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TMI Blog2016 (9) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... on although defacto the amount paid was not in the nature of commission. 5. Brief facts of the case are that the assessee is in Firm and in the business of trading and servicing of motorcycle and filed his return of income on 27-10-2005. 6. The assessee is a dealer for sale of TVS brand motorcycle for sale in the district of Murshidabad and some areas of Bhirbhum and Nadia Districts of West Bengal. The assessee sells motorcycles in the following manner: A) Cash sales to sub dealers B) Credit sale to sub dealers C) Direct sales to customers from the showroom of the assessee D) sales to customers to mechanics 7. In all the cases mentioned above, the assessee offers discount at a fixed rate depending upon the model. Whereas in the case of (A) (C) and (D) above i.e cash sales, the amount of sales net of discount is received in cash, in the cases of credit sales at (B) above, that sub dealers remit the sale proceeds after deducting the discount. The fact that invoices are raised and payments are received net of discount are invariably mentioned in each and every invoice, copies of 13 number of invoices are enclosed at pages 13 to 25 of the paper book as illustration. As rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services are to be rendered. The learned AR prayed this Tribunal to allow the appeal by deleting the addition of Rs. 13,90,070/- made by the assessing officer. The learned DR relied on the order of CIT-A. 11. We have considered the rival submissions and perused the paper book and we find the following is the breakup of amounts paid to sub dealers and mechanics: BERHAMPORE MOTORCYCLE PANCHANANTALA, P.O COSSIMBAZAR DIST-MURSHIDABAD DISCOUNT PAID FOR THE YEAR 2004-2005 SUB-DEALER (MOTORCYCLE) MONTH AMOUNT APRIL 113,895.00 MAY 117,665.00 JUNE 109,165.00 JULY 98,100.00 AUGUST 74,485.00 SEPTEMBER 91,995.00 OCTOBER 97,910.00 NOVEMBER 88,685.00 DECEMBER 100,890.00 JANUARY 116,230.00 FEBRUARY 101,985.00 MARCH 89,165.00 1,200,170.00 MECHANIC COMMISSION MONTH AMOUNT APRIL 17,150.00 MAY 16,050.00 JUNE 14,550.00 JULY 16,100.00 AUGUST 14,950.00 SEPTEMBER 14,050.00 OCTOBER 17,200.00 NOVEMBER 15,200.00 DECEMBER 15,500.00 JANUARY 15,700.00 FEBRUARY 16,500.00 MARCH 16,950.00 189,900.00 1,390,070.00 12. The above breakup of commission paid to the mechanics of each month i.e. April 2004 to March 2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med under the commission. It is pertinent to note here that the sub-dealer also paid incentives free service as per company norms etc. and for which details were filed. So the sub-dealer was paid both commission and debit notes. Judging the totality of the facts and circumstances of the case and viewing it through the normal practice of business transaction of a dealer and a sub-dealer, I have of the firm at the sub-dealer were paid commission on sale for their services rendered to their principals M/s Berhampore motorcycles. It is a fact that no tax was deducted at source on the commission so paid to the sub-dealer U/S 194H of the IT Act. As such, provision of section 40(a)(ia) is clearly applicable in this case of the assesseee." 14. We therefore confirm the order of CIT-A in so far as it relates to sum of Rs. 12,00,170/- paid to sub dealers. 15. We are however of the view that in respect of payment to sub dealers the assessee should get the benefit of showing before the assessing officer that the payees have filed their returns of income and included amounts received from assessee in their returns of income. In this regard, we may refer to the Hon'ble High Court of Delhi s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at such a denial of deduction is to compensate for the loss of revenue by corresponding income not being taken into account in computation of taxable income in the hands of the recipients of the payments. Such a policy motivated deduction restrictions should, therefore, not come into play when an assessee is able to establish that there is no actual loss of revenue. This disallowance does deincentivize not deducting tax at source, when such tax deductions are due, but, so far as the legal framework is concerned, this provision is not for the purpose of penalizing for the tax deduction at source lapses. There are separate penal provisions to that effect. Deincentivizing a lapse and punishing a lapse are two different things and have distinctly different, and sometimes mutually exclusive, connotations. When we appreciate the object of scheme of section 40(a)(ia), as on the statute, and to examine whether or not, on a "fair, just and equitable" interpretation of law- as is the guidance from Hon'ble Delhi High Court on interpretation of this legal provision, in our humble understanding, it could not be an "intended consequence" to disallow the expenditure, due to non deduction of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the said proviso is declaratory and curative and has retrospective effect from 1st April 2005, merits acceptance. 16. The Hon'ble High Court supra found that there is a mandatory requirement u/s. 201 to deduct at source, but, however, opined, the assessee cannot be viewed as a person in default in view of the first proviso to section 201(1) of the Act and further that the insertion of second proviso to section 40(a)(ia) of the Act was intended to benefit the assessee and it shall be viewed as in the same manner as that of first proviso to section 201(1) of the Act. 17. Keeping in view of the principle enunciated by the Hon'ble High Court of Delhi supra, we are of the view that the assessee cannot be treated as a defaulter in view of the first proviso to section 201(1) r/w second proviso to section 40(a)(ia) of the Act if the concerned payee has taken into account the relevant sum for computing income in his return of income furnished u/s. 139 and has paid tax due on the income declared in such return. We, therefore, set aside the impugned order of ld. CIT(A) confirming the disallowance made by the AO u/s. 40(a)(ia) and restore the matter to the file of the AO for deciding the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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