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2021 (10) TMI 1114 - HC - Income TaxTDS u/s 194H - discounts given to collection centres - Whether ITAT was justified in holding that the relationship between the assessee and collection centres is in the nature of Principal to Principal and not that of Principal to Agent? - HELD THAT - In this case, admittedly, respondent has not been paying any money to the collection centres. Respondent was only receiving payment from the collection centres. As noted earlier, the collection centres collect money from the patient and pays a reduced amount to respondent and keeps the difference for itself as its margin. As the section is applicable only to a person who is responsible for paying to deduct tax at the time of credit to the account of the payee or at the time of payment and as respondent does not perform any act of paying, there is no obligation on the company to deduct tax at source. We fail to understand appellant s arguments as to how respondent was to deduct TDS when it was not making any payment. Mr. Suresh Kumar was unable to explain how respondent should have deducted TDS and paid with the treasury when respondent was not making any payment. Even the Assessing Officer, who the appellant wishes to support, does not say anything on this - AO s order is contrary to sense. In our view, ITAT (though has applied slightly different preposition while allowing the appeal) has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.
Issues:
Impugning an order passed by the Income Tax Appellate Tribunal (ITAT) regarding the liability to deduct TDS under Section 194H of the Income Tax Act. Analysis: 1. The appellant contested the ITAT's decision, arguing that the relationship between the assessee and collection centers should be considered Principal to Agent, making the assessee liable to deduct TDS under Section 194H of the IT Act. The appellant claimed that the discounts given to collection centers were essentially commission within the meaning of the Act. 2. The respondent, engaged in laboratory and testing services, allowed discounts to third-party collection centers. The appellant alleged that the difference in charges between the collection centers and the respondent constituted commission that should have been subject to TDS. The Assessing Officer held the respondent in default under Section 201 of the IT Act for failing to deduct TDS. 3. The respondent challenged the Assessing Officer's order before the Commissioner of Income Tax (Appeals), who ruled in favor of the respondent. The appellant then appealed to the ITAT, which upheld the CIT (A) decision. The ITAT based its decision on a previous case involving the respondent, where it was established that the relationship between the respondent and collection centers was Principal to Principal, not Principal to Agent. 4. Section 194H of the IT Act specifies the obligation to deduct tax at source on commission or brokerage payments. However, in this case, the respondent was not making payments to the collection centers but receiving payments from them. As the section requires deduction at the time of payment or credit to the payee's account, and the respondent was not making any payments, there was no obligation to deduct TDS. The court found the appellant's arguments unfounded, as there was no payment made by the respondent to trigger the TDS requirement. 5. The court concluded that the ITAT did not err in its decision, as the facts were properly analyzed, and the correct legal principles were applied. The court dismissed both appeals, finding them devoid of merit and declined to award costs. In summary, the High Court upheld the ITAT's decision, ruling that the respondent was not liable to deduct TDS under Section 194H of the IT Act due to the nature of the relationship with the collection centers being Principal to Principal, where no payments were made by the respondent to trigger the TDS requirement.
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