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TMI Blog2022 (3) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... also by following decision of the ITAT., Chennai in the case of M/s.Cellular Mobile Telecom Services Vs. ITO (supra), has sustained additions made by the Assessing Officer towards disallowance of commission expenses u/s.40(a)(ia) of the Act, for non-deduction of TDS u/s.194H of the Income Tax Act,1961. Therefore, we are of the considered view that reasons given by the learned CIT(A) is in consonance with reasoning given by the ITAT., Chennai in the case of M/s.Cellular Mobile Telecom Services Vs. ITO (supra), and thus, we are inclined to uphold findings of the learned CIT(A) and reject arguments taken by the assessee. - Decided against assessee. - I.T.A.No.774/Chny/2016 - - - Dated:- 23-2-2022 - Shri V. Durga Rao, Judicial Member And Shri G. Manjunatha, Accountant Member For the Appellant : Ms. N.V.Lakshmi, Advocate For the Respondent : Mr. AR V. Sreenivasan, Addl.CIT ORDER PER G.MANJUNATHA, AM: This appeal filed by the assessee is directed against order passed by the learned Commissioner of Income Tax (Appeals)-7, Chennai, dated 27.01.2016 and pertains to assessment year 2011-12. 2. The assessee has raised following grounds of appeal:- 1. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of commission paid to dealers was not subjected to TDS. The Assessing Officer called upon the assessee to justify non-deduction of TDS on commission payment to dealers, for which the assessee claimed that he had paid commission to number of dealers, which is less than ₹ 5,000/- during the year and thus, same is outside scope of provisions of section 194H of the Income Tax Act, 1961. 4. The Assessing Officer, on the basis of information furnished by the assessee and also taken note of provisions of section 194H of the Act, observed that the assessee ought to have deducted TDS u/s.194H of the Act in respect of commission payment to dealers when the assessee has deducted TDS on part payments of commission to dealers. Therefore, he opined that expenses on which TDS was not deducted cannot be allowed u/s.40(a)(ia) of the Act and thus, made addition of ₹ 68,94,591/- to total income. The relevant findings of the Assessing Officer are as under:- 2.3 The issue involved in the case is as under: A) Whether the payments received of ₹ 1,83,86,858/- by the assessee in the name of different names of incentives from Aircel and subsequent payment to the dealers are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is an individual falling u/s 44AB of the IT Act hence he is liable to deduct the tax as per the section 194H. The payments are made to the dealers for the purpose of their services rendered to the assessee while selling the SIM cards and recharge coupons such as documentation for the sale of SIM and activation of the SIM cards. Hence the payments made by the assessee to the dealers are in the nature of commission as explained in the Section 194H of IT Act. 1961. Further to substantiate this, the assessee himself had deducted TDS on the sum of ₹ 1,13,34,6937- @10% by treating it as commission payments to dealers whereas he had not deducted TDS on the remaining sum of ₹ 68,94,5517- The assessee cannot take dual stand on the similar payments made to the dealers. From this it is clear that the payments made to the dealers are in the nature of commission only. Since the assessee had failed to deduct tax at source, it is in contravention to the provisions of section 40(a)(ia) of the Act which states that where the commission payments are made without TDS are not allowed as deduction and added to the total income of the assessee. 2.4 In this regard, reliance of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is the issue to be adjudicated in the case of a franchisee and not in this case. For example, if a person awards a contract to one person, Act says that 2% of that amount is to be deducted, even though the contractor again gives it as subcontractor to other person. When, a contractor gives the same as sub-contract 1% of TDS is to be made by him again and the original person who awards the contract cannot say that he will deduct only 1% of the receipts as TDS because the contractor is further giving it as sub-contract. The two transactions lire separate and independent and hence the Assessing Officer is correct in applying section 194H for the entire amount. In this connection, I rely on commission paid by travel again to its agent selling airlines tickets on his behalf but also as an agent discount and special commission passed on to them. Thus TDS to be deducted on whole amount. CIT vs Dex Travel (P) Limited 172 TM 142 Del). While assessee company is giving Sim cards/recharge coupons to various franchisees at reduced rate and correctly treated it as commission . The Id. Chennai Tribunal has concluded as under: We have heard both the sides, perused the records and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale - Therefore, the discount offered by the assessee to the distributors on payments made by the latter for the SIM cards/recharge coupons which are eventually sold to the subscribers at the listed price is commission and it is subject to TDS under section 194H - Contention of the assessee that section 194H is not applicable as there is no payment or credit by the assessee to the distributor cannot be accepted. 7. In view of the facts and circumstances of the case, and the decision of Id. Jurisdictional Tribunal as above, it is held that the Assessing Officer has correctly applied the provisions of section 40(a)(ia) of the Act in disallowing the impugned sum of ₹ 68,9 551/-.. As such, the addition made on this account to the total income of the appellant is sustained. 7. The learned AR for the assessee submitted that the learned CIT(A) erred in not appreciating fact that Commission paid by the assessee to dealers does not come under the purview of section 194H of the Income Tax Act, 1961, because there is no principal agent relationship between the assessee and dealers to attract provisions of section 194H of the Income Tax Act, 1961. The AR further sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y held that discount offered by the assessee to dealers for distribution of SIM cards and recharge coupons is in the nature of commission which is liable for TDS u/s.194H of the Income Tax Act, 1961. The learned CIT(A) after considering relevant facts and also by following decision of the ITAT., Chennai in the case of M/s.Cellular Mobile Telecom Services Vs. ITO (supra), has sustained additions made by the Assessing Officer towards disallowance of commission expenses u/s.40(a)(ia) of the Act, for non-deduction of TDS u/s.194H of the Income Tax Act,1961. Therefore, we are of the considered view that reasons given by the learned CIT(A) is in consonance with reasoning given by the ITAT., Chennai in the case of M/s.Cellular Mobile Telecom Services Vs. ITO (supra), and thus, we are inclined to uphold findings of the learned CIT(A) and reject arguments taken by the assessee. 10. Insofar as various case laws relied upon by the assessee, including decision of the Hon ble Karnataka High Court in the case of Bharathi Airtel Vs. DCIT (2015) 372 ITR 33 and decision of the ITAT., Delhi Benches in the case of Rajesh Kumar vs.CIT (supra), we find that although the Hon ble High Court and ITAT., ..... X X X X Extracts X X X X X X X X Extracts X X X X
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