2015 (9) TMI 187 - AT - Income Tax

Non deduction of TDS u/s. 194H - payment of discount and rebate given by the Assessee to the consignment agent - Held that - We find force in the arguments of Ld AR that the nature of payment is of discount and not commission which is liable for TDS more so in view of the fact that in the subsequent assessment orders for AY 2008-09,2009-10 and 2010-11, that have been framed u/s 143(3) and after the impugned order, wherein no disallowance u/s 40(a)(ia) on account of non deduction of TDS on the payments was resorted to by the AO and it is more relevant when the present impugned order was passed prior to the assessment orders passed u/s 143(3) and the assessing officer while framing the assessments u/s 143(3) was having the impugned orders before him and when the scope of assessment u/s 143(3) is much wider and it covers the computation of the total income by the assessee. Apart from the above, we find that issue in dispute is squarely covered in favour of Assessee by the decision of Hon ble Apex Court in the case of Hindustan Coco Cola (2007 (8) TMI 12 - SUPREME COURT OF INDIA ) AR also submitted that the payees to whom the amounts have been paid have already included the payments received from Assessee in their income and have also paid the taxes on the same and therefore there is no violation of the provisions of s. 201(1) of the Act and in support of this contention the assessee placed copy of the confirmations of the parties but however we find that there is no finding of AO or CIT(A) on the same. We are therefore of the view that the issue needs to be reexamined and decided. Therefore remit the issue to the file of AO to decide the issue afresh in the light of the foregoing - Decided in favour of assessee for statistical purposes

Summary

Issues:
Appeals against order of CIT(A)-V for A.Ys. 2008-09, 2009-10 & 2010-11.

Detailed Analysis:
1. The Assessee, a company engaged in manufacturing and selling specialized engineering thermoplastic, faced a dispute regarding the deduction of TDS on payments made to consignment dealers for discounts and rebates. The Revenue argued that these payments should be treated as commission, attracting TDS under Section 194H. The Assessee contended that the payments were discounts, not commission, supported by the nature of transactions and agreements with consignment agents.

2. The CIT(A) upheld the AO's decision, emphasizing that the payments to consignment agents were akin to commission and thus subject to TDS. The Assessee's claim of dealing with agents on a principal-to-principal basis was refuted based on the agreement terms and practical arrangements regarding stock ownership and billing.

3. The Assessee, dissatisfied with the CIT(A)'s order, appealed before the ITAT, arguing that the payments were discounts, not commission, and therefore not liable for TDS deduction. The Assessee presented evidence of past practices, agreements, and the nature of credit notes issued to support their stance.

4. The ITAT considered the arguments from both sides and observed that the issue revolved around whether the payments constituted commission or discounts. Noting that no TDS was deducted on certain types of payments (discounts) in previous assessments, the ITAT ruled in favor of the Assessee, accepting that the payments were in the nature of discounts, not commission subject to TDS.

5. The ITAT referred to the decision in Hindustan Coco Cola case, supporting the Assessee's position and remitted the issue back to the AO for further examination in light of the facts presented. The ITAT stressed the need for a fresh assessment considering all aspects and directed the AO to provide a fair hearing to the Assessee.

Conclusion:
The ITAT allowed the Assessee's appeals for statistical purposes, emphasizing the distinction between commission and discounts in the context of TDS obligations. The case highlights the importance of accurately characterizing payments to avoid unnecessary tax implications and the need for thorough assessment based on legal precedents and factual evidence.