TaxTMI 
TaxTMI 
2016 (9) TMI 5
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....,79,179/-under section 40(a)(ia) on account of commission although defacto the amount paid was not in the nature of commission. 5. Brief facts of the case are that the assessee is in Firm and in the business of trading and servicing of motorcycle and filed his return of income on 27-10-2005. 6. The assessee is a dealer for sale of TVS brand motorcycle for sale in the district of Murshidabad and some areas of Bhirbhum and Nadia Districts of West Bengal. The assessee sells motorcycles in the following manner: A) Cash sales to sub dealers B) Credit sale to sub dealers C) Direct sales to customers from the showroom of the assessee D) sales to customers to mechanics 7. In all the cases mentioned above, the assessee offers discount at a fixed rate depending upon the model. Whereas in the case of (A) (C) and (D) above i.e cash sales, the amount of sales net of discount is received in cash, in the cases of credit sales at (B) above, that sub dealers remit the sale proceeds after deducting the discount. The fact that invoices are raised and payments are received net of discount are invariably mentioned in each and every invoice, copies of 13 numb....
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....ns are in the nature of principal to principal and no element of agency is to be found and no services are to be rendered. The learned AR prayed this Tribunal to allow the appeal by deleting the addition of Rs. 13,90,070/- made by the assessing officer. The learned DR relied on the order of CIT-A. 11. We have considered the rival submissions and perused the paper book and we find the following is the breakup of amounts paid to sub dealers and mechanics: BERHAMPORE MOTORCYCLE PANCHANANTALA, P.O COSSIMBAZAR DIST-MURSHIDABAD DISCOUNT PAID FOR THE YEAR 2004-2005 SUB-DEALER (MOTORCYCLE) MONTH AMOUNT APRIL 113,895.00 MAY 117,665.00 JUNE 109,165.00 JULY 98,100.00 AUGUST 74,485.00 SEPTEMBER 91,995.00 OCTOBER 97,910.00 NOVEMBER 88,685.00 DECEMBER 100,890.00 JANUARY 116,230.00 FEBRUARY 101,985.00 MARCH 89,165.00 1,200,170.00 MECHANIC COMMISSION MONTH AMOUNT APRIL 17,150.00 MAY 16,050.00 JUNE 14,550.00 JULY 16,100.00 AUGUST 14,950.00 SEPTEMBER 14,050.00 OCTOBER 17,200.00 NOVEMBER 15,200.00 DECEMBER 15,500.00 JA....
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....the head commission as is done year to year. In fact, auditor in his audit report annexure part A and B in serial no.11 clearly put the amount under the commission paid. So, the assessee on his own as it suited him, stated that mistaken the claimed under the commission. It is pertinent to note here that the sub-dealer also paid incentives free service as per company norms etc. and for which details were filed. So the sub-dealer was paid both commission and debit notes. Judging the totality of the facts and circumstances of the case and viewing it through the normal practice of business transaction of a dealer and a sub-dealer, I have of the firm at the sub-dealer were paid commission on sale for their services rendered to their principals M/s Berhampore motorcycles. It is a fact that no tax was deducted at source on the commission so paid to the sub-dealer U/S 194H of the IT Act. As such, provision of section 40(a)(ia) is clearly applicable in this case of the assesseee." 14. We therefore confirm the order of CIT-A in so far as it relates to sum of Rs. 12,00,170/- paid to sub dealers. 15. We are however of the view that in respect of payment to sub dealers the assess....
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....viso to Section 40 (a)(ia) of the Act and also sought to explain the rationale behind its insertion. In particular, the Court would like to refer to para 9 of the said order which reads as under: "On a conceptual note, primary justification for such a disallowance is that such a denial of deduction is to compensate for the loss of revenue by corresponding income not being taken into account in computation of taxable income in the hands of the recipients of the payments. Such a policy motivated deduction restrictions should, therefore, not come into play when an assessee is able to establish that there is no actual loss of revenue. This disallowance does deincentivize not deducting tax at source, when such tax deductions are due, but, so far as the legal framework is concerned, this provision is not for the purpose of penalizing for the tax deduction at source lapses. There are separate penal provisions to that effect. Deincentivizing a lapse and punishing a lapse are two different things and have distinctly different, and sometimes mutually exclusive, connotations. When we appreciate the object of scheme of section 40(a)(ia), as on the statute, and to examine whether or no....