Appellant not liable to deduct tax on commission expenditure due to principal-to-principal transactions. Appeal allowed.

The Tribunal held that the appellant was not obligated to deduct tax at source on commission expenditure as the transactions were on a principal-to-principal basis and the appellant did not credit or pay the income to the payees. Relying on a decision of the Jurisdictional High Court, it was concluded that there was no requirement to deduct tax under section 194H. The appeal was allowed, and the disallowance of commission expenditure was set aside.

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Issues involved:
The issue involved in the present appeal is whether the appellant is liable to deduct tax at source u/s 194H in respect of expenditure claimed to have been debited to Profit & Loss Account under the head "commission."

Facts of the case:
The appellant, an individual engaged in the trading of onions, filed a Return of Income for the assessment year 2012-13 declaring a total income of Rs.5,23,249. The assessment was completed by the Income Tax Officer, who disallowed commission expenditure of Rs.14,29,170 for non-deduction of tax at source under section 40(a)(ia) of the Income Tax Act, 1961.

Contentions and decisions:
The appellant contended that the transactions were undertaken on a principal-to-principal basis, not falling within the purview of section 194H of the Act. The appellant also argued that the payees of the commission had already offered such income in their tax returns. The CIT(A) rejected the contention that the transactions were on a principal-to-principal basis but granted partial relief under the second proviso to section 40(a)(ia) of the Act.

Arguments and submissions:
The appellant had only received the net sale proceeds from the buyers and had not received the entire gross receipts. The appellant argued that since there was neither credit to the parties' account nor actual payment by the appellant, the obligation to deduct TDS did not arise. The appellant relied on a decision of the Bombay High Court in a similar case.

Judgment:
The Tribunal held that the appellant was not obligated to deduct TDS on the commission expenditure based on the facts that the appellant received sale proceeds net of various charges and did not pay or credit such income to the payee's account. Citing a decision of the Jurisdictional High Court, the Tribunal concluded that there was no obligation to deduct tax at source under section 194H of the Act in such circumstances. Therefore, the appeal filed by the assessee was allowed.

Separate Judgment:
No separate judgment was delivered by the judges in this case.

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