2018 (4) TMI 561 - AT - Income Tax

Assessee's Appeal Partly Allowed, Issue of Disallowance Remitted

M/s. Jai Balaji Textile Mills Versus The Asst. CIT, Circle-24 (1) (1), Mumbai

The Tribunal partly allowed the assessee's appeal, remitting the issue of disallowance of discounts and incentives back to the Assessing Officer for fresh ... TDS u/s 194H - payments made by the appellant to various customers on account of 'Rate difference, discounts and Incentives' - tds liability - principal to principal relationship - Held that:- We find the sole basis for the treatment for the claim of discount and incentives given by the assessee to be commission payments is that the assessee has not produced the agreement with customers or the scheme of incentive/rebates. We find that the assessee in its submissions before the ld. Commissioner of Income Tax (Appeals) which he has also recorded in his appellate order has duly contested that the Assessing Officer never required the assessee to produce such documents. Despite such submissions of the assessee, the ld. Commissioner of Income Tax (Appeals) himself never asks the assessee to produce these documents but proceeded to hold that in the absence of any such documents, adverse view was to be taken. In this view of the matter, in our considered opinion, this issue needs to be remitted to the file of the Assessing Officer. The Assessing Officer is directed to consider the issue afresh after giving the assessee proper opportunity of being heard. Issues Involved:1. Disallowance of discounts and incentives under Section 40(a)(ia) of the Income Tax Act, 1961.2. Territorial jurisdiction of the Assessing Officer (AO).Issue-wise Detailed Analysis:1. Disallowance of Discounts and Incentives under Section 40(a)(ia):Facts and Arguments:- The assessee debited amounts under 'Rate Difference to Customers,' 'Incentive Account,' 'Special Rebate,' and 'Discount against Export Sales,' totaling Rs. 1,14,02,802.- The AO treated these payments as Commission/Brokerage and disallowed them under Section 40(a)(ia) for non-deduction of TDS under Section 194H.- The assessee argued that these were trade discounts and not commissions, citing a principal-to-principal relationship with customers and referencing the Bombay High Court decision in Commissioner of Income Tax v. Intervet India (P) Ltd [2014] 49 taxmann.com 14.Findings:- The AO noted that the discounts were not reflected in invoices and were not reduced from sales turnover for sales tax purposes.- The Commissioner of Income Tax (Appeals) upheld the AO's decision, distinguishing the case from Intervet India (P) Ltd, noting that the assessee did not produce agreements or incentive schemes and failed to establish a principal-to-principal relationship.- The Tribunal found that the AO never required the assessee to produce such documents, and the Commissioner of Income Tax (Appeals) did not properly address the assessee's submissions or the binding jurisdictional High Court decision.Conclusion:- The Tribunal remitted the issue back to the AO for fresh consideration, directing the AO to give the assessee a proper opportunity to present their case and to duly consider the observations made.2. Territorial Jurisdiction of the Assessing Officer:Facts and Arguments:- The assessee contested that the AO had no territorial jurisdiction, arguing that the principal place of business was outside the AO's jurisdiction.- The Commissioner of Income Tax (Appeals) noted that this issue was not contested before the AO and that the defect was curable under Section 292B of the Income Tax Act, which addresses technical objections without substance.Findings:- The Tribunal observed that the assessee did not provide necessary particulars, such as the change in address due to a change in partnership.- The Commissioner of Income Tax (Appeals) had reasonably dismissed the ground, citing Section 292B and the intent to avoid purely technical objections.Conclusion:- The Tribunal upheld the Commissioner of Income Tax (Appeals)'s order on this issue, finding no infirmity in it.Final Judgment:- The appeal by the assessee was partly allowed for statistical purposes, with the issue of disallowance of discounts and incentives remitted back to the AO for fresh consideration, while the issue of territorial jurisdiction was upheld in favor of the revenue.