The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) has held that no tax is deductible under Section 194H of the Income Tax Act, 1961.
The assessee is deriving income from distributorship of Idea Cellular Limited for sale of SIM cards and mobile recharge coupons. During the course of assessment proceedings, the Assessing Officer noted that in the P&L account, the assessee has shown commission income of Rs. 16,03,103/- which has been received from the principal, Idea Cellular Limited. The officer invoked the provisions of Section 40(a)(ia) of the Act and disallowed the claim of deduction of Rs. 07,04,430/- on the ground that the payment of commissioner of the retailers/dealers was liable to TDS U/s 194H of the Income Tax Act, 1961.
On the second appeal, the Tribunal noted that the commission of Rs. 16,03,103/- received from Idea Cellular Limited after deducting TDS.
It was also noted that the assessee has shared the said commission with the dealers/retailers to the tune of Rs. 7,04,430/-, thus the Assessing Officer has not disputed the fact of commission received by the assessee was shared with the dealers/retailers as per the agreement between the Idea Cellular Limited and the assessee as well as the dealers/retailers.
“It is also not in dispute that the amount of total commission of Rs. 16,03,103/- has already suffered TDS at the time of payment. Thus, it is not a commission paid by the assessee in the capacity of principal to the retailers/dealers as an agent of the assessee but the commission is originally paid by the Idea Cellular Limited who is acting as a principal and all other parties being distributor, dealers and retailers are receiving the commission from Idea Cellular Limited. It is only for the sake of completeness of the entries in the books, the commission is rooted through the assessee’s books of account. We further note that the ld. CIT(A) for the A.Y. 2012-13 and 2013-14 has considered an identical issue and decided the same in favor of the assessee,” the Tribunal said.
