The Pune Bench of the Income Tax Appellate Tribunal (ITAT), observed that no Tax Deduction at Source (TDS) deduction under Section 194H of the Income Tax Act, 1961 for expenditure claimed to have been debited to profit and loss account under the head “commission”.
The issue involved in the present appeal is whether on the facts and circumstances of the case, the appellant, Ketan Sahebrao Purkar, is liable to deduct tax at source under Section 194H of the Income Tax Act in respect of expenditure claimed to have been debited to Profit & Loss Account under head “commission”.
The appellant is an individual engaged in the business of trading of onions. The assessment was completed by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961 after making disallowance of commission expenditure for non-deduction of tax at source.
The Tax Auditor in his report had reported that the appellant had not deducted TDS on the commission expenditure. Based on this information, the Assessing Officer had called upon the appellant to explain as to why the provisions of section 40(a)(ia) of the Income Tax Act should not be invoked in respect of commission expenditure.
The Counsel for the appellant submitted that the transactions between the assessee and the parties to whom the commission expenditure is stated to have been paid were undertaken on principal to principal basis, therefore, the question of deduction of tax deducted at source does not arise. It was further submitted that by inadvertence the gross receipts of the sale were shown instead of showing the net sale proceeds.
The Counsel further argued that that there is neither credit to the parties’ account on account of commission expenditure nor actual payment by the appellant. Therefore, the question of deduction of TDS in terms of provisions of section 194H of the Income Tax Act does not arise.
The Tribunal of Inturi Rama Rao, Accountant Member observed that “The appellant neither paid nor credited such income to the account of the payee. The Jurisdictional High Court in the case of Super Religare Laboratories Ltd, held that there is no obligation to deduct tax at source under Section 194H of the Income Tax Act for commission expenditure.”
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