Discount cannot be equated to commission for TDS u/s 194H

Surendra Mohan Mukhija v. Dy. CIT (2019) 167 TR (A) 34 (Del-Trib): 2018TaxPub(DT) 2475 (Del-Trib)

Where assessee-real estate agent had allowed discount/incentives to the purchaser of the flat, AO was precluded from treating such discount as commission in term of section 194H for TDS compliance because no service was rendered to assessee by the purchaser of the flat and on the contrary, assessee had rendered the services by facilitating booking of the flat.

Assessee was a real estate dealer on commission basis and was dealing in fresh booking of the pre-launched project of big builders. The persons booking the flats through assessee were allowed some incentives/ discounts against their booking and it was debited as “Marketing Expenses”. AO alleged that the discount was to be given to the purchaser of the flat only by the builder and not by assessee, which was only a broker, therefore, the same was in the nature of sub-commission and provisions of section 194H were attracted for non-deduction of TDS.

It was held that: In order to treat any amount as commission, it is necessary that the recipient of the money should render some service to the payer; the payment must relate to such service, and there shall be the relationship of principal and agent. Such ingredients were conspicuously absent in the instant matter because the recipient did not render any service to assessee and on the contrary, it was the assessee who rendered services by way of providing help to book a flat.