2023 (4) TMI 533 - AT - Income Tax

TDS u/s 194H - disallowance of commission expenditure for non-deduction of TDS - As submitted by assessee there is neither credit to the parties account on account of commission expenditure nor actual payment by the appellant. Therefore, the question of deduction of TDS in terms of provisions of section 194H of the Act does not arise - HELD THAT - The material facts to be noted is that the appellant had received sale proceeds net of the expenditure like transport, labour, adat, loading and unloading charges etc. The appellant neither paid nor credited such income to the account of the payee. In an identical facts in the case of Super Religare Laboratories Ltd 2021 (10) TMI 1114 - BOMBAY HIGH COURT held that there is no obligation to deduct tax at source u/s 194H - Thus assessee is not under obligation to deduct TDS in such commission expenditure. Decided in favour of assessee.

Summary

Issues involved:
The issue involved in the present appeal is whether the appellant is liable to deduct tax at source u/s 194H in respect of expenditure claimed to have been debited to Profit & Loss Account under the head "commission."

Facts of the case:
The appellant, an individual engaged in the trading of onions, filed a Return of Income for the assessment year 2012-13 declaring a total income of Rs.5,23,249. The assessment was completed by the Income Tax Officer, who disallowed commission expenditure of Rs.14,29,170 for non-deduction of tax at source under section 40(a)(ia) of the Income Tax Act, 1961.

Contentions and decisions:
The appellant contended that the transactions were undertaken on a principal-to-principal basis, not falling within the purview of section 194H of the Act. The appellant also argued that the payees of the commission had already offered such income in their tax returns. The CIT(A) rejected the contention that the transactions were on a principal-to-principal basis but granted partial relief under the second proviso to section 40(a)(ia) of the Act.

Arguments and submissions:
The appellant had only received the net sale proceeds from the buyers and had not received the entire gross receipts. The appellant argued that since there was neither credit to the parties' account nor actual payment by the appellant, the obligation to deduct TDS did not arise. The appellant relied on a decision of the Bombay High Court in a similar case.

Judgment:
The Tribunal held that the appellant was not obligated to deduct TDS on the commission expenditure based on the facts that the appellant received sale proceeds net of various charges and did not pay or credit such income to the payee's account. Citing a decision of the Jurisdictional High Court, the Tribunal concluded that there was no obligation to deduct tax at source under section 194H of the Act in such circumstances. Therefore, the appeal filed by the assessee was allowed.

Separate Judgment:
No separate judgment was delivered by the judges in this case.