TaxTMI 
TaxTMI 
2022 (12) TMI 1590
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....Act. 1961, without appreciating the fact that the entire liability in goods had not been transferred to the Stockist and that the company had to still carry liability in terms of expired goods and quality of goods etc, and therefore the Stockist were working as agents of assessee company, to promote and effect sales on behalf of assessee." 21 On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in relying on the Hon'ble ITAT decision in holding that bonus and incentive offered by the assessee company to Stockist were also in nature of discount and therefore not covered under Section 194H, without appreciating the fact that such bonus/incentive are offered subsequent to sales and therefore are essentially in nature of commission as envisaged u/s 194H. 31 On the facts and circumstances of the case and law, the Ld. CITIA) has erred in holding that provision of interest made was in nature of liquidation damages and therefore connected to sales or purchase without appreciating the fact that the assessee itself categorized this expenditure as interest and therefore the same is covered u/s 194A of the Act." 2. Briefly stated facts necess....
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....ssee in default" under section 201 read with section 194H/194A of the Act without ascertaining and proving that the recipient had not paid tax on the alleged income received/receivable from the assessee as required under section 191 of the Act. 8. The Ld. A.R. for the assessee further contended that identical issue has already been decided by the co-ordinate Bench of the Tribunal in assessee's own case for A.Y. 2011-12 and 2012-13 in ITA No.894/M/2022 order dated 21.11.2022. 9. We have perused the order passed by co-ordinate Bench of the Tribunal in assessee's own for earlier years which is on identical issue and this fact has not been controverted by the Ld. D.R. for the Revenue nor he has disputed the legal position in this regard. The co-ordinate Bench of the Tribunal decided the identical issue by returning following findings: "9. We have considered the rival submissions and perused the material available on record. We find that the Co-ordinate Bench of the Tribunal in assessee's own case in DCIT v/s Wockhardt Ltd., in ITA no. 6803/Mum/2018, vide order dated 11/12/2020, for the assessment year 2010-11, decided similar issue in favour of the assessee by ob....
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....or which primarily continues to be on principal to principal basis. Such exception of taking back the expired products has its genesis to the sensitivity of the product being drugs medicine handled by the assessee company otherwise it could have severe health hazard impacts on the consumer which is a normal market practice in the industry but the same is not decisive to conclude that the property in the goods with all risks and rewards have not passed to the distributor on sale of products by the assessee company to the distributor at the time of delivery by the carrier to the distributor as per stipulated terms of distribution agreement. We have also observed that the assessee company is raising sale invoice's on the distributor M/s Rudra Pharma Distributors Limited which are placed on the paper book filed by the assessee company at page 35 while the ledger account showing invoices raised and payments received from distributor M/s Rudra Pharma Distributors Limited by the assessee company is also placed in the paper book filed by the assessee company at page 36 to 51. We have also observed that the said distributor M/s Rudra Pharma Distributors Limited is registered with VAT au....
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....our of the assessee by returning following findings: "14. We have considered the rival submissions and perused the material available on record. We find that the Co-ordinate Bench of the Tribunal in assessee's own case in DCIT v/s Wockhardt Ltd. (supra), for the assessment year 2010-11, decided similar issue in favour of the assessee by observing as under :- "13. With the ground no.(c), we notice that the Coordinate Bench of ITAT in the case of Income-tax Officer, Ward-2(2), Ahmedabad v. Parag Mahasukhlal Shah [2011] 12 taxmann.com 37 (Ahmedabad) has already decided the similar issue raised by the revenue in the present case. For the sake of clarity, which is reproduced below :- "5. We have heard both the sides at some length. Admitted factual position is that the assessee is having a dealership of FAG Bearing (India) Ltd. and, therefore, in the business of sales of ball-bearings. This fact has also not been denied that there were certain terms and conditions agreed upon between the two parties in case of delay in payments. Whenever there was delay in payment or the payments got overdue, there was a condition to compensate the delay. Likewise, in case....
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....al undertaking, but in case of illustration (b) above, if the payment is described as sale price it would be profits derived from the industrial undertaking. This can never be, because in sum and substance these are only two modes of realising sale consideration, the object being to realise sale proceeds at the earliest and without delay. Purchaser pays higher sale price if it delays payment of sale proceeds. In other words, this is a converse situation to offering of cash discount. Thus, in principle, in reality, the transaction remains the same and there is no distinction as to the source. It is incorrect to state that the source for interest is the outstanding sale proceeds. It is not the assessee's business to lend funds and earn interest. The distinction drawn by Revenue is artificial in nature and is neither in consonance with law nor commercial practice." 7. In the light of the above precedent, we deem it proper to discuss the relevant provisions of Income-tax Act. 7.1 Section 2(28A) of the Income-tax Act has defined the term "interest" as follows: "Section 2(28A) : "interest" means interest payable in any manner in respect of any moneys borrowed or deb....
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.... damages for delay in construction or handing over possession of the same causing consequential loss to the complainant by way of escalation in the price of the property and also on account of distress and disappointment faced by him. Interest, in the order, had been used merely as a convenient method to calculate the amount of compensation in order to standardize it. Otherwise, each case of an allottee would have to be dealt with differently. Nomenclature did not decide the issue. In view of the definition of "interest" in section 2(28A), the provisions of section 194A were not applicable and the petitioner Authority was wrong in deducting tax at source from the interest payable to the respondent (complainant)." 7.3 This decision is very helpful to decide this appeal because it was held that if the nature of payment is to compensate an allottee, then the provisions of section 194A not to be applied as far as the question of deduction of TDS on interest is concerned. Though the said compensation was mentioned as "interest" but the Hon'ble Members have held that the word used "interest" did not fall within the definition as defined under section 2(28A) of the Income-tax....
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.... proceeds, then the source being trade activity, therefore, held as eligible profit of the Industrial Undertaking for the purpose of computation of deduction. 8.2 Almost on identical situation in the case of Phatela Cotgin Industries (P.) Ltd. (supra), the Hon'ble Court has stated that the interest which was received on delayed payment on account of sale to customers has to be termed as income derived from the Industrial Undertaking and such an income was held as distinct from interest income which is received from Fixed Deposit. The Courts have delivered these judgements by taking into consideration the immediate source of said receipt. If the immediate source is a loan, deposit, etc., then the payment is in the nature of "interest" but if the immediate source of receipt of payment is trade activity, then the nature of receipt is not "interest payment" but in the nature of payment of compensation. 9. In the case of Indo Matsushita Carbon Co. Ltd. (supra), the question was that whether overdues from trade debtors is eligible for relief under section 80HHC/80-I of the Income-tax Act. In that context the Hon'ble Court has commented that it is settled that th....
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.... was required to be deducted. 12. In the light of the overall discussion made hereinabove, we are of the view that the impugned payment had a direct link and immediate nexus with the Trade liability being connected with the delayed purchase payment, hence, did not fall within the category of "Interest" as defined in section 2(28A) of the Income-tax Act for the purpose of deduction of Tax at Source as prescribed under section 194A of the Act. Resultantly, this assessee cannot be held a defaulter of non-deduction of tax at source under section 194A of the Act. The Learned CIT (Appeals) has rightly reversed the findings of the Assessing Officer. Ground raised of the revenue is, therefore, dismissed." 14. We also notice that the Coordinate Bench of ITAT in the case of Sri Venkatesh Paper Agencies (Hyd.) (P.) Ltd. v. Deputy Commissioner of Income-tax, Circle-3(1), Hyderabad [2012] 24 taxmann.com 52 (Hyd.) has decided the similar issue. For the sake of clarity, which is reproduced below :- Held "It is not disputed that the interest paid is not for any loan or debt incurred by the assessee but for the delay in payment of bills for purchases effected fro....