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TMI Blog2016 (5) TMI 1141X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue of whether or not the assesseecompany is liable to deduct tax at source (TDS) under section 194J(ba) of the Act in respect of sitting fees paid to Directors as per the amendment thereto w.e.f. 01.07.2012 has been considered and held in favour of the assessee by the Coordinate Bench of this Tribunal in the assessee’s own case for assessment years 2009-10 and 2010-11, thus we hold that since the instant appeal is for A.Y. 2010-11 which is prior to A.Y. 2013-14, from when the amendment to section 194J(ba) comes into force w.e.f. 01.07.2012, we hold that no tax is deductible at source on payment of sitting fees to Directors and the assessee cannot be held as ‘assessee in default’ under section 201(1) of the Act or be charged interest under section 201(1a) of the Act. - Decided against revenue - ITA Nos. 5991 & 5992/Mum/2014 - - - Dated:- 22-4-2016 - Shri Jason P. Boaz, Accountant Member and Shri Sandeep Gosain, Judicial Member For The Appellant : Ms. Kranti For The Respondent : Shri Milin Bakhai ORDER Per Jason P. Boaz, A.M. These appeals by the Revenue are directed against the orders of the CIT(A)-14, Mumbai dated 11.07.2014 for A.Y. 2011-12 and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en further sell them to the stockists/retailers and then are finally sold to the ultimate customers. The contention of the assessee-company is that the distributors are independent traders and are not its agents. The AO, however, observed that in the course of survey it was seen that the MRP margins for drugs/medicines was fixed by the assessee-company, which would be different for controlled and uncontrolled drugs. In the event of expiry of the medicines, the same are returned by the distributors to the assessee-company, who in turn refunds the monies paid by the distributors to procure the same material. Thus, all the risk is borne by the assessee-company and not by the distributors. The AO observed that since it is the assessee who decides the margins to be charged by the distributors and the discount/incentives payable to them, their relationship may be inferred to be one of principal and agent. 2.3 After considering the assessee s submissions in the matter, the AO held that the relation between the assessee and the distributor was one of principal and agent and the discount/incentives/rebate given to/retained by the distributor is nothing but commission payments for service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived or receivable directly or indirectly by a person acting on behalf of another person for services rendered or for any services in the course of buying or selling of goods within the meaning of section 194H of the Act. (iii). On the facts and circumstances of the case and in law, the Id. CIT (A) erred in holding that the assessee cannot be held as an 'assesseein- default' for not deducting tax on sifting fees paid to directors and thereby erred in deleting the short deduction u/s. 201(1) and interest u/s. 201(1A) without appreciating that the payment was made as honorarium for the managerial services rendered by the directors and was clearly in the nature of professional fees paid for the services rendered by them. (iv) On the facts and circumstances of the case and in law, the Id. CIT (A) erred in holding that no TDS is required to be deducted on directors' sifting fees as the amendment to the provisions of section 194J(ba) were made w.e.f. 01 .07.2012 and it is not applicable to the relevant A.Y. without appreciating that this amendment is curative in nature. 2. The appellant craves leave to amend or alter any ground or add a new ground which may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is being paid by the distributor on principal to principal basis and property in goods with all risk and rewards passes to the distributor at the time of selling of the goods by the assessee company to the distributor when the goods are delivered by the carrier to the distributor. In-fact the distributors are the customers of the assessee company to whom the sales of the products i.e. drugsmedicine were effected by the assessee company. It is pertinent to note that the assessee company is dealing in products/goods i.e. drugsmedicine and not in the services. The distributors are required to notify any shortages during shipping or handling within 7 days of arrival of products at final destination to the assessee company along with endorsement on Lorry Receipt of the transporter along with shortage certificates by the transporter to claim loss from the assessee company, in other situations the loss or damage to products shall be borne by the distributor. The drugs being medicines contains certain restriction on the sale w.r.t. good governance and conduct by the distributors to follow first expiry and first out basis as the medicines having expiry could not be sold after the stipulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicine to the distributors. We hold accordingly. 5.3.2 Following the aforesaid decision of the Coordinate Bench of the Tribunal in the assessee s own case for assessment years 2009-10 2010- 11 (supra) we hold that the discount on MRP granted by the assessee to distributors at the time of sale of the drugs/medicines (i.e. goods) does not fall within the ambit of section 194H of the Act and therefore no tax was required to be deducted at source thereon and therefore the assessee cannot be held to be an assessee in default under section 201(1) of the Act and charged interest under section 201(1A) of the Act. Consequently, grounds 1(i) (ii) of Revenue s appeal are dismissed. 6. Ground No. 1(iii) (iv) 6.1 In these grounds, Revenue contends that the learned CIT(A) erred in holding that the assessee cannot be held as an assessee in default for not deducting tax at source on sitting fees paid to the Directors without appreciating that the payment was made as honorarium for the management services rendered by the Directors and was clearly in the nature of professional fees paid for services rendered by them. It was further contended that the learned CIT(A) erred in ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r deduction of tax at source prior to the amendment by Finance Act,2012 w.e.f. 01-07-2012 on payment of remuneration or fee or commission by whatever name called to Directors other than those on which tax is deductible at source u/s 192 of the Act. The amendment to the Section 194J(1) of the Act by insertion of subsection (ba) to Section 194J(1) of the Act has caste an additional burden on the taxpayer with respect to deduction of tax at source on remuneration, fee or commission to Director other than salary which as per memorandum to Finance Bill 2012 was not existing as per specific provisions of the Act prior to the aforesaid amendments and the amendments to Section 194J(1) of the Act by insertion of sub-section (ba) to Section 194J(1) of the Act were made effective from 01-07-2012, which in our considered view is prospective in nature to be applicable only from 01-07-2012 as it has caste an additional burden on the tax-payer by way of deduction of tax at source on remuneration, fees or commission to directors other than the salary for which tax is to be deducted at source under Section 192 of the Act. Since the instant appeal is for the assessment year 2009-10 which is prior to ..... 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