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TMI Blog2013 (11) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... He erred 1. in respect of non-deduction of tax at source on the payments on account of discounts and rebates given to the dealers. (a) In holding that the company was liable to deduct the tax at source on the payments on account of discounts and rebates also as per provisions of section 194H of the IT Act. (b) in confirming that even the discounts and rebates paid by the appellant company to such consignment stockiest / dealers are nothing but commission or incentive only. (c) in conforming the charging of interest of Rs.4,75,584/- (d) in directing the ACIT(TDS) to work out non-deduction of tax at source u/s.201(1) of the I.T. Act for applying other provisions of Section of the IT Act and also charging interest for the said year. 2. Without prejudice to above, in confirming the interest of Rs.4,75,584/- whereas as per the assessee's working interest comes to only Rs.2,76,823/- (Rs. 4,00,903/- for A.Y. 2009-10 & Rs.2,84,924/- for A.Y. 2010-11 3. The Appellant craves leave to add to, withdraw or modify any of the grounds of appeal at the time of hearing." 2. An order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deduct tax at source from discount. And rebate as they are not commission or brokerage as contemplated u/s. 194H, in fact they are reduction and deduction from the sales price." 3. The AO was not convinced. In his opinion, the relationship as per the "agency agreement" was that of "agent". The assessee is the principal; hence, the amount was in the nature of commission. The next observation of the AO was that the contract between the parties was not in the nature of "contract of sale". According to AO, it was "a contract of agency". The agents were authorized to sale on behalf of principal, i.e., the assessee. He has concluded that as per the terms of the agreement, the payment was in the nature of commission but a different name was given, i.e., rebates and discounts, but TDS was deductible u/s. 194H of IT Act. A detailed chart was made by the AO in respect of the discount and rebate given to those parties and thereafter AO has arrived at the conclusion that there was a short deduction over which interest u/s. 201(1) and u/s. 201(1A) was imposed, Rs.71,53,162 for the years under consideration. 4. The explanation of the assessee before learned CIT(A) was as under: "We are e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective returns; hence, it was taxed in the hands of the recipients. Learned CIT(A) has considered all those arguments. However, he has taken a view in respect of the year 2010-11 as under: "In view of the above discussion I hold that the appellant company was liable to deduct the tax at source on the payments on account of discount and rebates also as per provisions of Section 194H of the I.T. Act which it has failed to do. In view of this the non-deduction of tax at source of Rs. 43,83,405/- on payments of discount and rebates as worked out by the ACIT (TDS) Circle, Baroda u/s 201(1) & 201(1A) of the Act for A.Y 2010-11 and charging of interest of Rs. 8,54,802/- u/s 201(1A) are hereby confirmed." 4.3 In respect of Assessment Years, 2008-09 and 2009-10, learned CIT(A) has given the verdict as follows:- "As regards A.Y 2008-09 & 2009-10, on perusal of order u/s 201(1) & 201(1A) of the I.T. Act of the ACIT(TDS) Circle, Baroda, it is seen that he has not worked out non deduction of tax at source on payments on account of discounts and rebates as per provisions of Section 194H of the I.T. Act. The ACIT(TDS) Circle, Baroda has only worked out the interest u/s 201(1A) for these tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in such return of income in view of above decision of Hon'ble Supreme Court in the case of Hindustan Coco Cola Beverages Pvt. Ltd. Vs. CIT." 5. We have heard both the sides at some length. We have perused the "agency agreement" and the "agreement for the appointment of consignment stockist". A clause 'No. 6' prescribes that in addition to the commission the company at it's discretion allow an annual quantity discount as per slabs. Further as per clause 'No.7' it has also been provided in the said agreement that although a credit period of 30 days is permissible for payment but an incentive of 'cash-discount' shall be allowed if the dealers make the payment within 7 days. On the basis of the terms and conditions of those agreements and also the nature of business activity of the assessee, we are of the considered opinion that the assessee was not required to deduct the TDS on the impugned discounts and rebates. We have taken this view in the light of a decision already taken in the case of Fosters India Pvt. Limited, 29 SOT 32 (Pune). Facts of the case have revealed that on accomplishment of the targets the 'consignment stockiest' is permissible to retain the settled discount. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . These grounds of the Revenue pertained to non-deduction of tax at source on payments made to M/s. Nandesari Environment Control Ltd. and Gujarat Enviro Protection & Infrastructure Ltd. as per Section 194J of IT Act. An arrangement was made with those parties to lift the material and dispose of the waste. The assessee company was making the payments for treatment of an affluent up to the plants. According to AO such services of carrying on the waste to the affluent plant was a 'technical service'. According to AO, payment made for the disposal of the waste was a 'professional service'; therefore, the provision of Section 194J was applied. 9. When the matter was carried before learned CIT(A), it was held that instead of provision of Section 194J only the provision of Section 194C would be applicable. Relevant paragraph of learned CIT(A) is reproduced below: "The reasons of the ACIT(TDS) Circle, Baroda for arriving at the conclusion that the provisions of Section 194J of the I.T. Act are applicable in I respect of payments made by the appellant company to the Nandesari Environment Control Ltd. and M/s Gujarat Enviro Prot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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