellant has not been able to show that the finding of fact arrived at by the Revenue on the basis of the terms of the agreement is in any manner perverse, or capable of different interpretation. No substantial question of law

Summary

Issues:
Challenge to deletion of addition under section 40(a)(ia) rw section 194H of the Income Tax Act, 1961.

Analysis:
The case involved an appeal challenging the order passed by the Income Tax Appellate Tribunal relating to Assessment Year 2009-10. The main issue was whether the Tribunal was justified in deleting the addition under section 40(a)(ia) rw section 194H of the Act amounting to ?5,84,55,165. The Respondent, engaged in the manufacture of Ayurvedic medicines, had given discounts on sales turnover to a company. The Assessing Officer disallowed the commission amount under Section 40(a)(ia) of the Act for non-deduction of tax. The Commissioner of Income Tax (Appeals) upheld the decision. However, the Tribunal, after examining the agreement between the parties, concluded that the sale of goods was on a principal-to-principal basis, not through an agent, and therefore, no amount of the discount could be classified as commission. The Tribunal found that the discount given was part of the sale transaction and not subject to tax deduction under section 194H of the Act.

The Tribunal's decision was based on the fact that the ownership of goods was transferred to the buyer after certification, and the goods could not be returned to the seller. The agreement between the parties clearly indicated a principal-to-principal relationship, with no agency involved. The Tribunal highlighted that the Department had not disallowed similar trade discounts in previous or subsequent assessment years, indicating a consistent approach. The Appellant failed to demonstrate any perversity in the Revenue's findings based on the agreement terms. Therefore, the Tribunal concluded that the question raised did not give rise to any substantial question of law and dismissed the appeal. The judgment emphasized the importance of examining the nature of transactions and agreements between parties to determine the tax implications accurately.