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2005 (7) TMI 306 - AT - Income TaxApplicability of section 194H - Deduction Of Tax At Source - distribution and commission - survey action u/s 133(A) - maintaining mercantile system of accounting - whether present transaction in reality is principal to agent basis or principal-to-principal basis - HELD THAT:- The assessee has made the entries in its books of account debiting commission account as an expenditure and crediting the same to gross revenue account. This cannot be lost sight in view of judgment in the case of State Bank of Travancore v. CIT [1986 (1) TMI 1 - SUPREME COURT]. In that case sticky loans, interest were credited to suspense account by debiting to various sundry debtors and interest was not shown as income in the profit and loss account and the claim of the assessee bank, that there is no accrual or arising of the income in such cases. Further on the perusal of sales bill on which Ld. AR has relied upon very strongly. On perusal of the sales bill approximately 80% of the sales are exempt from sales-tax. Therefore an inference cannot be drawn on 20% of the sales on which sales-tax is charged that the transaction is principal-to-principal basis. Moreover invoices not give any terms and conditions which were so advocated by the Ld. AR as enumerated hereinabove. Moreover the charges of sales tax are different for different transactions under particular Sales Tax Act of a State. Sales-tax can be charged and returns are filed in many States on works contract, consignment sale and even on transfer of goods from head office to branch office. Moreover the sales bill is in the capacity as customer or consignee has not been made clear on the sales bill. Further the payment is to be made on fortnightly basis, as is evident from sales bills. But it has not been brought on record, whether the sales price collected from retailer is send to the assessee after deducting commission or indirectly said to be margin of profit or the distributor has the right to use that money to his advantage or benefit. Whether the distributor have their own warehouses or godowns and sells them as an owner has also not been brought on record. Without bringing on record any material, a said statement that closing stock belongs to distributor, is of no value. Since it is evident from papers found in survey, the distributor is entitled for commission only and hence his right to collect the money from retailer cannot be to retain the same but send the same to the assessee. There is an old section 194H which is in pari materia with the present section 194H. On perusal of Explanation to section 194H, it is evident that not only directly even indirectly any payment received by the assessee or any payment received for any services in the course of buying or selling of goods or where any income is credited to any account called by any other name in the books of account of the person liable to pay such income, such crediting shall be deemed to credit or such income to the account of the-payee and the provisions of this section shall apply accordingly. Thus, we also do not agree with the submission made by the Ld. AR that according to the CBDT Circular No. 275/201/95, dated 29-1-1997 a person responsible to deduct tax cannot be regarded as an assessee in default in respect of payment of any amount if the payee has already paid taxes in respect of such income. Thus keeping in view in the reality of transaction, own action of the assessee, explanation of section 194H, Circulars of CBDT and decision in the case of State Bank of Travancore, we are of considered view that tax at source should have been deducted u/s 194H by the assessee. Without repeating the same, the same are hereby sustained alongwith the reasons mentioned therein. In other words, the relationship between the assessee company and its distributor is principal and agent basis and the assessee was entitled to deduct the TDS on commission which he failed to do so. In the result, both the appeals of the assessee are dismissed.
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