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2013 (11) TMI 371 - AT - Income TaxWhether the payment of discount and rebate was subject to deduction of TDS There was agency agreement and the agreement for the appointment of consignment stockist - In addition to the commission the company at it s discretion allow an annual quantity discount as per slabs - Although a credit period of 30 days is permissible for payment but an incentive of cash-discount shall be allowed if the dealers make the payment within 7 days Held that - On the basis of the terms and conditions of those agreements and also the nature of business activity of the assessee, assessee was not required to deduct the TDS on the impugned discounts and rebates - Facts of the case have revealed that on accomplishment of the targets the consignment stockiest is permissible to retain the settled discount. It is not the case that the assessee is passing the discounts/rebates to the consignment stockiest . Such stockiest is required to sell certain minimum guaranteed quantities of the assesee s product per month and therefore permitted to retain it s discount on passing over of the proceeds. The discounts and rebates depend upon the quantity of purchase as also the early payment. Therefore, the rebates are in the nature of deduction from the sale price. Payments required to be made within a specific time as per the schedule fixed. Therefore, there was a rebate in respect of early payment - Certain incentives as given by the assessee did not constitute a commission ; hence, out of the purview of the provisions of Section 194H of IT Act - In the light of the judgments cited above i.e. Hindustan Coca Cola Beverages 2007 (8) TMI 12 - SUPREME COURT OF INDIA , the assessee was not simultaneously required to deduct the tax at source Decided in favor of Assessee. Applicability of section 194J or section 194C of the Income tax act Held that - The scope of work of Nandesari Environment Control Ltd. and M/s Gujarat Enviro Protection & Infrastructure ltd. was for collection, transportation and disposal of Hazardous Solid Waste from GFL, Dahej site to Gujarat Enviro Protection & Infrastructure ltd., Surat as per GPCB norms. Again the work of Nandesari Environment Control Ltd. was for operation and maintenance charges and was also based on the quantity lifted. The work of these two companies were of collection, transportation and disposable of waste and these two companies were not giving any technical or managerial or consultancy services as envisaged in Section 194J of the I.T. Act - Collection, transportation and disposal of waste by those two companies can be said to be covered under the provisions of Section 194C of IT Act Decided in favor of Assessee.
Issues Involved:
1. Non-deduction of tax at source on discounts and rebates given to dealers. 2. Calculation of interest on non-deduction of tax at source. 3. Applicability of Section 194J versus Section 194C for payments made to waste disposal companies. Issue-wise Detailed Analysis: 1. Non-deduction of tax at source on discounts and rebates given to dealers: The primary issue revolved around whether the payments made by the assessee company to its dealers and agents in the form of discounts and rebates were subject to Tax Deducted at Source (TDS) under Section 194H of the Income Tax Act. The Assessing Officer (AO) argued that these payments were essentially commissions and thus required TDS deduction. The assessee contended that these payments were reductions in sale price, not commissions, and hence not subject to TDS. The tribunal found that the discounts and rebates were indeed reductions in sale price and not commissions. The tribunal referenced the "agency agreement" and "agreement for the appointment of consignment stockist" to support its conclusion that the relationship between the assessee and the dealers was not that of principal and agent but rather a principal-to-principal basis. Consequently, the tribunal ruled that TDS was not required on these payments. 2. Calculation of interest on non-deduction of tax at source: The assessee challenged the interest calculation for non-deduction of TDS, arguing that the interest amount was overstated. Given the tribunal's decision that TDS was not required on the discounts and rebates, the issue of interest calculation became redundant. Therefore, the tribunal allowed this ground in favor of the assessee. 3. Applicability of Section 194J versus Section 194C for payments made to waste disposal companies: The Revenue argued that payments made by the assessee to M/s. Nandesari Environment Control Ltd. and M/s. Gujarat Enviro Protection & Infrastructure Ltd. for waste disposal services should be subjected to TDS under Section 194J, treating them as technical services. The assessee contended that these payments were for collection, transportation, and disposal of hazardous waste, which should fall under Section 194C as contract payments. The tribunal agreed with the assessee, noting that the services provided by these companies were not technical, managerial, or consultancy services but were purely for waste disposal. Thus, the tribunal upheld the CIT(A)'s decision to apply Section 194C, not Section 194J, for these payments. Conclusion: The tribunal ruled in favor of the assessee on all counts: - The assessee was not required to deduct TDS on discounts and rebates given to dealers. - The issue of interest calculation on non-deduction of TDS became redundant. - Payments made to waste disposal companies were correctly subjected to TDS under Section 194C, not Section 194J. All three appeals by the assessee were allowed, and the appeals by the Revenue were dismissed.
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