TaxTMI 
TaxTMI 
2024 (8) TMI 1662
X X X X Extracts X X X X
X X X X Extracts X X X X
....rking as agents of assessee company, to promote and effect sales on behalf of assessee." (b) "On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in holding that bonus and incentive offered by the assessee company to stockiest 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" (c) "On the facts and circumstances of the case and law, the ld. CIT(A) 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. The brief facts of the case are that the assessee is a Listed Public limited company engaged in the business of manufacturing and trading of pharmaceutical products. In the survey operations u/sec 133A(2A) of the Act, the assessee was treated as "assessee in default " due certain discrepancies of non deduction and s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... accordance with section 222 to 227, 229 and 232 of the Act without any further notice." 3. Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) has considered the grounds of appeal, submissions of the assessee and findings of the AO and has relied on the coordinate Bench decisions in the assessee's own case of the earlier years and granted relief observing at Page 7 Para 3.1 to 5 of the order as under: "Grounds no. I and III to VI: "3.1 Vide these grounds of appeal, the appellant has submitted that on the facts and in the circumstances of the case and in law, the Ld. TDS Officer has erred in not applying the principles of res judicata, since during the survey initiated on 14 February 2017, the question of non-applicability of Tax Deductible at Source ("TDS") provisions had already been decided. 3.2 The Appellant submitted that it has already received favcurable order dated 11 December 2020 from the Hon'ble Income tax Appellate Tribunal ("ITAT") for AY 2010-11 on similar grounds at the time of completion of the TDS proceedings for AY 2015-16. 3.3 Further, the Appellant explained that it has alr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and 12-13, the appellant cannot be treated as an assessee in default and also charging of consequential interest u/s 201(1A) is not attracted in the case of the appellant. As the appellant has got relief under Grounds No. I to VII, the Ground No. VIII is also ALLOWED." 4. Aggrieved by the CIT (A)order, the revenue has filed an appeal before Hon'ble Tribunal. 5. At the time of hearing the Ld. DR submitted that the CIT(A) has erred in granting relief to the assessee and the revenue has not accepted the decision of the Hon'ble Tribunal in the earlier assessment years in the assessee's own case and filed an appeal before the Hon'ble High Court. Per Contra, the Ld.AR supported the CIT(A) order, and the Ld.AR substantiated the submissions with the judicial decisions of the Hon'ble Tribunal in the assessee's own case for A.Y. 2010-11 to A.Y. 2014-15 and prayed for dismissal of the revenue appeal. 6. We heard the rival submissions and perused the material on record. The sole matrix of the disputed issue envisaged by the Ld. DR that, the CIT(A) has granted the relief to the assessee overlooking the findings of the Assessing Officer (TDS). We find the Hon'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idered the rival submissions and material placed on record. With the ground no. (a) and (b), we notice that the Coordinate Bench of ITAT in ITA No. 4592 & 4593/ Mum/ 2014 in the case of ITO(TDS) urs. Unichem Laboratoreis Ltd. has already decided the similar issue on the grounds raised by the revenue in the present case. For the sake of clarity, which is reproduced below :- "8. We have considered the rival contentions and perused the material on record, we have observed that the perusal of the clauses of the distributor agreement dated 01-07-2001 entered into by the assessee company and the Rudra Pharma Distributors Ltd. which is placed in the paper book page No. 18 to 34 clearly reveals that the assessee company is selling goods/products i.e. drugs-medicine to the distributor which is being paid by the distributor on principal to principal basis and property in goods with all risk and rewards passes to the distributor at the time of selling of the goods by the assessee company to the distributor when the goods are delivered by the carrier to the distributor. In-fact the distributors are the customers of the assessee company to whom the sales of the products i.e. drugs-medi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s (including VAT) to their customers, whereby all the above facts clearly reflects that the distributors is buying the products from the assessee company and then selling the same in its own right with all risks and rewards of ownership got vested in the said distributors on the delivery of goods by carrier to the said distributor which is also supported by the clause 5 of the distribution agreement dated 01-07-2001. Thus, we, therefore, hold that the assessee company has paid discount to MRP to the distributors at the time of sale of the said goods/products i.e. drugs-medicine which in our considered view is not covered u/s 194H of the Act and no tax was required to be deducted at source on these discount to MRP given by the assessee company to the distributors at the time of sale of drugs-medicine to the distributors. We hold accordingly." 12. Therefore, respectfully following the decision of Coordinate Bench of ITAT which is applicable mutatis mutandis in the present case, we are inclined to accept the submission of Ld. AR. Accordingly, the grounds (a) and (b) raised by the revenue are dismissed." 10. The learned D.R. could not show us any reason to deviate fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ced as under: 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 u 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 of prompt payment, the terms of payments ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (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 debt incurred (including a deposit, cl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Act. 8. The provisions of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 over dues 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 the interest earned on the belated....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 from company. Therefore, it has to be....