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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: SH. RAVISH SOOD & Dr. M. L. MEENA
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. RAVISH SOOD, JUDICIAL MEMBER AND Dr. M. L. MEENA, ACCOUNTANT MEMBER
ITA No. 479/(Asr)/2017 Assessment Year: 2012-13
Shri Sada Ram Chawla, Vs. Income Tax Officer, H.No. 5/59, Gali Masit Wali, Ward-2(2), Prop. M/s. Kd Communication, Tarntaran Shop No.6, Tehsil Bazar, Tarntaran. [PAN: AKYPC3903A] (Appellant) (Respondent)
Appellant by : Sh. Nipun Khanna, CA. Respondent by: Shri Rohit Mehra, D.R.
Date of Hearing: 20.12.2021 Date of Pronouncement: 24.12.2021
ORDER Per Dr. M. L. Meena, AM: The present appeal has been filed by the Assessee against the impugned order dated 27.04.2017, passed by Ld. Commissioner of Income Tax (Appeals)-I, Amritsar in respect of assessment passed u/s.143(3), for the Assessment Year 2012-13. In the grounds of appeal, the Assessee has raised the following grounds:
“1. That the Assessment Order passed by Ld. Assessing Officer u/s.143(3) of the Income Tax Act, 1961 is illegally, arbitrary and contrary to the facts on records and this illegality pervades over all other grounds of appeal. That the Worthy CIT(Appeals) further erred in confirming the decision of Ld. AO partially.
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That the Ld AO & Worthy CIT(Appeals) has erred on facts and in law in holding addition of Rs.10,32,932/-on account of unsubstantiated finding and treating the Redistribution amount allowed to retailers at Rs.10,32,932/- as commission liable to provisions of section 194H and since no tax was deducted by disallowing the same u/s. 40a(ia) whereas the Appellant is not having any payer and payee relationship with the retailers as retailers are not providing any services to the company and not to the appellant. The Appellant is only transferring/redistributing money received from Reliance as per their directions 3. That the Ld. AO & Worthy CIT(Appeals) has erred on facts and in laws in not considering the fact that it was the responsibility of Reliance Company of whom Appellant is holding the distributorship rights to deduct TDS of the individual retailers quoting their individual PANs instead of Appellant. 4. That the Worthy CIT(Appeals) has erred on facts and in law in holding addition of Rs.10,32,932/- without following decision of ITAT BENCH Amritsar on same issue in case of Shri Gurpreet Singh Sethi Prop M/s. Electronics Jammu vs ITO TDS 1TA No. 608/609(Asr)2013 being in contravention of law not following the CBDT instructions and the decided cases by the superior courts which is Ld. AO has totally ignored to deal with in the impugned assessment order which is against principles of equity and justice. 5. That The Worthy CIT(Appeals) has erred on law and facts by holding addition of Rs.2,42,624/- without going into facts that amount of commission/incentive received by assessee to the tune of Rs 5,58,870/- includes amount of TDS credited in 26 AS of amount to retailers which is the modus operandi of company. 6. That on facts and in law the addition of Rs.2,42,624/- and Rs.10,32,932/- stands to be deleted on principles of equity and justice. 7. That the Appellant craves leave to add, amend or withdraw any new ground or grounds of appeal before or at the time of hearing of appeal.” 2. The first issue is regarding confirmation of addition of Rs. 10,32,932/- on account of deriving commission income without deducting TDS u/s.194H.
Briefly, the facts as per the records are that during the course of assessment proceedings, the Assessing Officer noted from the form 26AS available that the assessee had received commission from Reliance Communication Ltd. to the tune
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of Rs.34,25,717/- on which TDS has not been deducted but the assessee had not shown commission income from Reliance Communication Ltd. Therefore, the Assessing Officer has added the difference of Rs.17,89,917, i.e., (Rs.34,25,717 (-) Rs.16,35,800/-) to the income of the assessee as undisclosed commission income from Reliance Communication Ltd.
The Ld. CIT(A) after considering the written submission of the assessee, remand report of the Assessing Officer and rebuttal of the assessee on the remand report has held vide paragraph 32 of the impugned order as under:
“The appellant has received an amount of Rs. 28,66,215 on account of sub distributor’s or retailers commission. The amount of Rs. 17,89,917/- has been directly disbursed by the reliance communications limited. The balance amount of Rs. 10,32,932/- has been credited to the account of appellant. The company has specifically mentioned that the same is in nature of commission- and TDS has been rightly deducted u/s 194H. The amount of Rs 10,32,932/- has also been claimed by the appellant as redistribution commission in the P&L account. However in para 6.7 of the written submission it has been claimed as REBATE & DISCOUNT. The nature of the transaction will not change by giving it a different name, when the same has been received by the appellant as commission. Even the appellant in the P&L account has claimed the same as commission and was liable for deduction of TDS. The amount of Rs.17,89,917/- was not received by the appellant and hence the appellant was not supposed to deduct any TDS as the same was disbursed by the company directly. The Assessing Officer has rightly disallowed the amount of Rs.10,32,932/- for non deduction of TDS u/s.40(a)(ia) of the Act. The cases relied upon by the appellant are not applicable to the facts of the case and hence the ground is dismissed.”
Ld. counsel for the assessee submitted that the nomenclature commission is used in ITR filed instead of discount/incentive as per the column prescribed in
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ITR. He contended that the assessee is not responsible for paying commission to the retailers but it is an obligation of the Reliance Communication Ltd. to pay commission to retailers. He argued that there is no Principal – Agent relationship between agent and retailers. He further submitted that as per form 26AS, the assessee had received commission from Reliance Communication Ltd. to the tune of Rs.24,35,717/- on which TDS at Rs. 3,42,586/- was deducted. He further submitted that before Ld. CIT(A), Reliance Communication Ltd. confirmed that commission paid to distributor was Rs.5,58,870/- and commission paid to retailers was Rs.28,66,215/- for Financial Year 2011-12, (copy of form 26AS and copy of confirmation for Reliance Communication Ltd. enclosed at page 1 of the PB). Ld. counsel further submitted that the summary of commission received with reconciliation statement is at page 2 of the Paper Book. Ld. AR argued that the Reliance Communication Ltd. had deducted TDS on the whole commission received by the assessee whether it is directly paid to the retailers or it was routed through the accounts of the assessee. He placed reliance on many decisions on the principle of principal agent relationship.
Per contra, the ld. DR supported the order of the ld. CIT(A) and contended that since the appellant-assessee has received an amount of Rs.28,66,215/- on account of sub-distributors/retailers commission whereas the amount of Rs.17,89,917/- has been directly disbursed by the Reliance Communication Ltd. Thus, the balance amount of Rs.10,32,932/- has been credited to the account of the appellant-assessee. He focused upon the fact that the company has specifically mentioned that this was in the nature of commission and TDS has been rightly deducted u/s.194H. He argued that the ld. CIT(A) has rightly confirmed the amount of commission of Rs.10,32,932/- as has also been claimed by the
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appellant-assessee as redistribution commission in the P&L account. He pleaded that the impugned order be sustained.
We have heard the rival submissions and perused the material on record. It is an admitted fact on record that assessee had received commission from Reliance Communication Ltd. of Rs.28,66,215/- on account of sub-distributors/retailers commission out of which Rs.17,89,917/- has been directly disbursed by Reliance Communication Ltd. and balance amount of Rs.10,32,932/- has been credited to the account of the appellant-assessee. It is also noted that the company has specifically mentioned that the amount disbursed was in the nature of commission and therefore the TDS was required to be deducted u/s.194H of the Act. As per the Ld. Counsel the Reliance Communication Ltd. has also confirmed the payment of commission paid to the distributor, the appellant-assessee of Rs.5,58,870/-, commission paid to the retailers on behalf of the distributors of Rs.28,66,215/-, totaling to Rs.34,25,085/-.
From the Profit and Loss account produced before the authorities below, ld. AR for the assessee has claimed an amount of Rs.10,32,932/- received as redistribution commission, as rebate and discount in place of commission receipts. The Ld. CIT(A) has observed that the nature of transaction will not be changed by giving it different name when the same has been received by the appellant- assessee as commission in the light of the fact that assessee itself claiming the amount of receipts as commission in its Profit and Loss Account, therefore, it was liable for TDS deduction.
In our view, the observation of the ld. CIT(A) that the amount received by the appellant-assessee is commission income from the Reliance Communication Ltd is required to be subject to TDS u/s.194H is justified. However, considering
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the documentary evidences furnished by the assessee, i.e., summary of the commission paid by the KD Communication Ltd. (enclosed at page 1 of the Paper Book) and reconciliation and summary of commission credited to KD Communication Ltd. received by the appellant assessee with the company by depicting note at page 2 of the Paper Book, it is required, to verify the exact amount of the commission received by the appellant-assessee from the Reliance Communication Ltd. as its part of the commission and the part of the commission for the sub-retailers for disbursement, so as to arrive at the net figure regarding the amount of the commission receipt of the assessee for the purpose of disallowances. The case laws relied upon by the assessee are distinguishable on the peculiar fact of the case at hand. In the cases relied upon, the principal and agent relationship does not exist whereas in the present case, there is principal agent relationship very well existed.
Ld. AR contention that the assessee has not provided any cellular services on his own but it is acting on behalf of the Reliance Communication Ltd., and the Reliance Communication Ltd. is the principal. However, since the Reliance Communication Ltd. is making the payment of commission to the sub retailors through the appellant-assessee where assessee is required to deduct TDS on such commission payment to sub retailors. In our view, this type of relationship between the Reliance Communication and the appellant-assessee being a wholesale distributor and the sub-retailers would certainly form principal-agent relationship. Hence, he is required to deduct TDS u/s. 40(a)(ia) of the Act, as rightly upheld by the ld. CIT(A).
In the backdrop of the aforesaid facts, we consider it a deem fit case to be restored back to the file of the Assessing Officer to re-examine this issue afresh in the light of the documentary evidences furnished by the assessee (APB, Pg 1-90),
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the reconciliation statement of the commission receipt, after granting sufficient opportunity of being heard. Accordingly, the first issue is restored to the AO.
The second issue is regarding the addition of Rs.2,42,624/-. The assessee alleged that this amount is included in the commission receipt of Rs.5,58,870/- in the TDS credits as per form 26 AS. This issue is also restored back to the file of the Assessing Officer for re-examination and verification with reference to the claim of the assessee that how it was forming part of the amount of commission receipt claimed to be included in the TDS receipts as per form 26AS of the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 24th December, 2021.
Sd/- Sd/- (Ravish Sood) (Dr. M. L. Meena) Judicial Member Accountant Member Date: 24.12.2021 prabhat Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T True Copy By Order