January 2019

Section 194H – TDS – Commission – Definition – Manufacture and sale of woolen articles – Trade discounts allowed to agents who procured orders and sold goods on behalf of assessee – Not commission – Consistent trade practice followed by assessee – Concurrent finding by appellate authorities – No liability to deduct tax at source

K. B. Bhujle
Advocate

40. CIT vs. OCM India Ltd.; 408 ITR 369 (P&H): Date of order: 9th May, 2018 A. Y. 2008-09

 

Section 194H – TDS – Commission – Definition – Manufacture and sale of woolen articles – Trade discounts allowed to agents who procured orders and sold goods on behalf of assessee – Not commission – Consistent trade practice followed by assessee – Concurrent finding by appellate authorities – No liability to deduct tax at source

 

The assessee manufactured and sold woolen articles. During inspection of the office records of the assesee it was found that the assessee debited an amount of Rs. 4,57,52,494, to the account of trade turnover discounts which had been netted out from the gross turnover and did not appear as an item of expense in the profit and loss account. The assessee submitted before the Assessing Officer that the commission or brokerage arose on account of agency transactions which did not attract deduction of tax at source for the services rendered by the third party. The Assessing officer held that the amount being turnover discount was directly or indirectly for the services rendered according to the inclusive definition of the Explanation to section 194H of the Act and that the assessee was liable to deduct the tax at source. A demand of Rs. 47,12,507 on account of TDS and a further amount of Rs. 6,59,751 on account of interest charged u/s. 201(1A) was raised.

 

The Commissioner (Appeals) held that the assessee had been debiting commission which amounted to Rs. 1.84 crore to its commission agents appointed territory-wise who acted and procured orders or effected sales of the assessee’s products for and on its behalf and got commission which varied from place to place and quality of the product to product and therefore, the Assessing officer was not justified in invoking the provisions of section 194H read with its Explanation to the trade discount allowed by the assessee to its buyers, customers and direct trade dealers without involvement of any intermediator or commission agents. Accordingly, he held that the assessee was not liable under the provisions of section 194H read with its Explanation and deleted the demand of Rs. 53,72,258. The findings were affirmed by the Tribunal which held that there was no material on record before the Assessing officer that such discount offer was a commission within the meaning of section 194H.

--->

Past Issues

Flip-Book
HTML View
Current Issue