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TMI Blog2014 (4) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... butor / stockists were the persons to whom the product was sold, no services were offered by the assessee and what was offered by the distributor was a discount under the product distribution scheme or product campaign scheme to buy the assessee's product. The distributors / stockists were not acting on behalf of the assessee and that most of the credit was by way of goods on meeting of sales target - it could not be said to be a commission payment within the meaning of explanation (i) to Section 194H of the Income Tax Act, 1961 - the application of the provision is required to be considered to the relevant facts of every case - as regards sales promotional expenditure, the provisions of Explanation (i) below Section 194H of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year, the assessee had introduced sales promotion scheme to boost the sale viz. 'Product discount scheme' and 'Product campaign.' The said schemes as described by the assessee are as under:- 1. Product Discount Scheme :- The product discount scheme (PDS) is a part of the product pricing strategy of the company. The PDS is circulated in advance in the market on monthly basis. Discounts are offered on the basis of value of the purchases by the distributors/ stockists, who are the customers for the company. (e.g. If a customer buys 10 quantity, he gets 2% discount vis a vis if he buys 100 quantity, he gets discount of 10%.) The PDS is account for as a net of sales in the books of intervet. The PDS is based on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee on 28.8.2006. In pursuance to the said notice, the assessee appeared before the Assessing Officer. The assessee produced all books of accounts, bills, vouchers, challans etc. The Assessing officer also called upon the assessee to submit the details of TDS deducted. From the details submitted by the assessee, it was revealed that the assessee had incurred sales promotion expenditure captioned under the head of advertisement expenses in respect of which the assessee was asked to further explain the said expenditure. Accordingly, the assessee had submitted details in support of its claim viz. Sales promotion expenditure bifurcated under the aforesaid two schemes viz. (i) the product discount scheme and (ii) the product campaign. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the Assessee had not deducted TDS on the said payment, the said expenses were liable to be disallowed under Section 40(a)(ia) of the Income Tax Act. An amount of Rs.70,67,089/- was disallowed on this count for non deduction of TDS as commission payment under Section 40(a)(ia). (vi) The Assessee being aggrieved by the assessment order passed by the Assessing Officer disallowing the amount of Rs.70,67,089/- for non deduction of TDS, filed an appeal before the Commissioner of Income Tax (Appeals). The Assessee inter alia contended that the Assessee had incurred sales promotional expenditure under the aforesaid sales promotion scheme introduced during the relevant assessment year to boost its sales. It was contended that the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of the said sales promotion expenditure by the Assessing Officer was not correct. The Revenue being aggrieved by these concurrent findings of the CIT (Appeals) and the Tribunal has preferred this appeal under Section 260A of the Income Tax Act. 4. Learned Counsel appearing on behalf of the appellant submits that the appeal gives rise to the substantial questions of law as formulated in paragraph 5 of the Memo of appeal which read as under:- (1) Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs.70,67,089/- made by the Assessing Officer on account of disallowance u/s.40(a) (ia) read with 194H of the Income Tax Act,1961 ? (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had offered an incentive on case to case basis to its stockists / dealers / agents. An amount of Rs.70,67,089/- was claimed as a deduction towards expenditure incurred under the said sales promotional scheme. The relationship between the Assessee and the distributor / stockists was that of principal to principal and in fact the distributors were the customers of the assessee to whom the sales were effected either directly or through the consignment agent. As the distributor / stockists were the persons to whom the product was sold, no services were offered by the assessee and what was offered by the distributor was a discount under the product distribution scheme or product campaign scheme to buy the assessee's product. The distributor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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