Section 194H was reintroduced in the Act with effect from 01.06.2001 by replacing the earlier section 194H. This section deals with the payment of ‘commission or brokerage’. It provides that any person other than individual or HUF (except who were covered under section 44AB), responsible for paying any income by way of 'commission' (not being insurance commission as specified in section 194D) or ‘brokerage’ to any person shall at the time of credit of such income to the account of payee or at the time of payment of such income in cash or by cheque or draft or any other mode will deduct income tax thereon at the rate of five per cent. The first proviso specifies the limit.
The second proviso makes
the individual or HUF liable to deduct the income tax, if they exceed the limit
specified therein. The third proviso exempts payment of commission or brokerage
when made to BSNL and MTNL to their public call office franchisees.
The Explanation appended
to section 194H defines the expression ‘commission or brokerage’. It is an
inclusive definition and includes therein 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
course of buying or selling of goods or in relation to any transaction relating
to assets, valuable article or thing not being securities. Clause (ii) defines
professional services; clause (iii) defines securities; and clause (iv)
provides a deeming fiction for treating any income so as to attract the rigour
of the section for ensuring its compliance.
Text of section 194H
Commission or brokerage
[1][194H. Any person, not
being an individual or a Hindu undivided family, who is responsible for paying,
on or after the 1st day of June, 2001, to a resident, any income by way of
commission (not being insurance commission referred to in section 1940) or
brokerage, shall, at the time of credit of such income to the account of the
payee or at the time of payment of such income in cash or by the issue of a
cheque or draft or by any other mode, whichever is earlier, deduct income-tax
thereon at the rate of [2][five] per cent :
PROVIDED that no deduction shall be made under this
section in a case where the amount of such income or, as the case may be, the
aggregate of the amounts of such income credited or paid or likely to be
credited or paid during the financial year to the account of, or to, the payee,
does not exceed [3][fifteen thousand rupees] :
[4][1PROVIDED FURTHER that
an individual or a Hindu undivided family, whose total sales, gross receipts or
turnover from the business or profession carried on by him exceed [5][one crore rupees in case of business or fifty lakh
rupees in case of profession1 during the financial year immediately preceding
the financial year in which such commission or brokerage is credited or paid,
shall be liable to deduct income-tax under this section:]
[6][PROVIDED ALSO that no
deduction shall be made under this section on any commission or brokerage
payable by Bharat Sanchar Nigam Limited or Mahanagar Telephone Nigam Limited to
their public call office franchisees.]
Explanation : For the purposes of this
section,—
(i) “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 course of buying or selling of goods or in relation to any
transaction relating to any asset, valuable article or thing, not being
securities;
(ii) the expression “professional services” means
services rendered by a person in the course of carrying on a legal, medical,
engineering or architectural profession or the profession of accountancy or
technical consultancy or interior decoration or such other profession as is
notified by the Board for the purposes of section 44AA;
(iii) the expression “securities” shall have the
meaning assigned to it in clause (h) of section 2 of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956);
(iv) where any income is credited to any account,
whether called “Suspense account” or by any other name, in the books of account
of the person liable to pay such income, such crediting shall be deemed to be
credit of such income to the account of the payee and the provisions of this
section shall apply accordingly.
KEY NOTE
1. Reintroduced by the
Finance Act, 2001, with effect from 01.06.2001. Earlier, section 194H was
omitted by the Finance Act, 1999, with effect from 01.04.2000.
2. Substituted for “ten”
by the Finance Act, 2016, with effect from 01.06.2016.
3. Substituted for “five
thousand rupees” by the Finance Act, 2016, with effect from 01.06.2016.
4. Inserted by the
Finance Act, 2002, with effect from 01.06.2002.
5. Substituted for the
words, brackets, letters and figures “the monetary limits specified under
clause (a) or clause (b) of section 44AB” by the Finance Act, 2020, with effect from 01.04.2020.
6. Inserted by the
Finance Act, 2007, with effect from 01.06.2007.
Meaning of words “Commission or brokerage” for the
purpose of section 194H
Commission
or brokerage includes any payment received or receivable, directly or
indirectly, by a person acting on behalf of another person:
(a)
for services rendered (not being professional services), or
(b)
for any services in the course of buying or selling of goods, or
(c)
in relation to any transaction relating to any asset, valuable article or thing,
not being securities.
KEY
NOTE
(i)
Therefore property agent who works as an agent in buy/sell or rent of property
is also covered under this section.
(ii)
The section clarifies that the services received shall not include professional
services. The professional service within its ambit includes legal, profession
of accountancy, technical, interior design services etc.
(iii)
Commission or Brokerage includes any payment receivable or received, directly
or indirectly or by a person acting on behalf of another person.
Who is responsible to deduct tax under section 194H
Any
person (other than individual or a Hindu undivided family), who is responsible
for paying, to a resident, any income by way of commission (not being insurance
commission referred to in section 194D) or brokerage, shall, deduct income-tax
thereon.
However,
with effect from 01.06.2002, individuals and HUF who were covered under section
44AB(a) and (b) in the preceding previous year i.e. whose gross turnover/receipts
of the business/profession in the immediately preceding financial year exceeded
business/profession in the immediately preceding financial year exceed Rs. 1,00,00,000/Rs.
50,00,000, as the case may be, are also required to deduct tax at source.
When TDS is to be deducted under section 194H
It
will be deducted at the time of credit of such income to the account of the payee
or to any account, whether called suspense account or by any other name or at
the time of payment of such income in cash or by the issue of a cheque or draft
or by any other mode, whichever is earlier.
In
other words, if such amount is credited to suspense account or account of any
name, it is considered as credited to account of payee and TDS is required to
be deducted at the time of such credit.
Principal-Agent Relationship is fundamental in
determining TDS under Section 194H
Principal
and agent relationship is fundamental in determining TDS under
Section
194H. TDS is not applicable in a case where sales were performed directly
without the involvement of an agent.
Threshold limit under section 194H
No
deduction shall be made under this section in a case where the amount of such
income or, as the case may be, the aggregate of the amounts of such income
credited or paid or likely to be credited or paid during the financial year to
the account of, or to the payee, does not exceed.
|
Period |
Amount does
not exceed (in Rs.) |
|
Payments/credits made on or
after 01.06.2016 |
15,000 |
|
Payments/credits made from 01.07.2010
to 31.05.2016 |
5,000 |
|
Payments/credits made on or
before 30.06.2010 |
2,500 |
No
tax shall be deducted on any commission or brokerage payable by Bharat Sanchar
Nigam Ltd. or Mahanagar Telephone Nigam Ltd. to their public call office franchisees
(Third proviso to section 194H inserted with effect from 01.06.2007).
Rate of TDS and threshold limits under section 194H
|
|
FROM
01.06.2016 |
UPTO
31.05.2016 |
|
Threshold Limit If PAN is
furnished |
Rs. 15,000 5% |
Rs. 5,000 10% |
|
If PAN is not furnished |
20% |
20% |
NOTE
(i)
No Surcharge or Health & Education cess is levied on payment to resident.
(ii)
If the commission/brokerage amount exceeds the threshold limit, then TDS is to
be deducted on whole amount paid or payable for that financial year and not
only on the amount exceeding the threshold limit.
Time limit within which tax is to be deposited [Rule
30]
The
time limit prescribed by rule 30 is as under:
|
S. No. |
Particulars
|
Due date
for payment |
|
1. |
Where the payment is made by
or on behalf of the Government |
On the same day (without using
any challan form). |
|
2. |
Where the payment is made by
any other person other than Government— (a) If the amount is credited
or paid in the month of March (b) In any other case. |
On or before 30th day of April
On or before 7 days from the end of the month in which the deduction is made.
|
Tax is either not to be deducted or to be deducted at
lower rate [Section 197 Rule 28 & Rule 28AA]
Any
person to whom commission is payable may make an application in Form No. 13 to
the Assessing Officer and obtain such certificate from him, as may be appropriate,
authorizing the payer not to deduct tax or to deduct tax at a lower rate. The
certificate will be given by the Assessing Officer if he is satisfied that it
is justified to do so.
As
per section 206AA(4), no certificate under section 197 for deduction of tax at
Nil rate or lower rate shall be granted unless the application made under that
section contains the Permanent Account Number of the applicant.
Quarterly deposit of tax [Rule 30(3)]
In
special cases, the Assessing Officer may, with prior approval of the JCIT, permit
quarterly payment of the tax deducted under section 194H for the quarters of
the financial year as per Table given below:
|
S. No. |
Quarter of
the Financial Year ended on |
Date for
Quarterly payment |
|
1. |
30th June |
7th July of the financial year
|
|
2. |
30th September |
7th October of the financial
year |
|
3. |
31st December |
7th January of the financial
year |
|
4. |
31st March |
30th April of the financial
year immediately following the financial year in which the deduction is made |
Due date of submission of quarterly TDS returns
Every
deductor who has deducted tax at source the quarterly returns shall be submitted
within the time limit as per table given below:
STATEMENT
OF DEDUCTION OF TAX UNDER SECTION 200(3) [RULE 31A(2)]
|
For the quarter ending |
Due date of submission of
quarterly TDS statements (from 01.06.2016) |
|
June 30 |
31st July of the financial
year |
|
September 30 |
31st October of the financial
year |
|
December 31 |
31st January of the financial
year |
|
March 31 |
31st May of the financial year
immediately following the financial year in which the deduction is made |
Fee for default in furnishing statements (Section
234E)
If
a person fails to deliver or cause to be delivered a statement within the time prescribed
in section 200(3) in respect of tax deducted at source [on or after 01.07.2012]
he shall be liable to pay, by way of fee a sum of Rs. 200 for every day during
which the failure continues. However, the amount of such fee shall not exceed
the amount of tax which was deductible at source. This fee is mandatory in
nature and to be paid before furnishing of such statement.
Penalty for failure in furnishing statements or
furnishing incorrect information (Section 271H)
If
a person fails to deliver or cause to be delivered a statement within the time prescribed
in section 200(3) or furnishes an incorrect statement, in respect of tax
deducted at source [on or after 01.07.2012], he shall be liable to pay, by way
of penalty a sum which shall not be less than Rs. 10,000/- but which may extend
to Rs. 1,00,000/-.
However,
the penalty shall not be levied if the person proves that after paying TDS with
the fee and interest, if any, to the credit of Central Government, he had
delivered such statement before the expiry of one year from the time prescribed
for delivering the statement.
Time limit for issue of TDS certificate
Time
limit for issue of TDS certificate shall be issued in Form No. 16A within 15
days from the due date of furnishing quarterly TDS return
|
For the quarter ending |
TDS certificate should be
given on or before |
|
June 30 |
15th August of the financial
year |
|
September 30 |
15th November of the financial
year |
|
December 31 |
15th February of the financial
year |
|
March 31 |
June 15th June of the
financial year immediately following the
financial year in which the deduction is made |
The
certificate should be downloaded from http://contents.tdscpc.gov.in
Penalty for non-issuance of TDS Certificates [Section
272A(2)(g)]
If
the deductor is not able to provide the certificate within due date, then a penalty
of Rs. 100 per day of delay per certificate has to be paid. Remember that
penalty cannot exceed the TDS amount deducted for the quarter.
TDS under section 194H is not deductible on turnover
commission payable by RBI to Agency Banks
Tax
deduction at source under section 194H should not be applicable in respect of
Turnover Commission payable by the Reserve Bank of India to the Agency Banks
(Banks authorized for conducting Government business) for performing the
general banking business of the Central and State Governments on behalf of
RBI.—[CBDT’s Circular No. 6/2003, dated 03.09.2003]
CBDT’s Circular No. 6/2003, dated 03.09.2003
Subject : Section 194H of the Income-tax Act,
1961 - Commission or brokerage - Clarifications regarding Turnover Commission
payable by RBI to Agency Banks - exemption from TDS
The
work of receipt of tax payments and issue of refunds is conducted by the Banks
authorized for such purposes by the Reserve Bank of India (RBI). As a
compensation for the work so conducted, the Central Government pays to the
Banks, through RBI, commission termed as “Turnover Commission”. It has been
represented to the Board that the requirement of tax deduction at source under
section 194H should not be applicable in respect of Turnover Commission payable
by the Reserve Bank of India to the Agency Banks (Banks authorized for
conducting Government business) for performing the general banking business of
the Central and State Governments on behalf of RBI. The matter was considered
in the Board and it has been decided that tax would not be required to be
deducted by RBI on the amount of Turnover Commission paid or credited by it.
Commission and brokerage retained by the
consignee/agent while remitting the sale consideration, TDS on such commission
amount is to be deposited by the principal
Where
commission or brokerage is retained by the consignee/agent and not remitted to
the consignor/principal while remitting the sale consideration. It may be
clarified that since the retention of commission by the consignee/ agent
amounts to constructive payment of the same to him by the consignor/ principal,
deduction of tax at source is required to be made from the amount of
commission. Therefore, the consignor/principal will have to deposit the tax
deductible on the amount of commission income to the credit of the Central
Government, within the prescribed time.—[CBDT’s Circular No. 619, dated
04.12.1991]
CBDT’s Circular No. 619, dated 04.12.1991
Subject : Instructions for deduction of tax
at source from commission, brokerage, etc.
1.
The Finance (No. 2) Act, 1991 has introduced a new section 194H, into the
Income-tax Act, 1961, which provides that any person, not being an individual
or a Hindu undivided family, who is responsible for paying, on or after the 1st
day of October, 1991, to a resident, any income by way of commission (not being
insurance commission referred to in section 194D) or brokerage, shall, at the
time of credit of such income to the account of the payee or at the time of
payment of such income in cash or by the issue of a cheque or draft or by any
other mode, whichever is earlier, deduct income-tax thereon at the rate of ten
per cent.
2.
For the purposes of this section, 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 course of buying or selling of goods or in relation to any
transaction relating to any asset, valuable article or thing.
3.
It may also be stated that credit of any income to any account whether called
“Suspense account” or by any other name shall be deemed to be credit of such
income to the account of the payee and the provisions of section 194H shall
apply accordingly.
4.
The tax so deducted at the rate of ten per cent is required to be increased by
surcharge at the rate of twelve per cent where the payee is a resident person
(other than a company) and at the rate of fifteen per cent where the payee is a
domestic company.
5.
No deduction is, however, required to be made in the following cases :
(i)
Where the aggregate amount of commission income credited or paid or likely to
be credited or paid by a payer to a payee during a financial year does not
exceed two thousand five hundred rupees.
(ii)
Where the payment is made by an individual or a Hindu undivided family.
(iii)
In cases of such persons or class or classes of persons (whether payer or
payee) as the Central Government may, having regard to the extent of
inconvenience caused or likely to be caused to them, and being satisfied that
it would not be prejudicial to the interests of revenue, by Notification in the
Official Gazette, specify, in this behalf.
(iv)
Where payment of commission income is made for “professional services”. For
this purpose, professional services mean services rendered by a person in the
course of carrying on legal, medical, engineering or architectural profession
or the profession of accountancy to technical consultancy or interior
decoration or such other profession as is notified by the Board for the
purposes of section 44AA of the Income-tax Act. So far, only two professions,
namely, of film artists and authorised representatives, have been notified.
6.
A question may raise whether there would be deduction of tax at source under
section 194H where commission or brokerage is retained by the consignee/agent
and not remitted to the consignor/principal while remitting the sale
consideration. It may be clarified that since the retention of commission by
the consignee/agent amounts to constructive payment of the same to him by the
consignor/principal, deduction of tax at source is required to be made from the
amount of commission. Therefore, the consignor/principal will have to deposit
the tax deductible on the amount of commission income to the credit of the
Central Government, within the prescribed time, as explained in the succeeding
paragraphs.
7.
The responsibilities, obligations, etc., under the Income-tax Act of a person
deducting income-tax at source are as follows :
(a)
According to the provisions of section 200, any person deducting tax at source
under section 194H shall pay, within the
prescribed time (as laid down in rule 30 of the Income-tax Rules, 1962), the
tax so deducted to the credit of the Central Government. In the case of
deduction by or on behalf of the Government, the sum has to be paid on the day
of the deduction itself. In other cases, payment is normally to be made within
one week from the last day of month in which the deduction is made. However,
with the permission of the Assessing Officer, tax deducted at source can also
be paid to the credit of the Central Government on quarterly basis. If a person
fails to deduct tax at source, or, after deducting, fails to pay tax to the
credit of the Central Government, he shall be liable to action under the
provisions of section 201. Sub-section (1A) of section 201 lays down that such
person shall be liable to pay simple interest at fifteen per cent per annum on
the amount of such tax from the date on which the tax was deductible to the
date on which it is actually paid. Further, section 271C lays down that if any
person fails to deduct tax at source, he shall be liable to pay by way of
penalty a sum equal to the amount of tax which he failed to deduct at source.
In this regard, attention is also invited to the provisions of section 276B
which lays down that if a person fails to pay to the credit of the Central
Government the tax deducted at source by him, he shall be punishable with
rigorous imprisonment for a term which shall not be less than 3 months but
which may extend to 7 years and with fine.
(b)
According to the provisions of section 203, every person responsible for
deducting tax at source is required to furnish a certificate to the effect that
tax has been deducted and to specify therein, the amount deducted and certain
other particulars. This certificate has to be furnished in Form No. 16A (copy
enclosed) within the prescribed period of one month and fourteen days to the
person to whose account credit is given or to whom payment is made or cheque is
issued. The certificate can be issued on the tax deductor’s own stationery. If
a person fails to furnish this certificate, he shall be liable to pay by way of
penalty under section 272A, a sum which shall not be less than Rs. 100, but
which may extend to Rs. 200 for each day during which the failure continues.
(c)
According to the provisions of section 203A, it is obligatory for all persons
responsible for deducting tax at source to obtain and quote the Tax-deduction
Account Number (TAN) in the various challans, TDS certificates, returns, etc.
Detailed instructions in this regard are available in this Department’s
Circular No. 497, dated 09.01.1987 for reference and guidance. If a person
fails to comply with the provisions of section 203A, he shall be liable to pay
by way of penalty under section 272BB, a sum up to Rs. 5,000.
These
instructions are not exhaustive and are issued with a view to helping the
persons responsible for making deduction of tax at source under section 194H.
Where there is any doubt, a reference may be made to the relevant provisions of
the Income-tax Act, 1961 and the Finance (No. 2) Act, 1991. In case any
assistance is required, the Assessing Officer concerned or the local Public
Relations Officer of the Income-tax Department may be approached.
Assessee-company was engaged in providing
laboratory and testing services to customers through its own and through third
party collection centres. It allowed certain discount to these collection
centres. Assessing Officer held that such discount allowed by assessee to
collection centres was in nature of commission and assessee was obligated under
section 194H to deduct tax at source on same - It was noted that provision of
section 194H to deduct tax was applicable only to a person who was responsible
for paying, at time of credit to account of payee or at time of payment. Since
assessee did not perform any act of paying but was only receiving payments from
these collection centres, there was no obligation on assessee-company to deduct
tax at source under section 194H on discount so allowed. [In favour of
assessee] – [CIT (TDS) v. Super Religare Laboratories Ltd. (2022) 284 Taxman 657 : (2021) 133 taxmann.com 313
(Bom.)]
Amount retained by bank as bank guarantee
commission is a fee charged by them for having rendered banking services and
cannot be treated as a commission or brokerage paid in course of use of any services
by a person acting on behalf of another for buying or selling of goods and
thus, same is not liable to TDS under section 194H. [In favour of assessee] (Related
Assessment year : 2011-12) – [CIT(TDS) v. ITD Cementation India Ltd. (2022) 135 taxmann.com 190 (Cal.)]
Service charges paid by assessee bank to National Financial Switch and Cash Tree for routing transactions of payments made by customers of assessee-bank to acquiring bank would not be liable to TDS deduction under section 194H
From perusal of section 194H
it is evident that the provision would apply if the payment was received or is
receivable directly or indirectly by a person acting on behalf of another
person for services rendered not being professional and for any services in the
course of buying and selling of goods or in relation to any transaction
relating to an asset, valuable article or thing. In this case the credit card
issued by the assessee was used on the swiping machine of another bank, the
customer whose credit card was used got access to internet gateway of acquiring
bank resulting in realization of the payment. Subsequently, the acquiring bank
realise and recover the payment from the bank, which had issued the credit
card. The relationship between the assessee and any other bank is not of an
agency but that of two independent basis on principal-principal basis. Even
assuming that the transaction was being routed to National Financial Switch and
Cash Tree, then also it is pertinent to mention here that the same is a
consortium of banks and no commission or brokerage is paid to it. It does not
act as an agent for collecting charges. Therefore, we concur with the view
taken by the High court of Delhi in CIT v. JDS Apparels (P) Ltd. (2015) 370
ITR 454 : 53 taxmann.com 139 (Del.) and hold that provisions of section
194H of the Act are not attracted to the fact situation of the case. Thus,
Service charges paid by assessee bank to National Financial Switch and Cash
Tree for routing transactions of payments made by customers of assessee-bank to
acquiring bank would not be liable to TDS under section 194H. [In favour of
assessee] (Related Assessment year : 2009-10) - [CIT v. Corporation Bank (2021) 431 ITR 554 : 277 Taxman 207 : 123
taxmann.com 204 (Karn.)]
Trade discount given by assessee, engaged in business of publishing and selling newspaper, to newspaper vendors and advertising agencies was not in nature of 'commission' and no TDS was to be deducted under section 194H on same
Assessee
was engaged in business of publishing and selling newspapers. During assessment
proceedings, Assessing Officer noted that assessee was paying commission to
newspaper vendors and advertising agencies but was not deducting tax at source
under section 194H on same. Assessee contended that amount paid to newspaper
vendors and advertising agencies was actually trade discount and not
commission. However, Assessing Officer made disallowance under section
40(a)(ia). It was noted that both Commissioner (Appeals) as well as Tribunal
had recorded concurrent findings of fact that transactions or dealings between
assessee and newspaper vendors and advertising agencies were on a
principal-to-principal basis. Thus, newspaper vendors and advertising agencies
were not agents of assessee. There was no commission paid by assessee to
newspaper vendors and advertising agencies but assessee merely extended a trade
discount to them. On facts, assessee would not be liable to deduct tax at
source under section 194H on payment made to newspaper vendors and advertising
agencies, thus, impugned disallowance made under section 40(a)(ia) was to be
deleted. [In favour of assessee] (Related Assessment year : 2011-12) – [PCIT v. Dempo Industries
(P) Ltd. (2021) 279 Taxman 166 : 126 taxmann.com 112 (Bom.)]
Discount on sale of recharge coupon vouchers and starter kits for telecommunication services by telecommunication company to its distributors/channel partners does not amount to commission in terms of section 194H
The assessee was a limited company
engaged in the business of providing telecommunication services across the
country. In the course of telecommunication services business, the assessee
sold Recharge Coupon Vouchers (RCV) and starter kits to its channel partners
for onward sale to the retailer and, thereafter, to the final customers.
The Assessing Officer held that the discount offered to the
distributors/channel partners was in the nature of commission on which the
assessee was liable to deduct tax at source under section 194H. Accordingly,
the Assessing Officer proceeded to raise a demand on account of non-deduction
of tax at source and also levied consequential interest under section 201(1A). On appeal, the Commissioner
(Appeals) set aside the order passed under section 201(1) on the ground that
the transaction of sale of recharge coupon vouchers and starter kits was done
on principal-to-principal basis and, therefore, the provisions of section 194H
were not applicable. On appeal by revenue to the Tribunal :
Held : The Karnataka High Court in the case of Bharti Airtel Ltd. v. CIT (2015) 372 ITR 33 has decided the issue in favour of the assessee by holding that tax was not deductable on discount allowed to distributors. Following the judicial precedents referred above, it is held that the discount allowed to distributors/channel partners by assessee telecommunication company on sale of recharge coupon vouchers and starter kits for telecommunication services would not attract TDS provisions under section 194H and as such no default under section 201(1) could be attributed to assessee. [In favour of assessee] (Related Assessment years : 2008-09 and 2009-10) – [ITO(TDS) v. Tata Teleservices Ltd. (2022) 134 taxmann.com 323 : (2021) 92 ITR(T) 87 (ITAT Delhi)]
Where assessee had paid commission and brokerage and claimed
deduction for same but failed to submit record or material. In the absence of
any record or material to show that the commission or brokerage paid by the assessee
to the extent of Rs. 8,86,790/-were to different individuals and each one of
such payments were less than the monetary limit of Rs. 20,000/-, said payment
was to be disallowed for failure to deduct TDS under section 194H. [In favour
of revenue] (Related Assessment year : 2007-08) - [Sudarsanan P.S. v. CIT,
Kottayam (2021) 283 Taxman 84 : 130 taxmann.com 375 (Ker.)]
Assessee pharmaceuticals company incurred expenses for providing travel, accommodation and equipment services and distribution of various articles/gifts/other facilities to persons associated with it such as stockist, field staff, distributors and doctors, since there existed no agency relationship between assessee and these persons, said expenses incurred for them could not be treated as commission liable for deducting tax at source under section 194H
Assessee company was engaged in
business of manufacturing and trading of pharmaceuticals. It incurred expenses
for providing facilities/services such as travel, accommodation and equipment
to persons associated with it such as stockist, field staff, distributors and
doctors. It also incurred expenses towards distribution of various
articles/gifts/other facilities to these persons. Assessing Officer was of view
that these expenses were in nature of commission and assessee was liable to tax
at source at rate of 10 per cent under section 194H on
same. It was noted that doctors were not acting as agent of assessee. Thus,
existence of agency relationship between assessee and doctor was missing which
was compulsory to invoke provisions of section 194H. Further, Assessing Officer had not brought anything on
record suggesting that there existed any agency relationship between assessee
and other persons i.e. stockist, dealers and field staff. These expenses were
incurred exclusively for purposes of business and product promotion. By no
means these could be classified as commission as envisaged under section
194H. Therefore, provisions of section
194H could not be applied to case of assessee. [In favour of assessee] (Related Assessment
years : 2011-12 to 2013-14) - [Intas
Pharmaceuticals Ltd. v. ACIT(TDS) (2021) 123 taxmann.com 300 (ITAT Ahmedabad)]
SLP granted against High Court ruling that sale of SIM cards/recharge coupons at discounted rate to distributors is not commission and therefore not liable to TDS under section 194H
Discount on pre-paid sim cards - High Court by
impugned order held that where discount allowed to distributors by assessee.
Telecommunication company was on account of principal-to-principal relationship
and not that of principal to agent, sale of SIM cards/recharge coupons at
discounted rate to distributors was not commission and therefore not liable for
deduction of TDS under section 194H. SLP against said impugned order was to be granted. [In favour of revenue]
(Related Assessment year : 2013-14) – [CIT(TDS)
v. Idea Cellular Ltd. (2021) 278 Taxman 188 : 125 taxmann.com 172 (SC)]
Assessee
company was primarily engaged in business of trading and manufacturing of
mobile handsets, spare parts and accessories. It entered into an agreement for
supply of Cellular Mobile Phones with distributor HCL. Relationship between
assessee and HCL was that of principal to principal and not that of principal
to agent. Discount which was offered to distributors was given for promotion of
sales. In absence of a principal-agent relationship, benefit extended to
distributors could not be treated as commission liable for withholding tax
under section 194H. Further, Assessing officer had not given any reasoning or
finding to extent that there was payment for technical service liable for
withholding under section 194J, hence, merely making an addition under section
194J without actual basis for same on part of Assessing Officer was not just
and proper. Therefore, addition on both accounts made by Assessing Officer
would not be sustainable. [In favour of assessee] (Related Assessment year : 2010-11)
– [Nokia India (P) Ltd. v. DCIT (2020)
114 taxmann.com 442 (ITAT Delhi)]
Payment of guarantee commission made by assessee to banks was not covered under commission or brokerage as defined under Section 194H of the Act - Not liable to deduct tax at source
Dismissing
the appeal of the revenue, it was held that payment of guarantee commission
made by assessee to banks was not covered under commission or brokerage as
defined under Section 194H of the Act. The so called bank guarantee commission is not in
the nature of commission paid to an agent but it is in the nature of bank
charges for providing one of the banking service. The requirement of Section
194H of the Act, therefore, would not arise. No question of law arises. On
facts, SLP filed against order of High Court was to be dismissed. [In favour of
assessee] – [CIT v. Nimbus Communications Ltd. (2019) 266 Taxman 375
: 109 taxmann.com 498 (SC)]
In terms of tripartite agreement, assessee sold its
goods at discounted price to dealers who, in turn, sold those goods to final
consumers, collected sale consideration from them and handed it over to assessee,
since it was a transaction on principal to principal basis and, there was no
service rendered by dealers to assessee, discount offered to dealers could not
be regarded as commission requiring deduction of tax at source under section 194H
On
a perusal of the aforesaid provision of section 194H, it is clear that any
person, not being an individual or Hindu undivided family, who is responsible
for paying by way of commission or brokerage shall, at the time of credit of
such income to the account of the payee or at the time of payment of such
income in cash whichever is earlier, is liable to deduct tax. Explanation (1)
to section 194H defines “Commission or Brokerage” which 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 course of buying and selling of goods or in relation to any
transaction relating to any asset, valuable article or thing, not being securities.
On the facts of the present case, as per the tripartite agreement entered into
between the assessee and the dealer, there is no service provided by the dealer
to the assessee in the course of buying or selling goods, inasmuch as, the
assessee directly sells goods to the dealer and the dealer makes the payment
after collecting it from the consumers and, therefore, it is a transaction on
principal to principal basis and, therefore, the payment made by the dealer is
not liable for any deduction of tax by the assessee company. Therefore, in the
facts of the case, the provisions of section 40(a)(ia) of the Act cannot be
applied as the dealer cannot be said to be a commission agent of the assessee
company, since it was a transaction on principal to principal basis and, there
was no service rendered by dealers to assessee, discount offered to dealers
could not be regarded as commission requiring deduction of tax at source under
section 194H. [In favour of assessee] (Related Assessment year : 2009-10) – [PCIT
v. Gujarat Narmada Valley Fertilizer And Chemicals Ltd. (2019)
266 Taxman 19 : 108 taxmann.com 541 (Guj.)]
Assessee, which was selling travel products, paid fees
to banks for providing payment gateway facility, same could not be treated as
commission or brokerage; hence, not liable to tax under section 194H
Bank
charges for payment gateways - Assessee was engaged in business of selling its
travel products through website. Payments were made by one principal to
another, same being facilitated by payment gateway facility provided by banks.
Such payment gateways collected facility charges and credited balance to bank
account of merchant. Amount charged by bank was a fee for rendering banking
services and, could in no way be treated as commission or brokerage under
section 194H. [In favour of assessee]
(Related Assessment year : 2009-10) – [PCIT v. Make My Trip India (P) Ltd. (2019)
263 Taxman 271 : 104 taxmann.com 263 (Del.)]
Bank guarantee commission is not in nature of
commission paid to an agent but it is in nature of bank charges for providing
one of banking service and, thus, while making payment of bank guarantee
commission, requirement of deduction of tax at source under section 194H would
not arise
Commission,
brokerage, etc. (Bank guarantee commission) - We are broadly in agreement with
the view of the Tribunal. The so-called bank guarantee commission is not in the
nature of commission paid to an agent but it is in the nature of bank charges
for providing one of the banking service. The requirement of Section 194H of
the Act, therefore, would not arise. No question of law arises. The Income Tax Appeal
is dismissed. [In favour of assessee] (Related Assessment year : 2010-11) – [CIT(TDS)
v. Larsen & Toubro Ltd. (2019) 260 Taxman 271 :
101 taxmann.com 83 (Bom.)]
Trade discount allowed can be considered as commission
or brokerage - Section 194H would be applicable to payments made by assessee, a
government organization running TV channel called ‘Doordarshan’, to advertising
agencies to secure more business as these were in nature of 'commission' paid
to agencies as defined in Explanation appended to section 194H;
Assessee, a Government
of India organization in course of its business activities, which included
running of TV channel called ‘Doordarshan’, had been regularly telecasting
advertisements of several consumer companies. It had entered into an agreement
with several advertising agencies to enable them to do business of telecasting
advertisements of several consumer products on its Doordarshan TV Channel.
Agreement, inter alia, provided manner, mode and time within which agency would
make payment to assessee and assessee would pay 15 per cent by way of
commission to agencies. Provisions of section 194H would be applicable to
payments made by assessee to agencies during period in question because
payments made were to secure more business and were in nature of ‘commission’
paid to agencies as defined in Explanation
appended
to section 194H. Advertising agency has acted as an agent of the
principal hence trade discount allowed can be considered as commission or
brokerage defined under Explanation (i) of Section 194 H of the Act. Since assessee
failed to deduct tax at source while making these payments to agencies in terms
of agreement in question, they committed default of non-compliance of section
194H resulting in attracting provisions of section 201(1A). [In favour of
revenue] (Related Assessment years : 2002-03 and 2003-04) - [Director,
Prasar Bharti v. CIT, Thiruvananthapuram (2018) 403 ITR 161 : 302 CTR 9 :255
Taxman 1 : 164 DTR 177 (SC)]
As per distributorship agreements, assessee sold goods
to distributors and no amount was paid to distributors as commission while certain
amounts were reduced from MRP fixed by assessee, there would be no occasion of
invoking provisions of section 194H
It
was business policy of assessee to give distributorship for a particular area. Responsibilities
of each party were stipulated under arrangement entered between company and
distributor. MRP had been fixed by assessee and other expenses including
commission to retailer, etc., was to be managed by distributor. Distributor had all right to increase margin
of retailer while reducing its own margin from 10 per cent. Further, there was no restriction by assessee
to give commission amount to retailer. It was always between assessee and
Distributor to decide who will absorb loss. It was always a matter of contract
how further goods would be distributed. Assessee had to provide special
allowance or expenses to promote sale. Assessee claimed that it made sales to
its distributors wherein property in goods was transferred to distributors and,
therefore, Tribunal was not justified in holding assessee liable to withhold
tax at source under section 194H. Provisions of section 194H stipulates condition
precedent being payment made by assessee and since in instant case, it was not
pointed out that any amount of commission was paid by assessee-company to
distributor, rather there was only an arrangement between parties by which an
amount was reduced from MRP and no amount was paid as commission, there was no
occasion of invoking provisions of section 194H. [In favour of assessee] - [Hindustan
Coca Cola Beverages (P) Ltd. v. CIT, Jaipur (2018) 402 ITR 539 : 303 CTR 13 : (2017)
87 taxmann.com 295 (Raj.)]
Assessee paid target incentives to dealers for
increasing sales of its products, since there was no relationship of principal
and agent between assessee and distributors, assessee was not required to
deduct tax at source under section 194H while making said payments
During
relevant year, assessee paid selling expenses which consisted of target
incentives to distributors. Assessing
Officer opined that assessee was required to deduct-tax at source under section
194H while making said payments. Commissioner (Appeals) noted that assessee did
not have any right or control over goods sold to dealers and distributors and
all stocks belonged to buyers. Moreover, assessee paid target incentives to
dealers only for increasing its sales volume. Commissioner (Appeals) thus
taking a view that there was no relationship of principal and agent between
assessee and distributors, set aside order passed by Assessing Officer. Tribunal
confirmed order passed by Assessing Officer. Since revenue failed to controvert
findings recorded by authorities below, impugned order was to be upheld. [In
favour of assessee] (Related Assessment year : 2008-09) – [PCIT, Kolkata v. Shalimar
Chemical Works Ltd. (2018) 257 Taxman 590 : 96 taxmann.com 275 (Cal.)]
Trade discount granted to principal distributor could
not be held as commission and, hence not liable for deduction of tax at source
under provisions of section 194H
Assessee
was provider of Direct to Home (DTH) services in name of Videocon d2H. It
entered into agreements with various parties (called distributors and dealers)
for distribution/sale of set-top boxes (STB), sale of recharge vouchers,
prepaid vouchers etc. As per existing procedure, distributors/dealers were
allowed discounts on sale of STB and recharge vouchers from their Maximum
Retail Price (MRP). Trade discount granted to principal distributor could not
be held as commission, and, hence, not liable for deduction of tax at source
under provisions of section 194H. [In favour of assessee] (Related Assessment
years : 2010-11 and 2011-12) – [JCIT(TDS) v. Bharat Business Channels Ltd. (2018)
170 ITD 628 : 92 taxmann.com 216 (ITAT Mumbai)]
Discount i.e. difference between MRP and the selling
price, allowed by the assessee to its distributors against advance payment made
by the distributor was in the nature of commission
It
was held that the discount i.e. difference between MRP and the selling price,
allowed by the assessee (engaged in the business of providing telecommunication
services) to its distributors against advance payment made by the distributor
was in the nature of commission and accordingly held that the assessee was
liable to deduct taxes under section 194H of the Act. Accordingly, it held that
the assessee was an assessee in default under Section 201 of the Act.—[Tata
Teleservices Ltd. v. ITO (2018) 52 CCH 186 (ITAT Delhi)]
Bank guarantee commission not liable to TDS under
section 194H
No
need to deduct TDS on the Bank Guarantee Commission paid by assessee to Bank.
Bank guarantee commission could not be subjected to TDS under section 194H as
the same did not fall into clause (i) of Explanation to section 194H and
also assessee in present case was not acting as an agent but on principal-to-principal
basis. Also exemption is provided under section 194A(2) (iiia) in respect of
any payment made to any banking company to which any Banking Regulation
applies. [Related Assessment Year : 2011-12]—[DCIT v. Jaypee Sports
International Ltd. - Date of Judgement : 06.12.2018 (ITAT Delhi)]
Trade discount – Incentive given only to promote sales
is not commission, hence not liable to deduct tax at source
Dismissing
the appeal of revenue the Court held that it was evident that beer was sold by
the assessee to the Corporation, and the Corporation, in turn, sold the beer
purchased by it from the assessee, to retail dealers. The two transactions were
independent of each other, and were on a principal to principal basis. No services were rendered by the retail dealer
to the assessee, and the incentive given by the assessee to the retailers as
trade discount was only to promote their sales. The Tribunal rightly held that
in the absence of a relationship of principal and agent, and as there was no
direct relationship between the assessee and the retailer, the discount offered
by the assessee to the retailers could only be treated as sales promotion
expenses, and not as commission, as no services were rendered by the retailers
to the assessee. (Related Assessment years : 2008-09 to 2010-11)—[CIT (TDS)
v. United Breweries Ltd. (2016) 387 ITR 150 (T&AP)]
Discount allowed by assessee to its distributors in respect of starter packs and recharge coupons for its prepaid mobile service amounted to payment of commission or brokerage requiring deduction of tax at source under section 194H
In
course of appellate proceedings, Tribunal held that discount allowed by
assessee to its distributors in respect of starter packs and recharge coupons
for its prepaid mobile service amounted to payment of commission or brokerage
requiring deduction of tax at source under section 194H. It was noted that as
per terms of agreement, service providers, i. e. ‘P’, could not enter into any
agreement with any third party which may be considered to be in competition of
business of assessee. Further, ‘P’ could not transfer or assign or sub-licence
any of its rights and obligations and it had to comply with all instructions
and directions of assessee. On facts, relationship between ‘P’ and assessee was
that of an agent and principal and, thus, impugned order of Tribunal did not
require any interference. [In favour of revenue] - [Hutchison Telecom East
Ltd. v. CIT(TDS), Kolkata (2015) 375 ITR 566 : 232 Taxman 665 : 59
taxmann.com 176 (Cal.)]
Commission paid by Mother Dairy to concessionaires who sell milk of assessee from booths owned by assessee not liable to TDS under section 194H as principal-agent relationship is missing
Relationship
between assessee-company (Dairy) and concessionaire, who sold milk and other
products of assessee from booths owned by assessee, was principal-to-principal
relationship inasmuch as milk and other products became property of
concessionaire moment they took delivery of them and they were selling milk and
other products in their own right as owners. Fact that concessionaires, were
selling milk and other products from booths owned by assessee and were using
assessee’s equipment and furniture in course of sale of milk was not
determinative of relationship between assessee and concessionaire with regard
to sale of milk and other products. Therefore, difference between MRP and price
which concessionaire paid to assessee was his income from business and it could
not be categorized as commission within meaning of section 194H. [In favour of
assessee] (Related Assessment Years : 2004-05 and 2005-06) - [CIT v. Mother Dairy
India Ltd. (2013) 358 ITR 218 : (2012) 249 CTR 559 : 206 Taxman 157 : 18
taxmann.com 49 (Del.)]
No TDS on discount given to Stamp Vendors for purchasing stamps in bulk quantity
The stamp vendors are
not agents of the State Government from whom they purchase the stamp papers. 0.50% to 4% discount
given to stamp vendors is for purchasing in bulk quantity is not commission as
the nature of transaction is of sale-purchase transaction and not of principal
agent. Therefore, no TDS under section 194H is applicable. [In favour of
assessee] - [CIT v. Ahmedabad Stamp Vendors Association (2012) 348 ITR 378: 254
CTR 111 : 210 Taxman 269 : 79 DTR 81 : 25 taxmann.com 201 (SC)]
Payment made by the assessee to the franchisee/commission agent was subject to tax deduction at source as commission under section 194H
Assessee was acting as a
liaison officer for an educational institute namely, ‘LITR’. Assessee had
appointed its agents at various places. Assessee entered into a tri-party
agreement as per terms of which assessee's agents had to collect gross receipts
on behalf of ‘LITR,’ send those receipts to assessee to remit same to ‘LITR’
and, in turn, they were entitled to 15 per cent commission on amount so
collected. According to assessee, it was
a case of diversion of income by an overriding title and, thus, he was not
liable to deduct TDS on payment of commission. Assessing Officer, however, held
that since assessee had made payments of commission to parties without
deduction of TDS under section 194H, those payments were to be disallowed under
section 40(a)(ia). On appeal, Commissioner (Appeals) deleted disallowance made
by Assessing Officer. When an income is received by an agent, he receives it
for and on behalf of his principal and, in such a case, there is no question of
diversion by overriding title as agent is bound to make over income to
principal under general law of agency. Therefore, payment of commission by
principal to agents amounts to discharge of an obligation after such income
reaches to principal. Even otherwise, in instant case, since payment was made
by assessee to his agents for advertisement campaign and other services
rendered in respect of courses offered by educational institute (LITR), same
fell within definition of 'commission' as defined under Explanation 1 to
section 194H. Since assessee failed to deduct TDS on payment of commission,
impugned disallowance made by Assessing Officer was to be restored. [In favour of revenue] (Related Assessment
year : 2005-06) – [ACIT v. Edroos Syed Mohammed Zakir (2012)
146 TTJ 100 : (2011) 47 SOT 199 : 12 taxmann.com 470 (ITAT Mumbai)]
Assessee
laboratory was rendering services of testing samples to collection
centres/franchisees, TDS under section 194H not required in respect of discount
offered by assessee to said collection centres/franchisees
Assessee entered into
agreements with collection centres, on a non-exclusive basis. In terms of said
agreements, assessee was rendering services regarding testing of samples. In
course of assessment, Assessing Officer made a disallowance concerning discount
offered by assessee company to collections centres/franchisees under section
40(a)(ia) on basis that assessee had not deducted tax thereon under section
194H. Commissioner (Appeals) affirmed disallowance in principle, holding that
relationship between assessee and collection centres/franchisees was that of
principal and agent, attracting provisions of section 194H. On instant appeal,
it was seen that collection centres had its own premises, infrastructure, staff
and necessary licences/approvals. It was also noted that collection centre
acted as an authorized collector for collecting samples and availed
professional services of assessee with respect to testing of samples and issue
of necessary reports. Collection centre, in turn, made payment to assessee
after deducting tax at source under section 194J for professional services
rendered. It was also apparent from records that collection centre had
flexibility and freedom to choose laboratory to which samples had to be sent
for testing, unless same was mandated by patient/customer. Moreover, charges to
be received from customers were fixed by collection centre itself. On facts, there was no principal-agent
relationship between assessee and collection centres and that being so,
provisions of section 194H had been wrongly invoked. Even otherwise, since no
payment had been shown to have been made by assessee to collection centres,
provisions of section 194H could not have been invoked. In view of aforesaid,
impugned disallowance made by authorities below was to be deleted. [In favour
of assessee]
(Related
Assessment
year : 2006-07 - [SRL Ranbaxy Ltd. v. ACIT (2012) 143 TTJ 265 : 50 SOT 173
(2011) 16 taxmann.com 343 (ITAT Delhi)]
Discount given on supply of SIM cards and pre-paid cards by a telecom company to its franchisee can be treated as commission to attract the TDS provisions under section 194H
The test has been
well-explained by the Supreme Court when the relationship of principal to
principal can be found, in the judgment of the Bhopal Sugar Industry Ltd. v.
STO (1977) 40 STC 42. It is held in that case that true relationship of the
parties has to be gathered from the nature of the contract, its terms and
conditions, and the terminology used by the parties is not decisive of the said
relationship. Explanation (i) of section 194H provides inclusive definition of
commission or brokerage and the same may be received or receivable indirectly
also by person acting on behalf of another person or service rendered. Assessee-company
was engaged in business of providing cellular mobile telephone services under
brand name ‘Airtel’. It provided such services through its
distributors/franchisees who kept sufficient stock of rechargeable coupons and
starter packs with them. Such starter packs/rechargeable coupons were sold by
distributors to retailers at rate stipulated by assessee which was less than
MRP on Sim cards. After selling all Sim cards and pre-paid coupons to
retailers, franchisees were to make payment of sale proceeds to assessee after
deducting a discount. There was principal-agent relationship between assessee
and franchisees and, therefore, receipt of discount by franchisee was, in real
sense, commission paid to franchisees and same would attract provisions of
section 194H. [In favour of revenue] (Related Assessment years : 2003-04 and
2004-05) - [Bharti
Cellular Ltd. v. ACIT (2011) 244 CTR 185 : 200 Taxman 254 : 12 taxmann.com 30
(Cal.)]
Discount given by assessee, a mobile cellular operator, to distributors in course of selling of sim cards and recharge coupons under pre-paid scheme of getting a connection is, in substance, a payment for services to be rendered by distributors to assessee and, so much so, it would fall within definition of ‘commission or brokerage’ under section 194H
It was held that there
was no sale of goods involved as claimed by the assessee-telecom company and
the entire charges collected by the assessee from the distributors at the time
of delivery of SIM cards or recharge coupons were only for rendering services
to ultimate subscribers. The assessee was accountable to the subscribers for
failure to render prompt services pursuant to connections given by the
distributor. Therefore, the distributor only acted as a middleman on behalf of
the assessee for procuring and retaining customers and consequently, the
discount given to him was within the meaning of commission on which tax was
deductible under section 194H. (Related Assessment years : 2004-05 to 2007-08) -
[Vodafone Essar Cellular Ltd. v. ACIT (TDS) (2011) 332 ITR 255 : (2010) 235
CTR 393 : 194 Taxman 518 (Ker.)]
Assessee, a manufacturer of bicycles, was giving trade
incentive to dealers, Tribunal was justified in holding that if dealers were
selling goods at price for which they were purchasing from company, such trade
incentive would amount to commission for purpose of section 194H
The
assessee was the manufacturer inter alia, of bicycles. It appointed dealers for
sale of the bicycles. Survey under section 133A was conducted and an order was
passed wherein the Assessing Officer treated the trade incentive, being given
by the assessee to its dealers, as coming within the scope of section194H.
According to the assessee, the trade incentive did not partake the character of
commission or brokerage and, therefore, tax was not deductible at source and
that it was more in the nature of discount which was actually a reduction in
the bill value. According to the assessee, the relationship between the
assessee and the dealer was that of a principal and principal and not principal
and agent. The Tribunal then referred to the judgment of Gujarat High Court in
Ahmedabad Stamp Vendors Association v. Union of India [2002] 257 ITR 202 and
the Tribunal remitted the matter to the file of the Assessing Officer with a
direction to re-examine the issue, after verifying the sale price. The assessee
contended that the sale price could not be the sole determinant of the nature
of the relationship between assessee and its dealers. He further submitted that
the observation of the Tribunal that the price at which the dealers sold the
goods would alone determine the real relationship between the manufacturer and
the dealers was not correct.
Held
that following the Gujarat High Court judgment the Tribunal had observed that
if the dealers were selling the goods at the price for which they were
purchasing from the company, then trade incentive would amount to commission
only. One should read the whole order in its entirety and not tear one sentence
out of context. Therefore, since the matter had been remanded to the file of
the Assessing Officer, the Assessing Officer shall independently examine the
issue, namely, whether the trade incentive was a discount and to prove this, if
any other evidence available was to the assessee, it was open to the assessee
to produce the same before the Assessing Officer. [In favour of revenue] (Related
Assessment year : 2005-06) - [Tube Investments of India Ltd. v. ACIT (2009)
223 CTR 99 (Mad.)]
TDS under section 194H not applicable to tickets
issued by airlines to its travel agents at a concessional price
Assessee-airlines
issued tickets to its travel agents at a concessional price, transaction
between assessee and travel agents was that of principal-to principal and
difference in price was discount and therefore, such transaction would not fall
with ambit of section 194H. - [CIT v. Singapore Airlines Ltd. (2009) 180
Taxman 128 (Delhi)]
Provisions of section 194H shall not apply to free
issue of goods under trade scheme
Free
issue of goods under trade scheme and free gift on sponsorship and promotions
and early payment discount given to distributors do not constitute commission
as the distributor works on principal to principal basis and not on principal
agent relation. - [Foster’s India (P) Ltd. v. ITO (2009) 29 SOT 32 (ITAT Pune)(URO)]
Assessee
had appointed a large number of agents to sell its milk and milk products from
booths owned by it - Commission was being paid to agents for milk sold and
unsold milk was taken back by assessee at same price - Cash collection was
daily handed over to assessee by agents - There was principal to agent
relationship and, thus, assessee was liable to deduct tax at source on commission
paid by it
A survey operation under
section 133A was carried out in case of the assessee on the basis of
information that it was not deducting tax at source on the commission paid by
it to its agents (called concessionaires) who sold milk on its behalf. During
the course of survey, it was found that the assessee had appointed a large
number of agents to sell its milk and milk products from booths owned by it;
that the commission was being paid to the agents for the milk sold; and that
the milk, which was not sold, was taken back by the assessee at same price. The
assessee claimed that there was no principal to agent relationship between it
and the agents, but was a principal-to-principal relationship and, therefore,
commission as defined in the Explanation to section194H was not applicable. The
contention of the assessee was rejected by the Assessing Officer as well as the
Commissioner (Appeals) and the Tribunal. On appeal under section 260A :
Held : On the facts of
the case, it was quite clear that the milk and milk products were not sold by
the assessee to the concessionaires. On the contrary, unsold milk was taken
back by the assessee from the concessionaires, without any price reduction. Therefore,
whichever way one looked at the matter from the point of view of the definition
of the word ‘commission’, as appearing in the Explanation to section 194H or
from the meaning of the word ‘discount’, the transaction between the assessee
and the concessionaires was a principal to agent transaction and not a
principal-to-principal transaction. The Tribunal had found as a matter of fact,
that the milk booths were owned by the assessee; the assessee had a right to
enter the milk booth and take charge thereof at any time without assigning any
reason or without any intimation to the concessionaires; unsold milk was taken
back by the assessee from the concessionaires ; cash collection was daily
handed over to the assessee by the concessionaires; the concessionaires only
rendered a service to the assessee for selling milk to the customers; and
finally, ownership of the goods did not pass from the assessee to the
concessionaires inasmuch as there was no sale of the milk or milk products to
the concessionaires. No material had been brought on record to controvert those
findings of fact. No perversity was found in the findings of fact that had been
arrived at by the Tribunal on the basis of the agreement entered into between
the assessee and the concessionaires and the terms of their appointment. That
being the position, no substantial question of law arose. [In favour of
revenue] (Related Assessment years : 2002-03 and 2003-04) – [Delhi Milk Scheme
v. CIT (2008) 301 ITR 373 : 218 CTR 630 : 173 Taxman 54 (Del.)]
Discount granted by Treasury to licensed stamp vendors
is not commission - Not liable for TDS under section 194H
The
discount given on sale of stamp by the Treasury to the stamp vendor is outside
the scope of TDS provisions under Section 194H of the Act. Wherever the
legislature wanted to levy tax on trade discount, they specifically provided for
the same which is clear from provisions of Section 194H of the Act which provides
for deduction of tax on discount paid to lottery dealers in the form of commission.
In the circumstances, discount paid to the stamp vendors is not intended to be
covered by Section 194H of the Act.—[Kerala State Stamp Vendor Association
v. Office of the Accountant General (2006) 282 ITR 7 : 200 CTR (Ker) 658 (Ker)]
No comments:
Post a Comment