TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 1229
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....A) erred in not appreciating that the Regional Distributors ('RDs') were not advertising agencies and did not carry out any advertising work for the appellant and the advertisement expenditure reimbursed to them did not fall within the ambit of section 194C of the Act. 1.2. That on the facts and circumstances of the case and in law, the CIT(A) erred in not holding that no tax was required to be deducted under section 194C of the Act from advertisement expenses reimbursed to RDs as there was no income element embedded therein. 1.3. That without prejudice, on the facts and circumstances of the case and in law, the CIT(A) erred in not holding that tax not deducted at source under section 194C from advertising expenses reimbursed to RDs, was not recoverable from the appellant, being the payer, under section 201(1) of the Act. 2. That on the facts and circumstances of the case and in law, the CIT(A) erred in not deleting interest of Rs. 15,41,531 charged under section 201(1 A) of the Act in respect of tax alleged to be deductible under section 194C of the Act but not deducted from advertisement expenses reimbursed to RDs. 2.1. That without prejudice, on the facts and circums....
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....r before the time of hearing. ITA No.2288/DEL/2016 (A.Y. 2012-13) 1. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming the order of the assessing officer holding the appellant to be an assessee in default under section 201(1) for the alleged failure to deduct tax at source under section 194C of the Income-tax Act, 1961 (The Act') from the amount reimbursed to Regional Distributors ('RDs') in respect of advertisement expenses incurred by them. 1.1. That on the facts and circumstances of the case and in law, the CIT(A) erred in not appreciating that the Regional Distributors ('RDs') were not advertising agencies and did not carry out any advertising work for the appellant and the advertisement expenditure reimbursed to them did not fall within the ambit of section 194C of the Act. 1.2. That on the facts and circumstances of the case and in law, the CIT(A) erred in not holding that no tax was required to be deducted under section 194C of the Act from advertisement expenses reimbursed to RDs as there was no income element embedded therein. 1.3. That without prejudice, on the facts and circumstances of the case and in law, the CI....
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....hat tax alleged to be deductible under section 194H of the Act from aforesaid amount payable towards recruitment expenses, was not recoverable'' from the appellant, being the payer, under section 201(1) of the Act. 5. That on the facts and circumstances of the case and in law, the C1T(A) erred in not deleting interest of Rs. 24,693 charged under section 201(1 A) of the Act from the aforesaid amount payable towards recruitment expenses, alleged to be deductible under section 194H of the Act. 6. That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming the order of the assessing officer holding the appellant to be an assessee in default under section 201(1) for non-deduction of tax at source on payments made for testing expenses. 6.1. That on the facts and circumstances of the case and in law, the CIT(A) erred in affirming the order passed under section 201(1) without appreciating that the assessing officer failed to specify under which section the appellant defaulted in deducting tax at source on payments made towards testing expenses. 6.2. That without prejudice, on the facts and circumstances of the case and in law, the CIT(A) erred....
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....to RDS, Salesman incentives and other reimbursement to RDS. In the Assessment Order, the Assessing Officer held the assessee as "assessee in default" under section 201 (1) of the Act and also levied interest under section 201 (1A) of the Act, in respect of failure to deduct tax at source in respect of the aforesaid payments made to various distributors/dealers. During the relevant previous year, the assessee deducted tax at source amounting to Rs. 2,22,40,792/- from the amounts paid as salary. The rate of tax deducted at source was calculated at "average rate of incometax" computed on the basis of the rates in force on the estimated income of the payee for the relevant financial year. The Assessing Officer computed the amount of tax to be deducted on month to month basis of average tax deducted. 4. Being aggrieved by the order u/s 201(1)/201(1A) of the Act, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. As regards Ground Nos.1, 1.1, 1.2 and 1.3, relating to failure to deduct tax at source u/s 194C of the Act from the amount reimbursed to regional distributors in respect of advertisement expenses incurred by them, the Ld. AR submit....
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....'s decision in the assessee's own case for Assessment Year 2009-10. The Tribunal has categorically given finding that there was a structure arrangement wherein the payments are rooted through the distributors to circumvent the Provisions of Chapter XVII-V of the Act. Therefore, the Tribunal has confirmed the CIT(A)'s direction as to directing the assessee to produce the evidences before the Assessing Officer to establish that the parties to whom the reimbursement have been made had actually complied with the provisions of Chapter XVI-V. In the present Assessment Year, the assessee during the previous year paid Rs. 18,35,15,604/- to regional distributors on account of reimbursement of expenses against third party bills, incurred by them for advertisement in relation to the assessee's products sold by them on their own account. From the records it is seen that these expenses included manpower reimbursement to RDS, Salesman incentives and other reimbursement to RDS. Thus, the assessee raised the bill in the name of payee and the assessee also produced evidences before the Assessing Officer to establish that the parties to whom the reimbursement have been made had actually complied wit....
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....st on deficit amount. Thus, this issue is remanded back to the file of the Assessing Officer for verifying as to whether the interest clause is applicable or not and if applicable whether there is surplus payment of TDS or not. After verifying the same the Assessing Officer decide this issue. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Thus, Ground Nos. 3 and 3.1 are partly allowed for statistical purpose. 12. As related to Ground No. 4, regarding provisions made for recruitment expenses, the Ld. AR submitted that the assessee company made a provision for recruitment expenses, where TDS has been deducted at the time of actual payment or credit to the party. Thus, the Ld. AR submitted that there is no default in TDS deduction. The Ld. AR further submitted that the action of the Assessing Officer in treating the assessee as an "assessee-in-default" and levying interest under Section 201(1A) of the Act is thus not based on proper appreciation of the facts of the case. 13. The Ld. DR relied upon the order of the Assessing Officer and the order of the CIT(A). 14. We have heard both the parties and perused all the material ....