Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

John Deere India Pvt. Ltd. Versus The DCIT (TDS) – 2, Pune.

2016 (1) TMI 860 - ITAT PUNE

TDS u/s 194H - commission expenditure incurred by the assessee company - non deduction of tds - whether the impugned expenditure towards “Authority to Guarantee charges” falls within the ambit of section 194H or not?- demand raised by the A.O. u/s 201 and 201(1A) - Held that:- It is noticeable from the definition of expression “commission or brokerage” as appearing in section 194H of the Act that (a) a payment should be received by a person for services rendered only and (b) such person should b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aneously 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’.

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 be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 PRADIP KUMAR KEDIA, AM : The captioned three appeals filed by the same assessee relate to different assessment years and involve a common issue. Therefore, they have been clubbed and heard together and a consolidated or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

10-11 in ITA No.390/PN/2014 is taken as the lead case. 4. In this appeal, the assessee has raised following Grounds of Appeal :- 1] The learned CIT (A) erred in holding that the authority to guarantee expenditure was in the nature of commission expenditure incurred by the assessee company and hence, the assessee company ought to have deducted tax u/s 194H in respect of the expenses under the head 'Authority to Guarantee' and thereby, upholding the demand raised by the A.O. u/s 201 and 20 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d the tax thereon u/s 194H of the Act. 3] The learned CIT (A) failed to appreciate that the authority to guarantee expenditure payable to Sundaram Finance Ltd. was not in nature of commission expenditure as envisaged in section 194H and therefore, the assessee company was not liable to deduct TDS in respect of the said expenditure. 4] The learned CIT(A) ought to have appreciated that the payment of authority to guarantee expenditure has no nexus with the amount of sales made by the assessee and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng 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 o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

agricultural equipments. Accordingly, the assessee has entered into an agreement as per which some part of loss if any, incurred on account of nonpayment of loan by the borrowing farmers would be borne by the assessee. Hence, the amount represents the contractual liability of the assessee to make good the losses that would be incurred by the finance companies on the credit assistance given to the farmers to whom products of assessee are sold. It was submitted that the assessee has to bear only .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

age by the company. In elaboration, the assessee submitted that their company s products are sophisticated and expensive and hence the retail customers (farmers) would buy them only if they are enabled credit assistance. The income of these customers are dependent on natural factors and hence do not have fixed income and established financial stability. Thus, to ensure that the demand for the products of the assessee continues to grow amongst the retail customers, the assessee endeavored to ensu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rom the farmers on loan given. Accordingly, the assessee emphasized that sharing of loss does not represent payment of any commission to the finance company as alleged. The entire arrangement entered into by the assessee is in 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 th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 rendered by the financial institutions obviously has helped in increasing the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ith the lending company, the sale of the assessee has increased and therefore the charges incurred for such assistance is in the nature of commission/brokerage. The Assessing Officer further observed that the plea of the assessee has no actual payment has been made so far till the date against this contractual liability is of no consequence for the purpose of applicability of section 194H of the Act. The liability of deduct TDS under section 194H arises even when the expenditure has been recorde .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n formed to promote the sales of product of the assessee. By entering into an arrangement of finance of tractor with the customers of the assessee, the said M/s Sundaram Finance Ltd. has rendered service to the assessee as the very nature of the customer profile i.e. farmer was not encouraging and therefore assessee made arrangement with its dealer to compensate possible losses to M/s Sundaram Finance Ltd.. In view of these reasons, the CIT(A) held that the financing of products of the assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at 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 ser .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e case of CIT vs. Intervet India P. Ltd., (2014) 364 ITR 238 (Bom) and submitted that relationship between the assessee and the finance company is principal to principal and not acting on behalf of the assessee. Accordingly, it was pleaded on behalf of the assessee that section 194H of the act has no applicability to the facts of the case. 13. The Ld. Departmental Representative on behalf of the Revenue, on the other hand, relied upon the orders of the Assessing Officer and the CIT(A) and submit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat the finance support is being provided by M/s Sundaram Finance Ltd. to the customers of the assessee under the arrangement whereby the portion of the loss arising, if any, due to failure on the part of the customers of the assessee to make payment thereof, will be borne by the assessee. It is the case of the Revenue that sharing of such losses if any, has augmented to demand and sales of the products of the assessee. Thus, as per Revenue, services have been rendered by the financial instituti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s cannot be equated with commission as defined in Explanation to section 194H of the Act. 16. In view of the judicial precedents cited, we are of the considered view the plea of the assessee deserves to be accepted. It is noticeable from the definition of expression commission or brokerage as appearing in section 194H of the Act that (a) a payment should be received by a person for services rendered only and (b) such person should be acting on behalf of the other person to whom the services have .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

DFC and the assessee in that case was held to be not of an agency but that of two independent parties on principal to principal basis. The HDFC was also acting or protecting the interest of the customers whose credit card was used in the swiping machines. The assessee has received sale consideration towards sale and the bank has undertaken a risk and remained out of pocket for some time as there would be a time gap between the date of payment and recovery of the amount paid. On these facts, the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version