TaxTMI 
TaxTMI 
2023 (11) TMI 743
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....der section 201(1)/201(1A) of the Income Tax Act. 3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the demand of Rs. 9,80,745/- raised by the ITO(TDS) in the order passed under section 201(1) & 201(1 A) of the Income Tax Act. 4. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the demand of Rs. 6,78,993/- on account of non-deduction of Tax on the bill discounting charges/factoring charges of Rs. 67,89,938/- deducted by the NBFC Company under section 194H of the Income Tax Act. (ii) That the abovesaid demand has been confirmed rejecting the contention of the assessee that the payment made by the assessee is not in the nature of 'commission or brokerage' and therefore provisions of section 194H are not applicable on such payments. (iii) That the abovesaid demand has been confirmed rejecting the contention of the assessee that in the absence of principal to agent relationship between the assessee and NBFC Company in the alleged transaction, provisions of section 194H would not be applicable. 5. On the fact....
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....r under consideration, the assessee company incurred bill discounting charges in order to receive/make immediate payment of a bill and no TDS was deducted on such bill discounting charges borne by the assessee. For this purpose, the bills were discounted from Hero FinCorp Ltd. 7. On 15.02.2018, an inspection/survey u/s 133A was conducted on the assessee wherein it was noticed that the assessee had not deducted TDS u/s 194H on the bill discounting charges. Thereafter, the assessee was asked to submit the details of bill discounting charges vide notice dated 19.02.2018. 8. The assessee submitted its reply dated 23.02.2018 wherein complete details of bill discounting charges was given and it was also explained that bill discounting charges are in the nature of factoring charges and therefore applicability of the provisions of TDS does not arise. A copy of ledger A/c of bill discounting charges is placed at PB Pg.17-19. A copy of ledger A/cs of Hero Fin Ltd. and Hero Moto Corp Ltd. is also placed at PB Pg.20-96. 9. The held that the amount on account of bill discounting charges is in the nature of commission and thus TDS is liable to deducted on such amount. Thereafter, AO pro....
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.... not constitute commission. 16. For deducting tax in terms of Section 194H of the Act - a. Income should be in the nature of commission or brokerage which is not the case here. The incurrence of bill discounting charges is fee charged by Hero Fin Corp Ltd. for rendering the service of Bill Discounting in a Principal capacity. b. Payment should be received by a person acting on behalf of other, in the course of rendering services to third parties. It may be relevant to note here that none of the charges received by factor i.e. Hero Fin Corp Ltd. is on the behalf of any other party. All of the bill discounting charges are received by Hero Fin Corp Ltd. in its own capacity and all the risks and rewards of the ultimate collection is also borne by the factor alone i.e. Hero Fin Corp Ltd. Thus, in no way it can be construed that Hero Fin Corp Ltd. has acted on the behalf of any other party. c. Thus, when the charges in itself are not in the nature of commission and more particularly when there's no principal & agent relationship, the transaction falls out of the ambit of section 194H and no TDS is liable to be deducted. 17. Reliance is also placed on the ....
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.... from the Government and selling to the customers) can be termed as the service in the course of buying or selling of goods. In view of the above discussion, we uphold the contention urged on behalf of the petitioner's association that the discount made available to the licensed stamp vendors under the provisions of the Gujarat Stamps Supply and Sales Rules, 1987, does not fall within the expression "commission" or "brokerage" under section 194H of the Income-tax Act, 1961. The impugned communication dated March 14, 2002, from the Income-tax Officer, TDS 4, Ahmedabad, to the Senior Treasury Officer, Ahmedabad, is, therefore, quashed and set aside, and so also the consequential instructions dated March 19, 2002 (annexure "D" to the petition), issued by the Senior Treasury Officer, Ahmedabad, to the secretary of, the petitioner's association are quashed and set aside." 18. Also, it has been held by various courts that factoring/bill discounting charges do not fall within the definition of interest u/s 2(28A) and thus are also not eligible for tax deduction u/s 194A. Reliance is placed on the following judicial pronouncements in this regard: * CIT DELHI-I ....
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....nation and simply treat the entire amount as interest. The question of disallowing the entire amount under Section 40(a) (ia) on the ground that the TDS was not deducted in terms of Section 194A of the Act did not arise. 9. In the facts and circumstances of the case, the Court is unable to find any legal infirmity in the view expressed by the IT AT that the factoring/discounting charges in the present case cannot be treated as interest for the purpose of 194A. No substantial question of law arises." Therefore, considering the above mentioned position and catena of judgments, the addition made by AO and confirmed by CIT(A) on account of non-deduction of tax u/s 194H by holding that bill discounting charges are in the nature of commission and liable for tax deduction 194H is bad and liable to be deleted. Deduction of TDS u/s 201(1) - Freight Charges 19. During the year under consideration the assessee has paid freight charges to the transporter for carriage of goods. The survey u/s 133A was conducted on 15.02.2018 wherein it was noticed that the assessee had not deducted TDS u/s 194C on the freight charges borne by the assessee. During the course of survey, the asse....