Trade discount given by assessee dealing with its vendors on P2P basis couldn’t be treated as commission

 1,288 total views

Trade discount given by assessee dealing with its vendors on P2P basis couldn’t be treated as commission

 

Dempo Industries (P.) Ltd

[2021] 126 taxmann.com 112 (Bombay)

Short overview of the case:

The case was regarding Deduction of tax at source as Commission or brokerage in respect of Trade Discount

Assessment year 2011-12

Assessee was engaged in business of publishing and selling newspapers

 During assessment proceedings, Assessing Officer noted that assessee was paying commission to newspaper vendors and advertising agencies but was not deducting tax at source under section 194H on same 

Assessee contended that amount paid to newspaper vendors and advertising agencies was actually trade discount and not commission

However, Assessing Officer made disallowance under section 40(a)(ia)

It was noted that both Commissioner (Appeals) as well as Tribunal had recorded concurrent findings of fact that transactions or dealings between assessee and newspaper vendors and advertising agencies were on a principal-to-principal basis

Thus, newspaper vendors and advertising agencies were not agents of assessee

There was no commission paid by assessee to newspaper vendors and advertising agencies but assessee merely extended a trade discount to them 

On issue as to whether,assessee would  be liable to deduct tax at source under section 194H on payment made to newspaper vendors and advertising agencies, the court answered it in negative.

Impugned disallowance made under section 40(a)(ia) was deleted by the court .

Conclusion : 

Trade discount given by assessee, engaged in business of publishing and selling newspaper, to newspaper vendors and advertising agencies was not in nature of ‘commission’ and no TDS was to be deducted under section 194H on same

Section 194H, read with section 40(a)(ia), of the Income-tax Act, 1961

Leave a Comment

Your email address will not be published.

the taxtalk

online portal for tax news, update, judgment, article, circular, income tax, gst, notification Simplifying the tax and tax laws is the main motto of the team tax talk, solving