TaxTMI 
TaxTMI 
TaxTMI 
2016 (4) TMI 1128
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....n facts in holding that the provision of warranty expenses amounting to Rs. 3,62,820 as an allowable expenses and deleting the entire addition. (2) That under the facts and circumstances of the case the Ld. CIT(A) has erred in law as well as in facts in allowing Rs. 1,20,88,591 as commission payments to the distributor/dealers by invoking the provisions of Section 40(a)(ia) read with Section 194H of the Act. (3) That the Department craves leave to amend, alter or delete any of the grounds mentioned above or to add a new ground if required." 4. Brief facts of the case are that the assessee is a domestic company and engaged in manufacturing of electrical, pumps, other equipments and accessories. The assessee filed its return of income on 30.9.2008 and the income declared thereon was Rs. 7,89,62,081/- and it was accepted. Under scrutiny, the AO found that the assessee debited an expenditure of Rs. 1,26,73,270/- as warranty expenses in its books of account. On being asked about the details of such expenses, the assessee submitted the computation as under: Financial Year 2004-05 Actual pay out towards warranty expenses Rs.1,23,10,450/- Provision Rs. 3,62,820/- Tota....
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.... an army of employees who were due to retire in future. In that case, the company had estimated its liability under two gratuity schemes and the amount of liability was deducted from the gross receipts in the profit and loss account. The company had worked out its estimated liability on actuarial valuation. It had made provision for such liability spread over to a number of years. In such a case it was held by this court that the provision made by the assessee-company for meeting the liability incurred by it under the gratuity scheme would be entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The same principle is laid down in the judgment of this court in the case of Bharat Earth Movers [2000] 245 ITR 428. In that case, the assessee-company had formulated leave encashment scheme. It was held, following the judgment in Metal Box Company of India [1969] 73 ITR 53(SC), that the provision made by the assessee for meeting the liability incurred under the leave encashment scheme proportionate with the entitlement earned by the employees, was entitled to deduction out of gross receipts for the accounting year duri....
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....of special incentive is in the form of commission, thereby attracting section 194H of the Act disallowed as per the section 40(a)(ia) of the Act for not deducting tax. Ld. CIT(A) found that the amount involved in special incentive is only turnover discount and it does not form of commission to consignee or agent and in the scope of section 194H of the Act. Accordingly, ld. CIT(A) deleted the addition made by the AO. 8. The submission of the ld. DR in respect of ground no.2 is that all cash transactions are contractual in nature , thereby, AO attracted section 194H of the Act for not deducting tax at source and relied on the AO's order. The ld. AR submitted that the relation between the assessee and dealer/distributor is like principal to principal and there exists no directly or indirectly services rendered for the assessee. It is not a commission or brokerage, therefore, application of section 194H of the Act is bad and consequently violation of section 40(a)(ia) of the Act is not justified. The ld. DR relied on case laws of the Hon'ble Bombay High Court and Hon'ble Delhi High Court. 9. The facts involved to decide the ground no.2 are that the assessee is manufacturing electrici....
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....or who was liable and not the assessee. Not only this, even all the approvals, consents, registrations, licenses, etc. whatever may be required from departments or authorities were to be obtained by the distributor. 9. From all that has been noted above, it is evident that the distributor was to purchase products at predetermined price from the assessee for selling the same within specified area. The products were to be purchased by the distributor against 100 per cent advance payment or may be sometimes on credit at the discretion of the assessee. Both the assessee and the distributor have been collecting and paying their sales-tax separately. Both the parties have clearly understood and accepted the agreement between them. That being the arrangement between the assessee and the distributor, it could not be said that the relation between them was that of principal-agent. On the other hand it was clearly stipulated to be an agreement between them on principal-to-principal basis. Both the CIT(A) and also the Tribunal rightly held that the payments being made by the assessee to the distributor were incentives and discounts and not commission. We find no infirmity in the findings o....
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....ontention of the Revenue in regard to the application of Explanation (i) below Section 194H being applicable to all categories of sales expenditure cannot be accepted. Such reading of Explanation (i) below Section 194H would amount to reading the said provision in abstract. The application of the provision is required to be considered to the relevant facts of every case. We are satisfied that in the facts of the present case that as regards sales promotional expenditure in question, the provisions of Explanation (i) below Section 194H of the Act are rightly held to be not applicable as the benefit which is availed of by the dealers / stockists of the Assessee is appropriately held to be not a payment of any commission in the concurrent findings as recorded by the CIT (Appeals) and the Tribunal. 7. Having considered the findings recorded by the CIT (Appeals) and the Tribunal and taking into consideration the provisions of Explanation (i) to Section 194H of the Act, we do not find that the appeal gives rise to any substantial question of law. It is accordingly dismissed." 12. As discussed above, the facts of the present case, falls within facts of the cases dealt by the Hon'ble ....