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2023 (8) TMI 877 - AT - Income TaxTDS on account of ESOP - DR submitted that the agreement for distributor with an agent and not on principal to principal basis - whether taxes required to be deducted on several payments made by the assessee or provisions of expenditure? - HELD THAT:- ESOP is considered as perquisite and taxes deducted at source by the employer assessee. Deduction is allowed to the assessee on the basis of provisions of the income tax Act. Disallowance u/s 40 (a) (ia) can be made only when the tax is deductible at source. TDS u/s 192 made at the time of payment and not at the time of accrual. Year end provisions - It is not the case that assessee is making a provision without any basis. Such a provision is a violation of accounting standards, accounting policy of the company and against provisions of the companies Act! As per accounting standard 29 the provision cannot be made unless the payee is identified. Therefore the various judicial precedents relied upon by the learned authorised representative does not apply to the facts of the case. However it is also the fact that the assessee has subsequently deducted tax at source on such payment and therefore the assessee is only liable to the extent of interest under section 201(1A) of the act. Accordingly on this issue we confirm the order of the learned assessing officer only to that extent of charging of the interest as the taxes already deducted on such payment and paid albeit late. TDS u/s 194H on Discount given held as commission expenditure - Assessee has also produced before us the details of several sales promotion schemes based on which discounts are offered to the various Distributors. The distributorship agreement clearly states that company shall supply the products on the basis of the order placed by the distributor from time to time and as soon as the products are delivered to the distributor the responsibility of the assessee ceases. As per clause number 4 of the distributorship agreement it is clear that risk and reward of the goods passes on to the distributor from the assessee as soon as the goods are delivered to the distributor. Therefore it is an agreement having a relationship of ‘principal to principal’ and not ‘principal to agent’. Thus assessee is not required to deduct any tax at source under the provisions of section 194H of the act on the discount given to the Distributors of the assessee.
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