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2015 (9) TMI 187 - ITAT AHMEDABAD

2015 (9) TMI 187 - ITAT AHMEDABAD - TMI - Non deduction of TDS u/s. 194H - payment of discount and rebate given by the Assessee to the consignment agent - Held that:- We find force in the arguments of Ld AR that the nature of payment is of discount and not commission which is liable for TDS more so in view of the fact that in the subsequent assessment orders for AY 2008-09,2009-10 and 2010-11, that have been framed u/s 143(3) and after the impugned order, wherein no disallowance u/s 40(a)(ia) on .....

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favour of Assessee by the decision of Hon’ble Apex Court in the case of Hindustan Coco Cola (2007 (8) TMI 12 - SUPREME COURT OF INDIA )

AR also submitted that the payees to whom the amounts have been paid have already included the payments received from Assessee in their income and have also paid the taxes on the same and therefore there is no violation of the provisions of s. 201(1) of the Act and in support of this contention the assessee placed copy of the confirmations of the par .....

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hra, Sr. D.R. PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. These 3 appeals filed by the Assessee are against the order of CIT(A)-V, Baroda dated 14.02.2012 for A.Ys. 2008-09, 2009-10 & 2010-11. 2. Before us, at the outset the ld. A.R. submitted that though the appeals of Assessee relates to 3 different assessment years but the facts and circumstances of all the cases are similar except for the assessment years and amounts and the submissions are also common for all the appeals and therefore all .....

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and it was noticed that most of the sales were made through consignment dealers and substantial amount of payments were made to them in the name of discounts and rebates. The Assessee was asked that in view of the relationship of principal and agent, why TDS was not deducted on the amount of money paid in the name of rebates and discounts as according to the Revenue it was part and parcel of the commission earned by the agents for acting on behalf of the Assessee. The submission of the Assessee .....

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the TDS, A.O worked out the interest u/s. 201(1) & 201(1A) and determined the amount at ₹ 18,26,991/-. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who upheld the order of A.O by holding as under:- 5.2 I have considered the facts of the case as well as the observation of the AO and the arguments put forth by the assessee.lt is seen from the copy of order passed by the AO that distributors/consignment agents are being made two types of payments. The fir .....

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agents to actual consumers market rate is being charged. The company is later on reimbursing the difference because distributors/consignment agents are only agents of the company. As has been explained by the appellant company this arrangement is allowing the actual consumers to claim certain tax benefits which would not be allowable in case of direct billing by the company. Claim of the appellant that it is dealing with distributors/consignment agents is on principal to principal basis is not .....

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e distributor and by distributor to the actual consumer is only an arrangement for accounting purposes. Under these circumstances it is very clear that the appellant is liable to deduct tax at source U/S. 194H in respect of those credit notes issued to the consignment agents which are in respect of payment of commission and any other incentive in the nature of commission irrespective of the nomenclature given by the appellant i. e . whether it is normal commission or it is further discount on at .....

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y the appellant. This ground of appeal is partly allowed. 4. Aggrieved by the aforesaid order of ld. CIT(A), Assessee is now in appeal before us and raised the following grounds:- 1. The Hon'ble Commissioner of Income Tax (A) has erred in confirming the levy of tax & Interest u/s 201(1)/201(1A) of ₹ 3,50,025/- by the AO on the ground that the discounts and rebates offered by your appellant to the agents is in the nature of COMMISSION, In turn, the action of the AO of invoking provi .....

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s requirement of materials. The company transfer the goods to the distributors at various depots and booked sales to the CSA. CSA raises the invoices to the end customers and all the risk and responsibility related to the sales lies with CSA. The Assessee gives various types of commission, discount and incentive to the distributors on their sales performance since last more than 20 years. On the commission amount which is paid distributors which is based at fixed rate per kg on the sales, the As .....

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which are booked as discount and is not in the nature of commission on sales but is in the nature of extra discount on price due to achieving bigger target. He pointed to the sample copies of the credit notes which were raised during the year in support of his contention that the amount was not in the nature of commission but was in the nature of discount. He further placed reliance on the decision of Ahmedabad Tribunal in the case of Gujarat Fluro Chemicals vs. ACIT (ITA Nos. 1956 to 1958/A/ o .....

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essee as their income and have also paid the taxes thereon and in such a case the Assessee cannot be considered to be a Assessee in default . He pointed to the sample copy of the certificate placed at page 5 & 6 of the paper book wherein the payees have confirmed to have considered the amount of discount and rebates while computing their income and had paid the taxes and for the proposition that when the payee has paid the taxes on the amounts received from the payer, then the payer of the s .....

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ed u/s. 143(3) vide order dated 25.8.2010, 21.03.2013 and 14.02.2014 respectively (being the date after passing the impugned order) and while passing the aforesaid assessment orders no disallowance u/s. 40(a)(ia) on account of non deduction of TDS on the amounts paid as discount has been made which would therefore mean that the contention of the assessee that the amounts being not in the nature of commission has been accepted by the Department and therefore in such circumstances the present orde .....

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ssessee s submission that it has paid various types of commissions and discounts to the distributors since last several years namely commission, overriding commission, discount (rate difference) discount (back to back), discount/incentives (target). It is further submitted that on the commission on overriding commission which has been paid by the Assessee, the TDS at the applicable rates were deducted and deposited with the Government authorities. With respect to the discount (rate difference) a .....

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ature of extra discount which is paid on the basis of the sales targets achieved by them. The Assessee has also pointed to the sample copies of the credit notes placed at paper book to demonstrate that the same is in the nature of discount and not in the nature of commission. We find force in the arguments of Ld AR that the nature of payment is of discount and not commission which is liable for TDS more so in view of the fact that in the subsequent assessment orders for AY 2008-09,2009-10 and 20 .....

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the total income by the assessee. Apart from the above, we find that issue in dispute is squarely covered in favour of Assessee by the decision of Hon ble Apex Court in the case of Hindustan Coco Cola (supra) as pointed out by the ld. A.R. in his alternative contention. In order to silence the controversy with all possible angles, we deem it fit to accept the altenate contention of the Assessee also. Before us Ld AR has raised one more contention that the payees to whom the amounts have been pa .....

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