TMI Blog2015 (4) TMI 1099X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in default’ under section 201(1) of the Act or be charged interest under section 201(1a) of the Act. - Decided in favour of assessee - ITA Nos. 5991 & 5992/Mum/2014 - - - Dated:- 22-4-2015 - Shri Jason P. Boaz, Accountant Member And Shri Sandeep Gosain, Judicial Member For the Appellant : Ms. Kranti For the Respondent : Shri Milin Bakhai ORDER Per Jason P. Boaz, A. M These appeals by the Revenue are directed against the orders of the CIT(A)-14, Mumbai dated 11.07.2014 for A.Y. 2011-12 and dated 14.07.2014 for A.Y. 2012-13. Identical issues being involved, these appeals were heard together and are being disposed off by way of this consolidated order. 2. The facts of the case, in brief, are as under: - 2.1 The assessee-company is engaged in the business of manufacturing and trading of formulation and bulk drugs. A survey under section 133A of the Income Tax Act, 1961 (in short 'the Act') was conducted at the business premises of the assessee on 14.10.2011 in order to verify compliance of TDS provisions as contained in Chapter XVIIB of the Act. The assessee-company has manufacturing plants at Goa, Ghaziabad, Sikkim, Roha and Pithampur a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not by the distributors. The AO observed that since it is the assessee who decides the margins to be charged by the distributors and the discount/incentives payable to them, their relationship may be inferred to be one of principal and agent. 2.3 After considering the assessee s submissions in the matter, the AO held that the relation between the assessee and the distributor was one of principal and agent and the discount/incentives/rebate given to/retained by the distributor is nothing but commission payments for services rendered in the course of buying and selling of goods within the meaning of section 194H of the Act. The AO held that these discounts/incentives/ rebates are nothing but commission payments embedded in a mutually beneficial pricing structure and is nothing but income within the meaning of section 194H of the Act. The AO accordingly held that the company has failed to deduct tax at source, which it was liable to deduct under section 194H of the Act vide orders dated 15.03.2013 and consequently held the assessee as an assessee in default in terms of section 201(1) of the Act for non deduction of tax at source on payment of commission and charged interest there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature of professional fees paid for the services rendered by them. (iv) On the facts and circumstances of the case and in law, the Id. CIT (A) erred in holding that no TDS is required to be deducted on directors' sifting fees as the amendment to the provisions of section 194J(ba) were made w.e.f. 01 .07.2012 and it is not applicable to the relevant A.Y. without appreciating that this amendment is curative in nature. 2. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary at the time of the hearing of the case or thereafter. 3. The order of the CIT(A) being erroneous be set aside and Ld. A.O's order be restored. 5. Grounds 1(i) (ii) 5.1 In these grounds Revenue contends that the impugned order of the learned CIT(A) is erroneous in holding that the relationship between the assessee and distributors is in the nature of principal to principal and that therefore the assessee-company was not liable to deduct tax at source under section 194H of the Act. It is contended that the learned CIT(A) in holding so did not appreciate that the pricing structure between the assessee-company and distributors is nothing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts at final destination to the assessee company along with endorsement on Lorry Receipt of the transporter along with shortage certificates by the transporter to claim loss from the assessee company, in other situations the loss or damage to products shall be borne by the distributor. The drugs being medicines contains certain restriction on the sale w.r.t. good governance and conduct by the distributors to follow first expiry and first out basis as the medicines having expiry could not be sold after the stipulated date of expiry, otherwise it will be health hazard to the consumers , the assessee company as normal market practice takes back the said expired drug-medicines from distributors which has expired and pay back the distributors but that does not in our humble opinion is decisive or change the character of dealing between the assessee company and the distributor which primarily continues to be on principal to principal basis. Such exception of taking back the expired products has its genesis to the sensitivity of the product being drugs-medicine handled by the assessee company otherwise it could have severe health hazard impacts on the consumer which is a normal market p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed. 6. Ground No. 1(iii) (iv) 6.1 In these grounds, Revenue contends that the learned CIT(A) erred in holding that the assessee cannot be held as an assessee in default for not deducting tax at source on sitting fees paid to the Directors without appreciating that the payment was made as honorarium for the management services rendered by the Directors and was clearly in the nature of professional fees paid for services rendered by them. It was further contended that the learned CIT(A) erred in holding that no TDS is required to be made on sitting fees paid to Directors, as the amendment to the provisions of section 194J(ba) made w.e.f. 01.07.2012 was not applicable to the relevant assessment year, when the amendment was only curative in nature. The learned D.R. was heard in support of the grounds raised. 6.2 At the outset, the learned A.R. for the assessee submitted that this issue before us, raised by Revenue (supra) has been considered and adjudicated in favour of the assessee by a Coordinate Bench of this Tribunal in the assessee s own case for assessment years 2009-10 and 2010-11 in ITA No. 4592 4593/Mum.2014 dated 29.01.2016. 6.3.1 We have heard the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Act by insertion of sub-section (ba) to Section 194J(1) of the Act were made effective from 01-07-2012, which in our considered view is prospective in nature to be applicable only from 01-07-2012 as it has caste an additional burden on the tax-payer by way of deduction of tax at source on remuneration, fees or commission to directors other than the salary for which tax is to be deducted at source under Section 192 of the Act. Since the instant appeal is for the assessment year 2009-10 which is prior to the assessment year 2013-14, we hold that no tax was deductible at source on payment of Directors sitting fee paid by the assessee company to its Directors u/s 194J of the Act and the assessee company could not be held as assessee in default u/s 201(1) and 201(1A) of the Act. We order accordingly. 6.3.2 Following the aforesaid decision of the Coordinate Bench of this Tribunal in the assessee s own case for assessment years 2009-10 and 2010-11 (supra), we hold that since the instant appeal is for A.Y. 2010-11 which is prior to A.Y. 2013-14, from when the amendment to section 194J(ba) comes into force w.e.f. 01.07.2012, we hold that no tax is deductible at source on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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