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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 ..... ers 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 since there was failure on the part of the assessee to do so, he required the assesese to explain as to why the amount of Rs. 14,47, 045/- should not be disallowed under section 40( a)(ia). In reply, the following explanation was offered by the assessee in writing:- "In this respect, I Sri Amit Majumder, a News paper Agent of A.B.P. (P) Ltd., duly appoint by the said papers management. Thus, I pay delivery charge only whosoever, for the time being, performs the work of delivery of news paper and magazines. In my books of account, my accountant being not conversant with the technicality of the "Commission" as per I. T. Act, 1961 , mentioned the word " Commission" in my account book due to his ignorance. Hence, the word "Commission", in my books of account is a wrong use of the said word for which I am not to be penalised, as my ignorant mistake of use of the word "Commission" will not prove that the deliverymen, actually undertake to deliver the news paper etc. on the basis of "Commission". The deliver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eirs replies of the show cause letter only. The eleven persons' absence from affirmation and execution of affidavit is purely due to their ignorance and can never interpreted otherwise. Therefore, in consideration of the above position, I pray Sir, Kindly, to drop the proceedings as initiated u/s. 194{H) of the I. T. Act, 1961 in as much as my mode of dealing with deliverymen can in no way be termed as "Commission". The delivery charges to delivery - men is a sine qua non, in the delivery of news papers otherwise which the distribution of news papers, magazines etc. are not possible. Hope, the explanation supra will convince you on this regard and Oblige". 3. The above explanation offered by the assessee was not found acceptable by the Assessing Officer for the following reasons:- "(i) Explanation(i) below 3rd Proviso to section 194H states- "Commission or Brokerage includes 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 case of buying or selling of goods or in relation to any transaction relating to any asset, valuable article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial relation between the appellant and the hawker' s who get the supply of newspapers for sale by hawking and/or by supply to regular consumers/readers has to be considered seriously. The hawker's get the supply of newspaper early in the morning from the appellant who is an agent of Ananda Bazar Pairika earning gross income by way of discount on the MRP of newspaper as evident from the invoice of ABP copy of which is attached hereto as annexure 'A' for your ready reference, for sale by hawking & supply, The hawker' s are neither enlisted on the records of the appellant nor they have any contract for the commercial dealing in this regard, The persons of the hawker' s differ from time to time. The hawker' s pay to the appellant the cost price of the papers supplied to them being the net amount due, after the deduction of discount on the MRP mentioned at the top of the 1st sheet of newspaper. As for the papers returned to the appellant as unsold the amount which differs from time to time in accordance with the direction of ABP, the principal Of the appellant, determined on the basis of the MRP of the newspapers, is realised from the hawkers in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er taking into consideration the comments made by the Assessing Officer as well as the counter comments thereon made by the assessee, the ld. CIT( Appeals) proceeded to confirm the disallowance of Rs. 14, 47, 045/- made by the Assessing Officer under section 40(a)(ia) for the following reasons given in paragraph no. 6 of his impugned order:- "6. I have considered the facts of the case and the submissions of the appellant and the Assessing Officer. All the grounds of appeal other than the last general ground are against the disallowance of Rs. 14 ,47,045 on account of payments made to hawkers of newspapers made by the appellant treated by the Assessing Officer as commission as against the appellant's claim that the payments were in the nature of discounts. The elaborate discussion by the appellant in the grounds of appeal, statement of facts, the detailed arguments on the grounds of appeal as also the Assessing Officer' s comments on the same and the appellant's comments are self-explanatory and reproduced above with a view to bring out clearly the claims and counter-claims of the appellant and the Assessing Officer. A large part of the discussion has been devoted to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of 16 hawkers each employed in F. Y. 2007-08, F. Y.2008 -09 and F.Y.2009 -10 but a careful scrutiny that said lists reveals that all the hawkers, rendering service of delivery of newspapers etc. to the appellant: i.e. the F.Y.2008-09 and F.Y. 2009 -10 were same and some of them had continued from F.Y.2007 -08 onwards. The appellant has passingly accepted that unsold newspapers were returned to the appellant. The appellant after being given due opportunity of rebutting the contentions of the Assessing Officer in the remand report also did not deny the observation that "It is pertinent to state that in response to the show cause notice dated 16 -12-2011 (for completion of assessment for the A. Y. 2009-10 ) the assessee stated that hawkers were merely delivery persons and "the price of news papers, as delivered by the delivery persons, to the specified destination, are collected by me. The delivery person' s services, for collection of prices of newspapers etc. are never used by me". These facts do not support the appellant's contention that the relationship between the appellant and the hawkers was that of two principals. It is also very reasonable to assume that in such tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness relationship as a principal with Anand Bazar Patrika is not relevant in this regard at all. In view of the factual and legal position as aforesaid, I hold that the hawkers were delivering newspapers on behalf of the appellant and for these services they were receiving payments from the appellant which are covered under the definition of 'commission or brokerage' given in the explanation to section 194H of the Act. It is not disputed that the appellant did not deduct any tax at source on such payments aggregating to Rs. 14,47, 045/- and, therefore, such expenses were rightly disallowed in view of the mandate of section 40(a)(ia) of the Act". Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal. 6. The ld. counsel for the assessee submitted that the Assessing Officer as well as the ld. CIT( Appeals) has not appreciated the exact nature of amount in question paid by the assessee to the Hawkers. He submitted that the assessee is in the business of trading in newspapers and magazines and the newspapers and magazines purchased by it from Ananda Bazar Patrika are sold to the Hawkers at the discounted rate on MRP for f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion mainly performed by the Hawkers thus is to deliver the newspapers and magazines supplied by the assessee to the customers and for these services, the Hawkers are compensated by the assessee by charging a discounted price of the newspapers and magazines. The supply or delivery of newspapers and magazines is made by the Hawkers to the customers on their own and there is nothing brought on record by the authorities below to show that such sale or supply was made by the Hawkers to the customers on behalf of the assessee as an agent. The Hawkers generally operate in an unorganized manner and the only compensation which they get for supply or delivery of the newspapers is the cash discount that the assessee offers to them on the printed price of the newspapers and magazines. Their business activities involving supply or delivery of newspapers and magazines are done by the Hawkers on their own and there is nothing on record to show that the same are done by them on behalf of the assessee as agent. Having regard to all these aspects concerning the modus operandi of the assessee' s business as well as the functions performed by the Hawkers, I am of the view that the amount in question p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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