2021 (11) TMI 81 - AT - Income Tax

TDS u/s 194H - Non deduction of TDS on the payment of incentive to various dealers - HELD THAT - A.O. or JCIT didn't refer to any judgment in support of their observations that provisions of Section 194H read with Explanation 1 bring the case as one of services rendered in buying and selling. We don't find any merit in the findings of A.O. read with the directions of JCIT and hold that no TDS deduction was required, keeping in mind the facts and circumstances in the appellant's case in respect, of incentives paid/payable to their franchise showrooms and distributors. TDS u/s 194J - Findings of the Ld. CIT(A) are in accordance with the provisions of law and in consonance with the ratio laid down by the Hon'ble Supreme Court in the case of Hindustan Coco Cola Beverage (P) Ltd. vs. CIT 2007 (8) TMI 12 - SUPREME COURT as held recipient of income has already paid taxes on amount received from deductor, the department cannot recover tax from deductor on the same income by treating deductor to be assessee-in-default for shortfall in its amount of tax deducted at source - Hence, we do not find any infirmity in the order of the Ld. CIT(A) to interfere with the same. Accordingly, uphold the findings of the Ld. CIT(A) and dismiss this ground of appeal of the revenue.

Issues Involved:
1. Applicability of Section 194H for non-deduction of TDS on incentives paid to dealers.
2. Applicability of Section 194J versus Section 194C for TDS on payments to advertising agencies.
3. Relevance of judgments cited by both parties.
4. Condonation of delay in filing the appeal due to COVID-19 lockdown.

Detailed Analysis:

1. Applicability of Section 194H for Non-Deduction of TDS on Incentives Paid to Dealers:
The Revenue contended that the assessee should have deducted TDS under Section 194H on incentives paid to dealers, arguing that the relationship between the assessee and the dealers was that of principal and agent. The CIT(A) set aside the JCIT's findings, holding that the relationship was on a principal-to-principal basis and not an agency arrangement, thus Section 194H was not applicable. The CIT(A) relied on several judgments, including those of Vodafone Idea Ltd. and Hindustan Coca Cola Beverages (P.) Ltd., which supported the assessee's position that incentives paid in the course of buying and selling goods do not constitute commission under Section 194H. The Tribunal upheld the CIT(A)'s decision, finding no merit in the Revenue's arguments and noting that the facts of the cited Calcutta High Court judgment were not applicable.

2. Applicability of Section 194J versus Section 194C for TDS on Payments to Advertising Agencies:
The Revenue argued that the assessee should have deducted TDS under Section 194J for payments to advertising agencies, as these involved professional and technical services. The CIT(A) disagreed, holding that the payments fell under Section 194C, which pertains to contracts, including advertising contracts. The CIT(A) referenced Circular No. 715 and the Supreme Court's judgment in Hindustan Coco Cola Beverage (P) Ltd., which clarified that where the recipient has paid taxes, the department cannot recover the same tax from the deductor. The Tribunal found the CIT(A)'s findings to be in accordance with the law and upheld the decision, dismissing the Revenue's appeal on this ground.

3. Relevance of Judgments Cited by Both Parties:
The CIT(A) and the Tribunal both considered various judgments cited by the parties. The CIT(A) relied on judgments from the Rajasthan High Court, Bombay High Court, and various ITAT benches, which supported the assessee's position. The Tribunal found these judgments applicable and noted that the Revenue did not cite any relevant case law to support their position under Section 194H. The Tribunal also found that the facts of the Calcutta High Court judgment cited by the Revenue were not applicable to the present case.

4. Condonation of Delay in Filing the Appeal Due to COVID-19 Lockdown:
The Revenue filed an application for condonation of a 37-day delay in filing the appeal, citing the COVID-19 lockdown as the reason. The Tribunal acknowledged the delay was due to circumstances beyond the Revenue's control and allowed the application, permitting the Revenue to argue the appeal on merits.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s findings that the assessee was not required to deduct TDS under Section 194H for incentives paid to dealers and that the payments to advertising agencies were rightly subjected to TDS under Section 194C, not Section 194J. The Tribunal found the CIT(A)'s decision to be in line with relevant case law and legal provisions.

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