TMI Blog2018 (4) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... to consider the issue afresh after giving the assessee proper opportunity of being heard. - I.T.A. No. 2044/Mum/2016 - - - Dated:- 6-4-2018 - SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH, JM For The Appellant : Shri Lalchand Choudhary For The Respondent : Shri Ram Tiwari ORDER Per Shamim Yahya, A . M .: This appeal by the assessee is directed against the order by the Commissioner of Income Tax (Appeals) dated 22.02.2016 and pertains to the assessment year 2011-12. 2. The grounds of appeal read as under: 1.0: On facts and in law and in the circumstances of the case, Hon'ble CIT (A) erred in confirming the disallowance in respect of discounts and incentives of ₹ 11,373,719 made by the AO by invoking provisions of section 40(a)(ia) the Income Tax Act, 1961. 1.1: Hon'ble CIT (A) failed to appreciate that payments made by the appellant to various customers on account of 'Rate difference, discounts and Incentives' were in the nature of discount and not 'commission' within the meaning of Section 194H of the Income Tax Act, 1961. 1.2: Hon'ble CIT (A) failed to appreciate that the appellant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn separately. Further, Incentive is additional discount given to the customers in terms of their performance in achieving annual targets set by the assessee. Assessee himself accepted that these payments under the subhead Incentive Account is in nature of Incentives in terms of customer's performance. Next, as and when the assessee is loaded with heavy inventory, it comes out with the scheme of lifting out by the customer's desired quantity in a specified period. Customers achieving that desired level become eligible for specular rebate. 4. The Assessing Officer was not convinced. He referred to the Explanation to section 194H and held that the definition was inclusive definition. He referred to the decision of the ITAT, Mumbai in the case of SKOL Breweries Ltd. vs. ACIT [2013] 29 taxmann.com 111 (Mum). The Assessing Officer further noted that the issue is regarding the amount of incentive/so called discount given by the assessee by way of credit note which was not adjusted or mentioned in the invoice. He also found that this amount of benefit by way of credit note was not reduced from the sale turnover for the purpose of sales tax return. Hence, he held that the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,402,802 7.2. Rate difference allowed to Customers ₹ 61,17,321/-: This is discount allowed by the appellant to its customer at the time of payment at the rate agreed with the customer. This also includes short payment received from the customers owing to their claims in respect of quality or rates charged. Incentive Account ₹ 39,11,270/-: This is additional discount allowed by the appellant to its customer at the end of a financial year. These incentives discounts are payable only to those customers who have achieved the sales target set for the year. Special Rebate ₹ 13,45,128/-: As and when the appellant is loaded with heavy inventories, the customers are encouraged to lift specified quantity in a specified period and avail the special rebate. The AO has disallowed these expenditures of ₹ 1,13,73,719/- by treating the same to be 'Commission' payment liable for TDS within the meaning of section 194H of the Income Tax Act. As the appellant has not deducted TDS in respect of these 3 expenditures, the AO by invoking the provisions of section 40{a)(ia) of the Act has disallowed the entire expenditure. It is also submitted that AO has m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction of tax u/s 194H of the Act and any discount or rebate to a customer who is an independent buyer and not acting as an agent cannot be treated as 'Commission' within the meaning of Section 194H of the Act and therefore the action of the AO was not legally tenable. Customer's ledger confirmation showing the relevant transactions and entries in respect of the discounts allowed was produced. But no such ledger confirmation from customers was produced or placed in appeal file.lt was also argued that most of the assessments have been made u/s 143(3)of the Act in past wherein the nature of the said expenditure has been accepted as discount. This was for the first time that the AO has deemed the Discount as 'Commission'. It was furthermore submitted that the issue is no more res-integra and the Hon'ble High Court of Bombay in the matter of Commissioner of Income Tax v. Intervet India (P) Ltd [2014] 49 taxmann.com14 (Order dated 01/04/2014) has held that a distributor or customer where their relationship with seller is principal to principal, could not be said to be acting on behalf of the seller and therefore any discount, rebate or incentive allowed to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Moreover, Incentives Character as ' Rate Differences Discount is not reflected in the invoices. 7.3.1. The claims of appellant on account of Rate Differences Discount i.e. rate difference to customers/Income/ Rebate is given by way of Credit Note is not acceptable when amount paid by appellant is independent of the invoice price. Appellant has also not reduced the said amount from the Turnover for Mahaiashtra VAT. During appellate proceedings appellant has just stated that he is engaged in selling fabric which is exempt from VAT but no such evidence has been produced either before AO or during appellate proceedings. Appellant has also failed to establish principal to principal relationship with his customers by any documentary evidence before AO as well as in appeal. This fact becomes all the more clear when appellant submits that he is also making payment of commission to its agents and brokers through whom the goods are supplied to the customers after deducting TDS. These facts clearly establish that appellant has appointed agents and brokers through whom he is supplying goods to the customers and his claim of principal to principal relationship is devoid of truth i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, the ld. Commissioner of Income Tax (Appeals) himself never asks the assessee to produce these documents but proceeded to hold that in the absence of any such documents, adverse view was to be taken. Furthermore, the assessee s detailed submissions as reproduced in the appellate order noted by us also herein above have not been properly dealt by the ld. Commissioner of Income Tax (Appeals). We are also of the opinion that the ratio emanating out of the binding of the Hon'ble jurisdictional High Court decision should not be lightly distinguished without properly brining on record the distinguishing features. 9. In this view of the matter, in our considered opinion, this issue needs to be remitted to the file of the Assessing Officer. The Assessing Officer is directed to consider the issue afresh after giving the assessee proper opportunity of being heard. The Assessing Officer shall duly consider the observations hereinabove. Apropos ground no. 2 10. By way of this ground, the assessee has contested that the ld. Commissioner of Income Tax (Appeals) has erred in rejecting the assessee s ground no. 2 before him. The said ground no. 2 before the ld. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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