Tribunal rules non-executive Directors' payments not subject to tax deduction under section 194H

The Tribunal dismissed the Revenue's appeals and upheld the Commissioner's decision that no tax deduction was required on payments to non-executive Directors. The Tribunal determined that the payments did not fall under the category of 'commission or brokerage' as per section 194H, referencing previous rulings and distinguishing the nature of services provided by non-executive Directors from those covered under 'commission or brokerage.'

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Issues:
Appeals by Revenue against orders of Commissioner of Income Tax (Appeals) regarding tax deduction on payments to non-executive Directors.

Analysis:
The Revenue challenged the Commissioner's findings that no tax should be deducted on payments to non-executive Directors. The Assessing Officer held the payments fell under 'commission or brokerage' as per section 194H, thus requiring tax deduction. The Commissioner relied on a Tribunal decision in a similar case and directed not to treat the assessee as in default.

The Department contended that the non-executive Directors' payments were akin to commission, falling under section 194H, and the assessee should be considered in default. Conversely, the assessee argued that the payments did not align with the definition of 'commission' under section 194H, citing a Tribunal decision in a similar context.

The Tribunal examined the definitions of 'commission or brokerage' under section 194H and 'professional or technical services' under section 194J. It noted that non-executive Directors do not provide services falling under 'commission or brokerage.' The amendment in section 194J, effective from July 2012, did not apply to the assessment years in question. Referring to a precedent involving sitting fees paid to directors, the Tribunal upheld the Commissioner's decision, stating no tax deduction was necessary on the payments to non-executive Directors.

In conclusion, the Tribunal dismissed the Revenue's appeals, upholding the Commissioner's decision. The Tribunal affirmed that the payments to non-executive Directors did not qualify as 'commission or brokerage' under section 194H, as per the Tribunal's previous ruling.

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