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2015 (12) TMI 1243 - ITAT CHENNAI

2015 (12) TMI 1243 - ITAT CHENNAI - TMI - TDS u/s 194H - Disallowance of sales promotion expenses - non-deduction of TDS by invoking the provisions of sec.40(a)(ia) - Held that:- The issue is to be decided by the Assessing Officer in the light of the Special Bench decision of the Tribunal in the case of Merilyn Shipping and Transports vs. Addl. CIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) wherein it was held that "provisions of section 40(a)(ia) are applicable only to the amounts of expenditure .....

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actors Ltd. - Held that:- Special Bench of the Tribunal in the case of Merilyn Shipping and Transports vs. ACIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) and judgment of CIT vs. M/s. Vector Shipping Services (P) Ltd [2013 (7) TMI 622 - ALLAHABAD HIGH COURT] held that sec 40(a)(ia) is not applicable when there is no outstanding balance at the end of the close of the year relevant to the assessment year in respect of these payment. However, the assessee has not brought on record, the details of out .....

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cans and crates at 50% - Held that:- As per Index 1 to item (4), containers made of glass, plastic as refills entitled for depreciation at 50%, where the assessee claimed depreciation at 50% on aluminium cans. Being so, it is not fit under that category as mentioned in Index I to item No.4 of I.T.Rules. As such, the lower authorities are justified in restricting depreciation at 15% on w.d.v. Accordingly, this ground is dismissed. - ITA Nos. 1433/Mds/2012, 795/Mds/2014 & 1096/Mds/2015, C.O.No.188 .....

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e appeals are common, these are clubbed together, heard together and disposed off by this common order for the sake of convenience. 2. The first common issue in Revenue's appeal is with regard to disallowance of sales promotion expenses for nondeduction of TDS by invoking the provisions of sec.40(a)(ia) of the Act. 3. The assessee company claimed sales promotion expenditure in the profit and loss account. However, it was not subjected to TDS. The assessee took a plea before the Assessing Off .....

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ontentions of the assessee and he invoked the provisions of sec.40(a)(ia) of the Act and disallowed this expenditure. Aggrieved, the assessee went in appeal before the Commissioner of Income-tax(Appeals). 4. On appeal, the Commissioner of Income-tax(Appeals) observed that the relationship existed between the assessee and its distributors is purely "principal-to-principal" relation and not "principal-to-agent" relation. Hence, it cannot be regarded as "commission" or .....

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omotion expenses, the Commissioner of Income-tax(Appeals) observed that these are primarily business/sales promotion in nature and it represents additional payment to dealers/distributors over and above the agreed discount based on the volume of sales done by them and these expenditure are purely sales promotion expenses allowable u/s.37(1), and the provisions of sec.194H cannot be applied and he deleted the addition made by the Assessing Officer u/s.40(a)(ia) of the Act. Against this, the Reven .....

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annot be invoked to disallow expenditure which has been actually paid during the previous year, without deduction of TDS." In view of the above, we remit this issue to the file of the AO for fresh consideration. At this stage, we refrain from deciding the issue of sec. 194-H of the Act, to these payments. 6. The next common ground is with regard to deleting the disallowance u/s.40(a)(ia) of the Act for non-deduction of TDS on discount/factoring charges paid to M/s. Canbank Factors Ltd. 7. T .....

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mpt from the provisions of sec.194A of the Act, i.e. interest payments to such banks are not to be subjected to TDS. Further, the Commissioner of Incometax( Appeals) observed that this factoring' charges are nothing but the bill discounting charges. The word factoring' charges is a suitable nomenclature used by the Canbank Factors Ltd. In substance, it is only bill discounting charges, which are similar to the interest charges for the purpose of Income-tax. But in this case, the assessee .....

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so foregone may represent the compensation for receiving the amounts in advance. It is not an amount actually paid by the assessee and it is a loss suffered by the assessee. In our opinion, the issue is to be decided as discussed in the case of N. Palanivelu v. ITO in ITA No.618/Mds/2015 dated 29.4.2015, wherein it was held as under: "3. We have heard both the sides and perused the material on record. We find that the Special Bench of the Tribunal in the case of Merilyn Shipping and Transpo .....

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ed amount is outstanding at the end of the close of the previous year relevant to the assessment year either in the name of the party or outstanding expenses. Hence, in the interest of justice, we are remitting the issue back to the file of the Assessing Officer with direction to verify the claim of the assessee and the assessee shall place necessary evidence in support of his claim. 4. Further, we make it clear that if the impugned amount is not outstanding at the end of the close of the assess .....

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