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2022 (3) TMI 34 - AT - Income TaxTDS u/s 194H - commission payment to dealers - commission payment to dealers for distribution of SIM cards and recharge coupons of telecom service providers - whether there is principal and agent relationship between the assessee and dealers? - HELD THAT - Admittedly, the very same issue has come up in the case of M/s. Cellular Mobile Telecom Services 2012 (12) TMI 294 - ITAT CHENNAI as held that commission paid by the assessee to dealers for distribution of SIM cards and recharge coupons for telecom providers is liable for TDS u/s.194H of the Income Tax Act, 1961. We further noted that the Tribunal has considered agreement between the assessee and telecom provider and also nature of services rendered by the assessee to dealers by distribution of SIM cards and recharge coupons and also considered relevant facts and rightly held that discount offered by the assessee to dealers for distribution of SIM cards and recharge coupons is in the nature of commission which is liable for TDS u/s.194H CIT(A) after considering relevant facts and also by following decision of the ITAT., Chennai in the case of M/s.Cellular Mobile Telecom Services Vs. ITO (supra), has sustained additions made by the Assessing Officer towards disallowance of commission expenses u/s.40(a)(ia) of the Act, for non-deduction of TDS u/s.194H of the Income Tax Act,1961. Therefore, we are of the considered view that reasons given by the learned CIT(A) is in consonance with reasoning given by the ITAT., Chennai in the case of M/s.Cellular Mobile Telecom Services Vs. ITO (supra), and thus, we are inclined to uphold findings of the learned CIT(A) and reject arguments taken by the assessee. - Decided against assessee.
Issues Involved:
1. Whether payments received by the assessee from Aircel and subsequent payments to dealers are in the nature of commission as per Section 194H of the Income Tax Act, 1961. 2. Whether the assessee was correct in deducting TDS on part of the commission payments and not on the remaining sum. 3. Applicability of Section 40(a)(ia) for non-deduction of TDS on commission payments to dealers. Comprehensive, Issue-wise Detailed Analysis: Issue 1: Nature of Payments as Commission The primary issue was whether the payments received by the assessee from Aircel and subsequent payments to dealers are in the nature of commission as per Section 194H of the Income Tax Act, 1961. The assessee argued that the commission passed to dealers was not liable for TDS under Section 194H because there was no principal-agent relationship between the assessee and the dealers. However, the Assessing Officer (AO) observed that the assessee, who is an individual falling under Section 44AB of the IT Act, was liable to deduct tax as per Section 194H. The AO noted that the payments made to dealers for services rendered in selling SIM cards and recharge coupons were in the nature of commission. The AO substantiated this by pointing out that the assessee had deducted TDS on a portion of the commission payments, indicating that these payments were indeed considered commission. Issue 2: Partial Deduction of TDS The second issue was whether the assessee was correct in deducting TDS on part of the commission payments and not on the remaining sum. The AO found that the assessee had deducted TDS on ?1,13,34,693/- but not on the remaining ?68,94,551/-. The AO held that the assessee could not take a dual stand on similar payments made to dealers. Since the assessee had deducted TDS on part of the commission payments, it was clear that the payments were in the nature of commission. Therefore, the AO concluded that the assessee should have deducted TDS on the entire amount. Issue 3: Applicability of Section 40(a)(ia) The third issue was the applicability of Section 40(a)(ia) for non-deduction of TDS on commission payments to dealers. The AO disallowed the expenses on which TDS was not deducted under Section 40(a)(ia) of the Act and made an addition of ?68,94,591/- to the total income. The CIT(A) upheld the AO's decision, relying on the ITAT Chennai's decision in the case of M/s. Cellular Mobile Telecom Services vs. ITO, which held that commission paid by the assessee to dealers for distribution of SIM cards and recharge coupons was liable for TDS under Section 194H. Findings and Conclusion: The ITAT Chennai noted that the issue had already been considered in the case of M/s. Cellular Mobile Telecom Services vs. ITO, where it was held that commission paid to dealers for distributing SIM cards and recharge coupons was liable for TDS under Section 194H. The Tribunal found that the CIT(A) had correctly applied the provisions of Section 40(a)(ia) in disallowing the commission expenses for non-deduction of TDS. The Tribunal also considered various case laws cited by the assessee but preferred to follow the decision of the ITAT Chennai. Consequently, the appeal filed by the assessee was dismissed, and the order of the CIT(A) was upheld. Final Judgment: The appeal filed by the assessee was dismissed, and the order of the CIT(A) sustaining the additions made by the AO was upheld. The Tribunal concluded that the assessee ought to have deducted TDS under Section 194H for commission payments to dealers, and for non-deduction of TDS, the expenses could not be allowed as a deduction under Section 40(a)(ia) of the Act.
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