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2023 (2) TMI 222 - AT - Income TaxTDS u/s 194H OR 192 - Disallowance u/s 40(a)(i) - commission expenses - assessee contended that the commission expenses are in the nature of Salary paid to the directors and hence TDS provisions of sec. 194H of the Act will not apply to these payments - HELD THAT - As relying INDOFIL INDUSTRIES LIMITED 2021 (12) TMI 830 - BOMBAY HIGH COURT we hold that the assessee is liable to deduct tax at source in respect of commission expenses payable to the whole time directors u/s 192 only, as the same shall form part of their salary payment only. CIT(A) has given a finding that the assessee has deducted tax at source on the commission expenses at the time of making payment in the succeeding year. Tribunal in the earlier years has specifically held that the TDS is liable to be deducted u/s 192 only at the time of making payment and this view has since been upheld by the High Court. Accordingly, the disallowance made u/s 40(a)(ia) of the Act in all the three years in respect of commission expenses is liable to be deleted. We order accordingly.
Issues:
- Disallowance of commission expenses under section 40(a)(ia) of the Act for non-deduction of tax at source u/s 194H. - Whether commission expenses payable to whole-time directors are in the nature of salary and hence exempt from TDS provisions of sec. 194H. - Interpretation of provisions of sec. 194J in relation to commission payments to directors. - Applicability of earlier tribunal decisions and High Court rulings on similar disallowances. Analysis: 1. The appeals were filed against orders by Ld CIT(A)-26 related to assessment years 2014-15 to 2016-17. The issues were heard together due to identical nature and disposed of by a common order for convenience. 2. Grounds relating to jurisdiction of Ld CIT(A) were not pressed during the hearing. Remaining grounds focused on disallowance under section 40(a)(ia) of the Act for non-deduction of tax at source u/s 194H. 3. The AO disallowed commission expenses payable to whole-time directors for non-deduction of TDS u/s 194H. Assessee argued that these expenses were in the nature of Salary and hence exempt from TDS provisions of sec. 194H. 4. Ld CIT(A) upheld the disallowance, stating that TDS should have been deducted at the time of booking commission expenses. The Tribunal's earlier order for AY 2009-10 was deemed inapplicable as the expenses were booked after 1.7.2012. 5. The Tribunal noted that the commission payable to whole-time directors should be treated as Salary income, subject to TDS u/s 192 only at the time of payment, not at the time of making provision. 6. Referring to a High Court ruling, the Tribunal held that TDS is deductible u/s 192 only at the time of payment, not at the time of making provision. Therefore, the disallowance made u/s 40(a)(ia) in all three years was deemed unjustified and ordered to be deleted. 7. Following the binding decision of the High Court, it was concluded that the assessee was liable to deduct TDS u/s 192 only in respect of commission expenses payable to whole-time directors, as these payments constituted part of their salary. 8. The Tribunal upheld that TDS should be deducted u/s 192 only at the time of payment, as per the earlier Tribunal rulings and High Court decision. Consequently, the disallowance under section 40(a)(ia) for commission expenses was ordered to be deleted in all three years. 9. As a result, all three appeals filed by the assessee were allowed, and the disallowance of commission expenses under section 40(a)(ia) was set aside. This detailed analysis provides a comprehensive overview of the judgment, focusing on the issues raised and the Tribunal's decision on each point.
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