Dealer not liable to deduct TDS on Commission directly paid by Mobile Operator to Retailers: ITAT [Read Order]

Late Fee - TDS Default -ITAT - Taxscan

The Jaipur Bench of Income Tax Appellate Tribunal ( ITAT ) in the case of Shri Virendra kumar Jain v.  ITO held that the dealer in SIM cards, who was paid a commission directly by the mobile operator was not liable to deduct TDS on such commission.

The appeal was filed by the assessee challenging the order of the Assessing Officer (AO) in confirming the disallowance u/s 40(a)(ia) of the Income Tax Act (IT Act), the addition on account of bogus expenses on account of commission paid by the assessee to retailers.

The facts of the present case are that the assessee is an individual engaged in the business of trading in mobile and accessories including SIM card, pre-paid card, etc. The AO was of the opinion that the assessee has shown the payment of commission under Section 40(a)(ia) without deduction of TDS and disallowed the same. The Commissioner of Income Tax (CIT (A)) confirmed the order of the AO.

The assessee submitted that the alleged payment was not made by the assessee but was directly paid by the mobile operator to the retailers and hence the TDS shall not be deducted from the amount. Also, it was only for the purposes of accounting that the assessee had made contra entries in respect of the said amount being receipts as well as payments whereas there is no actual payment by the assessee but by the company which had accepted the said payment.

After considering the contentions of both the parties, the Tribunal bench comprising of Judicial Member Vijay Pal Rao and Accountant Member Vikram Singh Yadav relying upon a number of decisions held that the Hon’ble Supreme Court has clearly held that “when the assessee’s role is only an intermediary and passing the services from one hand to other hand then merely because the assessee is showing an amount of commission/discount in the books of account for completeness of accounts and transactions will not impute any liability of deducting tax at source”, hence the allowance made by the AO was directed to be deleted.

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