Sale discount not claimed as deduction cannot be disallowed under tax deduction rules for retailers' SIM card margins.

Retail discounts on SIM cards and recharge coupons were treated as a sale discount, not commission, because the difference from MRP was not debited as expenditure or claimed in computing business income. Section 40(a)(ia) applies only where the amount is of a deductible nature, tax is required to be deducted on it, and the sum has been claimed as a deduction. Since no deduction was claimed, no disallowance could be made, and the addition was deleted. The principal-agent issue and reliance on jurisdictional precedent became unnecessary to decide.

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Issues: Whether the discount allowed to retailers on sale of SIM cards and recharge coupons was commission within the meaning of section 194H so as to attract disallowance under section 40(a)(ia), when the amount was not claimed as an expenditure in the profit and loss account.

Analysis: The assessee sold the products to retailers at a discounted rate below the MRP fixed by the principal company. The impugned difference was only the sale discount and was not debited as expenditure in the books or claimed in computing business income. The precondition for section 40(a)(ia) is that the amount must be of a nature covered by the section, tax must be deductible on it, and the amount must have been claimed as a deduction while computing income. Where no deduction is claimed, no disallowance can be made. On these facts, the amount could not be brought within section 40(a)(ia), and the controversy on principal-agent character and applicability of the jurisdictional precedent became unnecessary to decide.

Conclusion: The discount was not liable to be disallowed under section 40(a)(ia), and the addition was deleted in favour of the assessee.

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