Tribunal rules for assessee on TDS disallowance, remits income verification back to AO.

The Tribunal allowed the appeal in part. It ruled in favor of the assessee, deleting the disallowance under Section 40(a)(ia) for non-deduction of TDS on commission payments. The issue of alleged under-reporting of commission income was remitted back to the AO for further verification. The Tribunal dismissed the discrepancy in interest on the Income Tax refund as not pressed. The decision was pronounced on 19/07/2018.

---

---

Issues Involved:
1. Disallowance under Section 40(a)(ia) for non-deduction of TDS under Section 194H on commission payment.
2. Addition due to alleged under-reporting of commission income.
3. Addition due to discrepancy in interest on Income Tax refund.

Issue-wise Detailed Analysis:

1. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS under Section 194H on Commission Payment:

The assessee, a wholesale dealer of SIM cards and mobile accessories, was disallowed Rs. 28,22,036/- by the AO for not deducting TDS on commission payments to retailers/sub-dealers as required under Section 194H. The assessee contended that mobile companies had already deducted TDS on behalf of the assessee for commissions paid directly to retailers/sub-dealers. The assessee argued that the commissions were directly paid by telecom companies, with the assessee merely recording these transactions in its books for accounting purposes. The Tribunal referenced the case of M/s Chocopack Enterprises vs. ITO, where it was held that if the commission was directly paid by the telecom company and the assessee only recorded the entries, the provisions of Section 194H would not apply to the assessee. Following this precedent, the Tribunal deleted the disallowance under Section 40(a)(ia), concluding that the assessee, acting merely as an intermediary, was not required to deduct TDS on the commission amounts directly paid by the telecom companies.

2. Addition Due to Alleged Under-Reporting of Commission Income:

The AO found a discrepancy between the commission income reported by the assessee (Rs. 45,46,072/-) and the amount shown by the mobile companies (Rs. 55,73,310/-), leading to an addition of Rs. 10,27,298/-. The assessee explained that the difference arose due to service tax reimbursement (Rs. 3,73,953/-) and commission directly paid by the companies to retailers (Rs. 6,60,876/-). The Tribunal noted that these details were not considered by the AO and remitted the issue back to the AO for verification of the reconciliation provided by the assessee. The AO was directed to re-examine the records and make a decision after giving the assessee an appropriate opportunity for a hearing.

3. Addition Due to Discrepancy in Interest on Income Tax Refund:

The assessee contested an addition of Rs. 2,234/- made by the AO, who calculated the interest on an Income Tax refund as Rs. 9,434/- instead of the actual Rs. 7,200/- received. At the hearing, the assessee chose not to press this ground, and the Tribunal dismissed this ground as not pressed.

Conclusion:

The appeal was partly allowed. The Tribunal deleted the disallowance under Section 40(a)(ia) and remitted the issue of alleged under-reporting of commission income back to the AO for verification. The ground concerning the discrepancy in interest on the Income Tax refund was dismissed as not pressed. The Tribunal's order was pronounced in the open court on 19/07/2018.

---