TMI Blog2009 (5) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of manufacture and sale of ayurvedic products. The assessee has filed its return for the impugned assessment year 2005-06 showing Nil income. The return was revised and thereafter a loss of Rs. 11,78,933 has been reported. On verification of the accounts; the Assessing Officer found that the assessee has given trade discount against sales reported. The total sales amounted to Rs. 4,82,12,960 and corresponding trade discount amounted to Rs. 1,42,43,565. The assessee is having a sister concern, partnership firm by name of M/s. S.D. Pharmacy which is mainly marketing and distributing the products of the assessee-company. M/s. S.D. Pharmacy is lifting the major share of sales reported by the assessee-company. The trade discount cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be liable for deduction of tax. 2. The Officers below have given a very narrow interpretation of the word trade discount which is outside the purview of commission and brokerage. 3. The Officers below failed to appreciate the cardinal difference between the trade discount and commission as in the former, the title passes immediately on sale whereas in the latter, the title remains with the seller." 5. Shri R. Sreenivasan, ld. Chartered Accountant appeared for the assessee and argued the case. He has produced copies of invoices as samples to show that the assessee is raising the invoices against the parties net of the discount. He has produced before us the copies of invoices issued to Mr. Bharath Sharma, M/s. S.D. Pharmacy and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the case pointed out by the Assessing Authority is the case of an outright sale after giving a margin to the dealers by way of trade discount. He, therefore, contended that this is not a case of payment of commission or crediting any commission or brokerage or any other similar amounts to the agents of the assessee-company. He explained that the sales are on the footing of principal to principal and the dealers are not acting as the agents of the assessee-company. 7. In support of his argument, the ld. Chartered Accountant for the assessee has relied on the judgment of the Income-tax Appellate Tribunal at New Delhi rendered in the case of Mother Dairy India Ltd. v. ITO [2009] 28 SOT 42. In the said decision, the Tribunal has made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd has given a lawful finding that the assessee is covered by section 194H of the Act. He, therefore, submitted that the orders of the lower authorities should be upheld in this case. 9. We heard both the sides in detail and considered the issue. Apart from the various business relations and associations of various dealers in the business of the company, there is nothing on record to show that the dealers and buyers are not acting on their own behalf. The Assessing Officer has not produced any material on record to show that the assessee company is selling its products through the agents and the invoices are issued to these agents. But, on the other hand, on verification of the copies of the invoices produced before us, it is clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce is raised and the goods are delivered, sale is complete. The only transaction which remains is the payment of the invoice amount by the parties to the assessee-company which is in the nature of trade debts. At the time of the sale also, the assessee is not crediting the personal accounts of the dealers with the amount of trade discount. The trade discount is directly debited in the trade discount account itself. There is no question of the assessee making any payment of commission or brokerage to the parties or crediting the accounts of the parties for similar amounts. Therefore, there is no occasion to deduct the tax as contemplated under section 194H of the Act. 10. The Hon ble High Court of Kerala has considered a similar issue in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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