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Income Tax Officer (TDS) -3 (4) , Mumbai Versus M/s. Unichem Laboratories Ltd.

2016 (5) TMI 1141 - ITAT MUMBAI

TDS u/s 194H - payments in the form of discounts/rebates/incentives on MRP given by the assessee to the distributors in the course of selling its goods - whether 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? - Held that:- Following the decision of the Coordinate Bench of the Tribunal in the assessee’s own case for assessment years 2009-10 & 2010- .....

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cting tax at source on sitting fees paid to the Directors - Held that:- We find that the issue of whether or not the assesseecompany is liable to deduct tax at source (TDS) under section 194J(ba) of the Act in respect of sitting fees paid to Directors as per the amendment thereto w.e.f. 01.07.2012 has been considered and held in favour of the assessee by the Coordinate Bench of this Tribunal in the assessee’s own case for assessment years 2009-10 and 2010-11, thus we hold that since the instant .....

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eep 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 enga .....

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from the factories/warehouses to distributors and Consignment Agents based on orders/indents received from them. The assessee-company sells the formulation products to Distributors on Principal to Principal basis and to stockists through consignment agents. Collections are received from distributors, consignment agents and stockists in the assessee s bank accounts. In the course of survey proceedings under section 133A of the Act the Assessing Officer (AO) found that the assessee is selling its .....

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ucted at source thereon. In this regard, a statement on oath was recorded by the Department of the G.M. Finance of the assessee-company on 14.10.2011. 2.2. The AO observed that the assessee used three methods for sale of drugs/medicines. First, through consignment agents, second through distributors and, thirdly by way of exports. In respect of consignment agents, the assessee is paying thereon commission after deduction of tax at source in accordance with the provisions of section 194H of the A .....

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which would be different for controlled and uncontrolled drugs. In the event of expiry of the medicines, the same are returned by the distributors to the assessee-company, who in turn refunds the monies paid by the distributors to procure the same material. Thus, all the risk is borne by the assessee-company and 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 relati .....

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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 inter .....

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of the learned CIT(A)-14, Mumbai dated 11.07.2014 for A.Y. 2011-12 and dated 14.07.2014 for A.Y. 2012-13 and has raised identical grounds for both these years. We would therefore proceed to first dispose off the appeal for A.Y. 2011-12. Revenue s appeal in ITA No. 5991/Mum/2014 for A.Y. 2011-12 4. The grounds of appeal raised by the Revenue are as under: - 1. Grounds of Appeal: (i). On the facts and circumstances of the case and in law, the Id. CIT (A) has erred in holding that the relationship .....

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in deleting the non deduction/short deduction u/s. 201(1) and interest u/s. 201(1A)without appreciating that the pricing structure between the assessee company and distributors is nothing but "a payment received or receivable directly or indirectly by a person acting on behalf of another person for services rendered or for any services in the course of buying or selling of goods within the meaning of section 194H of the Act. (iii). On the facts and circumstances of the case and in law, the .....

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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 erron .....

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re between the assessee-company and distributors is nothing but a payment received or receivable, directly or indirectly by a person acting on behalf of another person for services rendered in the course of buying or selling of goods within the meaning of section 194H of the Act. The learned D.R. was heard in support of the grounds raised. 5.2 At the outset, the learned A.R. for the assessee submitted that the issue in question raised by the Revenue (supra) has been considered and adjudicated in .....

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counts/rebates/incentives on MRP given by the assessee to the distributors in the course of selling its goods was considered and held in favour of the assessee by the Coordinate Bench of this Tribunal in the assessee s own case for assessment years 2009-10 and 2010-11 in ITA Nos. 5492 & 5493/Mum/2014 dated 29.01.2016, holding as under at para 8 thereof: - 8. We have considered the rival contentions and perused the material on record, we have observed that the perusal of the clauses of the di .....

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n the goods are delivered by the carrier to the distributor. In-fact the distributors are the customers of the assessee company to whom the sales of the products i.e. drugsmedicine were effected by the assessee company. It is pertinent to note that the assessee company is dealing in products/goods i.e. drugsmedicine and not in the services. The distributors are required to notify any shortages during shipping or handling within 7 days of arrival of products at final destination to the assessee c .....

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rwise 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 .....

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bserved that the assessee company is raising sale invoice s on the distributor M/s Rudra Pharma Distributors Limited which are placed on the paper book filed by the assessee company at page 35 while the ledger account showing invoices raised and payments received from distributor M/s Rudra Pharma Distributors Limited by the assessee company is also placed in the paper book filed by the assessee company at page 36 to 51. We have also observed that the said distributor M/s Rudra Pharma Distributor .....

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we, therefore, hold that the assessee company has paid discount to MRP to the distributors at the time of sale of the said goods/products i.e. drugs-medicine which in our considered view is not covered u/s 194H of the Act and no tax was required to be deducted at source on these discount to MRP given by the assessee company to the distributors at the time of sale of drugs-medicine to the distributors. We hold accordingly. 5.3.2 Following the aforesaid decision of the Coordinate Bench of the Trib .....

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equently, grounds 1(i) & (ii) of Revenue s appeal are 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 render .....

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a) 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 rival contentions and perused and carefully considered the material on record, including the judicial pronouncement cited (supra). We find that the issue of whether or not the assesseecompany is liable to deduct tax at source (TDS) under section 194J .....

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Tribunal in the case of Bharat Forge Limited (supra) that no tax is to be deducted at source on Director sitting fee payable to Director u/s 194J of the Act prior to the amendment w.e.f. 01-07-2012 in Section 194J by insertion of sub-section (ba) to Section 194J(1) of the Act . The insertion of sub-section (ba) to Section 194J of the Act has clearly stipulated that tax is to be deducted at source on any remuneration or fees or commission by whatever name called to a director of a company, other .....

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ior to the amendment by Finance Act,2012 w.e.f. 01-07-2012 on payment of remuneration or fee or commission by whatever name called to Directors other than those on which tax is deductible at source u/s 192 of the Act. The amendment to the Section 194J(1) of the Act by insertion of subsection (ba) to Section 194J(1) of the Act has caste an additional burden on the taxpayer with respect to deduction of tax at source on remuneration, fee or commission to Director other than salary which as per memo .....

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