2023 (5) TMI 1400 - AT - Income Tax

TDS u/s 194H - default of the assessee in deducting tax at source in respect of the said commission paid/allowed to the distributors/dealers - demand u/s 201(1) and 201(1A) - HELD THAT - The solitary issue raised in these appeal is common and identical to the issue involved in case of Bharti Airtel Ltd. 2023 (5) TMI 1397 - ITAT INDORE wherein held though the AO has recorded the fact that distributors are appointed by the assessee through written agreements however, the AO has not considered the terms and conditions of the agreement which are crucial for determination of the nature of transaction between the assessee and distributors/dealers whether the payment allowed by the assessee is in the nature of discount or commission attracting the provision of section 194H. Further the another aspect which is also relevant for determining nature of the transaction being payment allowed by the assessee is treatment given by the assessee to the said transaction in its books of account. Both of these aspects are inevitably relevant for determining the nature of the transaction and consequential liability/obligation of the assessee to deduct the tax at source as per provisions of section 194H of the Act. Thus in the interest of justice, we are of the considered view that matter requires a proper verification/ examined and fresh adjudication at the level of the AO after considering terms and conditions of the agreement between assessee and distributors/dealers as well as the treatment of these transactions in the books of the assessee. Appeals of assessee are allowed for statistical purposes.

Summary

Issues:
Interpretation of provisions of section 194H of the Act regarding tax deduction on payments to distributors/dealers.

Analysis:
The judgment pertains to 19 appeals by the assessee challenging orders passed by the Assessing Officer (AO) under sections 201(1) and 201(1A) of the Income Tax Act. The AO held the assessee liable for not deducting tax at source on amounts paid to distributors/dealers, considering it as commission or brokerage. The assessee contended that the payments were discounts and not commissions, emphasizing a principal-to-principal relationship. The Commissioner of Income Tax (Appeals) (CIT(A)) upheld the AO's order based on previous tribunal decisions. The Tribunal noted divergent views by different High Courts on similar issues and pending Supreme Court cases. The Tribunal emphasized the importance of examining the agreement terms and accounting treatment to determine the nature of transactions. As these aspects were not considered by the AO or CIT(A), the Tribunal set aside the orders, remanding the matter for fresh adjudication.

The assessee presented specimen agreements and ledger copies to support their argument that the payments were discounts, not commissions. The Tribunal highlighted the necessity of considering these documents and the treatment in the books of accounts for a proper determination. The Tribunal noted that the CIT(A) did not address the contradictory views of other High Courts, emphasizing the need for a comprehensive analysis. Given the conflicting judgments and pending Supreme Court cases, the Tribunal stressed the importance of a thorough examination of agreement terms and accounting entries for a fair decision.

The Tribunal referenced various decisions by High Courts and tribunal benches, illustrating the conflicting interpretations of section 194H. The Tribunal emphasized the need for a detailed review of agreement terms and accounting records to ascertain the nature of transactions. Considering the absence of such examination by the lower authorities, the Tribunal set aside the orders for fresh adjudication. The Tribunal directed the Assessing Officer to conduct a detailed verification and examination of the agreement terms and accounting treatment, ensuring the assessee's right to a fair hearing. Consequently, the appeals by the assessee were allowed for statistical purposes, emphasizing the importance of a comprehensive assessment based on relevant documents and accounting records.

In conclusion, the judgment highlights the significance of analyzing agreement terms and accounting treatment to determine the nature of transactions for tax deduction purposes. The Tribunal stressed the need for a thorough examination, especially in the presence of conflicting judgments and pending Supreme Court cases, to ensure a fair and just decision-making process.