TaxTMI 
TaxTMI 
2026 (9) TMI 1806
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....4J of the Act in respect of 'refurbish and rebate' on defective products granted to the distributors. 2. The ld. CIT(A) has erred in disallowing a sum of INR 89,574/- received from employees u/s 36(1)(va) of the Act. 3. The appellant craves leave to add to, amend, alter or delete all or any of the foregoing grounds of appeal." 3. The assessee-company is engaged in the business of trading/distribution of laptops, smartphones, notebooks and accessories in India. For the year under consideration, the assessee filed its return declaring total income of Rs. 11,39,06,370/- under the normal provisions and book profit of Rs. 17,88,02,862/- under section 115JB of the Act. In the original assessment proceedings, the Ld. AO noticed that the assessee had debited Rs. 1,01,65,008/- towards "refurbish and rebate" on defective products. The assessee explained that where products supplied to distributors were found defective, instead of taking back and repairing such products, a flat discount of 30% was granted to the concerned distributor. The Ld. AO treated the amount as payment towards repair/professional services liable for deduction of tax at source under sections 194C/194....
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..... The sample invoices and corresponding credit notes at APB pages 195 to 207 were relied upon to demonstrate that the credit note represents exactly 30% of the original cost of the product. 9. It was further submitted that declarations obtained from two key distributors, placed at paper-book pages 208 to 209, specifically confirm that the "refurbish and rebate" discount has no connection with repair of the defective product and that there is no obligation upon the distributor to utilise the discount for repairs. 10. The Ld. AR submitted that the decision dated 05.10.2020 for A.Ys. 2016- 17 and 2017-18 had proceeded on the factual premise that the assessee asked the distributors to undertake repairs and granted 30% discount towards such repair cost. However, when additional and material facts were subsequently brought before the Coordinate Bench for A.Y. 2015-16 in ITA No.7831/Mum/2019 (supra), the Coordinate Bench specifically declined to mechanically follow the earlier view and restored the issue to the Ld. AO with a direction to examine all the contentions independently and uninfluenced by the earlier orders. 11. The Ld. AR further submitted that the same position was no....
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....e distributor and, therefore, according to the assessee, no liability to deduct tax at source could arise on such reimbursement. 15. With respect to Ground No.2, the Ld. AR submitted that the disallowance under section 36(1)(va) arose from inadvertent errors in Form Nos.3CA/3CD. In respect of Rs. 32,567/-, the payment was actually made on 11.07.2017, before the statutory due date of 15.07.2017, whereas the tax audit report inadvertently recorded the payment date as 31.07.2017. Similarly, in respect of Rs. 26,224/-, payment was made on 12.01.2018 against the due date of 15.01.2018, whereas the tax audit report inadvertently mentioned the due date as 15.01.2017. 16. Per contra, the Ld. DR relied upon the orders of the Revenue authorities. The Ld. DR submitted that the issue of refurbish and rebate had earlier been decided against the assessee and that the Ld. AO, in the consequential proceedings, had examined the submissions in accordance with the directions of the Coordinate Bench. It was contended that the discount was intrinsically connected with defective products and represented compensation towards repair obligations, thereby attracting the provisions of sections 194C/194....
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.... the payment remains linked to compensation towards defective products which has been held in earlier proceedings to attract TDS provisions. Further, the order passed under section 143(3) r.w.s. 254 is in consequence to the binding directions of the Hon'ble ITAT and therefore cannot be disturbed unless it is shown that the Assessing Officer has travelled beyond such directions or failed to comply with them. No such infirmity has been demonstrated. Accordingly, I find no reason to interfere with the action of the Assessing Officer." 19. We have heard the rival submissions and perused the material available on record, including the two sets of paper book filed by the assessee and the orders of the Coordinate Benches referred to above. The controversy before us has to be examined in the light of the subsequent factual development recorded by the Coordinate Benches themselves. Undoubtedly, in the order dated 05.10.2020 relating to A.Ys. 2016-17 and 2017-18, the Bench proceeded on the factual understanding that the assessee required the dealers/distributors to repair the defective products and granted an additional 30% discount to compensate the cost of such repairs. However....
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....drawn essentially from an inference regarding the nature of the 30% discount. The material presently available, particularly the uniformity of the discount irrespective of actual repair cost and the absence of an obligation upon the distributor to undertake repairs, does not support such inference merely on the basis that the discount arises upon identification of a defective product. 25. Accordingly, considering the factual matrix now available on record and the observations/directions of the Coordinate Benches in the assessee's own cases, the disallowance of Rs. 30,49,502/- under section 40(a)(ia) r.w.s. 194C/194J of the Act cannot be sustained. Ground No.1 is accordingly allowed. 26. Ground No.2 relates to disallowance of Rs. 89,574/- under section 36(1)(va). The Ld. CIT(A) dismissed the ground principally on the finding that the assessee had not demonstrated that the employees' contributions were deposited within the due dates prescribed under the relevant statutes. Before us, however, the assessee has specifically referred to the underlying payment evidence and pointed out errors in the tax audit report. In particular, payment of Rs. 32,567/- is stated to have be....