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TMI Blog2012 (11) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... H COURT), Distinguished. TDS u/s 194I - rent - show room and go-down - Form 15G - Mistakes in the form 15G submitted by the land lady - held that:- Mistakes in the form submitted by the land lady as provided under the Act remains a mere technical formality when the assessee cannot be subjected to disallowance of expenditure claimed as rent for its shop and godown which together were to be considered under the provisions of Section 194-I r.w.s 197A of the I.T. Act. Obviously the disallowance u/s.40(a)(ia) comes after considering the collection and recovery of tax by deduction of tax at source which the assessee has satisfied for non-deduction cannot result in disallowance of expenditure for no fault of the assessee. The remedy lies elsewhere. - Decided in favor of assessee. - IT Appeal No. 354 (Ctk.) of 2012 - - - Dated:- 28-9-2012 - K.K. Gupta And K.S.S. Prasad Rao, JJ. J.M. Pattnaik for the Appellant. Smt. Paramita Tripathy for the Respondent. ORDER K.K. Gupta, Accountant Member - This appeal by the assessee mainly raises the issues dealt with by the learned CIT(A) being disallowance of expenditures claimed in computing the profits of the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of BSNL as per the MRP fixed by the BSNL as principal to principal. As a matter of fact, the assessee firm has never sold any materials to the customer directly, whatever business has done by the assessee firm is only through sub-dealers/franchisee and retailers. There is no clause in the said Franchiseeship agreement to provide/allow any discount to sub-franchisee/retailers. However, at Clause-26.11 of the Franchiseeship agreement it has clearly been reflected that "the franchisee will distribute the services and products at a rate fixed by the BSNL to all its associated, its franchisee and/or retailers." The learned Counsel for the assessee submitted that from the above, it is abundantly clear that in the aforesaid clause the MRP has been fixed by the BSNL (Principal) and the assessee firm can in no circumstances sale any products more than MRP, thereby the profit margin is only limited to the commission provided by the BSNL @ 6.5%. But, to compete in the market the assessee firm has given trade discount to the retailers/sub-franchisee. Therefore, the assessee firm has forgone its profit to the extent allowing the trade discount. It is an undisputed fact on record that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of issuing the bill as a Trade Discount not necessarily construed as Commission. BSNL has never spelt anything so far as parted with the commission granted to the assessee firm to the Sub-dealer/ Retailer out of its own commission which is nothing but the profit of the assessee firm. In order to compete in the market the assessee firm has allowed trade discount thereby by reducing its income. The reduction of income out of @6.5% to any other lower percentage due to grant of discount to the retailers should not be amenable to TDS U/s. 40(a)(ia) of the IT Act as the commission which the assessee firm has received from the principal has already subjected to TDS U/s. 194H by the principal. The learned Counsel for the assessee vehemently argued that in view of the aforesaid facts and circumstances of the case, the applicability of the Sec. 40(a)(ia) of the IT Act is not at all attracted. The assessee firm has booked the purchases in the Trading Account after deduction of commission and disclose sales in addition of the commission, thereafter crediting the discounts in the P L Account, which is less than @ 6.5% in the P L Account, thereby the accounting method is a correct one bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscount falls within the definition of commission or brokerage within the meaning of cl.(i) of Explanation to s.194h from which tax is deductible at source. Assessee is neither a Cellular phone operator nor he wants customer for his network. The ratio of judgment in case of Vodafone is equitable to BSNL in the present arrangement and BSNL has duly deducted TDS without any default. The learned AR of the assessee submitted that such distinctions on fact in both the cases though pleaded before the first appellate authority, the learned CIT(A) upheld the view of the Assessing Officer without applying his judicious mind, in so far as the basic facts are concerned as the TDS has already been deducted, U/s. 194H, on the commission given by the BSNL. Therefore, there should not be any further TDS on the same said amount while forgoing certain percentage of the original commission by allowing discount to the sub-franchisee/retailer. By this process the assessee firm has reduced its own profit to certain extent. When entire part of the commission has already suffered TDS, further TDS on the some portion of the profit of the assessee firm is not at all justified. Thus, both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ledger account, copy of the Deed of rent agreement executed with the house owner Smt.Pramila Kumar Ratha, copy of the ledger account of shop and godown rent, sample copy of purchase invoice, copy of TDS certificates in respect of deduction made u/s.194H by the BSNL. 2.5 On the basis of above submissions and the supporting evidences furnished in the Paper Book, the learned AR of the assessee submitted that the disallowance u/s.40(a)(ia) of the I.T. Act of expenditures on account of discount of Rs. 1,74,00,814 and disallowance of shop and go-down rent of Rs. 1,92,000 on the facts and circumstances of the case are not justified and therefore he prayed for deletion of the same. 3. The learned CIT-DR opposed the contentions of the learned Counsel of the assessee by holding a view that the case laws cited at the bar and relied upon by the learned CIT(A) has not been distinguished insofar as BSNL being a server or a service provider is akin to the assessee providing services as was considered in the case of Vodaphone and it is only a method of participating in the profits when there are three tier system of services being provided by the assessee in the lines of the assessee becoming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts by disclosing the gross margin therein booking the sales at the MRP provided by BSNL. In other words, the purchase and sales clearly indicate that the commission earned by the assessee was to be subjected to deduction of tax at source u/s.194H which as per the bills produced by the learned Counsel for the assessee as of now in the Paper Book submitted along with other documentary evidences that the commission was between the assessee and the BSNL lost its identity of commission again when the assessee chose to foregoe part of its margin by giving various discounts to its authorized dealers or sub-franchisees as notified by it to BSNL as per the agreement brought on record. It was never the case of BSNL being the service provider to raise bills for the same product which had been billed by the assessee on the distributors at the MRP being the recharge coupon, Top up coupons and other SIM card s etc. In the case of Vodafone Essar Cellular Ltd. (supra) it has been clearly held that the foregoing of commission as a matter of discount cannot arise to a different person insofar as the sale price remains the same which purchases have been booked by the assessee alone at the discounted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the assessee as mentioned above, which we are inclined to uphold. For the reasons discussed above, we are of the considered view that the disallowance of Rs. 1,74,00,814 u/s.40(a)(ia) of the I.T. Act made by the Assessing Officer and confirmed by the learned CIT(A) is not justified and as such, the same is hereby deleted. 4.1 With respect to the deduction u/s.194-I,the learned Counsel for the assessee has submitted that the land lady being a senior citizen has submitted Form 15G to the assessee declaring that no tax should be deducted on the rent paid to her when the taxable limit for taxation in her hand was to be Rs. 1,95,000. Mistakes in the form submitted by the land lady as provided under the Act remains a mere technical formality when the assessee cannot be subjected to disallowance of expenditure claimed as rent for its shop and godown which together were to be considered under the provisions of Section 194-I r.w.s 197A of the I.T. Act. Obviously the disallowance u/s.40(a)(ia) comes after considering the collection and recovery of tax by deduction of tax at source which the assessee has satisfied for non-deduction cannot result in disallowance of expenditure for no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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