The ACIT, Circle-3, Ahmedabad V. Bombay Sales Corporation, Ahmedabad

ITA 1835/AHD/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67517 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 20-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: S N DIVETIA
• Keywords: Non-deduction of tax
• Section: 143(3)

Judgement Text

, , , , A, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.1835/AHD/2011 [ASSTT.YEAR : 2008-2009] ACIT, CIR.3 AMBAWADI, AHMEDABAD. /VS. BOMBAY SALES CORPORATION GROUND FLOOR, MRUDUL TOWER B/H. TIMES OF INDIA ASHRAM ROAD AHMEDABAD 380 009. PAN : AAAFB 8515 F ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) + 1 2 )/ REVENUE BY : SHRI O.P. BATHEJA, SR.DR 4& 1 2 )/ ASSESSEE BY : SHRI S.N. DIVETIA 5 1 &(*/ DATE OF HEARING : 16 TH JULY, 2013 678 1 &(*/ DATE OF PRONOUNCEMENT : 02-08-2013 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT : THIS APPEAL BY THE REVENUE FOR THE ASSESSMENT YEAR 2008-2009, IS DIREC TED AGAINST THE ORDER OF THE CIT(A)-XVI, AHMEDABAD DATED 20.5.2 011. 2. THE ONLY GROUND OF THE APPEAL OF THE REVENUE IS AS UNDER: ITA NO.1835/AHD/2011 -2- 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.1,81,23,420/- MADE ON ACCOUNT OF DISALLOWANCE U/S.40(A)(IA) FOR NON-DEDUCTION OF TAX U/S.194H ON SALES INCENTIVES WHICH WAS TREATED AS COMMISSION AS LAID DOWN IN THE EXPLANATION TO THE S AID SECTION. 3. THE LEARNED DR HAS RELIED ON THE ORDER OF THE AO . HE REFERRED TO THE RELEVANT PARAS OF THE ASSESSMENT IN SUPPORT OF THE CASE OF THE REVENUE. THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE ASSESSEE HAS PAID INCENTIVE TO T HE DEALERS OF GOODS AND PAYMENT WAS NOT IN THE NATURE OF BROKERAG E OR COMMISSION AS PER THE PROVISION OF SECTION 194H OF THE ACT, AND THEREFORE, NO TDS IS REQUIRED TO BE MADE, AND ACCOR DINGLY, THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE AC T WAS NOT CALLED FOR. HE REFERRED TO RELEVANT PARAS OF THE A PPELLATE ORDER PASSED BY THE CIT(A) IN SUPPORT OF THE CASE OF THE ASSESSEE. HE RELIED ON THE ORDER OF THE CIT(A). 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS CAREFULLY A ND HAVE PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FI ND THAT THE ASSESSEE-FIRM IS DISTRIBUTOR OF M/S. SHEELA FOAM PV T. LTD. (SFPL FOR SHORT) FOR THE GUJARAT STATE. THE ASSE SSEE HAS MADE PAYMENT OF SALES INCENTIVE TO THE DEALERS OF SFPL . THE ONLY ISSUE IN THIS CASE IS REGARDING THE NATURE OF PAYME NT OF SALES INCENTIVE PAID TO THE DEALERS OF SFPL WHETHER IN THE NATURE OF COMMISSION OR BROKERAGE, WITHIN THE MEANING OF SECT ION 194H OF THE ACT. WE FIND THAT A PLAIN READING OF PROVISION OF SECTION 194H WITH ITS EXPLANATION MAKES IT CLEAR THAT THE PROVISION OF ITA NO.1835/AHD/2011 -3- SECTION 194H SHALL BECOME APPLICABLE WHEN THE PAYME NT IS RECEIVED BY A PERSON WHO IS ACTING ON BEHALF OF ANO THER OR ACTING AS AN AGENT OF ANOTHER PERSON. THE CIT(A) HAS RECO RDED A FINDING THAT A PERUSAL OF VARIOUS TERMS AND CONDITI ONS OF THE AGREEMENT ENTERED INTO BY SFPL WITH THE ASSESSEE- FIRM SHOWS THAT THE DISTRIBUTORSHIP IS ON PRINCIPAL-TO-PRINCIP AL BASIS AND NOT ON PRINCIPAL-AGENT BASIS. THE REVENUE COULD NOT CO NTROVERT THIS FINDING RECORDED BY THE CIT(A). THE CIT(A) HAS REC ORDED THAT M/S. SFPL WAS SELLING THE GOODS TO THE ASSESSEE F IRM, AND IN TURN THE ASSESSEE WAS SELLING GOODS TO THE AUTHORIS ED DEALERS APPOINTED BY M/S. SFPL. VARIOUS DEALERS WERE GIV EN SALES TARGET AND PERCENTAGE OF INCENTIVE WAS GIVEN ON THE BASIS OF THEIR PERFORMANCE/ACHIEVEMENT OF THE SALE TARGET GIVEN TO THEM. THE CIT(A) HAS REPRODUCED THE RELEVANT TABLE OF INCENTI VE DEPENDING ON THE HIGHER ACHIEVEMENT OF SALES IN HIS APPELLATE ORDER. WE FIND THAT THE NATURE OF PAYMENT BY THE ASSESSEE TO VARIOUS DEALERS OF SFPL IS AN INCENTIVE TO ACHIEVE MORE SALES ONL Y, AND NOT IN THE NATURE OF PAYMENT OF BROKERAGE OR COMMISSION TO THIRD PARTY. THE CIT(A) HAS FOLLOWED THE DECISION OF ITAT, DELHI BENCH IN THE CASE OF NATIONAL PANASONIC INDIA P. LTD. VS. DC IT, 94 TTJ (DELHI) 899 WHEREIN SALES INCENTIVES ALLOWED TO THE DEALER TREATED AS COMMISSION BY THE LOWER AUTHORITIES, WAS REJECTE D AND HELD AS NOT COVERED UNDER SECTION 194H OF THE ACT. A SIMIL AR VIEW WAS TAKEN BY THE ITAT, CALCUTTA BENCHES IN VIDYANATH AY URVED BHAVAN LTD. VS. JCIT, 83 TTJ 409 (CAL). WE FIND TH AT SIMILAR PAYMENT OF SALES INCENTIVE GIVEN TO THE DEALERS IN THE ITA NO.1835/AHD/2011 -4- IMMEDIATELY PRECEDING ASSESSMENT YEAR 2007-2008 WAS NOT TREATED AS COMMISSION IN SCRUTINY ASSESSMENT FRAMED BY THE AO UNDER SECTION 143(3) OF THE ACT. WE FIND THAT THE CIT(A) HAS PASSED A WELL REASONED SPEAKING ORDER ON THIS ISSUE . IN THESE FACTS, WE CONFIRM THE ORDER OF THE CIT(A) IN HOLDIN G THAT THE AO WAS NOT JUSTIFIED IN TREATING THE PAYMENT OF INCENT IVES TO THE DEALERS AS WELL AS TO ANOTHER DISTRIBUTOR, AS PAYME NT OF COMMISSION LIABLE TO TDS UNDER SECTION 194H OF THE ACT, AND THAT PROVISION OF SECTION 194H ARE NOT AT ALL APPLI CABLE ON THE FACTS OF THE CASE, AND IN DELETING THE ADDITION UND ER SECTION 40(A)(IA) OF THE ACT. ACCORDINGLY, THE GROUND OF T HE APPEAL OF THE REVENUE BEING WITHOUT MERIT, IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD