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TMI Blog2017 (2) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... ated:- 3-2-2017 - Shri P. M. Jagtap, Accountant Member Shri Siddhartha Pratim Dutta, Advocate Shri Soumitra Ghosh, Advocate, for the assessee Shri Dulal Chandra Mondal, JCIT, Sr. D. R., for the Department ORDER This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax ( Appeals)-XII, Kolkata dated 11. 02.2015 and the solitary issue arising out of the same relates to the disallowance of ₹ 14, 47, 045/- made by the Assessing Officer and confirmed by the ld. CIT( Appeals) under section 40(a)(ia) on account of payment made by the assessee to the Hawkers. 2. The assessee in the present case is an individual, who is engaged in the business of trading in newspapers, magazines, etc. The return of income for the year under consideration was filed by him on 10.03.2009 declaring total income of ₹ 1,81,604/-. In the Profit Loss Account filed along with the said return, a sum of ₹ 14,47,045/- was debited by the assessee on account of Hawkers commission. According to the Assessing Officer, the assessee was required to deduct tax at source from the said amount as per the provisions of section 194H of the Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e noting but casually engaged labourers who received their labour charges for the purpose of delivery of news papers to the respective destination and they have no other work to perform. The prices of News Papers, as delivered by the delivery- person, to the specified destination, are collected by me. The delivery person's services, for collection of prices of news papers etc. are never used by me. The written submissions, in this behalf, have already been submitted by those delivery persons to you to whom also you issued the Show Cause letters. This apart, most of the persons have also affirmed affidavit and notarised before the appointed Notary Public. ( Xerox copies of affidavit are enclosed collectively marked A ) Thus, out of fifteen delivery person, to whom show cause letters were issued, eleven persons affirmed and executed the enclosed affidavits. The remaining four persons, being illiterate on perusal of the non-judicial stamp paper got scared and did not affirmed and executed the affidavit through they have submitted theirs replies of the show cause letter only. The eleven persons' absence from affirmation and execution of affidavit is purely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since the assessee had failed to do so, the Assessing Officer invoked the provisions of section 40(a)(ia) and made a disallowance of ₹ 14, 47, 045/- in the assessment completed under section 143( 3) vide an order dated 27.12. 2011. 4. Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT( Appeals) challenging the disallowance made by the Assessing Officer under section 40( a)(ia). During the course of appellate proceedings before the ld. CIT( Appeals), the following submissions were made on behalf of the assessee in support of his case that the disallowance made by the Assessing Officer under section 40(a)( ia) was not sustainable:- The pivot of this appeal is whether the 'hawkers commission' is a misnomer phrase of 'hawker's service charge paid by way of discount on the MRP of newspapers sold by hawking on Road, Rly. Stations, market places etc. and/or by effecting supply of them to the readers of newspaper or not. Before indulging in any discussion on the above issue the commercial relation between the appellant and the hawker' s who get the supply of newspapers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew to victimising the Appellant who is an honest tax payer and who maintains proper books of account and he brought the expenses within the ambit of the mischief of Sec. 194H of the I. T. Act, 1961., I crave leave to mention here that the Ld. AO did not find any fault in the maintenance of books of a/ c. ( Some Xerox sheets of Cash Book giving out the mode of payment made to the hawkers are attached hereto as Annexure- 'C' for your Honour' s kind perusal). I cannot help saying 'this is very unfortunate. It is, therefore, prayed that by probing into the facts and circumstances of the case with judicial perspective your Honour would graciously find that the phrase hawker s commission appearing in P L a/c. of the statements of a/ c is a misnomer of service charges paid by allowing discount on MRP of newspapers and allow the expenses claimed in P : a/c on merit. And for this act of justice, as in duty bound, my client shall ever pray . 5. The above submissions made by the assessee were forwarded by the ld. CIT(Appeals) to the Assessing Officer for his comments and after taking into consideration the comments made by the Assessing Officer as well as the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al nature of transactions / expenses/ receipts. What is therefore, necessary to examine is the nature of relationship between the appellant and hawkers and the nature of payments made to the hawkers. It is undisputed that the hawkers were distributing newspapers on behalf of the appellant and in their affidavits, they have declared that they receive 'delivery expenses' for delivery of newspapers etc. and not commission from the appellant. It is pertinent to note here that they have not affirmed that they were offered any discount against the price of the newspapers. It. has also been declared that the price of the newspapers is collected by the newspaper dealer (read 'the appellant ). It is also undisputed that cash payments have been shown to have been made to 'the hawkers by the appellant in the cash books regardless of the nomenclature. The appellant has denied the Assessing Officer's finding that the same set of 16 hawkers was employed over a period of more than one year by furnishing the names of 16 hawkers was employed over a period of more than one year by furnishing the names of 16 hawkers each employed in F. Y. 2007-08, F. Y.2008 -09 and F.Y.2009 -10 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such services, if at all there were some strict terms and conditions. The Assessing Officer has referred to the provisions of section 194H in support of his contentions. The explanation to section 194H defines 'commission or brokerage' to include any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities. It is clear from the definition that payments received by any person acting on behalf of another person for services rendered are categorized as commission or brokerage for the purposes of section 194H. In the appellant's case, the payments have been made as delivery charges in the course of buying and selling newspapers on behalf of the appellant and the appellant has not made out any case to show that such payments are excluded from the purview of the provisions of section 194H. The appellant's reference to his own business relationship as a principal with Anand Bazar Patrika is not relevant in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hawkers is in the nature of commission as rightly held by the authorities below. He also contended that the fact that the unsold newspapers and magazines are returned back by the Hawkers to the assessee further goes to show that it is not a case of purchase and sale of newspapers and magazines on principal to principal basis as sought to be contended by the ld. counsel for the assessee. 8. I have heard the arguments of both the sides and also perused the relevant material available on record. In order to ascertain the exact nature of the amount in question paid by the assessee to Hawkers, it is necessary to consider the modus operandi of the business of the assessee as well as the functions performed by the assessee and the Hawkers in the course of the business. In this regard, it is observed that the assessee is in the business of trading in newspapers and magazines and this position is accepted even by the Assessing Officer in the assessment order. The assessee thus purchases the newspapers and magazines from Aananda Bazar Patrika and supplies the same to Hawkers for further sale to the customers. The function mainly performed by the Hawkers thus is to deliver the newspape ..... X X X X Extracts X X X X X X X X Extracts X X X X
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