Manimuthu, Dindigul V. ITO Ward 1, Dindigal

ITA 1450/CHNY/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 0272 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-08-2024
• Assessment Year: misc
• Appeal Filed On: 15-05-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R. ANDICHAMY
• Keywords: TDS
• Section: 143(3); 40(a)(ia)

Judgement Text

आयकर अपीलीय अिधकरण, ‘ए’ ᭠यायपीठ,चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ᮰ी महावीर ᳲसह, उपा᭟यᭃ एवं ᮰ी एस. आर.रघुनाथा, लेखा सद᭭य के समᭃ BEFORE SHRI MAHAVIR SINGH, HON’BLE VICE PRESIDENT AND SHRI S. R. RAGHUNATHA, HON’BLE ACCOUNTANT MEMBER आयकर अपीलसं./ITA No.: 1450/Chny/2024 िनधाᭅरणवषᭅ / Assessment Year: 2018-19 P. Manimuthu, No.1, A.K. Traders, Shanmuga Towers, Dindigul Road, Vadamadurai, Dindigul District – 624 802. [PAN: AOHPM-0872-K] v. Income Tax Officer, Ward -1, Dindigul. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओरसे/Appellant by : Shri. R. Andichamy, CA ᮧ᭜यथᱮ कᳱ ओरसे/Respondent by : Smt. M.S. Deeptha, JCIT सुनवाई कᳱ तारीख/Date of Hearing : 07.08.2024 घोषणा कᳱ तारीख/Date of Pronouncement : 09.08.2024 आदेश /O R D E R PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi for the assessment year 2018-19 dated 30.03.2024. 2. The only ground raised by the Assessee is the ld.CIT(A) erred in dismissing the appeal by upholding the action of the :-2-: ITA. No: 1450/Chny/2024 AO in disallowing 30% of Rs.16,70,954/- as TDS U/s.194H of the Act has not been done on this expenditure. 3. The assessee is an individual carrying on the business as distributor of mobile recharge card, sale of maida and atta along with jio phone sales on commission basis. The assessee filed his return of income for the AY 2018-19 on 31/10/2018 by declaring total income of Rs.6,90,530/-. The assessee has declared a sales turnover of Rs.1,24,30,645/- for reliance jio recharge coupons and jio router modems besides income through commission scheme, discount and incentives to the tune of Rs.28,12,459/-. During the year the assessee has passed on the discount of Rs.19,23,721/- to his retailers and claimed the same as business promotion expenses in the profit and loss account. The return of income was selected for limited scrutiny under CASS for verification of ‘business expenses’. During the assessment proceedings, the assessee furnished the details sought by the AO and the assessment was concluded by disallowing an expenditure to the tune of 30% of Rs.16,70,954/- as TDS U/s.194H of the Act has not been done on this expenditure by passing an order U/s.143(3) on 25/02/2021 holding as under: :-3-: ITA. No: 1450/Chny/2024 “Thus it appears to be a suspicious entry. Further ,as per section Section 40(a)(ia): The nature of the expenditure of amount of Rs 16,70,954.65, included under the head "Sales Promotion Expenses, is in the nature of expenditure described u/s 194H on which TDS is deductible Further ,as per Section:194H:Commission or brokerage: Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of five per cent. However no such TDS entry is reflected in the books of accounts furnished by the assessee for the commission received from Reliance Retail limited. In view of the above explanation and documents available with the department, 30% of the commission expenses (taking a liberal view) claimed by the assessee, ie, Rs 501286 is disallowed for deduction u/s 40(a)(ia) of the I.T.Act. Thus 30% of the commission expenses are being added back to the income. The income under the head Profits & Gains from business & profession is assessed as (515525 +501286) Rs10,16,811. Assessed u/s 143(3) of the Act.” 4. Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld.CIT(A), NFAC. The Ld.CIT(A) has confirmed the disallowance made by the AO as per the Assessment order. Aggrieved by the order of the Ld.CIT(A), the assessee in appeal before us. 5. The ld.AR for the assessee stated that the said expenditure is debited to Profit and loss account in respect of the discount passed on to the customers against the sale of :-4-: ITA. No: 1450/Chny/2024 sim cards, modems and mobile phones. Therefore, the same cannot be treated as commission expenses and hence the AO has erred in disallowing 30% of the same by considering it as commission and liable for TDS U/s.194. The assessee also relied on the following judgments in support of the claim of the expenditure as discount as against the decision of the AO to treat that as commission. The following judgments clearly states that discount given (Debit Note) are not in the nature of commission and hence not liable for tax deduction at source. (i) It should have been acknowledged that this incentive is not given at a fixed rate for payments which is known in the trade as incentive for actual collection and this incentive is in the nature of discount and not commission. a) DCIT Vs Creative Technotex (P) Ltd in ITA No. 2035/KOL/2016/ITAT, Kolkatta b) CIT (TOS) Vs United Breweries Ltd. (2017) 80 Taxmann.com 123 (Andhra Pradesh and Telangana) (ii) When the assessee is not directly or indirectly decides the quantum of alleged commission/discount as well as determining the retail price at which the recharge coupon is sold to the customer then the provision of section 194H cannot be applied to the assessee. :-5-: ITA. No: 1450/Chny/2024 Choco pack Enterprises ITA No. 821/JP/2016-ITAT Jaipur Bench VirendrakumarVermain - ITA No. 970/JP/2017- ITAT Jaipur Bench (iii) TDS is not applicable on discount by dealers or distributors to retailers on the sale of repaid SIM cards and Mobile recharge cards by stating that the relationship between a distributor and retailer was not that of agent but on a Principal to Principal basis . Nabirul Islam Vs DCIT dated 02/08/2023 in ITA No. 43/KOL/2023- ITAT Kolkatta 6. Per contra, the ld.DR relied on the orders of the lower authorities. 7. We have heard the rival contentions and gone through the orders of the lower authorities. The assessee has received certain income from the reliance retail limited. In the course of carrying on the sales to the retailers, he has passed on certain amount of incentives/discounts and the same has been accounted as business promotion expenses. According to the ld.AR these amounts are not in the nature of commission paid by the assessee to the retailers and it is only a trade discount / :-6-: ITA. No: 1450/Chny/2024 incentive and hence the same is not liable for TDS. We also note that, the assessee has relied on the above stated decisions of various courts in support of non-applicability of provisions of 194H for this expenditure and accordingly we also agree that these payments are not in the nature of commission. 8. Even considering the said expenditure as commission payment made by the assessee to his retailers as decided by the AO, since the assessee’s turnover for the previous Assessment year 2017-18 was only Rs.43,78,420/- and thereby the TDS provisions as per Section 194H is not applicable for the A Y 2018-19. The second proviso to section 194H is reads as follows: “that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed [one crore rupees in case of business or fifty lakh rupees in case of profession] during the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid, shall be liable to deduct income tax under this section.” 9. Therefore, the AO has erred in disallowing the 30% of the Expenditure u/s.40(a)(ia) of the Act and needs to be deleted. Therefore, we are of the considered view that the lower authorities have erred in disallowing Rs.5,01,286/- i.e. :-7-: ITA. No: 1450/Chny/2024 30% of Rs.16,70,954/- from the business promotion expenses treating it as payment liable for TDS U/s.194H and hence the same is deleted by allowing the appeal of the assessee. 10. In the result the appeal of the assessee is allowed. Order pronounced in the Open court on 09 th August, 2024 at Chennai. Sd/- (महावीर िसंह ) (MAHAVIR SINGH) उपा᭟यᭃ/Vice President Sd/- (एस. आर.रघुनाथा) (S. R. RAGHUNATHA) लेखासद᭭य/Accountant Member चे᳖ई/Chennai, ᳰदनांक/Dated, the 09 th August, 2024 JPV आदेशकीŮितिलिपअŤेिषत/Copy to: 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3.आयकर आयुƅ/CIT – Madurai 4. िवभागीय Ůितिनिध/DR 5. गाडŊ फाईल/GF