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2016 (1) TMI 315 - AT - Income TaxTDS u/s 194J - non deduction of TDS on the rebates and incenties - CIT(A) deleted the disallowance - Held that - There should be an agency among the parties for the payment of commission and brokerage to bring the parties within the ambit of section 194H. There is no dispute that the law relied by the counsel of the parties but the crux of the said law is that in the case of incentives and rebates where there is no element of Agency the provision u/s. 194H of the Act is not applicable. The facts and circumstances of the present case is similar of the law settled in CIT Vs. Intervet India Pvt. Ltd. 2014 (4) TMI 353 - BOMBAY HIGH COURT In view of the said circumstances we are of the view that the learned CIT(A) has passed the order judiciously and correctly which does not require to interference with this appeal at this stage. - Decided in favour of assessee
Issues:
- Appeal against order of Commissioner of Income Tax (Appeals) regarding TDS deduction on sales incentives and rebates under section 194H of the Income Tax Act, 1961 for A.Y. 2008-09. Analysis: 1. The appeal was filed by the revenue against the order of the Commissioner of Income Tax (Appeals) regarding the liability of the assessee to deduct TDS on sales incentives and rebates for A.Y. 2008-09. The Assessing Officer had held that the assessee fell under section 194H of the Act and was obligated to deduct TDS. However, the Commissioner allowed the appeal, stating that section 194H was not applicable to the case. This led to the revenue filing the present appeal before the ITAT Mumbai. 2. The ITAT Mumbai considered the arguments presented by both parties. The Department's representative contended that the Commissioner's conclusion was incorrect, citing previous judgments. On the other hand, the assessee's representative argued that there was no agency relationship with the Franchisee holders, making section 194H inapplicable. The ITAT examined the agreement between the parties, which clarified the relationship as "Principal to Principal," not creating an agency. This distinction was crucial in determining the applicability of section 194H. 3. Section 194H of the Income Tax Act pertains to commission or brokerage received by a person acting on behalf of another for services rendered in buying or selling goods. The ITAT emphasized that for the provision of section 194H to apply, there must be an agency relationship between the parties. Relying on case law, including a judgment by the Bombay High Court, the ITAT concluded that in cases of incentives and rebates without an agency element, section 194H does not apply. The ITAT found that the Commissioner's order was judicious and correct, leading to the dismissal of the revenue's appeal. 4. The ITAT's decision was based on the absence of an agency relationship in the case of sales incentives and rebates, aligning with established legal principles. By analyzing the agreement and relevant legal provisions, the ITAT upheld the Commissioner's decision, emphasizing the importance of agency for the application of section 194H. The appeal was dismissed, affirming the Commissioner's order in favor of the assessee. 5. In conclusion, the ITAT Mumbai, in its judgment delivered on 18.12.2015, dismissed the revenue's appeal against the Commissioner's decision regarding the applicability of TDS deduction under section 194H for sales incentives and rebates, emphasizing the absence of an agency relationship in the case.
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