October 2019

Sandu Pharmaceuticals Ltd. vs. Asst. CIT-10(2); date of order: 23rd March, 2016; [ITA. No. 2087/Mum/2012; A.Y.: 2009-10; Mum. ITAT] Section 194H Tax deduction at source Manufacture the goods as per the specification Discount vis-a-vis commission No principal-agent relationship, hence not liable to deduct tax at source Consistent view accepted over years

Ajay R. Singh
Advocate

2.       Pr. CIT-14 vs. Sandu Pharmaceuticals Ltd. [ITA No. 953 of 2017] Date of order: 27th August, 2019 (Bombay High Court)

 

Sandu Pharmaceuticals Ltd. vs. Asst. CIT-10(2); date of order: 23rd March, 2016; [ITA. No. 2087/Mum/2012; A.Y.: 2009-10; Mum. ITAT]

 

Section 194H Tax deduction at source Manufacture the goods as per the specification Discount vis-a-vis commission No principal-agent relationship, hence not liable to deduct tax at source Consistent view accepted over years

 

The assessee company is engaged in the manufacture of Ayurvedic medicines. During the assessment proceedings the AO noted that on the sales turnover of Rs.14.25 crores, the assessee had given discount of Rs. 7.27 crores. The AO called upon the assessee to furnish details of the discount given. In response, the respondent pointed out that it was selling its Ayurvedic medicines to a company called Sandu Brothers Private Limited (SBPL) at a discount of 51%. This, after taking into account the cost of distribution, field staff salary, travelling expenses, incentives, marketing, etc. However, the AO held that 10% was on account of discount and the balance 41% was the commission involved in selling its product through SBPL. He therefore held that tax had to be deducted on the commission of Rs. 5.84 crores u/s 194H of the Act. This not being done, the entire amount of Rs. 5.84 crores being the commission at 41% was disallowed in terms of section 40(a)(ia) of the Act.

 

Being aggrieved, the assessee filed an appeal before the CIT(A). But the CIT(A) dismissed the appeal.

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