TaxTMI 
TaxTMI 
2016 (9) TMI 1609
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....(A) has erred in holding that the assessee company was not liable to deduct TDS u/s. 194H of the I.T. Act and thereby erred in deleting the non deduction/short deduction u/s. 201(1) and interest u/s. 201(1A) without appreciating that all the collection centres are working as agents of the assessee company on the basis of commission only and hence the discounts given to collection centres were in the nature of "commission" within the meaning of section 194H of the Act." 3. At the outset, the Ld. Counsel for the assessee submits that an identical issue arose in assessee's own case for the Assessment Years 2006-07 and 2008-09 and the Tribunal held that the discounts allowed by the assessee to collection centres will not attract the provisions of Sec. 194H because there was no principal agent relationship between assessee and collection centres hence provisions of Sec. 194H have no application. Copies of the decision reported as SRL Ranbaxy Ltd Vs. ACIT (50 SOT 173) and ACIT Vs SRL Ranbaxy Ltd (42 ITR (Trib) 676 are submitted before us. The Ld. Counsel for the assessee further submits that the name of the assessee SRL Ranbaxy Ltd., was changed to Super Religare Laboratories Ltd., on....
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...., any income by way of commission (not being insurance commission referred to in 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 mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent : Provided that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed five thousand rupees : Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financialyear in which such commission or brokerage is credited or paid, shall be liable to deduct income-tax under this section: Provided also that no deduction shall be made under this ....
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....d in "Mother Dairy India Ltd. V. ITO", 28 SOT 42 (Del), "Delhi Milk Scheme v. CIT", 173 Taxmann 54 (Del), and "ABP Pvt. Ltd. V. CIT", 23 SOT 28 (Kolkata). 9. Where the dealing between the parties is not on a Principal to Agent basis, Section 194 H does not get attracted, as held in "Ahmedabad Stamp Vendor Association v. Union of India", 257 ITR 202 (Guj), "Kerala Stamp Vendors Association" 282 ITR 7(Ker) and "ACIT v. Samaj", 77 ITD 358(Cuttack). 10. In the present case, the business working of the assessee is that it signs agreements with the Collection Centres, on a non-exclusive basis. It is under these agreements, that the Collection Centres avail the professional services of the assessee regarding testing of samples. These Centres operate as authorized Collectors for collecting the samples. Now, these Collection Centres are working in this manner with various concerns, of which, the assessee is one. The Collection Centre is under no obligation to always forward these samples to the assessee. It is only in case the patient/customer insists that the laboratory testing be done by the assessee, that the Collection Centre forwards the sample of such a patient to th....
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....ces, similar payments made by "Jai Drinks", to its distributor, were held to be incentives and discounts and not commission. The distributor had been permitted to sell its product in a specified area exclusively. It was as per the agreement that the distributor was to purchase the products of Jai Drinks and was to be allowed discount per case on the printed maximum retail price. The breakage, leakage, etc., was the liability of the distributor and not that of Jai Drinks. All the approvals, consents, registration, licence, etc., required from Departments or Authorities were to be obtained by the distributor. The purchase of the products by the distributor from Jai Drinks was against one hundred per cent advance payment or, at times, on credit, at the discretion of Jai Drinks. No element of Principal - Agent relationship was found to exist, as is the case herein. 13. The ld. CIT(A) has observed that the submission of the assessee that it provided professional services in the form of medical diagnostic services to the Collection Centres, was not acceptable. For arriving at this observation, the learned CIT(A) noted that the assessee provides professional services to the patie....
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.... may have come to their notice during their engagement with the assessee, to the competitors of the assessee. This contention has neither been rebutted, nor can be thrown out neck and crop. This is a perfectly plausible explanation. Prudence demands the imposition of such-like restrictions in the agreement, so as to safe-guard the assessee's interests. Further, as contended, it has not been shown that there is any restriction on the Collection Centres from continuing to act as such Collection Centres. The assessee has only sought to prevent the Collection Centres from collaborating with the competitors of the assessee. In the event of absence of such a covenant in the agreement, there would be no safe-guard against the Centres divulging the assessee's confidential specific know-how to its competitors, thereby prejudicing the assessee's business. And not only this, the mere existence of such alleged restriction does not, by itself, establish a Principal - Agent relationship between the assessee and the Collection Centres. In this regard, in "Bhopal Sugar Industries v. STO", AIR 1977 (SC)1275, it has been observed, inter alia, that the concept of a sale has under-gone a revolutionary....
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....9 to 102 of the Assessee's Paper Book. 18. Apropos this issue, it is seen that APB 96 shows that Sapra Diagnostic Centre, a Collection Centre, bearing Code No. P 00000075/, is charging Rs. 975/-against SRL DOS price of Rs. 915/-. APB 97 is a copy of receipt issued by Sapra Diagnostic Centre to whom Khanna Renu, for payment of Rs. 975/- for various medical tests. Then, APB 98 contains the copy of price list (Systems)of the assessee, as on 17.12.09. This list reads as follows:- Test Code Test name SRL Test Price(Rs.) 5111 CBC+PS+ESR 285 1302H FASTING BLOOD SUGAR 60 1302 GLUCOSE PP 60 1209AD CORONARY RISK PROFILE, SERUM 390 1310H URIC ACID, SERUM 120 TOTAL 915 19. Further, APB 99 to 102 contain the relevant extracts of the standard pricelist of the assessee. All these documents were placed before the Authorities below. In the impugned order, however, the ld. CIT(A) has not taken those into consideration. In fact, no reference whatsoever has been made to this documentary evidence. Therefore, the contention of the assessee regarding the Collection Centre free to charge the rates as desired by t....
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....d in the books of account of the assessee. 23. Then, the disallowance in terms of section 40(a)(ia) read with section 194H of the Act can be made only in respect of expenditure in the nature of commission paid/credited to the account of the recipient, or to any other account. In the present case, the assessee receives the amount of the invoice raised, net of discount, from the Collection Centres. This, discount, indisputably, cannot, in any manner, be said to be expenditure incurred by the assessee and so, section 40(a)(ia) of the Act is not attracted. 24. In "United Exports v. CIT", 330 ITR 549(Del), it was held, with reference to section 40 A(2) (b) of the Act, that since trade discount offered by the assessee could not be said to be expenditure incurred, there was no question of disallowance under the said section. 25. From this angle also, the Authorities below erred in disallowing the discount offered by the assessee, by invoking the provisions of section 40(a)(ia) of the Act. 26. Coming to the case laws referred to on behalf of the Department, these are as follows:- 1. "CIT v. Singapore Airlines Ltd.", 319 ITR 29 (Del); ....
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....on the standard price of tickets could not be said to be income in the nature of commission/brokerage, warranting deduction of tax at source under section 194 H of the Act. 32. Apropos "CIT v. Director, Prasar Bharti", (supra), it was held that under the advertising trade too, the advertising agencies, which are accredited with Advertising Standards Council of India (ASCI), release advertisements to the media (print or electronic) and are entitled to commission from the media. The advertising agencies which receive payment from the advertisers retain thecommission and pass on the balance to the media. Tax is deducted under section 194 H of the Act on the amount of commission retained by the advertising agency, in view of the admitted Principal - Agent relationship between the media and the advertising agency. 33. In the facts of the given case, it was observed that the advertising agency was an agent for Prashar Bharti, considering that the agent was entrusted to canvass advertisement on behalf of Doordarshan, the advertisement charges recovered from the customers were also in accordance with the tariff prescribed by Doordarshan, which was incorporated in the agre....
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....the concessionaires, inasmuch as there was no sale of the milk/milk products to the concessionaires. 37. It was observed that looking at the facts of the case, namely, that the ownership of the milk booth rests with the assessee who does not charge any rent for the use of the booths from the concessionaires; the unsold milk is taken back by the assessee from the concessionaires who are prohibited from selling any other product of any other brand; the sale collections of the concessionaires are collected in cash by the assessee from concessionaires on a daily basis, there can be no doubt that the concessionaires are selling milk for and on behalf of the assessee and were being paid a commission for it. 38. On the basis of the aforesaid undisputed facts, it was held by the Hon'ble High Court, confirming the decision of the Tribunal, that the commission paid to the agents for the goods sold attracted the mischief of section 194H of the Act. 39. In the present case, however, the collection centre has its own premises, infrastructure, staff and necessary licenses/approvals. The collection centre acts as an authorized collector for collecting samples and avails....