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2023 (2) TMI 190 - ITAT MUMBAITDS u/s 194H - commission or brokerage - referring the students to the booksellers to purchase the textbooks published by the assessee - support services - Whether recipients had disclosed the receipts from the assessee in their returns of income? - HELD THAT:- The assessee had made payment of School support services to various schools / societies for the services rendered by them to the assessee by way of referring the students to the booksellers to purchase the textbooks published by the assessee. For the reference made by the schools to the students, it would not be possible for the booksellers to sell the textbooks published by the assessee. Hence but for this reference from the schools, the assessee’s profitability could not have been enhanced. Hence we hold that the payment of school support services is an expenditure wholly and exclusively incurred for the purpose of business of the assessee. The substance of the transaction is to be given more importance than its form. The Character of payment is to be analysed. On analyzing the same, the only logical conclusion that could be drawn is that the payments made by the assessee squarely falls under the ambit of ‘commission or brokerage’ in terms of section 194H of the Act. The case law relied upon by the ld. AR of CIT vs Intas Pharmaceuticals Ltd [2021 (8) TMI 1005 - GUJARAT HIGH COURT] is factually distinguishable and does not advance the case of the assessee herein. Hence it could be safely concluded that the assessee is bound to deduct tax at source, failure of which , would be invited with disallowance u/s 40(a)(ia) of the Act. We find lot of force in the alternative argument advanced by the ld.AR before us that in view of second proviso to section 40(a)(ia) of the Act, since the payees / recipients had disclosed the said receipts in their returns of income, no disallowance should be made in the hands of the assessee payer. In view of this second proviso, we direct the ld. AO to make factual verification as to whether the recipients had duly disclosed the subject mentioned receipts in their returns of income. The assessee is directed to furnish the necessary details in this regard in the prescribed form. If on verification, it is found that the recipients had disclosed the receipts from the assessee in their returns of income, even if the entire income of the recipients is exempt under the provisions of the Act in their hands, still the assessee cannot be treated as an ‘assessee in default’ and consequentially the disallowance u/s 40(a)(ia) of the Act made in the hands of the assessee payer would have to be deleted. Accordingly, the revised grounds raised by the assessee are disposed off in the abovementioned manner. Appeal of the assessee is partly allowed for statistical purposes.
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