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TMI Blog2010 (2) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee is a partnership firm. It runs a Cafe under the name and style M/s Sweet Chariot Cafe dealing in food, beverages and confectionery items. For the asst. year 2005-06, return of income was filed on 31.10.2005 declaring a total income of Rs.12,07,400/-. During the course of assessment proceedings, it was noticed by the Assessing Officer that following amounts were claimed in the profit and loss account in respect of payment of commission:- i) Sales Commission at M/s Fab Mall, Airport Road Rs.5,30,110.12 ii) Sales Commission at M/s Fab Mall, Bannerghatta Road Rs.5,37,922.95 During scrutiny, it was seen that the assessee did not deduct tax in respect of commission to M/s Fab Mall. The authorized representative of the assessee was asked to furnish explanation regarding non deduction of TDS. In response to it, it was stated that there was a marketing arrangement with M/s Fab Mall to sell its products. It was submitted that M/s Fab Mall paid for the supply made to them after deducting the commission and there was no scope for the assessee to deduct or recover tax on such commission. The contention of the assessee was not accepted by the Assessing Officer and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t include "payable" and, as such, disallowance of Rs.10m68,033/- and Rs.11,40,956/- in AY 2005-06 and 2006-07 was not warranted. vii) TDS was only one mode of recovery of tax as per section 202 of the I T Act, 1961 and if the party to whom payment was made has already paid the taxes due on the payments received by it, non-deduction of TDS cannot be taken as a pretext to disallow the expenditure of Rs.10,68,033/- and Rs.11,40,,956/- claimed by the appellant. In other words, since M/s Fab Mall had already paid taxes due on income received by it from the appellant, any action to tax the said amount in the hands of the appellant would be tantamount to taxing the same amount twice. A similar view has been held by the Supreme Court in the case of Hindustan Coca Cola Beverages P Ltd. v Commissioner of Income Tax (2007) 293 ITR 226. viii) As already mentioned in clause (v) above, the appellant had dispatched goods at maximum retail price (MRP) to M/s Fab Mall and M/s Fab Mall had sold the same at MRP and paid the proceeds to the appellant after deducting the discount. It was contended that purchase of goods at a discount was not to be treated as an agency. This view has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related discounts, if any, offered would typically be on the invoice and by their very nature, are not credited to the party at the end of a month or, in some cases, at the end of several months. 5) It also seems to be beyond the realm of reason that sales discounts would, as a percentage of total sales, month after month hover around the same percentage whereas this would quite clearly be expected in the case of payment of a sales commission. In the case of the appellant, as I have already pointed out above, the quantum of commission as a percentage of the sales continues to hover around the same number month after month. 8. Assessee, being aggrieved by the order of the CIT(A), is in second appeal before us. 9. It was contended by the learned AR that the assessee sold the goods to the Fab Mall and they became the owners of the goods. If any loss is incurred due to deterioration in quality, the same was to be borne by the Fab Mall and not by the assessee. It was submitted that such position will exist only in a sale contract and not in an agency. As such, the payment in question is only discount and not commission. It was further contended by the learned AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cludes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities ". 12. The above section provides for deduction of tax from income by way of commission or brokerage. The definition of "commission or brokerage" as contained in the Explanation to Section 194H includes any payment receivable, directly or indirectly, for services in the course of buying or selling of goods. In other words, to fall within the aforesaid explanation, the payment received or receivable, directly or indirectly, is by a person acting on behalf of another person (i) for services rendered (not being professional services), or (ii) for any services in the course of buying or selling of goods, or (iii) in relation to any transaction relating to any asset, valuable article or thing not being securities. 13. During the course of assessment proceedings, the assessee was asked to explain non-deduction of TDS on commission payment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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