2005 (6) TMI 21

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....n the sale of stamp paper to them. The members of the two petitioner-Associations and the other petitioners are licensed stamp vendors engaged in purchase of stamp paper from the Treasury and sale of the same in accordance with the Kerala Manufacture and Sale of Stamps Rules, 1960 (hereinafter called "the Rules"). Stamp papers are sold to the licensed vendors by the Treasury at a discounted price which varies from 1 per cent, to 4.5 per cent, depending on the face value of the stamp paper. The highest denomination stamp paper sold through stamp-vendors is Rs. 10,000. While the case of the Income-tax Department is that the reduction given in the price of the stamp paper by the Treasury on sale of the same is "commission" which has to be subj....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....overnment in Gujarat as against full value reimbursable excluding discount on repurchase by the Government in Kerala. In order to appreciate the contentions, the provisions of section 194H of the Act have to be referred to. Therefore, the said section is extracted here-under for easy reference: "Section 194H: Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to m section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mod....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... the discount allowed to him under rule 39 of the Rules. The short question is whether this discount can be treated as "commission" or "brokerage" under section 194H of the Act for the purpose of deduction of tax at source. It is clear from the definition of "commission and brokerage" as contained in the Explanation to section 194H that the commission or brokerage that attracts TDS is the one paid for "services rendered in the course of sale" which obviously can be the services rendered by a third party like a broker or an agent and cannot be the buyer as the buyer is not rendering any service except buying. Therefore, obviously payments to third parties involved in sale or purchase such as a commission agent or a broker is covered by secti....