TaxTMI 
TaxTMI 
2014 (1) TMI 304
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....ees to whom they have sold their goods. These amounts were claimed as reimbursement of expenses incurred by them. However, the A.O. noted that the case of the assessee was not reimbursement of actual expenses incurred by consignees but a fixed percentage was paid irrespective of the actual expenses incurred by them. Therefore, as per the A.O. the assessee was liable to deduct tax at source as per the provisions of section 194H of the Act. Since the assessee was liable to deduct tax at source and has failed to do so, the A.O. made an addition of Rs.28,14,174/- by invoking the provisions of section 40(a)(ia) of the Act. 4. The addition made by the A.O. has been confirmed by the CIT(A) as under:- (Paragraph no.5, page nos.7 & 8) "5. I have carefully considered the assessment order as well as the written submission of the appellant company. I find that in the Assessment Year 2007-08, an identical issue was adjudicated upon by the CIT(A)-II, Agra wherein the following decisions has been given. "I have analyzed the matter and find that after going through the submissions made by the ld. AR it is abundantly....
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....sp; The fee given an agent or sales person for his or her services. (v) As per Dictionary of CULTUIRAL LITERACY ECNOMICS A fee paid to a broker or other financial agents for negotiating a sale. The fee is based on percentage of sale price. 5.1 In the light of above dictionary meaning, if we see the facts of the case under consideration, we notice that the assessee claimed Rs.28,14,174/- as revenue expenses on consignment sales in profit and loss account. It is relevant to note that the assessee paid commission on sale and were separately accounted for under the head commission on sale of Rs.48,55,646/-in profit loss account. The consignee agents make the sale on behalf of the assessee company to the distributor/dealer/retailer appointed by them for which they are paid commission at the fixed percentage as per the Agreement executed between them and TDS is deducted on the said commission. No dispute on this issue. Goods are sent to the consignee agents from Malanpur Unit for which the primary freight is paid on behalf of the assessee company. This freight paid is reimbursed by the assessee compa....
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.... (ii) Consignee agent incurs expenses on sales on behalf of the assessee company. (iii) Consignee agent maintains day to day details of expenses incurred by them for and behalf of the assessee company. (iv) Monthly Sale Patti is sent by consignee agents along with ledger account of expenses incurred. (v) In Sale Patti consignee agent, from the sale amount deduct their commission and expenses which they have to receive from the assessee company on the basis of fixed cost rate as per agreement. (vi) On receipt of Sale Patti credit note for the expenses is issued. (vii) In the books of the assessee company amount of credit note is debited under the head "Expenses on consignment sale". 5.2 The commission is said to be payment of commission if it is evident that it is being paid for service of a person provided in respect of sale of product of the assessee. In the case ....
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....signee agents on behalf of the assessee company are from the sale amount collected by them as there always remain outstanding balance. 1.8 That the Assessing Officer has treated the reimbursement of expenses as commission paid only on the ground that the expenses are reimbursed at fixed rate and therefore it is not in the nature of reimbursement of expenses but it was part and parcel of commission on which tax at source has not been deducted and consequently made addition u/s 40a(ia) of the Act." 5.3 The concerned parties have also furnished the sale Patti along with claim of the expenses on sale of consignment goods the claim of expenses given detail the expenses pertaining to the monthly selling expenses loading and unloading dealing with expenses. These expenses have been adjusted and accounted for in the account of respective parties. After considering these arguments, we notice that the impugned payment is reimbursement of the expenses and are not the commission as the concerned party did not give any services in respect of the payment of expenditures made. Providing services is essentially requirement of the nature of transaction of a commission....