AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (3) TMI 736
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....o deduct the TDS as per the provisions of section 194H of the Act. Since the assessee has not deducted the TDS from the above payments, the said expenditure required to be disallowed u/s 40(a)(ia) of the Act. The assessee neither deducted the TDS nor the A.O. made the addition u/s 40(a)(ia) of the Act, hence the CIT held that the assessment is erroneous and prejudicial to the interest of the revenue and accordingly, set aside the assessment order passed by the A.O. with a direction to redo the assessment do-novo. 3. Aggrieved by the order of the Ld.CIT, the assessee is in appeal before us. During the appeal hearing, the Ld. Counsel argued that the assessee is engaged in the wholesale distribution of Nokia mobiles and accessories for retail trading. The assessee receives the scheme incentives from the Nokia company which were passed on to the retail traders as per the targets achieved. The details of the trade discounts received and passed on to the retail traders are as under; Description Amount in Rs. 1. Trade scheme incentives allowed to the assessee on its purchases by the manufacturer during the F.Y. 2011-12 (subject to point 'b' infra) 1,95,72,851.20 2. Trade scheme inc....
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..... also argued that the assessee has submitted the entire details before the AO by production of all the details required for completion of assessment. This is evident from the page No.9 of the Ld. Pr.CIT's order where in it is stated that the A.O. has collected the details, obtained the ledger accounts of various trade schemes in the books of the assessee company. 5. Further, Ld. A.R. submitted that the assessee has submitted the details of salaries and the incentives paid to the employees which were included in the salaries and the TDS was made as applicable from the salary paid to the employees. Thus, the Ld. Counsel argued that as decided by the courts, the incentives are not covered u/s 194H of the Act for the purpose of commission or brokerage. The A.O. has verified the details filed by the assessee and allowed the incentives as deduction holding that incentives passed on to the retailers were not covered as brokerage and commission. Since the A.O. has allowed the expenditure after due verification of the details, there is no error in the order of the A.O., hence requested to set aside the order u/s 263 of the Act passed by the Pr.CIT. 6. On the other hand, the Ld. D.R. argu....
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....elation exists, hence the incentives passed on to the retailers cannot be held to be commission or brokerage within the meaning of section 194H of the Act. Similar issue was considered by the coordinate bench of Kolkata 'A' Bench in the case of DCIT Circle-7 Kolkata Vs. M/s. BCH Electric Ltd. (supra) and held that there is no principal and agent relationship and the payments made to the distributors/dealers by way of incentives would not come under the purview of section 194H of the Act and invocation there on u/s 40(a)(ia) of the Act is bad in law. For the sake of clarity and convenience, we extract relevant paragraph of the order of the coordinate bench which reads as under: 9. The facts involved to decide the ground no.2 are that the assessee is manufacturing electricity pumps as equipment and accessories which includes control gears, motor control centres, control panels and enclosures etc. The dealers/ distributors, under an agreement with the assessee would purchase goods from assessee against cash payment or on credit depending upon the agreement under scheme of promotion in selling the assessee's goods beyond targetted quantum for which the incentive is being given to the....
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....a. 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 C'IT('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 of the CIT(A) and also Tribunal. 10. Keeping in view the above-mentioned facts and circumstances of the case, the present appeal has no merits and is hereby dismissed." 11. Recently, Hon'ble Bombay High Court in the case of CIT-vs- Intervet India Pvt. Ltd. in 364 ITR 238 dealt with the same issue as that of the assessee herein in claiming deduction towards expenditure incurred u....
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....e 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 Delhi and Hon'ble Bombay High Court. In the present case, the ld. CIT(A) examined the copies of agreements of dealers and he found that dealers are the receipts of the amount given by the assessee as incentive. The dealers are buying the goods from the assessee on their own risk. The assessee paid the incentive to the dealers for the purpose of promotion in selling it....
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.... effected with the retail dealers, the assessee had promoted a sales promotion scheme under which incentives were given to retail dealers upon achievement of certain targets in sales; by this scheme retail dealers were motivated to purchase more quantity of beer manufactured by the assessee, which in turn would increase the turnover of the assessee; in order to market the trade discount scheme, and also in order to promote sales of its products, the assessee had appointed del-credere agents; there was no dispute that payment made to del-credere agents, for the services provided by them to the assessee, was treated as commission by the assessee; TDS had been deducted, under Section 194H of the Act, from them; the incentives payable under the trade discount scheme was disbursed by the assessee to the retail dealers through del-credere agents who had opened separate bank accounts for the said purpose; and the delcredere agents had only acted as a conduit for transferring incentives to the retail dealers. 5. Placing reliance on the judgment of the Supreme Court in Bhopal Sugar Industries Ltd. vs. STO the Tribunal held that the essence of a "Contract of Agency" was that the agent did....
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.... Section 194H of the Act. 8. Before us Sri K. Raji Reddy, learned Senior Standing Counsel for Income Tax, would reiterate the very same submissions as were urged by the Revenue before the Tribunal. As has been noted by the T ribunal, in the order under appeal, the Explanation to Section 194H of the Act defines "commission or brokerage" to include any payment received directly or indirectly by a person acting on behalf of another person for services rendered, or for any services in the course of buying or selling of goods, or in relation to any transaction relating to any asset, valuable articles or thing, not being securities. Payment received by a person from another, for services rendered, constitutes "commission" under the Explanation to Section 194H of the Act. 9. From the facts noted by the Tribunal, in the order under appeal, it is evident that beer was sold by the respondent-assessee to APBCL, and APBCL had, in turn, sold the beer, purchased by them from the respondent-assessee, to retail dealers. Both these transactions were independent of each other, and were on a principal to principal basis. No services were rendered by the retail dealer to the respondent- assessee....