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TMI Blog2023 (6) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... re in the nature of rebates given by the assessee to its dealers / distributors. The impugned orders have been passed by learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] on 09.01.2023 in the matter of separate orders passed by learned Assessing Officer u/s 201(1) / 201(IA) of the Act on 19-02-2020. 2. The Ld. AR, drawing our attention to copies of invoices, credit notes and ledger extracts, submitted that the transactions were carried out on principal-to-principal basis and there was no agency relationship between the assessee and its customers. Therefore, the assessee was not obligated to deduct TDS on the impugned payments. The Ld.AR submitted that rebate was given on sales turnover and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the price fixed by the principal from time to time. 3. The Principal will pass on to the Distributor/ Dealer such trade margins, discounts or commissions currently in vogue and as modified periodically by the Principal to the Distributor/ Dealer. 4. The Distributor/ Dealer or their authorized agent shall ensure, during the currency of this agreement, to promote the distribution of Product within the prescribed location. 5. The Principal shall have and does reserve the rights at all times during the currency of this agreement to appoint other Distributor/ Dealer, Agents or to open marketing points besides effecting distribution directly by themselves by opening and operating their own depots and distribution points or otherwise. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponsible for completing the task given by the principal so long as the principal provides reasonable instructions. The agent has an obligation to perform the tasks with certain level of skill and care. A duty of loyalty is also implied. Generally, the onus is on the principle to create incentives for the agent to ensure they act as the principal wants. Therefore, the contention of the appellant that the relationship between the appellant company and these dealers is that of principle to principle and not that of principle and agent did not stand to the test of facts and clauses of the dealer agreement. 5.4 Further, it was noted that the appellant appointed dealers to distribute its product in the prescribed geographical areas. The dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic amount of TDS with specific payment to dealers, tax should be deducted at source from rebates paid at a fixed percentage. Payments received from dealers are a continuous, indivisible process embedded in the business dynamics of the appellant. The income or loss is the cumulative result of the working carried on by the appellant for a particular year. Therefore, there was no requirement of immediate nexus between payment as such and the TDS made out of a particular payment. Further, where the law used the words 'credit shall be given to TDS on production of certificate for AY for which income is assessable' under section 194H of the act, it was implied that nexus between TDS and corresponding income was rather notional / conceptual. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tasks. The activities of the distributor were in full control of the assessee. Therefore, the assessee was liable to deduct TDS against impugned payments. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 5. In our considered opinion, for applicability of TDS obligation u/s 194H, there should exist agency relationship between the payer and the payee. The payee should act as on agent for the assessee. From the fact, it emerges that the assessee sells its products through network of dealers / distributors under a commercial agreement. As per the terms, the risk and rewards of sale transaction pass on to these dealers at the point of time of sale only. The assessee merely regulates business terms for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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