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M/s Rainganj Communication Versus Income Tax Officer

2016 (6) TMI 595 - ITAT KOLKATA

TDS u/s 194H - Disallowance of the expenses claimed as ‘incentive paid to retailers’ - disallowance u/s 40(a)(ia) - non deduction of tds - Held that:- The assessee in the instant case has just shown the incentive paid as an expense without adjusting the same from the sales account. We further find that in none of the case, incentive has been paid to the retailers in cash which was just the method of accounting and presentation that assessee has shown incentives paid to the retailers as an expens .....

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de by the assessee is in the category of principal to principal and the provisions of section 194H of the Act would come into play only when the payment is from principal to agent - Decided in favour of assessee

Addition u/s 68 - On question raised by AO about the payment of the incentive in the subsequent year, the assessee submitted that the documents was stolen from its office on 12.10.2011 and therefore the supporting evidences are not available for the purpose of verification - H .....

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an Som, JCIT-DR ORDER Per Waseem Ahmed, Accountant Member This appeal by the assessee is arising out of order of Commissioner of Income Tax (Appeals), Jalpaiguri dated 05.03.2012. Assessment was framed by ITO Ward-45(2), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 10.12.2010 for assessment year 2008-09. Assessee has taken the following modified grounds of its appeal:- 1. FOR THAT on a true and proper interpretation of the scope and am .....

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. Commissioner of Income Tax (Appeals) Jalpaiguri acted unlawfully in upholding the impugned addition in the sum of ₹ 52,63,871/- resorted to by the Ld. Income Tax Officer, Ward 1, Rainganj within the province of s. 40(a)(ia) of the Income Tax Act, 1961 by misreading the facts and circumstances of the instant case and such specious finding reached on that behalf in violation of the statutory prescription is completely unfounded, unjustified and untenable in law. 3. FOR THAT the Ld. Commiss .....

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reading evidence, considering improper facts, failing to consider proper position in law and thus coming to an erroneous finding in sustaining the impugned addition in the sum of ₹ 2,11,770/- resorted to by the Ld. Income Tax Officer, Ward 1, Raiganj by invoking the provisions of s. 68 of the Act basing on extraneous considerations not germane to the issue in dispute is wholly illegal, illegitimate and infirm in law. Shri Somnath Ghosh, Ld. Authorized Representative appeared on behalf of a .....

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ssee is a partnership firm and engaged in the distribution business of AIRCEL products of Dishnet Wireless Limited (for short DWL). The assessee for the year has filed income tax return declaring profit under the business head for ₹ 1,00,730/- only. The case was selected for scrutiny under section 143(3) of the Act through CASS system. During the year assessee has received a sum of ₹ 61,93,897/- from DWL towards incentive and service tax after the deduction of tax at source under sec .....

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w.s. 40(a)(ia) of the Act with regard to the aforesaid expenses. In compliance to the notice, assessee submitted that payment of incentive to retailers was in the nature of trade discount but wrongly shown as incentive paid to retailers in the profit & loss account. However, AO disregarded the contention of assessee on the ground that discount is deducted from the gross sale amount or given by way of credit note. In the instant case, incentive has been paid in terms of cash without deducting .....

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Aggrieved, assessee preferred an appeal before Ld. CIT(A), where it was submitted that the assessee is getting the commission at fixed rate from the DWL on the distribution cash card. The assessee used to pass on a part of the commission to the retailers in the form of trade discount. The DWL never paid the commission by way of cash but it was always adjusted against the purchase consideration. Similarly the assessee never paid the commission in cash to the retailers but it was always paid in t .....

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its books of account, so the assessee was liable to deduct the TDS. (iii) The claim of the assessee that he was acting just as a medium for disbursement of incentive among the retailers was incorrect as the assessee was also retaining some part of it. (iv) The assessee has claimed the benefit of TDS in the books of accounts and in income tax returns, so it proves that the assessee is enjoying the incentive income. (v) The assessee failed to produce the copy of the agreements or prospectus or oth .....

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the incentive paid to the retailers as an expense by debiting same in profit and loss account for the accounting purpose. In this connection, Ld.AR drew our attention at pages 33 to 41 of the paper book where sales ledger of assessee was placed which was reflecting the entries of the incentive in the category of journal entries. Similarly the details for the payment of incentive paid to retailers was placed on pages 49 to 51 and no cash payment was made in the ledger but it was adjusted with the .....

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ssessee has shown the sales amount at the gross value without adjusting the same with the trade discount given to the retailers. Accordingly the trade discount was shown as an independent expenditure in the profit and loss account under the head of Incentive paid to retailers but factually no such incentive expenses was required to be incurred. The assessee in the instant case has just shown the incentive paid as an expense without adjusting the same from the sales account. We further find that .....

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retailers amount to commission and therefore liable to TDS as contemplated u/s 194H of the Act. In this connection, we find on the similar facts and circumstances the Co- ordinate Bench of Cuttack Bench has decided this issue in favour of assessee and against the Revenue and we are putting our reliance in the order of Pareek Electricals v. ACIT (2012) 27 taxmann.com 219 (Cut), wherein the Sec. 194H, read with Sect. 40(a)(ia), of the Income-tax Act, 1961 - Deduction of tax at source - Commission .....

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nder section 194H on trade discount - Whether trade discount made available to sub-franchisees was a compensation by foregoing part of commission already subjected to tax at source by BSNL and it could not have suffered taxation under section 194H - Held, yes - Whether, therefore, disallowance under section 40(a)(ia) was unjustified - Held, yes [para 4] Section 40(a)(ia), read with sections 194-I and 197A of the Income-tax Act, 1961 - Business disallowance - Interest, commission etc, paid to res .....

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as unjustified Held, yes [para 4.1] 4.2 Similar issue has also been decided by the Co-ordinate Bench of Cuttack in the case of DCIT v. Sri Santibrata Saha in ITA No. 651/Kol/2013 dated 27.11.2013 for the AY 2007-08, for the sake of clarity, the relevant extract of para 4.3 which is reproduced below:- 4.3 We have heard the rival submissions and perused the materials available on record. We find from the statement of facts and grounds of appeal of the Revenue, the observations made by the Learned .....

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e assessee are only discount paid to the purchasers of recharge coupons through wrongly categorized as commission on sales in the books of account. We also agree that the nomenclature in books of account would not be the determinative factor for understanding the real nature of the transactions and it is well settled that substance would always prevail over its form. We hold that in these facts and circumstances, the payments made by the assessee is in the category of principal to principal and .....

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