2024 (6) TMI 797 - AT - Income Tax

TDS u/s 194H - sale of pre-paid vouchers and cards to distributors at a rate lower than face value - difference of the MRP and price charged from distribution is the trade discount passed on to the retailers - HELD THAT - The appeal of the assessee against the aforesaid order before CIT(A) was also dismissed by the CIT(A) by holding that the distributors was acting as an agent of the assessee and therefore the assessee was liable to deduct taxes u/s 194H. Separately the assessee also filed rectification application u/s 154 before the CIT(A)-8 Ahmedabad submitting that irrespective of treatment of trade discount as commission by the Department the assessee had duly deducted taxes at source on such trade discount / commission to it s distributors and accordingly the assessee could not be held to be an assessee in default in the first instance having deducted taxes at source on such alleged commission income. The aforesaid application was also dismissed by the CIT(A) against which the assessee is in appeal before us. Assessee has contended that it has made due compliance of TDS provisions and the assessee has deducted taxes at the appropriate rates at the time of giving trade discount / commission to it s agents and accordingly the assessee could not be held to be an assessee in default in the first instance - As since it has already deducted taxes at source at the appropriate rates. We observe that the Department has not analyzed this aspect / contention of the assessee that since the assessee has already deducted taxes at source at appropriate rates there is no question of invoking the provisions of Section 201(1)/201(1A) since the assessee cannot be held to be an assessee in default for non-deduction of TDS when assessee has already deducted taxes at source appropriate rates. Accordingly in the interest of justice the matter is being restored to the file of the CIT(A) for carrying out the necessary verification as to whether the assessee has deducted taxes at source on such discounts / commission given to it s agents as contended by the assessee. Appeals of the assessee are allowed for statistical purposes.

Summary

Issues Involved:
The judgment involves appeals filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals) regarding demand raised for non-deduction of tax at source under Section 194H of the Act on sale of pre-paid vouchers and cards to distributors at a rate lower than face value.

Issue 1 - ITA No. 400/Rjt/2018 (A.Y. 2009-10):
The assessee contested the actions of the Ld. A.O. treating them as liable for making no TDS and interest charging on discount payment u/s 201(1) / 201(1A), raising a demand of Rs. 5,03,229. The appeal highlighted errors in law and facts, lack of reasonable opportunity, and order being bad in law, illegal, and beyond statutory authority. The appellant sought cancellation of the order.

Issue 2 - ITA No. 401/Rjt/2018 (A.Y. 2009-10):
The assessee challenged the rejection of the rectification application by the Ld. CIT(A) without a speaking order, confirming tax liability without proper opportunity, and in violation of natural justice. The appeal also raised concerns about the order being beyond statutory limitations and inadequate opportunity provided at both assessment and appellate stages. The appellant requested rectification and annulment of the order.

Judgment Details:
The assessee, engaged in telecom operations, sold pre-paid vouchers and cards to distributors at a lower rate than face value during the relevant year. The Assessing Officer held the assessee in default for non-deduction of tax at source on the difference between face value and amounts received, treating it as commission paid to distributors. The Ld. CIT(A) upheld this decision, considering distributors as agents of the assessee. Additionally, a rectification application was dismissed despite the assessee deducting taxes on trade discounts. The appeals were filed against these orders.

The main contention was that the assessee had complied with TDS provisions by deducting taxes at appropriate rates while giving trade discounts. The Department failed to analyze this aspect, leading to the restoration of the matter to the Ld. CIT(A) for verification. Supporting documents were provided to demonstrate TDS deduction on trade discounts. Consequently, both appeals were allowed for statistical purposes, and the matter was referred back for necessary verification.

This Order was pronounced in Open Court on 05/01/2024.