2014 (8) TMI 941 - AT - Income Tax

Tribunal rules discounts not subject to TDS under Income-tax Act

Income-tax Officer (TDS) -2(2), Mumbai Versus M/s. Kesar Travels Ltd,

The Tribunal upheld the Commissioner's decision, dismissing the Department's appeals regarding the treatment of discounts as commission subject to TDS ... Non deducting TDS under section 194H - levy of penalty under section 201(1)/201(1A) - Whether a discount has the same nomenclature as that of commission, because, the Assessing Officer treated discount as commission - Held that:- Even in normal parlance, commission is passed on to the person, who solicits the business, whereas discount is a reduction on the sale price. Here, the assessee is offering discount to its customers, wherein, the customer pays less than the price quoted to him. The issue is squarely covered by the decision of the hon'ble Bombay High Court, in the case of CIT v. Qatar Airways [2009 (3) TMI 598 - BOMBAY HIGH COURT], wherein the hon'ble lordships were seized with identical issue and held that the provisions of section 194H are not attracted in the case of discount, being passed to the customer. - view taken by the Commissioner of Income-tax (Appeals) is correct, when he observes, 'it is merely a discount to the customers on which TDS provisions are not attracted'. We, therefore, sustain the view of the Commissioner of Income-tax (Appeals) and as a consequence, both grounds raised in the GOA are rejected. - Decided against Revenue. Issues involved:- Whether discounts offered by the assessee to customers should be treated as commission for the purpose of TDS under section 194H of the Income-tax Act, 1961.Comprehensive Analysis:1. The Department filed four appeals against the orders of the Commissioner of Income-tax (Appeals) that deleted demands raised under section 201(1)/201(1A) of the Income-tax Act, 1961. The appeals had common grounds related to the treatment of discounts as commission.2. The primary issue revolved around whether the discounts provided by the assessee, a registered IATA air travel agent, should be considered as commission subject to TDS under section 194H. The Assessing Officer treated the discounts as commission, leading to penalties.3. The Commissioner of Income-tax (Appeals) accepted the assessee's contention that the discounts were not commission but merely reductions offered to customers. The Commissioner emphasized that the discounts were not payments for services rendered, unlike commissions.4. The Tribunal deliberated on the nature of discounts and commissions, citing a Bombay High Court decision that held TDS provisions were not applicable to discounts passed on to customers. The Tribunal agreed with the Commissioner's view that the discounts were not subject to TDS.5. Consequently, the Tribunal upheld the Commissioner's decision, dismissing the Department's appeals across multiple assessment years (2002-03 to 2005-06) based on the consistent treatment of discounts as not falling under the purview of commission for TDS.6. The Tribunal's judgment reiterated the common and consolidated approach taken due to identical issues in all appeals, providing a comprehensive resolution to the matter in favor of the assessee.In conclusion, the Tribunal's detailed analysis affirmed that the discounts offered by the assessee were not akin to commission for TDS purposes, leading to the dismissal of all four appeals by the Department across various assessment years.