ASUS INDIA PVT LTD., MUMBAI V. ASST CIT CIRCLE- 9(1)(2), MUMBAI

ITA 942/MUM/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5437 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 06-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV HARIT
• Keywords: Sale consideration of property below Jantri Value; Business expenditure; Search and seizure; TDS
• Section: 40(a)(ia); 194C; 208; 194J; 13; 22; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHR I MANOJ KUMAR AGGARWAL , ACCOUNTANT MEMBER ITA NO. 942 / MUM . /20 20 ( ASSESSMENT YEAR : 20 1 7 1 8 ) ITA NO. 943 /MUM./20 20 ( ASSESSMENT YEAR : 20 16 17 ) ASUS INDIA PVT. LTD. 402, SUPREME CHAMBRS 17 18, SHAH INDUSTRIAL ESTATE VEERA DESAI ROAD, ANDHERI (E) MUMBAI 400 053 PAN AAJCA6450C . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 9(1)(2), MUMBAI . RESPONDENT AS SESSEE BY : SHRI VIJAY MEHTA REVENUE BY : SHRI RAJEEV HARIT DATE OF HEARING 03.09.2020 DATE OF ORDER 05.10.2020 O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEAL S BY THE ASSESSEE ARISE OUT OF TWO SEPARATE ORDERS , BOTH DATED 30 TH JANUARY 2020, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 16 , MUMBAI, FOR THE ASSESSMENT YEAR S 20 16 17 AND 2017 18 . 2 ASUS INDIA PVT. LTD. ITA NO.943/MUM./2020 A.Y. 2016 17 2. THE ISSUE S INVOLVED IN THE PRESENT APPEAL IS BASICALLY RELATED TO DISALLOWANCE S MADE UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) ON ACCOUNT OF EXPENDITURE CLAIMED BY WAY OF SALES REBATE / DISCOUNT GIVEN TO THE DEALERS / DISTRIBUTORS. 3. BRIEF FACTS ARE, THE ASSESSEE , A RESIDENT COMPANY , IS ENGAGED IN THE BUSINE SS OF IMPORTING AND TRADING IN ELECTRONIC GOODS , SUCH AS , NOTE BOOKS, TABLETS, PAD PHONES, MOBILE PHONES AND ACCESSORIES. FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 TH NOVEMBER 2016, DECLARING TOTAL INCOME OF ` 17,90,29,3 40. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WHILE VERIFYING THE AUDIT ED ACCOUNTS OF THE ASSESSEE NOTICED THAT THE ASSESSEE HAS CLAIMED THE FOLLOWING ADJUSTMENT AGAINST THE GROSS SALES. SALES ` 178,78,77,006 LESS : SALES RETURN ` 25,08,87,210 SALES REBATE ` 71,04,23,345 _ ` 96,13,10,555 NET SALES ` 1672,65,66,452 =========== 4. INSOFAR AS THE AMOUNT OF SALES RETURN IS CONCERNED, THE ASSESSING OFFICER ACCEPTED THE CLAIM. HOWEVER, INSOFAR AS THE SALE S REBATE IS CONCERNED, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO FURNISH THE BREAK UP OF SUC H REBATE GRANTED TO THE DEALERS/ DISTRIBUTORS WITH 3 ASUS INDIA PVT. LTD. SUPPORTING DETAILS. AFTER VERIFYING THE DETAILS FURNISHED BY THE ASSESSEE, HE NOTED THAT THE SALE S REBATE C OMPRISE OF THE FOLLOWING: CONDITIONAL DISCOUNT SCHEME SUCH AS BACK END TENDER / SI / PROJECT, SALES OUT PRICE PROTECTION, SPECIAL PROGRAM, ETC. ` 42,13,01,780 REIMBURSEMENT OF OCTROI AND INSURANCE ON ACTUAL BASIS ` 4,13,94,781 REFU RBISH AND REBATE ON DEFECTIVE PRODUCTS ` 6,76,00,752 VOLUNTARY DISCOUNT (ON ACHIEVEMENT OF TARGET SALES) ` 13,31,55,955 TOTAL: ` 71,04,23,344 5. AFTER CALLING UPON THE ASSE SSEE TO EXPLAIN WHY SUCH REBATE/DISCOUNT GIVEN TO THE DEALERS/ DISTRIBUTORS WERE NOT SUBJECTED TO DEDUCTION OF T AX AT SOURCE UNDER SECTION 194C/194J/ 194H OF THE ACT AND NOT BEING CONVINCED WITH ASSESSEES SUBMISSIONS, DISALLOWED 30% OUT OF THE AFORESAID PAYMENT/ EXPENDITURE AGGREGATING TO ` 21,31,27,003, UNDER SECTION 40(A)(IA) OF THE ACT AND ADDED BACK TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED WITH THE SAID DISALLOWANCE S , THOUGH , THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, HOWEVER, THE DISALLOWANCE WAS SUSTAINED . THIS IS HOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. GRO UND NO.1, BEING A GENERAL GROUND DOES NOT REQUIRE SPECIFIC ADJUDICATION. 4 ASUS INDIA PVT. LTD. 7. IN G ROUND NO.2, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT OUT OF THE EXPENDITURE ON ACCOUNT O F DISCOUNT GIVEN TO THE DEALERS/ DISTRIBUTORS U NDER THE CONDITIONAL DISCOUNT SCHEME. AS DISCUSSED EARLIER, DURING THE ASSESSMENT PROCEEDINGS, ON BEING CALLED UPON BY THE ASSESSING OFFICER TO JUSTIFY THE DISCO UNT/ REBATE GIVEN AMOUNTING TO ` 42,13,01,780. IT WAS SUBMITTED BY THE ASSESSEE THAT PERIOD WISE AND PRODUCT WISE SCHEME ARE FLOATED TO PUSH SA LES FOR ALREADY LAUNCHED MODELS/ SLOW MOVING ITEMS. HE SUBMITTED , SUCH BENEFIT/ REBATE IS BASED ON DEALERS / DISTRIBUTORS WHO ULTIMATELY SELL THE PRODUCTS IN THE MARKET TO THE END USERS. FURTHER EXPLAINING, IT WAS SUBMITTED BY THE ASSESSEE THAT AS PER T HE DISCOUNT SCHEME, THE DEALERS/ DISTRIBUTORS SELL THE PRODUCTS AT A SPECIAL PRICE WHICH IS BELOW THE MAXIMUM RETAIL PRICE (MRP). THEREFORE, THE ASSESSEE GETS A LESSER MARGIN ON SUCH SALE. IT WAS SUBMITTED , S UCH SPECI AL SALES UNDER PROJECT/ TENDER , ETC., THE PRICE Q U O TED BY THE DEALERS/ DISTRIBUTORS ARE GUIDED BY SPECIAL PRICE SET UP S . THEREFORE, TO COMPENSATE THE DEALERS/ DISTRIBUTORS FOR LOW MARGIN, THE ASSESSEE RAI SES CREDIT NOTES TOWARDS REBATE/DISCOUNT IN FAVOUR OF DEALERS/DISTRIBUTORS. THE ASSESSING OFFICER OBSERVED , THE PAYMENT MADE BY THE ASSESSEE IS OUT OF CONTRACTUAL OBLIGATION OR IN THE NATURE OF COM MISSION. THEREFORE, SUCH REBATE/DISCOUNT GIVEN TO THE DEALERS/ DISTRIBUTORS WOULD GET COVERED UNDER SECTION 194C/ 1 94H OF THE ACT. THE ASSESSEE HAVING NOT DEDUCTED TAX AT THE PRESCRIBED RATE IN 5 ASUS INDIA PVT. LTD. TERMS OF THE AFORESAID PROVISIONS, THE ASSESSING OFFICER DISALLOWED 30% OUT OF THE EXPENDITURE. AS DISCUSSED EARLIER, THE DISALLOWANCE MADE WAS ALSO UPHELD BY THE LEARNED COMMIS SIONER (APPEALS) ACCEPTING THE REASONING OF THE ASSESSING OFFICER. 8. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSEE IMPORTS ELECTRONIC GOODS SUCH AS NOTE BOOKS, TABLETS, PAD PHONES, MOBILE PHONES AND ACCESSORIES FOR RE SELLING IN INDIA. HE SU BMITTED , TECHNOLOGY RELATING TO THESE PRODUCT S GETS UPGRADED/ DEVELOPED VERY FAST AND WITHIN A SHORT PERIOD OF LAUNCH OF A PARTICULAR PRO DUCT , IT BECOMES OBSOLETE. THEREFORE, TH E COMPANY CONCEIVES VARIOUS REBATE/ DISCOUNT SCHEME S TO PUSH SALES OF SUCH OBSOLE TE/SLOW MOVING PRODUCTS. DRAWING OUR ATTENTION TO NOTE 17 OF THE PROFIT & LOSS ACCOUNT, A COPY OF WHICH IS AT PAGE 3 OF THE PAPER BOOK, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , MAJOR REVENUE DURING THE YEAR WAS GENERATED FROM SALE OF NOTE BOOKS, TAB LETS, PAD PHONES, MOBILE PHONES AND ACCESSORIES, WHICH HAVE A F IERCELY COMPETITI VE MARKET. DUE TO QUICK TECHNOLOGICAL ADVANCE, THESE PRODUCTS BECOME OUT DATED/ OBSOLETE WITHIN A VERY SHORT SPAN, THEREFORE, HAVE TO BE SOLD AT A DISCOUNTED PRICE. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSEE DOES NOT HAVE ANY PRINCIPAL AGENT RELATIONSHIP WITH ANY OF THE DEALERS/ DISTRIBUT ORS AND ONCE THE ASSESSEE SELLS/ DELIVERS THE GOODS TO THE DEALERS/DISTRIBUTORS , SALE IS COMPLETE. THE ASSESSEE DOES 6 ASUS INDIA PVT. LTD. NOT ENTER INTO ANY SALES WITH THE END USER S . THEREFORE, THE SALE CONTRACT BETWE EN THE ASSESSEE AND THE DEALERS/ DISTRIBUTORS ENDS ON DELIVERY OF GOODS TO THEM. THAT BEING THE CASE, THERE IS NO PRINCIPAL AGENT RELATIONSHIP. IN THIS CONTEXT, HE DREW OUR ATTENTION TO TH E AGREEMENT ENTERED WITH F LIPKART INDIA PRIVATE LTD. ( IN SHORT FLIPKART ) . DRAWING OUR ATTENTION TO VARIOUS CLAUSES OF SUCH AGREEMENT, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE AGREEMENT MAKES IT CLEAR THAT ONCE THE ASSESSEE SE LLS GOODS TO F LIPKART , SALE IS COMPLETE. THEREFORE, THERE IS NO PRINCIPAL AGENT RELATIONSHIP, BUT IT I S A PRINCIPAL TO PRINCIPAL SALE . THAT BEING THE CASE, THE PROVISIONS OF SECTION 194H OF THE ACT WOULD NOT BE APPLICABLE. DRAWING OUR ATTENTION TO THE TAX INVOICE AND CR EDIT NOTE, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THESE ARE SIMPLE SALE TRANSACTION S BETWEEN TWO PRINCIPAL S WITHOUT INVOLVEMENT OF ANY AGENCY. FURTHER, DRAWING OUR ATTENTION TO THE ITEMS SOLD, HE SUBMITTED , THESE ARE SLOW MOVING GOODS AND HAVE TO BE SOLD WITH DISCOUNT , OTHERWISE , THEY CANNOT BE SOLD AT ALL. THUS, HE SUBMITTED , THE PROVISIONS OF SECTION 194H OF THE ACT IS NOT APPLICABLE. AS REGARDS APPLICABILITY OF SECTION 194C OF THE ACT, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE TRANSA CTION BETWEEN THE ASSESSEE BEING SAL E TRANSACTION OF SPECIFIC GOODS/ ITEMS , IT CANNOT BE BROUGHT WITHIN THE PURVIEW OF SECTION 194C OF THE ACT, WHICH IS APPLICABLE ONLY IN RESPECT OF CARRYING OUT ANY WORK. FINALLY HE SUBMITTED, THOUGH, SIMILAR REBATE/DISCOU NT WAS GIVEN IN EARLIER YEARS, 7 ASUS INDIA PVT. LTD. NO DISALLOWANCES WERE MADE UNDER SECTION 40(A)(IA) OF THE ACT. THUS, HE SUBMITTED , DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT FOR ALLEGED VIOLATION OF SECTION 194C / 194H OF THE ACT IS LEGALLY UNSUSTAINABLE. IN SUPP ORT OF SUCH CONTENTION, THE LEARNED AUTHORISED REPRESENTATIVE RELIED UPON THE FOLLOWING DECISIONS: I) AHMEDABAD STEMP VENDOR ASSOCIATION V/S UNION OF INDIA, [2002] 257 ITR 202; II) CIT V/S AHMEDABAD STAMP VENDOR ASSOCIATION, [2012] 348 ITR 378; III) CIT V/S UNITED BEVERIES LTD., [2017] 387 ITR 150; AND IV) CIT V/S INTERVATE INDIA PVT. LTD. , [2014] 364 ITR 238. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELYING UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND LEARNED COMMISSIONER (APPEALS) SUBMITTED , THE CONTRACT BETWEEN THE PARTIES ARE NOT CONCLUSIVE, THEREFORE, THE TRUE NATURE AND CHARACTER OF THE TRANSACTION HAS TO BE EXAMINED TO FIND OUT WHETHER IT IS A TRANSACTION OF SALE BETWEEN TWO PRINCIPAL S OR THERE IS A PRINCIPAL AGENT RELATIONSHIP. IN THIS CONTEXT, HE RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN DURGA PRASAD MORE, 83 ITR 540 (SC). TO EMPHASIS UPON THE FACT THAT THE CONTRACT OF SALE DOES NOT END WI TH THE SALE MADE TO THE DEALERS/ DISTRIBUTORS, THE LEARNED DEPARTMENTAL REPRESENTATIV E DREW OUR ATTENTION TO CERTAIN CLAUSES OF THE CON TRACT BETWEEN THE ASSESSEE AND F LIPKART. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , AS 8 ASUS INDIA PVT. LTD. PER THE TE RMS OF THE CONTRACT, THE PACKAGING OF THE GOODS IS BEING CARRIED OUT BY THE ASSESSEE. FURTHER, THE AS SESSEE ALSO UNDERTAKES THE LIABILITY TO REPLACE ANY DEFECTIVE GOODS. DRAWING OUR ATTENTION TO THE COPY OF THE INVOICE PLACED AT PAGE 27 OF THE PAPER BOOK, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , ASSESSEES CONTENTION THAT THERE IS A PRINCIPAL TO PRINCIPAL RELATIONSHIP WITH F LIPKART AND THE SALE CONTRACT CONCLUDE S UPON SALE BEING EFFECT ED TO F LIPKART IS ALSO INCORRECT AS THE ASSESSEE HAS RAISED THE INVOICE IN THE NAME OF END USER I.E., RASHI ENTERPRISES. THUS, HE SUBMITTED , I N THE GIVEN FACTS OF T HE CASE, F LIPKART HAS ACTED AS AN AGENT BETWEEN THE ASSESSEE AND THE END USER TO WHOM THE PRODUCT HAS BEEN ULTIMATELY SOLD. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , AS PER THE TERMS OF THE CONTRACT WITH F LIPKART, THE ASSESSEE HAS TO INDEMNIFY FOR ANY LOSS OR DEFECT IN THE PRODUCT SOLD. THAT SHOWS THAT THERE IS NO PRINCIPAL TO PRINCIPAL RELATIONSHIP IN RESPECT OF THE SALE MADE. HE SUBMITTED , MERELY RELYING UPON THE CONTRACT ONE CANNOT DETERMINE THE TRUE NATURE AND CHARACTER OF THE TRANSACTION, BUT ALL OTHER ANCILLARY AND INCIDENTAL FACTS HAVE TO BE SEEN. IN SUPPORT OF THIS CONTENTION, THE LEARNED D .R. RELIED UPON THE DE CISION OF THE HONBLE P&H HIGH C OURT IN PMS DIESELS & ORS V / S CIT , [2015] 374 ITR 562 (P&H). 10. I N REJOINDER, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE LEARNED COUNSEL FOR THE REVENUE HAS MISCONCEIVED THE FACT S AS THE 9 ASUS INDIA PVT. LTD. ASSESSEE HAS NOT SOLD ANY PRODUCT DIRECTLY TO THE END USER. AS REGARDS THE INVOICE PLACED AT PAGE 27 OF THE PAPER BOO K REFERRED TO BY THE LEARNED DEPARTMENTAL R EPRESENTATIVE, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE INVOICE IS RAISE D IN THE NAME OF ANOTHER DEALER/ DISTRIBUTOR NAMELY RASHI ENTERPRISES WHICH IS IN NO WAY CONNECTED TO THE SALES EFFECTED TO THE F LIPKART. IN THIS CONTEXT, HE DREW OUR ATTENT ION TO THE INVOICE AS WELL AS THE LIST OF DEALER S/ DISTRIBUTORS TO WHOM GOODS HAVE BEEN SOLD. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, THE ASSESSEE IMPORTS CERTAI N ELECTRONIC GOODS SUCH AS NOTE BOOKS, TABLETS, PAD PHONES, MOBILE PHONES AND ACCESSORIES AND SELLS THEM IN INDIA THROUGH DEALERS/ DISTRIBUTORS WHO , IN TURN , SELL THEM TO END USERS. IT IS COMMON KNOWLEDGE THAT THE PRODUCTS DEALT BY THE ASSESSEE HAVE FIERCELY COMPETITIVE MARKET AND THERE IS CONSTANT UP GRADATION/ ADVANCEMENT IN THE TECHNOLOGY CONCERNING THESE PRODUCTS. AS A RESULT OF SUCH REGULAR UP GRADATION / ADVANCEMENT IN TECHNOLOG Y, THE PRODUCTS BECOME OBSOLETE / OUTDATED WITHIN A VERY SHORT SPAN OF TIME AND IT BECOMES DIFFICULT TO SELL THEM IN THE MARKET. THEREFORE, IT IS UNDERSTANDABLE THAT FOR PUSH ING SALE OF SUCH SLOW MOVING/ OUTDATED PRODUCT S, ALL THE MANUFACTURERS DEALING IN SUCH PRODUCTS PROVIDE REBATE/ DISCOUNT SCHEMES TO SELL THEIR PRODUCTS AT A RATE BELOW THE MRP. LIKEWIS E, THE ASSESSEE FROM TIME TO TIME 10 ASUS INDIA PVT. LTD. HAS FORMULATED REBATE/DISCOUNT SCHEMES FOR DEALERS/ DISTRIBUTORS TOWARDS SALE OF SUCH PRO DUCTS. UNDISPUTEDLY, THE REBATE/ DISCOUNT GIVEN BY THE ASSESSEE TO THE D EALERS/ DISTRIBUTORS HAVE BEEN TREATED AS PAYMENT COMING WITHIN THE AMBIT OF SECTION 194C/ 194H OF THE ACT WHILE MAKING DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. 12. BEFORE WE DEAL WITH THE CORRECTNESS OF THE AFORESAID DISALLOWANCE, IT IS NECESSARY TO BRIEFLY DEAL WITH CERTAIN CRUCIAL FACTS. IT IS EVIDENT FROM THE MATERIAL ON RECORD THAT DUR ING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD PROVIDED CONDITIONAL REBATE/DISCOUNT OF ` 42,13,01,780 TO 29 DISTRIBUTORS/ DEALERS TO WHO M VARIOUS PRODUCTS, SUCH AS, NOTE BOOKS, ZENPHONES , TABLETS, ZENPADS, EEE BOOK S , ACC ESSORIES, ETC., WERE SOLD FOR A TOTAL AMOUNT OF ` 1768,78,77,006. IT IS FURTHER RELEVANT TO OBSERVE , OUT OF THE 29 DEALERS/ DISTRIBUTORS TO WHOM PRODUCTS WERE SOLD, THE ASSESSEE HAD ENTERED INTO A WRITTEN CONTRACT ONLY WITH FLIPKART . ON A PERUSAL OF THE AGR EEMENT WITH FLIPKART, A COPY OF WHICH IS AT PAGE 5 OF THE PAPER BOOK, IT IS SEEN THAT AS PER THE TERMS OF THE CONTRACT, THE ASS ESSEE IS REQUIRED TO SELL GOODS/ PRODUCTS AS PER THE PURCHASE ORDER TO BE PLACED BY FLIPKART. AS PER PARA (III) OF THE AGREEMENT, THE ASSESSEE IS REQUIRED TO DELIVER THE PRODUCT TO FLIPKART IN ACCORDANCE WITH THE SPECIFICATIONS AND PRICES AS SPECIFIED IN THE PURCHASE ORDER. FURTHER, THE TERMS OF THE AGREEMENT MAKES IT CLEAR THAT THE TOTAL OWNERSHIP TO THE PRODUCTS SHALL PASS ON TO 11 ASUS INDIA PVT. LTD. FL IPKART AT THE TIME OF DELIVERY OF SUCH PRODUCTS TO FLIPKART. PARA (IV) OF THE AGREEMENT PROVIDES THAT FLIPKART HAS TO PROVIDE THE ASSESSEE RELEVANT INFORMATION IN ORDER TO SUPPLY PRODUCTS AS SOUGHT BY FLIPKART FROM TIME TO TIME. IT FURTHER SAYS THAT FLIPKA RT SHALL MAKE PAYMENT TO THE SUPPLIER IN A TIMELY MANNER AS PROVIDED IN THE AGREEMENT. PARA (V) OF THE AGREEMENT SETS OUT THE OBLIGATION OF THE ASSESSEE TOWARDS FLIPKART. PARA (VI) OF THE AGREEMENT PROVIDES FOR PRICING AND DISCOUNT . W HEREAS , PARA (VII) PRO VIDES FOR INVOICING AND PAYMENT. AS PER THE AFORESAID CLAUSE, THE ASSESSEE IS REQUIRED TO ISSUE INVOICE TO FLIPKART FROM TIME TO TIME WITH REGARD TO SUPPLY OF PRODUCTS. IT FURTHER STIPULATES THAT INVOICE SHALL CONTAIN VARIOUS DETAILS INCLUDING THE REFERENC E TO RELEVANT PURCHASE ORDER AND ITEM NUMBER, PRICE, VAT DETAILS, ETC. PARA (IX) PROVIDES THAT THE ASSESSEE SHALL DELIVER THE PRODUCTS TO FLIPKART IN DUE TIME AND IN ACCORDANCE WITH THE DELIVERY DATES AS MENTIONED IN THE PURCHASE ORDER. 13. SO, FROM THE AFOR ESAID BROAD TERMS OF THE AGREEMENT, IT IS VERY MUCH CLEAR THAT IT IS A PRINCIPAL TO PRINCIPAL SALE CONTRACT AND THE CONTRACT OF SALE CONCLUDES ONCE THE GOODS/ PRODUCTS ARE DELIVERED TO FLIPKART AT WHICH POINT THE OWNERSHIP TO THE PRODUCT PASSES ON TO FLIPKA RT. THOUGH, LEARNED DEPARTMENTAL REPRESENTATIVE DRAWING OUR ATTENTION TO CERTAIN CLAUSES OF THE CONTRACT , SUCH AS , REQUIREMENT OF THE ASSESSEE T O DO THE PACKAGING OF THE GOODS PRODUCTS AS WELL AS THE 12 ASUS INDIA PVT. LTD. INDEMNITY CLAUSE TRIED TO IMPRESS UPON THE FACT THAT IT IS NOT A PRINCIPAL TO PRINCIPAL SALE BUT IS ESSENTIALLY A PRINCIPAL AGENT RELATIONSHIP, H OWEVER, WE ARE UNABLE TO ACCEPT SUCH CONTENTION . IT IS WELL SETTLED LEGAL PRINCIPAL THAT TO ASCERTAIN THE TRUE INTENTION OF THE PARTIES, THE CONTRACT HAS TO BE READ AS A WHOLE AND CANNOT BE REFERRED TO IN P IECEMEAL MANNER. THEREFORE, SIMPLY RELYING UPON CERTAIN CLA USES OF THE CONTRACT ON A STAND ALONE BASIS, IT CANNOT BE SAID THAT IT IS A CONTRACT HAVING PRINCIPAL AGENT RELATIONSHIP. INSOFAR AS THE TRANSACTION WITH OTHER DEALERS / DISTRIBUTORS ARE CONCERNED, THE REVENUE HAS NOT BROUGHT ON RECORD ANY MATERIAL TO NEGATE ASSESSEES CONTENTION THAT IT IS A CONCLUDED SALE TRANSACTION BETWEEN TWO PRINCIPALS AND THERE IS NO ELEMENT OF AGENCY INVOLVED. THE SAMPLE INVOICE S , CREDIT NOTE S , ETC., PLACED IN THE PAPER BOOK CLEARLY DEMONSTRATE THE AFORESAID FACTUAL POSITION. 14. HAVING DEALT WITH THE FACTS INVOLVING IN THE ISSUE, NOW WE WILL DEAL WITH THE LEGAL ASPECT. UNDISPUTEDLY, THE ASSESSING OF FICER HAS DISALLOWED THE REBATE/ DISCOUNT GIVEN UNDER SECTION 40(A)(IA) OF THE ACT ON THE RE ASONING THAT SUCH PAYMENTS COME WITHIN THE PURVIEW OF SECTION 194C/194H OF THE ACT. A READING OF SECTION 194C OF THE ACT WOULD SUGGEST THAT IN RESPECT OF A NY PAYMENT MADE TO A CONTRACTOR/ SUB CONTRACTOR FOR CARRYING OUT ANY WORK , INCLUDING SUPPLY OF LABOUR , WOULD BE SUBJECT TO DEDUCTION OF TAX AT SOURCE AT THE 13 ASUS INDIA PVT. LTD. APPROPRIATE RATE. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAS ENTERED INTO A SA LE CONTRACT, SIMPLICITE R , FOR SALE OF ITS PRODUCTS TO DEALERS/ DIS TRIBUTORS. CERTAINLY, THE TRANSACTION BETWE EN THE ASSESSEE AND THE DEALERS/ DISTRIBUTORS CANNOT BE TERMED AS A CONTRACT FOR WORK. THE ASSESSEE SIMPL Y SELLS ITS PRODUCTS TO DEALERS/ DISTRIBUTORS WHO , IN TURN , SELL THEM TO THE END USER S . THEREFORE, THERE IS NO ELEMENT OF WORK AS DEFINED UNDER CLAUSE (IV) OF EXPLANATION TO SECTION 194C OF THE ACT. THEREFORE, UNDER NO CIRCUMSTANCES, SECTION 194C OF THE ACT WOUL D BE APPLICABLE TO THE DISCOUNT/ REBATE. 15. INSOFAR AS APPLICABILITY OF SECTION 194H IS CONCERNED, A READI NG OF THE SAID SECTION WOULD MAKE IT CLEAR THAT WHILE MAKING ANY PAYMENT WHICH IS IN THE NATURE OF COMMISSION/ BROKERAGE OTHER THAN INSURANCE COMMISSION , WOULD BE SUBJECT TO DEDUCTION OF TAX AT THE APPROPRIATE RATE. EXPLANA TION TO THE AFORESAID PROVISION DE FINE S COMMISSION OR BROKERAGE TO INCLUDE ANY PAYMENT RECEIVED OR RECEIVABLE DIRECTLY OR INDIRECTLY BY A PERSON ACTING ON B EHALF OF ANOTHER PERSON FOR SERVICES RENDERED OR FOR ANY SERVICE IN THE COURSE OF BUYING OR SELLING OF GOODS. THUS, THE PRIMARY CONDIT ION S FOR QUALIFYING AS COMMISSION OR BROKERAGE ARE , THE PERSON RECEIVING SUCH PAYMENT MUST BE ACTING ON BEHALF OF THE PAYER AND MUST BE RENDERING SOME SERVICES IN TH E COURSE OF BUYING OR SELLING OF GOODS. UNDISPUTEDLY, IN THE FACTS O F THE PRESENT CASE, THE DEALERS/ DISTRIBUTORS ARE NOT PROVIDING ANY SERVICE TO THE 14 ASUS INDIA PVT. LTD. ASSESSEE IN THE COURSE OF BUYING OR SELLING OF GOODS. THE ASSESSEE IS SIMPLY SELLING ITS PRODUCTS TO DEALERS/ DISTRIBUTORS WHO IN TURN SELL THEM TO END USERS. THERE IS NO CONTRACT OF SALE BETWEEN TH E ASSESSEE AND END USER S SO AS TO CONCLUDE THAT THE DEALERS/ DISTRIBUTORS ACT AS INTERMEDIARY BETWEEN THE ASSESSEE AND THE END USER S TO FACILITATE SALE OF PRODUCTS. AT LEAST , THE DEPARTMENT HAS NOT BROUGHT ON RECORD ANY MATERIAL TO ESTA BLISH THE FACT THAT THE DEALERS/ DISTRIBUTORS ARE SIMPLY ACTING AS INTERMEDIARIES TO FACILI TATE SALE OF PRODUCTS TO END US ERS SO AS TO INFER A PRINCIPAL AGENT RELATIONSHIP. IN VIEW OF THE AFORESAID FACTUAL POSITION, WE HAVE NO HESITA TION IN HOLDING THAT THE REBATE/DISCOUNT GIV EN TO THE DEALERS/ DISTRIBUTORS WOULD NOT ATTRACT THE PROVISIONS OF SECTION 194H OF THE ACT. OUR AFORESAID VIEW IS WELL SUPPORTED BY THE DECISION S CITED BY THE LEARNED AUTHORISED REPRESENTATIVE. IN CASE OF AHMEDABAD STAMP ASSOCIATION (SUPRA) AFFIRMED BY THE HON'BLE SUPREME COURT, THE HONBLE GUJARAT HIGH COURT AFTER EXAMINING THE TRUE IMPORT OF THE TERM COMMISSION AND DISCOUNT AND THEIR BASIC DIFFERENCE AND FURTHER , REFERRING TO THE PROVISIONS OF SECTION 194H OF THE ACT, HAS HELD THAT FOR ATTRACTING THE AFORESAID PROVISION, THE ELEMENT OF AGENCY HAS TO BE THERE. THE HON'BLE HIGH COURT WHILE PROVIDING BY WAY OF ILLUSTRATION, THE NATURE OF TRANSACTION BETWEEN A DEALER IN CAR AND ITS MANUFACTURER HAS OBSERVED THAT A SERVICE IN THE COURSE OF BUYING OR SELLING OF GOODS HAS TO BE SOMETHING MORE THAN THE ACT OF SIMPLY BUYING OR SELLING OF GOODS. THEREFORE, THE 15 ASUS INDIA PVT. LTD. DISCOUNT/ REBATE GIVEN CANNOT BE TERMED AS COMMISSION. THE HONBLE ANDHRA PRADESH HIGH COURT IN UNITED BEVERIES LTD. (SUPRA) WHILE DEALING WITH IDENTICAL NA TURE OF DISPUTE HAS HELD THAT WHEN THE SALE TRANSACTION BETWEEN TWO PARTIES IS ON PRINCIPAL TO PRINCIPAL BASIS, THERE IS NO ELEMENT OF SERVICE BEING RENDERED BY ONE PARTY TO ANOTHER AND DISCOUNT GIVEN TO RETAILERS IS ONLY FOR PROMOTING SALES, THEREFORE, CA NNOT BE TERMED AS COMMISSION. THE HON'BLE JURISDICTIONAL HIGH COURT IN INTERVATE INDIA PVT. LTD . (SUPRA) HAS EXPRESSED SIMILAR VIEW THAT WHEN THE RELATIONSHIP BETWEEN THE SELLER AND BUYER IS THAT OF A PRINCIPAL TO PRINCIPAL, THE DISCOUNT GIVEN CANNOT BE TE RMED AS COMMISSION. ON THE CONTRARY, THE DECIS ION IN CASE OF PMS DIESELS & ORS. (SUPRA) CITED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IS CONTEXTUALLY DIFFERENT, HENCE, W OULD NOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE. 16. IT IS RELEVANT TO OBSERV E , IN COURSE OF HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE DRAWING OUR ATTENTION TO PAGE 27 OF THE PAPER BOOK HAD SUBMITTED THAT THE ASSESSEE HAS NOT DIRECTLY SOLD ITS PRODUCT S TO FLIPKART BUT HAS SOLD TO END USER S AS THE INVOICE IS RAISED IN THE NAME OF END USER. HOWEVER, ON A PERUSAL OF THE FACTS ON RECORD, WE FIN D THE AFORESAID SUBMISSION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE FACTUALLY INCORRECT. A REFERENCE TO PAGE 27 OF THE PAPER BOOK WOULD REVEAL THAT IT HAS NOTHING TO DO WITH ANY SALE EFFEC TED TO 16 ASUS INDIA PVT. LTD. FLIPKART BUT IS IN RESPECT OF A SALE MADE TO ANOTHER DISTRIBUTOR/ DEALER , RASHI PERIPHERALS PVT. LTD. AND SUCH SALE IS CO RELATED WITH THE CREDIT NOTE ISSUED IN THE NAME OF THE SAID PARTY. IN VIEW OF THE AFO RESAID, WE HOLD THAT THE REBATE/ DISCOUNT GI VEN BY THE ASSESSEE TO THE DEALERS WILL NOT COMING EITHER WITHIN THE PURVIEW OF SECTION 194C OR SECTION 194H OF THE ACT, THEREFORE, WOULD NOT REQUIRE DEDUCTION OF TAX AT SOURCE. AT THIS POINT, IT IS RELEVANT TO OBSERVE, THE ASSESSING OFFICER WHILE INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT HAS STATED THAT IT ATTRACTS SECTION 194C / 194H OF THE ACT. THE AFORESAID STATEMENT OF THE ASSESSING OFFICER MAKES IT CLEAR THAT HE HIMSELF IS NOT SURE WHETHER IT IS A PAYMENT FOR CARRYING OUT ANY WORK OR IS IN THE NATURE OF COMMISSION / BROKERAGE FOR ANY SERVICE RENDERED BY ANOTHER PARTY IN THE COURSE OF BUYING AND SELLING A PRODUCT. THAT BEING THE CASE, NO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT CAN BE MADE. ACCORDINGLY, WE DELETE THE DISALLOWANCE. 17. IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT AMOUNTING TO ` 3,99,46,787, BEING 30% OF THE VOLUME DISCOUNT GIVEN OF ` 13,31,55,945. 18. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD SUBMITTED THAT THE VOLU ME DISCOUNT IS GIVEN TO DEALERS/ DISTRIBUTORS ONCE THE QUARTERLY TARGETS ALLOTTED TO DISTRIBUTORS ARE FULFILLED. HOWEVER, THE ASSESSING OFFICER HELD THAT VOLU ME DISCOUNT IS NOTHING 17 ASUS INDIA PVT. LTD. BUT IN THE NATURE OF COMMISSION AS IT IS ESSENTIAL LY A REWARD GIVEN BY THE PRINCIPAL TO ITS AGENT FOR ACHIEVING THE TARGET SET FOR SALES. THUS, HE HELD THAT THE PAYMENT HAS TO BE TREATED AS COMMISSION AS PER SECTION 194H OF THE ACT AND PROCEEDED TO COMPUTE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. 19. THE LEANED COUNSE L FOR THE ASSESSEE SUBMITTED , VOLUME DISCOUNT IS NOTHING BUT ADDITION AL PRICE SUPPORT SYSTEM PROVIDED TO THE DEALERS/ DISTRIBUTORS IN RESPECT OF SALE OF CERTAIN SPECIFIC PRODUCTS. THE LEANED COUNSEL SUBMITTED , IN RESPECT OF SUCH SALE TRANSACTI ONS, NO THIRD PARTY IS INVOLVED. THEREFORE, THE PROVISION OF SECTION 194H OF THE ACT IS NOT ATTRACTED. FURTHER, HE REITERATED HIS SUBMISSIONS MADE IN RESPECT OF GROUND NO.2. 20. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER A ND LEARNED COMMISSIONER (APPEALS). 21. HAVING CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD, WE ARE OF THE VIEW THAT OUR REASONING WHILE DELETING THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT IN RESPECT OF GROUND NO.2 WOULD EQUALLY APP LY TO THIS ISSUE AS WELL , SINCE , THE RE VENUE HAS FAILED TO ESTABLISH ANY PRINCIPLE AGENT RELATIONSHIP BETWE EN THE ASSESSEE AND THE DEALERS/ DISTRIBUTORS TO WHOM VOLUME DISCOUNT WAS 18 ASUS INDIA PVT. LTD. GIVEN. THEREFORE, FOLLOWING OUR DETAILED REASONING GIVEN IN RESPECT OF GROUN D NO.2, WE DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 22. IN GROUND NO.4, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT MADE BY THE A SSESSING OFFICER IN RESPECT OF REIMBURSEMENT OF OCTROI AND I NSURANCE TO DEALERS/ DISTRIBUTORS. 23. AS COULD BE SEEN FROM THE FACTS ON RECOR D, THE ASSESSEE HAD REIMBURSED O CTROI PAID ON T HE PRODUCTS SOLD BY THE DEALERS/DISTRIBUTORS AS WELL AS I NSURANCE CLAIMED AGAIN ST ASUS PRODUCTS TO THE DEALERS/ DISTRIBUTORS ON ACTUAL BASIS. THE ASSESSIN G OFFICER WAS OF THE VIEW THAT SUCH REIMBURSEMENT AMOUNTING TO ` 4,13,94,071, IS IN THE NATURE OF COMM ISSION AS THE LIABILITY TO PAY OCTROI AND I NSURANCE C LAIMED IS SOLELY ON THE DEALERS/ DISTRIBUTORS. T HEREFORE, ANY REIMBURSEMENT OF OCTROI AND I NSURANCE IS IN THE NATURE OF COMMISSION AND WIL L BE COVERED UNDER SECTION 194C/ 194H OF THE ACT. ACCORDINGLY, HE DISALLOWED AN AMOUNT OF ` 1,24,18,434, OUT OF THE EXPENDITURE CLAIMED BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 24. THE LEARNED COMMISSIONER (APPEALS) ALSO SUSTAINED THE DISALLOWANCE. 19 ASUS INDIA PVT. LTD. 25. THE LEANED COUNSEL FOR THE ASSESSEE REITERATING THE SUBMISSIONS MADE IN RESPECT OF OTHER DISALLOWANCE S MADE BY THE ASSESSING OFFICER , AS CONTESTED IN THE EARLIER GROUNDS , SUBMITTED THAT THOUGH THE PAYMENT OF OCTROI AND I NSURANCE CLAIMED ARE THE LIABILITIES OF THE DEALERS/ DISTRIBUTORS, HOWEVER, THE REIMBURSEMENT OF SUCH PAYMENTS ON ACTUAL BASIS CANNOT BE TERMED AS COMMISSION OR CONTRACT FOR WORK AS PROVIDED UNDER SECTION 194C AND 194H OF THE ACT. HE SUBMITTED , SUCH PAYMENTS WERE MADE PURELY KEEPING IN VIEW THE BUSINESS EXPEDIENCY . THUS, HE SUBMITTED , NO DISALLOWANCE SHOULD BE MADE. 26. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , THE LIABILITY TO PAY OCTROI AND I NSURANCE CLAIMED IS COMPL ETELY THE BURDEN OF TH E DEALERS/DISTRIBUTORS. THEREFORE , THE REIMBURSEMENT OF SUCH EXPENDITURE EVEN ON ACTUAL BASIS WOULD BE IN THE NATURE OF COMMISSION. 27. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THERE CANNOT BE A NY DISPUTE THAT THE PAYMENT OF OC TROI AND I NSURANCE CLAIMED IS THE LIABILITY OF THE DEALERS/ DISTRIBUTORS. JUST TO INCENTIVIZE THE DEALERS/ DISTRIBUTORS, THE ASSESSEE HAS REIMBURSED THE PAYM ENT MADE TOWARDS OCTROI / INSURANCE CLAIMED TO THE DEALERS / DISTRIBUTORS ON ACTUAL BASIS. HOWEVER, I N THE FACTS OF THE PRESENT CASE, WE ARE NOT CALLED UPON TO DECIDE THE ALLOWABILITY OF SUCH EXPENDITURE AT THE HANDS OF THE ASSESSEE AS BUSINESS EXPENDITURE. THE ASSESSING 20 ASUS INDIA PVT. LTD. OFFICER HIMSELF HAS NOT DISPUTED THAT THE EXPENDITURE IS ALLOWABLE. THE PART DISALLOWANCE MADE BY HIM IS ONLY ON ACCOUNT OF ALLEGED NON DEDUCTION OF TAX AT SOURCE WHILE MAKING SUCH PAYMENT. ACCORDING TO THE ASSESSING OFFICER, THE REIMBURSEM ENT OF OCTROI AND I NSURANCE CLAIMED IS COVERED UNDER THE PROVISION OF SECTION 194C AND 194H O F THE ACT. AS DISCUSSED IN DETAIL WHILE DEALING WITH GROUND NO.2 (SUPRA), WE HAVE HELD THAT NEITHER THERE IS ANY CONTRACT FOR WORK BETWEEN THE ASSESSEE AND THE DE ALERS/ DISTRIBUTORS AS PROVIDED UNDER SECTION 194C OF THE ACT, NOR THERE IS ANY PRINCIPAL AGENT RELATIONSHIP BETWE EN THE ASSESSEE AND THE DEALERS/ DISTRIBUTORS TO TREAT THE PAYMENT MADE AS COMMISSION IN TERMS OF SECTION 194H R/W ITS EXPLANATION. THEREFORE, WE ARE OF THE VIEW THAT SINCE THE PAYMENT MADE BY THE ASSESSEE ARE NOT COVERED UNDER SECTION 19 4C/ 194H OF THE ACT, NO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT COULD HAVE BEEN MADE. AT THE COST OF RE PETITION , WE MUST OBSERVE THAT CONSIDERING THE LIMITED ISSUE ARISING IN THE PRESENT APPEAL AS TO WHETHER THE REIMBURSEMENT OF OCTROI/I NSURANCE CLA IMED IS COVERED UNDER SECTION 194C/194H OF THE ACT, THEREBY, REQUIRING DEDUCTION OF TAX AT SOURCE, WE REFRAIN FROM EXPRESSING ANY OPINION WHETHER THE EXPENDITURE IS ALLOWABLE AS A BUSINESS EXPENDITURE AT THE HANDS OF THE ASSESSEE. THIS GROUND IS ALLOWED. 21 ASUS INDIA PVT. LTD. 28. IN GROUND NO.5, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT IN RES PECT OF PAYMENT MADE TO DEALERS/ DISTRIBUTORS ON ACCOUNT OF REFURBISHING AND REPAIR OF DEFECTIVE PRODUCTS. 29. BRIEF FACTS ARE, DURING THE YEAR UNDER CON SIDERATION, THE ASSESSEE HAD INCURRED EXPENDITURE OF ` 6,76,00,752, TOWARDS ADDITIONAL DISCOUNT GIVEN TO DEALERS/ DISTRIBUTORS TO GET THE DEFECTIVE PRODUCT REPAIRED AT THEIR END. ACCORDING TO THE ASSESSEE, TO AVOID GETTING THE PRODUCTS BACK FROM THE DEALERS / DISTRIBUTORS GETTING THEM REPAIRED AND AGAIN RE SELLING THEM, THE ASSESSEE ASKS THE DEALERS/ DISTRIBUTORS TO REPA IR THE PRODUCTS AT THEIR END AND MAKES GOOD THE COST OF SUCH REPAIR BY REIMBURSING AT FIXED RATE OF 30%. THE ASSESSING OFFICER WAS O F THE VIEW THAT HAD THE DEALERS/ DISTRIBUTORS WOULD NOT HAVE REPAIRED THE PRODUCTS , THE ASSESSEE WOULD HAVE HIRED THE SERVICES OF A PROFESSIONAL TO UNDERTAKE REPAIRS. THEREFORE, THE ASSESSEE WOULD HAVE BEEN LIABLE TO DEDUCT TAX AT SOURCE WHILE MAKING PAYMENT FOR SUCH REPAIRS TO THE PROFESSIONAL AS IT WOUL D BE COVERED UNDER SECTION 194C/ 194J OF THE ACT. THE ASSESSEE HAVING FAILED TO DEDUCT TAX AT SOURCE, THE ASSESSING OFFICER DISALLOWED 30% AMOUNTING TO ` 2,02,80,226, UNDER SECTION 40(A)(IA) OF THE ACT. THE DISALLOWANCE WAS ALSO SUSTAINED BY LEARNED COMMISSIONER (APPEALS). 22 ASUS INDIA PVT. LTD. 30. THE LEANED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE DEPARTMENTAL AUTHORITIES. WHILE DOING SO, HE BROUGHT TO THE NOTICE OF THE BENCH THE INVOICES RAISED AND CREDIT NOTES ISSU ED FOR REIMBURSEMENT. 31. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND LEARNED COMMISSIONER (APPEALS). 32. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS REGARDS APPLICABILITY OF S ECTION 194J, NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE PAYMENT MADE COMES WITHIN THE PURVIEW OF FEES FOR PROFESSIONAL SERVICES, OR FEES FOR TECHNICAL SERVICES OR ANY OTHER PAYMENT UNDER SUB SECTION (1) OF SECTION 194J OF THE AC T. THEREFORE, IN OUR VIEW, SUCH PAYMENT WILL NOT COME WITHIN SECTION 194J OF THE ACT. 33. NOW, WE WILL EXAMINE APPLICABILITY OF SECTION 194C OF THE ACT. AS COULD BE SEEN FROM THE FACTS ON RECORD, IF ANY OF THE PRODUCTS SOLD BY THE ASSESSEE TO THE DEALERS/ DISTRIBUTORS IS FOUND T O BE DEFECTIVE REQUIRING REPAIR/REFU RBIS H ING , AS A MATTER OF POLICY , INSTEAD OF GETTING BACK SUCH D EFECTIVE GOODS FROM THE DEALERS/ DISTRIBUTORS AND GETTING THEM REPAIRED , THE ASSESSEE ASKS THE CONCERNED DEALER/DISTRIBUTOR TO REPAIR A T THEIR END AND SELL . TO COMPENSATE SUCH REPAIR COST, THE 23 ASUS INDIA PVT. LTD. ASSESSEE ALLOWS 30% ADDITIONAL DISCOUNT IN RESPECT OF THE DEFECTIVE PRODUCTS BY ISSUING CREDIT NOTE . THUS, IT IS VERY MUCH CLEAR, ORDINARILY IT IS THE DUTY OF THE ASSESSEE TO REPAIR/REFURBISH THE DE FECTIVE PRODUCTS. BASICALLY, AS A MATTER OF CONVENIENCE, ASSESSEE HAS OUTSOURCED SUCH WORK TO THE DEALERS/DISTRIBUTORS AND ALLOWED ADDITIONAL 30% DISCOUNT. IN OUR VIEW, THIS ADDITIONAL 30% DISCOUNT GIVEN BY THE ASSESSEE TOWARDS COST OF REPAIR IS NOTHING BU T PAYMENT MADE TOWARDS CONTRACT FOR WORK AS DESCRIBED UNDER SECTION 194C OF THE ACT. IN FACT, IN THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER THE ASSESSEE ITSELF HAS STATED THAT SUCH DISCOUNT WAS PROVIDED FOR COST OF LABOUR. THEREFORE , WE ARE OF THE V IEW, THE PAYMENT MADE TOWARDS REFURBISH / REPAIR CLEARLY COMES WITHIN THE AMBIT OF SECTION 194C OF THE ACT. THE ASSESSEE HAVING FAILED TO DEDUCT TAX AT SOURCE IN TERMS THEREOF, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE A CT IS SUSTAINED. THIS GROUND IS DISMISSED. 34. IN GROUND NO.6, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF ` 1,40,91,023, BEING THE PROVISION FOR SALE S REBATE UNDER SECTION 40(A)(IA) OF THE ACT. 35. BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASS ESSEE HAS CREATED PROVISION FOR AN AMOUNT OF ` 4,69,70,076, TOWARDS SALES REBATE ON THE BASIS OF RATIO OF PERCENTAGE OF SALES REBAT E TO SALES OF PAST YEARS. JUSTIFYING SUCH CLAIM, 24 ASUS INDIA PVT. LTD. THE ASSESSEE HAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE QUANTUM OF PROVISION IS COMPUTED AFTER REVERSIN G THE PRECEDING YEARS PROVISION . THE ASSESSING OFFICER, HOWEVER, WAS NOT CONVINCED WITH THE SE SUBMISSIONS. HE OBSERVED , THE PROVISION IS NOTHING BUT A COMMIS SION TO INCENTIVIZE THE D EALERS/ DISTRIBUTORS. HE OBSERVED , SUCH WORK ING OF PROVISION DOES NOT CONSIDER ANY ASPECT OF SALE S PROMOTION DONE BY THE DEALERS/ DISTRIBUTORS DURING THE CURRENT YEA R. THUS, TREATING THE PROVISION MADE AS COMMISSION UNDER 194H OF THE ACT, THE ASSESSING OFFIC ER MADE THE DISPUTED DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT FOR THE ALLEGED FAILURE ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE. THE LEARNED COMMISSIONER (APPEALS) ALSO UPHELD THE DISALLOWANCE. 36. THE LEANED COUNSEL FOR THE ASSESSEE SUBMITTED , THERE BEING NO PRINCIPAL AGENT RELATIONSHIP BETW EEN THE ASSESSEE AND THE DEALER/DISTRIBUTOR, THE PROVISION FOR SALES REBATE CANNOT BE TREATED AS COMMISSION UNDER SECTION 194H OF THE ACT. 37. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , FIRST LY THE EXPENDITURE CLAIMED BY THE ASSESSEE IS MERELY A PROVISION. THEREFORE, IT CANNOT BE ALLOWED AS EXPENDITURE. FURTHER, HE SUBMITTED , EVEN IF IT IS A PROVISION STILL SINCE THE ASSESSEE HAS CLAIMED IT AS DEDUCTION, TDS PROVISION WOULD BE APPLICABLE. HE S UBMITTED , MERE MENTIONING OF WRONG PROVISION BY THE ASSESSING OFFICER WOULD NOT INVALID ATE THE 25 ASUS INDIA PVT. LTD. DISALLOWANCE MADE. FURTHER, HE SUBMITTED , THOUGH THE ASSESSING OFFICER HAS NOT DEALT WITH THE ALLOWABILITY OF THE EXPENDITURE UNDER SECTION 37 OF THE ACT, HOWEVER, THE REVENUE CAN RAISE SUCH PLEA BEFORE THE TRIBUNAL. IN SUPPORT OF SUCH CONTENTION, THE LEANED COUNSEL FOR THE ASSESSEE REL IED UPON T HE FOLLOWING DECISION : PAVANKUMAR M. SANGHVI VS. ITO, [2017] 81 TAXMANN.COM 208 (AHMEDABAD TRIB.). 38. IN REJOINDER, THE LEARNED COUNSEL SUBMITTED , NEITHER THE ASSESSING OFFICER NOR LEARNED COMMISSIONER (APPEALS) HAD ANY DOUBT WITH REGARD TO THE GENUINEN ESS OR ALLOWABILITY OF EXPENDITURE. A PART DIS ALLOWANCE UNDER SECTION 40(A)(IA ) WAS MADE ONLY BECAUSE THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE. THEREFORE, THE REVENUE CANNOT RAISE A COMPLETELY NEW PLEA AT THIS STAGE REGARDING THE ALLOWABILITY OF EXPENDI TURE. 39. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. NO DOUBT, THE ASSESSING OFFICER HAS DIS ALLOWED A PART OF THE PROVISION MADE TOWARDS SALES REBATE UNDER SECTION 40(A)(IA) OF THE ACT BY TREATING IT AS COMMISSION UNDER SECTION 1 94H OF THE ACT. THE LEARNED COMMISSIONER (APPEALS) HAS ALSO CONFIRMED THE AFORESAID DECISION OF THE ASSESSING OFFICER. THEREFORE, THE PRECISE ISSUE ARISING BEFORE US IS THE VALIDITY OF DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT BY TREATING THE EX PENDITURE CLAIMED AS PAYMENT TOWARDS 26 ASUS INDIA PVT. LTD. COMMISSION. AS DISCUSSED EARLIER, WHILE DEALING WITH THE ISSUE RAISED IN OTHER GROUNDS WHICH ARE MORE OR LESS IDENTICAL TO THE ISSUE RAISED IN THIS GROUND, WE HAVE HELD THAT AS PER THE FACTS ON RECORD, A PRINCIPAL AGENT RELATIONSHIP BETWE EN THE ASSESSEE AND THE DEALERS/ DISTRIBUTORS IS NOT DIS CERNIBLE. THEREFORE, THE REBATE/ DISCOUNT GIVEN CANNOT BE TREATED AS COMMISSION UNDER SECTION 194H OF THE ACT. OUR AFORESAID REASONING RENDERED IN CONTEXT OF GROUND NO.2, WOULD EQUA LL Y APPLY TO THIS GROUND AS WELL. THEREFORE, THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) DESERVES TO BE DELETED. AS REGARDS THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE PROVISION IS NOT ALLOWABLE AS EXPENDITURE , WE ARE AFRAID , WE CANN OT ENTERTAIN SUCH CLAIM AT THIS STAGE. AS COULD BE SEEN FROM THE FACTS ON RECORD, THE ASSESSING OFFICER HAS NOT RAISED ANY DOUBT WITH REGARD TO THE GENUINENESS OR ALLOWABILITY OF EXPENDITURE. HE HAS DISALLOWED PART OF SUCH EXPENDITURE SIMPLY FOR THE REASON THAT TAX HAS NOT BEEN DEDUCTED AT SOURCE IN TERMS O F SECTION 194H OF THE ACT. L EARNED COMMISSIONER (APPEALS) HAS ALSO APPROVED THE AFORESAID DECISION OF THE ASSES SING OFFICER. THEREFORE, THE LIMITED ISSUE BEFORE US IS THE VALIDITY OF DISALLOWANCE UNDER SE CTION 40(A)(IA) OF THE ACT. IN VIEW OF THE AFORESAID, WE DECLINE TO ENTERTAIN THE FRESH PLEA OF LEARNED DEPARTMENTAL REPRESENTATIVE. THE DECISION S CITED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE BEING FACTUALLY DISTINGUISHABLE WOULD NOT APPLY TO THE FACTS OF THE PRESENT CASE. THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 27 ASUS INDIA PVT. LTD. 40. GROUND NO.7, BEING GENERAL IN NATURE DOES NOT REQUIRE ADJUDICATION. 41. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ITA NO.942/MUM./2020 ASSESSMENT YEAR 2017 18 42. GROUNDS NO.1 AND 7, BEING GENERAL IN NATURE DO NOT REQUIRE ADJUDICATION. 43. GROUNDS NO.2 TO 6 ARE CORRESPONDING TO GROUND NO.2 TO 6, RAISED BY THE ASSESSEE IN ITS APPEAL BEING ITA NO.943/MUM./2020, DECIDED BY US IN THE EARLIER PART OF THE ORDER. FOLLOWING OUR DECISION THERE IN, WE ALL OW GROUNDS NO.2, 3, 4 AND 6. WHEREAS, FOLLOWING OUR DECISION, THEREIN, WE DISMISS GROUND NO.5. 44. IN THE RESULT, APPEAL IS PARTLY ALLOWED. 45. TO SUM UP, BOTH THE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED THROUGH NOTICE BOARD UNDER RULE 34(4) OF TH E INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 ON 05.10.2020 SD/ - MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED : 05.10.2020 28 ASUS INDIA PVT. LTD. COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI