TMI Blog2017 (9) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... lers has not been claimed as deduction by the assessee under sections 30 to 38 of the Act. Hence, the question of making any disallowance or adding back of the said discount to the income of the assessee under section 40(a)(ia) of the Act does not arise. - Decided in favour of assessee. - I. T. A. No. 453/Kol/2017 - - - Dated:- 12-7-2017 - J. Sudhakar Reddy (Accountant Member) And S. S. Viswanethra Ravi (Judicial Member) For the appellant : S. K. Tulsiyan, Senior Advocate For the Respondent : Sallong Yaden, Addl. Commissioner of Income-Tax ORDER J. Sudhakar Reddy (Accountant Member) 1. This is an appeal filed by the assessee directed against the order of the Commissioner of Income-tax (Appeals)-6, Kolkata, (hereinafter the Ld. CIT(A) ), dated December 27, 2016, passed under section 250 of the Income-tax Act, 1961 (hereinafter the Act ), relating to the assessment year 2013-14. 2. Facts in brief The assessee is an individual. He is a distributor of Reliance Telecom Limited (RTL) products under the name and style of Dhruba Communication . He filed his return of income electronically on October 1, 2013 declaring a total income at ₹ 8,77,090. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on the decision of the hon'ble Calcutta High Court in the case of Bharti Cellular Ltd. v. Asst. CIT [2013] 354 ITR 507 (Cal) ; [2011] 244 CTR (Cal) 185 wherein it was held that section 194H provides for an inclusive definition of the term commission or brokerage and the same may be received or receivable indirectly by a person acting on behalf of another person for services rendered. He further held that there is no question of passing of any ownership or title of the goods from RTL to the distributor and from the distributors to the retailers. RTL had deducted tax from the assessee under section 194H of the Act treating the assessee as an agent and the assessee cannot take a plea that the relationship between the retailer and the assessee was on principal to principal basis. He disallowed an amount of ₹ 71,42,777 under section 40(a)(ia) of the Act. Aggrieved, the assessee carried the matter in appeal before the first appellate authority. 3.1. The first appellate authority relied on the order of the hon'ble jurisdictional High Court in the case of Bharti Cellular Ltd. v. Asst. CIT (supra) and dismissed the appeal of the assessee. 4. Aggrieved the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals) on the above issues suffers from illegality and is devoid of any merit, the same should be quashed and your appellant be given such relief(s) as prayed for. (7) That the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/or rescind any or all of the above grounds. 5. The learned counsel for the assessee submitted that the judgment in the case of Bharti Cellular v. Asst. CIT (supra) does not apply to the facts of the case on hand, as it was a case between a company which provides cellular mobile telephone services i.e., Airtel, and its franchisee/distributor. And that whereas, in the case on hand, the assessee is a distributor and has sold SIM cards and other products to various retailers. He took this Bench through the various terms and conditions in the distribution agreement entered into between RTL and the assessee M/s. Dhruba Communications on September 14, 2011 and submitted that the assessee had received commission from RTL after deduction of tax at source and the relationship between RTL and the assessee was that of a principal and an agent. He argues that the relationship between the assessee and the 496 retailers appointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conditions are to be satisfied before the expenditure claimed is disallowed under section 40(a)(ia) of the Act. He submitted that when the method of accounting and the methodology followed by the assessee does not result in any claim of expenditure, there is no question of a disallowance being made of that which is not claimed. He referred to the definition of commission or brokerage under section 194H clause (i) of the Explanation and submitted that commission/brokerage includes payments received or receivable by a person acting on behalf of another person for services of certain nature rendered by the former to the later. He submitted that a combined and synchronised reading of section 40(a)(ia) and section 194H of the Act reflects that the buyer should be the principal who has paid income in the nature of commission on sale of products to the agents. Disallowance under section 40(a)(ia) read with section 194H of the Act as per the learned counsel for the assessee, will be applicable only if there is principal agent relationship and only if the impugned payments was commission offered to the retailers by the assessee. He relied on the decision rendered in the case of National ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Cal) 185, in its judgment dated May 19, 2011 at paragraph 25 observed as follows (page 516 of 354 ITR) : It appears from the records in this case that the transaction in the case of prepaid SIM cards, and rechargeable coupons, sufficient stocks are to be kept by the franchisee, and then the same are to be sold to the retailers at a rate stipulated by the assessee, say at ₹ 324 and the retailer is allowed to sell it to the ultimate customer at the maximum price again fixed by the assessee, say at ₹ 330. The asses see is to realise lesser rate say at ₹ 317 per SIM card from franchisee. Thus discount of ₹ 7 is given. Therefore after selling all the SIM cards and pre-paid coupons to the retailers the franchisee is to make payment of sale proceeds to the assessee after deducting a discount of ₹ 7 per SIM card. Thus this receipt of discount at ₹ 7 is in real sense commission paid to the franchisees. Hence all the trappings of liability as agent, of the franchisee towards the assessee subsists. (emphasis ours) 8. A perusal of the above demonstrates that the SIM cards and rechargeable cards are sold to the retailers by the franchisee at the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for carrying out any work, on which tax is deductible at source under Chapter XII-B and such tax has not been deducted or, after deduction has not been paid on or before the due date specified in sub-section (1) of section 139 : Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid : Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the asses see has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso. Explanation-For the purposes of this sub-clause,- (i) 'commission or brokerage' shall have the same meaning as in clause (i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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