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TMI Blog2023 (2) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... only logical conclusion that could be drawn is that the payments made by the assessee squarely falls under the ambit of commission or brokerage in terms of section 194H of the Act. The case law relied upon by the ld. AR of CIT vs Intas Pharmaceuticals Ltd [ 2021 (8) TMI 1005 - GUJARAT HIGH COURT] is factually distinguishable and does not advance the case of the assessee herein. Hence it could be safely concluded that the assessee is bound to deduct tax at source, failure of which , would be invited with disallowance u/s 40(a)(ia) of the Act. We find lot of force in the alternative argument advanced by the ld.AR before us that in view of second proviso to section 40(a)(ia) of the Act, since the payees / recipients had disclosed the said receipts in their returns of income, no disallowance should be made in the hands of the assessee payer. In view of this second proviso, we direct the ld. AO to make factual verification as to whether the recipients had duly disclosed the subject mentioned receipts in their returns of income. The assessee is directed to furnish the necessary details in this regard in the prescribed form. If on verification, it is found that the recipien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ford University Press started its operations in India by opening a branch office in Mumbai in 1912. After Mumbai, offices were quickly established in Chennai and Kolkata and an office at Delhi opened in 1972 and the branch obtained the approval from Reserve Bank of India in 1977. The four regional offices located at New Delhi, Kolkata, Chennai and Mumbai serve as a nodal point where the books to be sold are distributed to the dealers. The assessee furnished a copy of the Tax Residency Certificate (TRC) duly issued by the HM, Revenue Customs , UK. The assessee submitted that it being a resident of UK, shall therefore be entitled to be taxed in accordance with the provisions of India UK Double Taxation Avoidance Agreement (DTAA). The assessee filed its return of income for the A.Y. 2016-17 on 30/11/2016 declaring total income of Rs 23,69,96,370/-. We find that the assessee is a non-resident foreign company, also having a Branch Permanent Establishment in India and hence would be governed in that status as per the provisions of the Indian Income Tax Act and also India-UK DTAA. Consequently the assessee will be taxed on its income from business @ 40% plus applicable surcharge and ed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f) These payments are not in the nature of commission since there is neither principal agent relationship between the payer and the recipient nor the recipient has rendered any services to the payer. g) The payments made are not in the nature of donation since the assessee has not made gratuitous payments to these schools. h) These payments to schools do not fall within any provisions under which the assessee is required to deduct tax at source. Therefore, it was pleaded that the provisions of section 40(a)(ia) of the Act would not be applicable in the instant case. The ld. AO however did not heed to the contentions of the assessee and concluded - that the payments were made by the assessee to the schools only for schools making reference to its students to make them buy the textbooks published by the assessee; that the schools would give the list of authorized booksellers in this regard to the students ; that the students would directly approach the concerned booksellers and buy the textbooks published by the assessee from the booksellers ; that the quantum of payments to be made by the assessee to schools is based on certain percentage of sales based on the number of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance made by AO is confirmed 34053 8 EXCELLENT EDUCATIONAL AND CULTURAL SOCIETY Sales promotion expenses 113510 Disallowance made by AO is confirmed 34053 9 FCM TRAVEL SOUTIONS (INDIA) PVT Ltd. Sales promotion expenses 81,276 Disallowance made by AO is confirmed 24383 10 BHARTIYA VIDYA BHAVAN S PUBLIC SCHOOL Sales promotion expenses 76,044 Disallowance made by AO is confirmed 22813 11 CATHOLIC DICESE OF BIJNORE Sales promotion expenses 499019 Disallowance made by AO is confirmed 149706 12 CCMT-CHINMAYA VIDYALAYA Sales promotion expenses 186266 Disallowance made by AO is confirmed 55880 13 IDEAL ASSOCIATION FOR MINORITY EDUCATI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,997 Provision made 30% of Rs 1,01,92,977 - 30,57,893 Total disallowance u/s 40(a)(ia) towards sales promotion 1,11,02,694 However, the ld. AO had granted depreciation @ 60% on Rs 69,69,997/- as it was treated as capital expenditure. 6. Aggrieved, the assessee is in appeal before us. 7. The ld. AR before us drew our attention to the provisions of section 194H of the Act together with its Explanation and submitted that the schools had not acted on behalf of the assessee. The schools just suggest the textbooks published by the assessee and directs the students to buy the same from the concerned authorized booksellers, if the students so desire. Hence the schools merely refer the students to the booksellers. There is no agreement entered into between assessee and the schools. Since schools are not acting on behalf of the assessee, there is no principal-agent relationship established. The purchasing of these textbooks of assessee are not forced upon the students by the schools. The schools merely suggest that the textbooks of assessee are also additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred for the purpose of business of the assessee. c) The substance of the transaction is to be given more importance than its form. d) The Character of payment is to be analysed. On analyzing the same, the only logical conclusion that could be drawn is that the payments made by the assessee squarely falls under the ambit of commission or brokerage in terms of section 194H of the Act. e) The case law relied upon by the ld. AR on the decision of Hon ble Gujarat High Court in the case of CIT vs Intas Pharmaceuticals Ltd reported in 439 ITR 692 (Guj) is factually distinguishable and does not advance the case of the assessee herein. f) Hence it could be safely concluded that the assessee is bound to deduct tax at source, failure of which , would be invited with disallowance u/s 40(a)(ia) of the Act. However, we find lot of force in the alternative argument advanced by the ld.AR before us that in view of second proviso to section 40(a)(ia) of the Act, since the payees / recipients had disclosed the said receipts in their returns of income, no disallowance should be made in the hands of the assessee payer. In view of this second proviso, we direct the ld. AO to make factua ..... X X X X Extracts X X X X X X X X Extracts X X X X
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