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TMI Blog2014 (6) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... e. - ITA. No. 2433/Ahd/2013, ITA. No. 2553/Ahd/2013 - - - Dated:- 13-6-2014 - Shri Anil Chaturvedi And Shri Kul Bharat,JJ. For the Petitioner : Shri S. N. Divatia, A.R. For the Respondent : Shri O. P. Batheja, Sr. DR ORDER Per Shri Kul Bharat, Judicial Member : These two appeals; one by the Assessee and the another by the Revenue are directed against the order of the Ld.Commissioner of Income Tax(Appeals)-VI, Ahmedabad ( CIT(A) in short) dated 26/08/2013 pertaining to Assessment Year (AY) 2010-11. These appeals were heard together and are being disposed of by way of this consolidated order for the sake of convenience. 2. First, we take up the Revenue s appeal in ITA No.2553/Ahd/2013 for AY 2010-11. The Revenue has raised the following grounds of appeal:- 1. The CIT(A) has erred in law and on facts in deleting the disallowance of Rs.2.46 crores made u/s.40(a)(ia) despite the fact that the assessee had not deducted TDS u/s.194H on these payments which were in the nature of commission. 2. The CIT(A) ought to have considered the so called sales incentives/cash discount as commission as envisaged in Explanation (i) to section 194H of the Act. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of his order which are reproduced hereinbelow for the sake of clarity. 4.2. These grounds are against disallowance of Rs.2,46,27,384/-. This amount comprises of two elements. The first one is disallowance of sales incentive of Rs.2,42,31,233/- and the second one is disallowance of cash discount of Rs.3,96,151/-. These two amounts were disallowed u/s.40(a)(ia) for non-deduction of tax u/s.194H. 4.3. As regards the first element being disallowance of sales incentive, identical issue came up for the consideration in the immediately preceding assessment year 2009-10. Vide my order dtd. 31.01.2013 in appeal No.CIT(A)-VI/ACIT.Cir.3/134/11-12, disallowance made on this count was deleted by me. While doing so, reliance was placed by me on the order of CIT(Appeals) in the case of the appellant for the A.Y. 2008- 09. The said order of CIT(Appeals) for A.Y.2008-09 was appealed against by the revenue. The Hon ble ITAT, Ahmedabad vide the order dtd. 02.08.2013 in ITA No.1835/Ahd/2011 dismissed the appeal of the revenue by holding as under:- 4. We have considered rival submissions carefully and have perused the orders of the AO and the CIT(A). We find that the assessee-firm is distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not justified in treating the payment of incentives to the dealers as well as to another distributor, as payment of commission liable to TDS under section 194H of the Act, and that provision of section 194H are not at all applicable on the facts of the case, and in deleting the addition under section 40(a)(ia) of the Act. Accordingly, the ground of the appeal of the Revenue being without merit, is dismissed. Respectfully following the said decision, impugned disallowance of sales incentive u/s.40(a)(ia) is deleted. 4.4. Second element of the disallowance is cash discount of Rs.3,96,151/-. In the assessment order, A.O. observed that the cash discount was paid to dealers to whom the sales incentives were paid; since the cash discount was similar in nature to sales incentives, it was being treated as commission and since tax was not deducted on the cash discount, disallowance of the said sum was being made u/s.40(a)(ia). The contentions of the ld.A.R. are that cash discount is reduction in invoice value of the goods on account of timely payment within the credit period allowed by the vendor; it is credited to the ledger accounts of the dealers and therefore Section 194H has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities below and submitted that the assessee has not explained the direct link to the business purpose. 7. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The ld.CIT(A) reproduced the submissions of the assessee in paragraph No.5.1 of his order which are in the following terms:- 5.1. In the written submission, the appellant submitted as under:- 4.1 The next ground of appeal relates to the disallowance of interest expense of Rs.1,04,948/- It is discussed in para-9.7 of the order. It is observed by AO that the appellant had claimed interest expenses of RS.18,74,051 but there was no proof that the funds were directly linked to the business purpose. Hence, pro-rata interest to the interest free loans and advances of Rs.18,15,832/- given to three parties was made. The appellant had submitted explanation vide letter dt.1.3.2013. 4.2. The appellant submits that it had sufficient interest-free fund by way of capital of Rs.2,01,15,717 which far exceed the aforesaid advances. Therefore, in view of the free fund available to the appellant, no disallowance of interest is justified. Refer to Reli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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