2014 (1) TMI 304 - AT - Income Tax

Addition made u/s 40(a)(ia) of the Act Liability to deduct TDS as per Section 194H of the Act Nature of Expenditure Commission OR reimbursement expenditure Held that - The payment is reimbursement of the expenses and are not the commission as the concerned party did not give any services in respect of the payment of expenditures made - Providing services is essentially requirement of the nature of transaction of a commission - Since this condition is not satisfied thus it is a case of reimbursement of the expenses incurred by the concerned party on behalf of the assessee thus the Revenue authority is not correct in taking such expenses as commission expenses - The finding of Revenue Authorities is on presumption basis without considering the relevant agreement/documents and books of account maintained by the assessee - orders of Revenue Authorities set aside and the claim of the assessee is allowed - this is not a commission payment thus there is no question of deducting tax at source under Section 194H of the Act - the payment is not subject to tax deducted at source provisions of Section 40(a)(ia) of the Act is not applicable Decided in favour of Assessee.

Summary

Issues involved:
- Appeal against addition of expenses under section 40(a)(ia) of the Income Tax Act, 1961 for Assessment Year 2009-10.

Analysis:
1. Issue 1: Addition of expenses under section 40(a)(ia)
- The case involved appeals by two different assessees against orders dated 31.01.2013, passed by the CIT(A)-II, Agra for the Assessment Year 2009-10.
- In the first case, M/s Pee Cee Cosma Sope Limited appealed against the addition of Rs.28,14,174 under section 40(a)(ia) of the Act. The AO noted that the assessee failed to deduct tax at source on amounts paid to consignees, leading to the addition.
- The CIT(A) confirmed the addition, citing an earlier decision where similar issues were addressed. The Tribunal analyzed whether the payments were commissions or reimbursements based on dictionary meanings and the nature of transactions.
- The Tribunal found that the expenses were reimbursements, not commissions, as the payments were for expenses incurred by consignee agents on behalf of the assessee. The Tribunal set aside the Revenue's decision, allowing the assessee's claim and deleting the addition.

2. Issue 2: Similarity in facts with another case
- In the second case of M/s. Suraj Bhan Agencies (P) Ltd., the facts were identical to the first case, except for the figures involved.
- The Tribunal, considering the detailed discussion and decision in the first case, deleted the additions of Rs.21,94,506 and Rs.16,48,186 in the second case.
- Both appeals were allowed, and the additions were deleted based on the findings in the first case.

In conclusion, the Tribunal analyzed the nature of payments made by the assessees to consignee agents, determining them to be reimbursements rather than commissions. This distinction led to the deletion of the additions made under section 40(a)(ia) of the Act in both cases. The decisions were based on detailed discussions, agreements, documents, and the nature of transactions, ensuring that tax deductions at source were not required for the expenses claimed by the assessees.