"Commission" Or "Brokerage" - Definition / Legal Terminology - Income Tax

Explanation (i) - For the purposes of section 194H of the Income tax Act 1961- Commission Or Brokerage includes- Any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or; in relation to any transaction relating to any asset, valuable article or thing, not being securities; In Bharti Cellular Ltd. (Now Bharti Airtel Ltd.) Vs Assit.- CIT- 2024 (3) TMI 41 - SUPREME COURT .........assessees would not be under a legal obligation to deduct tax at source on the income/profit component in the payments received by the distributors/franchisees from the third parties/customers, or while selling/transferring the pre-paid coupons or starter-kits to the distributors. Section 194-H of the Act is not applicable to the facts and circumstances of this case. Commission The word commission is not defined in the Income-tax Act. However, it is useful to refer to the meaning assigned to the said word in the Law Lexicon, P. Ramanatha Aiyar as under : In Commercial law , commission is a compensation to a factor or other agent for services to be rendered in making a sale or otherwise ; a sum allowed, as compensation to a servant factor or agent who manages the affairs of others, in recompense for his services. It is an allowance, recompense or reward, made to agents, factors, brokers and others for effecting sales or carrying out business transactions. It is generally calculated, as a certain percentage on the amount of the transaction or on the profit to the principals. In Blacks Law Dictionary, sixth edition, the word commission has been defined as under : The recompense, compensation or reward of an agent, salesman executor, trustee, receiver, factor, broker, or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit to the principal. The word commission is used occasionally to mean discount . What is called commission , is a percentage deducted in the case of goods which are consigned the ordinary invoice price. It is in the nature of compensation paid to a person who has rendered service instead of paying remuneration. He has been paid compensation on percentage basis or on a price basis. The word commission has some what different connotation and is used differently in different contexts. JK. PANTHAKI AND CO. VERSUS INCOME-TAX OFFICER (INVESTIGATION)- 2012 (6) TMI 615 - KARNATAKA HIGH COURT