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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV & SHRI JASON P BOAZ
Per Sunil Kumar Yadav, Judicial Member This appeal is preferred by the assessee against the order of CIT(A), interalia, on the following grounds:
1. That the order of the learned Commissioner of Income Tax (Appeals) in so far as prejudicial to the interests of the appellant, is bad and erroneous in law and against the facts and circumstances of the case.
2. That the learned Commissioner of Income Tax (Appeals) erred in law and in facts in disallowing a sum of Rs.4,63,563/- u/s. 40(a)(ia) of the Act having held that the amount paid to the pigmy agents is not commission but salary and ignoring the fact at disallowance u/s. 40(a)(ia) is not applicable for non-deduction of tax at source u/s. 192.
Additional Ground
That the learned Commissioner of Income Tax (Appeals) ought to have reduced the sum of Rs.85,375/- from the income since the same was added as income for assessment year 2011-12 on accrual basis.
Each of the above ground is without prejudice to one another, the appellant craves the leave of the Hon'ble Income Tax Appellate Tribunal, Bangalore to add, delete, amend or modify otherwise all or any of the grounds either before or at the time of hearing this appeal.
During the course of hearing, the learned counsel for the assessee has opted not to 2. press the additional ground relating to reduction of Rs.85,375/- from the income from 2011-12 on accrual basis. Accordingly, this ground is dismissed being not pressed. Now the solitary ground is with regard to disallowance of Rs.4,63,563/- under section 40(a)(ia) of the Act.
The brief facts borne out from the record are that the AO has noticed that assessee has not deducted tax at source on the pigmy commission paid to pigmy deposit collectors as according to it tax is not deductable. Against the disallowance, assessee preferred an appeal before the CIT(A) and placed reliance upon the CBDT’s circular but he did not find favour with the CIT(A) and the CIT(A) confirmed the disallowance. Now the assessee is before the Tribunal and placed reliance upon the clarification issued by the CBDT vide its letter dated 03.03.2008 and also letter dated 01.12.2011, in support of his contention that the commission paid to pigmy deposit collectors should be treated as salary in place of commission, therefore on its payment, TDS is not required to be deducted.
The learned DR placed reliance upon the order of the CIT(A).
Having carefully examined the order of the lower authorities in the light of rival submissions, we find that assessment year involved is 2012-13 and vide letter dated
Page 3 of 3 03.03.2008, the CBDT has clarified the scope of earlier letter dated 12.12.2007 treating the remuneration (commission) earned by the pigmy deposit collectors as salary and subject it to TDS under section 192 of the IT Act. It is for the purpose of income tax and no way extends the scope of IT laws. This clarification was reiterated vide letter dated 01.12.2011 by stating therein that the applicability of relevant provisions of deduction of tax at source, remuneration (commission) earned by pigmy deposit collectors will be treated as salary and subject to TDS under section 192 of the IT Act. In the light of these circulars, the payment by the assessee to the pigmy collectors cannot be termed to be the payment of commission for making disallowance under section 40(a)(ia) for non deduction of TDS under section 194H of the Act. In the light of these legal positions, we find no merit in the order of the lower authorities for making disallowance for non deduction of TDS under section 194H of the Act. Accordingly, order of the CIT(A) is set aside and addition is deleted.
In the result, appeal of the assessee is partly allowed.
Pronounced in the open court on 10th November, 2017.