2013 (10) TMI 416 - AT - Income Tax

Rectification of mistake in the order - TDS u/s 194H - Disallowance made u/s 40(a)(ia) - whether the transaction in question was in the nature of commission or discount - Held that - when this issue has not been raised by the assessee in the sales tax matter and the assessee has admitted that the turnover shown for the purpose of sales tax is the amount as per the original invoices without reducing the amount of so called discount then the finding of this Tribunal is not based only on legal aspect but by considering the entire facts and circumstances relevant for adjudication of the issue. The assessee has otherwise not disputed the fact that the alleged discount was not reduced/adjusted from the total turnover as per the original invoices for the purpose of sales tax therefore, the decision of Hon ble Supreme Court would not help the case of the assessee - no error or mistake in the order - Decided against the assessee. Regarding non consideration of decision in case of Jai Drinks (2011 (1) TMI 1035 - Delhi High Court) as well as Pearl Bottling (P) Ltd. (2011 (2) TMI 42 - ITAT, VISAKHAPATNAM). - A finding given on merit cannot be reviewed in the proceedings u/s 254(2). The evidence considered while deciding the issue cannot be re- evaluated or re-appreciated in the proceedings u/s 254(2). - Decided against the assessee.

Summary

Issues:
Rectification of mistake in the order dated 18.1.2013 regarding disallowance made u/s 40(a)(ia) of the Income Tax Act in respect of discount given to distributors.

Analysis:
1. The Tribunal discussed the term "agents/distributors" used in the order and clarified that it did not affect the finding on the issue of disallowance. The Tribunal favored the assessee by disapproving the AO's action of considering the entire sale instead of sale through agents/distributors only. No rectification was needed under section 254(2) of the Income Tax Act.

2. The Tribunal noted the discrepancy in para 10.1 regarding the passing on of discounts to retailers. It was observed that the assessee did not provide evidence during the appeal, but the issue was remitted to the AO for further verification. The Tribunal modified the sentence in para 10.1 to reflect that the discount had not been passed on to the retailer, based on the available information.

3. The Tribunal addressed the assertion that the discount given through credit note was a post-sale transaction, contrary to a Supreme Court decision. The Tribunal found that the issue was not raised in the sales tax matter, and the assessee admitted not reducing the discount from the total turnover. Therefore, no rectification was warranted under section 254(2).

4. The Tribunal considered the existence of marketing guidelines presented by the assessee. While the guidelines were not referred to during the hearing, the Tribunal directed the AO to examine and verify them, as they had not been evaluated by the authorities below.

5. The Tribunal rejected the contention that certain legal decisions would impact the case, emphasizing that findings were based on case-specific facts. The Tribunal highlighted the limited jurisdiction under section 254(2) for reviewing decisions based on merit, stating that evidence considered initially could not be re-evaluated. Minor modifications were made, but no significant mistakes were found in the Miscellaneous Application.

In conclusion, the Miscellaneous Application filed by the assessee was partly allowed, with certain observations modified, and the order was pronounced on 4th October 2013.