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TaxTMI 
TaxTMI 
TaxTMI 
2011 (5) TMI 512
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....r, Chartered Accountants appeared before the Assessing Officer and submitted the requisite details. On scrutiny of the accounts, it revealed to the Assessing Officer that assessee has debited a sum of Rs. 1,19,16,142 under the head 'marketing expenses including incentive and discount'. The Assessing Officer had issued a show cause notice inviting assessee's explanation as to why deduction of this amount be not disallowed, because it failed to deduct tax at source, while making these payments in the shape of incentives and discount. In response to the query of Assessing Officer, it was contended by the assessee that it has received a commission from the builders for booking the flat/houses in their projects. The amount received by the assessee from the builders are commission. Hence, tax has been deducted at source on such payments to the assessee by the builders. The assessee had given a discount to the ultimate buyer of flat. Hence, assessee is just passing a part of such commission from the builder to the buyer. It is not paying any commission to any sub-agents. The alleged commissions given by the assessee to the purchaser of the flat is the discount to the customers. The relati....
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....n. Further there is no principle agent relationship between the assessee and the persons who had done the original booking. As such the provision of section 194H are not attracted in this case. Thus, the disallowance of Rs. 1,19,16,142 made by the Assessing Officer under section 40(a)(ia) is hereby deleted." 4. Ld. DR while impugning the order of ld. Assessing Officer, contended that assessee has paid the commission to the ultimate purchaser . Therefore, it should have deduct the TDS. He pointed out that Assessing Officer has observed in paragraph No. 3.3 that assessee has received a commission from the builder and part of it, when shared by the assessee with the third party is still commission. Therefore, TDS ought to have been deducted. On the other hand, ld. Counsel for the assessee drew our attention towards section 194H and explanation 1 appended to this section. He pointed out that there is no relationship of principal and agent between the assessee and the ultimate purchaser of the flat. No services have been rendered by those customers to whom it can be said that commission/brokerage was paid by the assessee. The assessee has only provided discount from the commission whic....
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....sion "commission or brokerage" has been explained in the explanation appended to this section. According to the meaning provided in the explanation, the commission would be considered, if any person received it directly or indirectly on behalf of another person for the services rendered, and such services should not be professional services. In the present case, admittedly the person to whom discount was granted by the assessee were not acting as an agent for the assessee, rather they are the purchaser of the property. They have not provided any type of services to the assessee. They have just booked the flat through the assessee. In fact, assessee is an agent between the builder and the ultimate purchaser of the flats. The assessee has parted with some part of the commission received from the builder from alluring the purchaser so that it can earn more commission. It is just providing a discount to the purchaser and not paying any commission for any services taken from such customers. It appears that ld. Assessing Officer was influenced by the nomenclature of the receipt in the hands of the assessee. He failed to distinguish what character such receipt would attain when it will be....
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....ous stations. It is not practically possible for the assessee to open offices on various locations, for the said purpose the assessee has to engage some other persons for the booking. He drew our attention towards page 17 of the paper book, where details of commission paid by the assessee is available. With the help of this chart, he pointed out that booking of projects was made at different places namely , Mohali, Kundaly etc. These persons have helped the assessee to book the properties for its customer. Payments have been made through account payee cheque. All the persons are Income-tax assessee. Their permanent account number has been given to the Assessing Officer. They have given confirmation. They have also disclosed the details of the booking made for the assessee. Surender Mukhija HUF and Sorabh Chopra had given advertisement in the newspaper for booking of the flats at DLF TDI etc. Assessee has placed on record copies of the newspaper cutting exhibiting the advertisement given by these persons. Thus according to the assessee, these persons are in the real estate business. They are carrying out these activities and they extended the help to the assessee. All these details ....
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....per found that name of M/s Surendra Properties, a proprietary concern of one of the directors and Surendra Mechanical Engineer is also appearing in the advertisement. Thus according to the Assessing Officer, the expense was not exclusively incurred for the business of the assessee. He disallowed 20 per cent of the expenses and made an addition of Rs. 12,75,635. On appeal, ld. CIT(A) restricted this disallowance to 10 per cent. 14. Ld. counsel for the assessee submitted that Shri Surendra Mukhija has also incurred similar expenditure in his proprietary concern. He had incurred a sum of Rs. 20,39,479. The name of the assessee appeared in all those advertisement and Assessing Officer has made disallowance of 25 per cent from his claim on the ground that expense was not exclusively incurred by Shri Surendra Mukhija for his business. He submitted that if expenses incurred by the assessee and there is incidental benefit to some other concern, then expense cannot be disallowed. He also pointed out by giving assessee's name in the advertisement given by Shri Surender Mukhija assessee has been compensated. For butteracing his contention, he relied upon the decision of Hon'ble Delhi High Co....