Short Overview:

Section 194H of the Income-tax Act, 1961 – Deduction of tax at source

 Commission or brokerage etc. (Commission, Connotation of)

Assessment years 2011-12 to 2013-14

Assessee company was engaged in business of manufacturing and trading of pharmaceuticals

 It incurred expenses for providing facilities/services such as travel, accommodation and equipment to persons associated with it such as stockist, field staff, distributors and doctors

 It also incurred expenses towards distribution of various articles/gifts/other facilities to these persons

 Assessing Officer was of view that these expenses were in nature of commission and assessee was liable to tax at source at rate of 10 per cent under section 194H on same

 It was noted that doctors were not acting as agent of assessee

Thus, existence of agency relationship between assessee and doctor was missing which was compulsory to invoke provisions of section 194H

Further, Assessing Officer had not brought anything on record suggesting that there existed any agency relationship between assessee and other persons i.e. stockist, dealers and field staff

These expenses were incurred exclusively for purposes of business and product promotion

By no means these could be classified as commission as envisaged under section 194H

Whether, therefore, provisions of section 194H could not be applied to case of assessee

 Held, yes

Where assessee pharmaceuticals company incurred expenses for providing travel, accommodation and equipment services and distribution of various articles/gifts/other facilities to persons associated with it such as stockist, field staff, distributors and doctors, since there existed no agency relationship between assessee and these persons, said expenses incurred for them could not be treated as commission liable for deducting tax at source under section 194H