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TMI Blog2018 (4) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellant has made payments of 'Rate difference, discounts & incentives' directly to its customers with whom it has principal to principal relationship. 1.3: Hon'ble C1T(A) while dealing with the issue erred in observing certain incorrect observations in the order so passed by him u/s 250(6) of the Income Tax Act, 1961. 2.0: Hon'ble CIT(A) erred in rejecting the Assessee's ground No.2 before him by taking a view that an assessment order passed in respect of an assessee on whom the AO had no territorial jurisdiction is only a technical mistake curable under section 292B of the Income Tax Act, 1961. 2.1: Hon'ble CIT(A) failed to appreciate that any assessment order passed without holding proper jurisdiction would be bad in law and invalid ab-initio.. Apropos issue on merits in ground no. 1: 3. Brief facts of the case are as under: The Assessing Officer during assessment proceedings found debited following payments under subgroup "Sales": SI No. ITEMS AMOUNT IN RUPEES 1 Rate Difference to Customers 61,17,321/- 2 Incentive Account 39,11,270/- 3 Special Rebate 13,45,128/- 4 Discount against Export Sales 29,083/- TOT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 128/- TOTAL 1,13,73,719/- 5. Before the ld. Commissioner of Income Tax (Appeals), the assessee's submissions were as under: Appellant during appellate proceedings has submitted that he is a wholesaler. In order to promote its sales, the appellant is granting rebates and quantity discounts and sales incentives to its customers and all such expenditures are recorded under the heading "Rate difference and discounts" in its audited accounts. These costs are reflecting in the Profit & Loss account by debiting under the heading Gross Sales. As these payments are directly made to its own customers, these were not liable for TDS u/s 194H of the Act. The AO in the assessment order so passed u/s 143(3) has disallowed the expenditure of Rs. 1,13,73,719/- u/s 40{a)(ia) of the Act by taking a view that these expenditures were 'Commission' and therefore liable for TDS u/s 194H of the Act. While doing so, AO has relied upon the ITAT decision in the matter of SKOL Breweries Ltd Vs. ACIT [2013] 29 taxmann.com 111. AR further submitted that the appellant has debited total sum of Rs. 1,14,02,802/- in its books under the heading 'Rate difference and Discount'. Following is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounted for the amount of 'Rate difference and Discounts' by reducing the same from sales. It is submitted that the payments grouped under the heading 'Rate difference and Discounts' are primarily in the nature of 'Discounts and rebates' directly allowed by the appellant to its Customers where it has 'Principal to Principal relationship'. The appellant is also making payment of Commission to its agents and brokers through whom the goods are supplied to the customers after deducting TDS as required by the law. Further, it is submitted that any payment between two principals i.e. seller and buyer is undoubtedly not "Commission" for the buyer. AR of appellant argued that the definition of commission u/s 194H of the Act provides that "'Commission or brokerage' includes that any payment received 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 submitted that customers to whom discount or rebate is allowed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) also distinguished the decision of the Hon'ble Bombay High Court decision relied upon by the assessee in the case of Commissioner of Income Tax v. Intervet India (P) Ltd [2014] 49 taxmann.com14 (vide order dated 01/04/2014). He concluded as under: In the case of the CIT vs.Intervet India (P) Ltd,(2014) 49 Taxmann.Com14 (Bombay) assessee used to circulate Produce Discount Scheme (PDS) in advance in the market on monthly basis. Discount is offered on the basis of value of the purchases by the distributors who are customers of the company. PDS is accounted for as a quantum of sales in book of Intervet India (P) Ltd. PDS is based on the sales quantum. It is common for all the distributors/stocklists and no agreement in this regard is entered into between Intervet India (P) Ltd and the Distributors/ Stockists. Product Campaign Discount is clearly specified for 3 to 6 months which is offered on quantum of sales during campaign period and Purchase Credit Notes are given to the distributors / stockists as a part of Product Campaign Scheme. Intervet India (P) Ltd passed on the incentives to the Distributors/ Stockists/ Dealers through the consignment agent by way of Sale Cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of transaction of sale and purchase, whereas the commission is given only after the completion of the task or service or sales. In the instant case, assessee has not passed on rate difference to Customer/ Incentive/Rebate as discount on each transaction basis as the same is not reflected in the invoices. This is also evident from the Schedule "N" of Audit Report in "Notes in accounts" where it is mentioned at para 1(v) that rate difference allowed to Debtors is accounted for on the basis of settlement till the date of accounts finalization. 7.3.3. In view of above discussion, fact and circumstances, I hold that AO has rightly treated amount of Rs. 1,13,73,719/- as Commission/Brokerage and disallowed u/s 40 (a) (ia) of the Act as no TDS u/s 194H of the Act has been deducted. Hence, I sustain the disallowance made by the A.C 7. Against the above order, the assessee is in appeal before us. 8 We have heard both the counsel and perused the records. We find the sole basis for the treatment for the claim of discount and incentives given by the assessee to be commission payments is that the assessee has not produced the agreement with customers or the scheme of incentive/rebates. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of the Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of the Act. Further, by Circular No. 179 dated 30th September, 1975, the scope of section 292-B was explained and it has been stated in the said circular that this provision has been made to provide against purely technical objections without substance coming in the way of the validity of assessment proceedings, etc. In view of these facts and circumstances and position of law, ground raised by the appellant is dismissed. 12. Against this order, the assessee is in appeal before us. 13. The ld. Counsel of the assessee has reiterated that the Assessing Officer in this case has not justified inasmuch as there was a change in address. However, all the necessary particulars in this case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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