M/S. SAIRAM & CO.,CHENNAI vs. ITO, CHENNAI

Shri S. Sridhar, the Ld. counsel for the assessee submitted that the assessee is a consignment sale agent and received commission on sale of goods consigned to the assessee. In fact, the assessee received commission from other parties. The Assessing Officer disallowed ₹71,318/- under Section 40(a)(ia) of the Income Tax Act, 1961 (in short ‘the Act’), for non-deduction of tax. According to the Ld. counsel it is not a case of payment by assessee, it is a case of receipt of commission by assessee. When the assessee receives commission, there is no question of deduction of tax. It is for the other party to deduct tax. Therefore, according to the Ld. counsel, the CIT (Appeals) is not justified in confirming addition made by the Assessing Officer.

On the contrary, Shri V. Nandakumar, the Ld. Departmental Representative submitted that the assessee has not deducted tax in respect of payment made by M/s. Sai Lakshmi Padmavati Dhall Mill and M/s. Venkateswara Traders. The assessee explained before the Assessing Officer that the payment was made to the parties with whom the assessee engaged as consignment agent. The Assessing Officer found that no evidence was available on record to support that the assessee is consignment agent for M/s. Sai Lakshmi Padmavati Dhall Mill and M/s. Venkateswara Traders.

We have considered the rival submissions on either side and perused the material available on record. What was disallowed by the Assessing Officer is the claim made by the assessee under the nomenclature consignment sales. When the assessee claims as a consignment agent, the goods of the 3 parties are sold by the assessee and after recovering the sale proceeds from the purchaser would deduct its commission and pay the rest of the amount to the consignor. Even if it is assumed that there was no evidence for consignment sale and the assessee engaged as a normal sales person, still the assessee is selling the goods and collecting the sale proceeds. In either case, amount received by the assessee as sale proceed or commission is not liable for deduction of tax at source at the hands of the assessee. If the assessee receives commission, it is for the payer of the commission to deduct tax and not for the assessee. Under normal sales, the assessee would purchase the goods on payment or on credit and sell the same by keeping a margin of profit. In such a case also, there is no question of deduction of tax would arise. Therefore, this Tribunal is of the considered opinion, the disallowance made by the Assessing Officer is not justified. Therefore the orders of the lower authorities are set aside and addition of ₹71,318/- is deleted.

In the result, the appeal of the assessee stand allowed.