TaxTMI 
TaxTMI 
2024 (12) TMI 761
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....-18. Issue 1: Disallowance of Rs. 3,03,99,796/- under Section 40(a)(ia) of the IT Act in respect of incentives provided to dealers for reason that tax was not deducted under Section 194H of the IT Act. 1. That the Ld. CIT (A) has erred in holding that the payments made to dealers for various incentives provided constitutes payments in the nature of commission and therefore subject to deduction of tax under Section 194H of the IT Act. 2. Without prejudice, the Ld. CIT(A) ought not to have held that the provisions of Section 194H would apply without properly appreciating the fact that the incentives were all given in non-monetary terms and the provisions of Section 194H being made expressly applicable only for 'sums paid', cannot be invoked for non-monetary payments. 3. That the Ld. CIT (A) has failed to appreciate that existence of principal agency relationship between the payer and payee is a sine qua non for invoking the provisions of Section 194H and that in the present facts, such a relationship does not exist and therefore, provisions of Section 194H cannot be invoked. 4. Without prejudice, the Ld. CIT(A) erred in holding tha....
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....e in pursuance of a statutory duty to the Employees Provident Fund Organization. Issue 3: Disallowance of Rs. 255,375/- under Section 40(a)(ia) of the IT Act in respect of meet and greet expenses provided to dealers for reasons that tax was not deducted under Section 194H of the IT Act. 11.That the Ld. CIT (A) has erred in holding that the payments made by the Appellant towards various meet and greet events are towards advertisement, promotion expenses and hence, subject to deduction of tax under Section 194C of the IT Act. 12.That the Ld. CIT(A) ought to have appreciated that the expenses incurred for meet and greet do not involve 'carrying on any work' and consequently the provisions of Section l 94C cannot be attracted in the instant case. 13.That despite the Appellant placing various bills and vouchers to substantiate the nature of expenses, the Ld. CIT (A) erroneously construed the expenses to be in the nature of advertisement/ promotional expenses. 14.The consequential levy of interest under Section 234B and Section 234C are not sustainable in law and merits to be set aside. 15.The Appellant prays for leave to add,....
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....ee and not directly to the individual laborers. Thus, the provisions of Section 194 C are applicable on entire payment made to the contractor without any exclusion. Thus, the whole amount paid to contractor comes under sum for the purpose of Section 194C. It does not make any difference that the assessee paid this amount to the Govt. and not to Job workers because it is paid on behalf of Job workers who are employed in contractual capacity with the assessee as these job workers have been hired by the contractor rendering contractual services to the assessee. Circular No.23 of 2017 exempts only GST charges in the invoice if shown separately. But the contract is awarded considering the whole amount that is to be paid to the contractor. Therefore, while deducting TDS on Contractual payment to the contractor for hiring of job workers, the assessee cannot exclude the payment made towards PF and ESI contributions of Job workers. It ought to have deducted TDS on entire payment made to Contractor as per provisions of section 194C. Since the assessee has failed to deduct TDS on EPF, ESI and PF contribution of Job workers (8,37,642) from the total payment made to contactors for hiri....
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.... by the assessee only on achieving of a set Target. Thus the assessee here acts a Principal while the Dealers act as its agents. The payments made by the assessee under Dealer incentive schemes are in nature of additional remuneration paid to the contractors for their superior performance in rendering Advertisement and Sales Promotion services to the assessee. Thus these are only commission income though paid in different name. Therefore, the incentives or discounts given to dealers under the dealership agreement are in the nature of commission, liable to TDS under section 194H of the Income-tax Act, 1961. Since the assessee has failed to Deduct TDS under section 194H on Payment made to dealers on Dealer Incentive Schemes worth Rs. 10,13,32,654.26, 30% Disallowance under section 40(a)(ia) is made. This amount is calculated at Rs. 3,03,99,796.28 4.6.3 Non deduction of TDS on Expenses under Advertisement and Promotion Head on account of Promotional expenditure on Meet and Events (Rs.8,51,250/-) as same are liable for TDS deduction under 194C. Assessee has stated that since these expenses were incurred on purchase of travel tickets, food expenses, s....
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....yments were made to the contractor for providing manpower. Also, in the present case, the manpower are working in contractual capacity through the contractor. Further, it is seen that the payment was made to the manpower contractor and not directly to the individual manpower. As such, it is held that the provisions of Section 194C are applicable on entire payment made to the contractor. Also, held that it does not matter whether the appellant paid this amount to the Government on behalf of Job workers since the employees are employed in contractual capacity as these were hired by the contractor. Also, it is held that Act specifies no exemptions for such payments made to the contractor. In view of the above discussion, this appellate authority is of the opinion that the claim of the appellant that TDS provisions cannot be applicable for such payments cannot be accepted and the addition in this regard is upheld. Hence, the Ground No. 2 of the appeal is dismissed. 8.2. The appellant's contentions in the form of Grounds of appeal and submissions made have been considered. It is seen that the appellant had not deducted TDS on payments made to dealers on promotional schemes.....
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....s of sales, benefits entitled to dealers and expectations sought from them. Further, the assessee offers incentive and commission to dealers based on their performance. Also, it is Seen that the appellant determines as to at what price the dealer will buy, stock or sell the goods. The appellant also provides capacity building measures to the dealers in form of training programs, technical sessions etc at its own cost. Besides, the appellant conducts audit at regular intervals to monitor compliance of the guidelines mentioned in appointment of dealers. These all conditions specifically says the relationship between appellant and the dealers is Principal-Agent relationship. The appellant has stated that the terms and conditions are laid down to the dealers for maintaining the TATA Company's standards and policies. The same cannot be accepted as the appellant has the control over dealers in respect of the price, business, training, etc.. Therefore, the contention of the assessee that dealer incentive scheme of the assessee are on principal-to principal basis, does not stand to the test of facts and clauses of the dealer appointment letters. In normal situation of principal-to prin....
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....4C on payments made towards expenditure on meet and events. The appellant has stated that these expenses were incurred on purchase of travel tickets, food expenses, stationery for promotional meets, same were not liable to TDS deduction under Section 194C.However, it is observed that these payments have been made to hotels for promotional meets. The nature of expense incurred is in the form of advertisement to promote the sales of the company. Since the expenditure was incurred towards promotion of business sales, the same needs to be considered as a contract and as such the payment is liable get TDS deducted u/s 194C. Since the appellant failed to deduct the TDS as per the provisions of the Act, The AO has rightly disallowed the same. As per the above discussion, this appellate authority is of the opinion that the claim of the appellant cannot be entertained and the addition in this regard is upheld. Hence, the Ground No. 4 of the appeal is dismissed. Aggrieved by the order of the ld.CIT(A), the assessee is before us. 5. Disallowance of Rs. 2,51,293/- towards EPF, PF & ESI contribution of the job workers: 5.1 The ld.AR submitted that these payments have been directly made....
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.... applicable. The ld.AR stated that the appellant had not deducted TDS on payments made to dealers on promotional schemes. The assessee has claimed that since no payment was done to the dealers, TDS provisions does not attract in these instances. Further, the assessee has claimed that the relationship between it and the dealers is buyer-seller and not principal-Agent. The Ld.AR argued that the assessee has claimed that TDS under 194H are not attracted on such payments made to dealers by way of non-monetary benefits. The assessee has submitted that the schemes were there to promote the sales and turnover of the business. Further, the ld.AR stated that there is no risk borne by it if the goods invoiced in the name of dealers were not sold. Since, the assessee and dealers are working on principal to principal basis, the TDS provisions are not applicable for this kind of business promotional expenditure spent by the assessee and not paid to the dealers. 6.1.1 Further, the assessee relied on the various judicial decisions laying down the difference between the relationship of 'Principal-Agent' and 'Principal-Principal' as below: (i) Bharti Cellular Limited vs ACIT [2024] 462 ....
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....incipal basis, we are of the considered view that, there is no relationship of Principal- Agent between the assessee and the dealers appointed in the State and hence, the provisions of section 194H of the Act is not applicable to these payments. 6.4 It is important to note that the assessee's reliance on Hon'ble Apex Court decision in the case of Bharti Cellular Limited vs ACIT [2024] 462 ITR 247 (SC), wherein the Hon'ble court differentiated the pure trading activity of the distributor and the agency business for the purpose of applicability of section 194H of the Act by holding as under: "39. Coming back to the legal position of a distributor, it is to be generally regarded as different form that of an agent. The distributor buys goods on his account and sells them in his territory. The profit made is the margin of difference between the purchase price and the sale price. The reason is, that the distributor in such cases is an independent contractor. Unlike an agent, he does not act as a communicator or creator of a relationship between the principal and a third party. The distributor has rights of distribution and is akin to a franchisee. Franchise agreements are nor....
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....hips in which one person acts for another, and thereby possesses the capacity to involve them in liability, yet the nature of the relationship and the kind of acts in question are sufficiently different to justify the exclusion of servants and independent contractors from the law relating to agency. In other words, the term 'agent' should be restricted to one who has the power of affecting the legal position of his principal by the making of contracts, or the disposition of the principal's property; viz. an independent contractor who may, incidentally, also affect the legal position of his principal in other ways. This can be ascertained by referring to and examining the indicia mentioned in clauses (a) to (d) in paragraph 8 of this judgment. It is in the restricted sense in which the term agent is used in Explanation (i) to Section 194-H of the Act." 6.5 Therefore, in the present facts and circumstances of the case and by respectfully following the decision of the Hon'ble Apex court (Supra), we are of the considered view that the payments made by the assessee towards promotional expenses in the form of various schemes are not liable for TDS u/s. 194H of the Act and hence, delet....