TMI Blog2016 (1) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... he customers. The requirement of an agent and principal relationship is found absent in this case. Also, no nexus is found between the amount of sales made by the assessee and the expenditure towards ‘authority to guarantee charges’. We find that the ratio of both the judgements below are squarely applicable to the present fact-situation also, wherein finance company is not acting on behalf of the assessee. The finance company is merely providing financial services in the form of loan and subsequently collecting the payment against the assurance for sharing a part of losses. Respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court in Intervet India P. Ltd. (2014 (4) TMI 353 - BOMBAY HIGH COURT ) and also by the Hon’ble Delhi High Court in JDS Apparels Pvt. Ltd. (2014 (11) TMI 732 - DELHI HIGH COURT), we are of the considered view that section 194H is not applicable in the facts of the case - Decided in favour of assessee - ITA Nos.390 to 392/PN/2014 - - - Dated:- 6-11-2015 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Appellant : Appellant by : Shri Sunil Pathak For The Respondent : Shri B. C. Malakar ORDER PER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Sundaram Finance Ltd. and thus, the said expenditure did not partake the character of commission envisaged in section 194H of the Act and hence, the assessee was not liable to deduct the TDS in respect of the said expenditure. 5] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. 5. The solitary issue arising in the present appeal is imposition of penalty under section 201(1) on account of alleged failure of the assessee to deduct tax at source under section 194H and consequent levy of interest thereon under section 201(1A) of the Act. 6. The facts, in brief, are that the assessee company is engaged in the business of selling tractors and has setup a unit at Sanaswadi near Pune. Some spot verification was carried out by the TDS officers on 21.03.2012 to verify correctness of deductibility of TDS on various payments. It was found by the Assessing Officer that the assessee has incurred an expenditure of ₹ 3,28,29,048/- allocated towards expenditure under the head Authority to Guarantee . The assessee submitted that it has entered into an agreement with M/s Sundaram Finance Ltd. (credit company) for providing credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to provide credit facilities to the farmers. As per Explanation to section 194H of the Act, the impugned expenditure would come within the ambit of definition of commission only where any service is rendered by any person for selling the goods or articles etc.. In the case of the assessee, the finance company is not providing any service to the assessee per se for selling its goods. It is providing finance to the farmers. It is only out of commercial expediency that the assessee has agreed to share some of the losses. When the assessee has agreed to share the losses, no service is rendered by the finance company to the assessee per se. It is merely sharing of losses without any element of services. 7. The Assessing Officer, however, rejected the contentions of the assessee that the agreement was entered to take care of certain percentage on loans which would occur to the finance company in case the customers do not repay the loan advanced. The Assessing Officer observed that the expenditure has been incurred as a part of its sale promotion activity. The services for sale promotion has been given by the financial institutions by giving loans to the customers. The services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to some corrections in the arithmetic figures. 11. Aggrieved further, the assessee is in appeal before us. 12. The Ld. Authorized Representative on behalf of the assessee submitted that provision for sharing of probable losses under the head Authority to Guarantee in the books of accounts were made as per agreement with the lending company, M/s Sundaram Finance Ltd. for assessment years 2010-11, 2011-12 and 2012-13 in appeal. The provision has been reviewed by the assessee company periodically and the same has been reversed, wherever found necessary. The Ld. AR reiterated the submissions made before the authorities below and strenuously argued that there is no element of service rendered in the present arrangement whereby the portion of the possible losses incurred by the finance company, if any, is replenished by the assessee as a part of the contractual liability. The services to have been rendered by the finance company to its customers (farmers) and not to the assessee per se. He relied upon the decision of the Hon ble Delhi High Court in the case of CIT vs. JDS Apparels Pvt. Ltd., 2014-TIOL-2046-HC-DEL-IT and the decision of the Hon ble Bombay High Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services rendered only and (b) such person should be acting on behalf of the other person to whom the services have been rendered in respect of buying and selling of goods, etc.. It is clear from the factual matrix of the case that there is no component of service rendered by the finance company to the assessee against recovery of portion of losses, if any. In our view, it is a simple business proposition whereby an arrangement has been entered into by the assessee to assist its customers to enable them ready finance of their products and simultaneously assured the finance company for recovery of losses, if any due to default in repayment by the customers. The requirement of an agent and principal relationship is found absent in this case. Also, no nexus is found between the amount of sales made by the assessee and the expenditure towards authority to guarantee charges . In the facts of the case, the ratio of decision in the case of JDS Apparels Pvt. Ltd. (supra) as well as Intervet India P. Ltd. (supra) are squarely applicable. In the case of JDS Apparels case (supra), the assessee was engaged in the business of trading readymade garments. The assessee paid commission to HDFC on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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