2018 (2) TMI 424 - AT - Income Tax

TDS u/s 194H - Addition u/s 40(a)(ia) - want of deduction of tax at sources in respect of the commission/discount to the retailers of recharge cards - Held that - The assessee is an intermediatetory and only recording this transaction in the books of account for the purpose of completeness. Hence, when the assessee is neither competent nor responsible nor actually paying any commission to the retailer on sale of recharge coupons to the retailers then the obligation for deduct tax u/s 194H is attracted only against the service provider and not against the assessee who is only a distributor and receiving its share of the commission/ margins provided by the service provider. The determination of sale price of recharge coupons is in the sole domain of the service provider and the assessee is no role in determining the retail price at which the retailer is selling the recharge coupons to the customer or end user of the service. Accordingly, when the assessee is not directly and indirectly in deciding the quantum of alleged commission/discount as well as determining the retail price at which the recharge coupons is sold to the customer then the provisions of section 194H cannot be applied on the assessee. - Decided in favour of assessee.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Disallowance of commission expenses under section 40(a)(ia) for not deducting tax at source.

Issue 1: Condonation of Delay
The appeal by the assessee was filed with a delay of 38 days, citing reasons related to a family bereavement. The assessee submitted a petition for condonation of delay, supported by an affidavit. The ld. AR argued that the delay was due to unavoidable circumstances beyond the assessee's control. After considering the submissions and the affidavit, the Tribunal found a reasonable cause for the delay and decided to condone the delay of 38 days in the interest of justice.

Issue 2: Disallowance of Commission Expenses
The primary issue raised in the appeal was the disallowance of commission expenses by the AO under section 40(a)(ia) for not deducting tax at source. The assessee, a partnership firm engaged in distributorship, debited expenses for discount on online schemes. The AO disallowed a specific amount as commission expenses for not deducting tax as per section 194H. The assessee contended that the discount was allowed by the service provider directly to the retailers, and the assessee had no role in the payment process. The ld. CIT(A) upheld the disallowance.

Before the Tribunal, the assessee reiterated that they had no discretion in fixing the discount percentage, as it was solely determined by the service provider. The assessee argued that since they were not directly involved in paying the commission or fixing the discount, they were not obligated to deduct tax at source. The ld. DR, however, argued that the auditor confirmed the commission payment and that the provisions of section 194H were applicable. The Tribunal analyzed the role of the assessee as an intermediary in the sale of recharge coupons and concluded that the assessee, not being the party responsible for paying the commission, was not liable for TDS deduction under section 194H. The Tribunal referenced relevant court decisions and held that the disallowance made by the AO under section 40(a)(ia) was unjustified, ultimately allowing the appeal of the assessee.

In conclusion, the Tribunal decided in favor of the assessee, allowing the appeal and deleting the disallowance made by the AO under section 40(a)(ia) for not deducting tax at source on commission expenses.