Section 194H of the Income Tax Act

Income-tax Act, 2025: s.393

Section 194H of the Income-tax Act, 1961 corresponds to section 393 (Tax to be deducted at source) of the Income-tax Act, 2025.

Read section 393 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 194H is CIT v. Nagri Mills Co. Ltd. (33 ITR 681), cited in 165 of the 1,314 judgments on BharatTax that turn on this section.

Leading authorities on Section 194H

CIT v. Nagri Mills Co. Ltd.
33 ITR 681 · 1958 · High Court
165
citing judgments

An addition to income is revenue neutral if its tax impact remains the same regardless of the year in which it is assessed. Assessments should not dispute the year of addition when the tax rate and impact are consistent, to avoid unnecessary disputes and potential loss to revenue.

CIT v. Idea Cellular Ltd.
325 ITR 148 · 2010 · High Court
155
citing judgments

Discounts offered to distributors under a tightly controlled relationship constitute commission and are subject to tax deduction at source under Section 194H of the Income-tax Act.

CIT v. Bharti Cellular Ltd.
330 ITR 239 · 2011 · Supreme Court
147
citing judgments

The Supreme Court holds that for a service to qualify as 'fees for technical services' under Section 9(1)(vii) of the Income-tax Act or Article 12 of a DTAA, direct human involvement or intervention in rendering the service is essential. This principle applies to telecommunication services like interconnect charges and roaming charges, and also to services related to software use.

Bharti Airtel Ltd. v. DCIT
372 ITR 33 · 2015 · High Court
139
citing judgments

Section 194H of the Income Tax Act, 1961, is not applicable on the discount extended to distributors of pre-paid services, as the distributor does not earn income at the time of purchasing pre-paid cards from the assessee. The assessee is not in possession of any income belonging to the distributor at that point.

Merilyn Shipping & Transports v. Addl. CIT
136 ITD 23 · 2012 · ITAT
139
citing judgments

Section 40(a)(ia) disallowance applies only to expenses that remain payable at the end of the financial year, not to expenses that have been actually paid during the previous year without deduction of tax at source.

State Lotteries & Ors. (2001) 249 ITR 186 and Ahmedabad Stamp Vendors Association v. Union of India
257 ITR 202 · 2002 · High Court
121
citing judgments

Supplementary commission forional or extra services does not fall within the ambit of Section 194H of the Income Tax Act, 1961. This may affect the applicability of certificates issued under Section 197.

CIT v. HCL Comnet Systems & Services Ltd.
305 ITR 409 · 2008 · Supreme Court
118
citing judgments

For computing book profits under Section 115JB, an Assessing Officer's power is limited to examining duly certified books and making adjustments only as per the Explanation. A provision for bad and doubtful debts, being a diminution in the value of an asset (receivable), does not constitute a 'provision for liability' under Clause (c) of the Explanation and therefore cannot be added back.

Southern Switchgear Ltd. v. CIT
232 ITR 359 · 1998 · Supreme Court
99
citing judgments

Expenditure on technical aid fees for factory setup and rights to sell products under a collaboration agreement is capital in nature, not revenue, as it provides an enduring benefit.

Hindustan Coca Cola v. CIT
402 ITR 539 · 2018 · High Court
73
citing judgments

Discounts allowed by a business to grow its operations in a competitive market are acceptable and cannot be disallowed. Expenses incurred for business growth in a competitive world are not to be disallowed.

Nabha Investments Pvt. ltd. v. UOI
248 ITR 292 · 2001 · High Court
65
citing judgments

An assessment order is considered erroneous and prejudicial to the interest of the revenue, warranting revision under Section 263, if there is an inadequate inquiry or non-application of mind by the Assessing Officer, satisfying the two cumulative conditions required for revisional powers.

Judgments on Section 194H

Md. Nabirul Islam, Murshidabad vs. D.C.I.T., Circle - 42, Murshidabad

In the result, the appeal of the assessee stands allowed

ITA 43/KOL/2023[2013-2014]Status: DisposedITAT Kolkata02 Aug 2023AY 2013-2014

Bench: Shri Sanjay Garg & Dr. Manish Boradi.T.A No.43/Kol/2023 Assessment Year: 2013-14 Md. Nabirul Islam……………...................................................……Appellant Purapara, Raghunathpur, Jangipur, Murshidabad-742201. [Pan: Abkpi1550Q] Vs. Dcit, Circle-42, Murshidabad...................……........……...…..…..Respondent Appearances By: Shri Sonam Bajoria, Fca, Appeared On Behalf Of The Appellant. Shri Sudip Kr. Bandyopadhyay, Addl. Cit- Sr. Dr, Appeared On Behalf Of The Respondent. Date Of Concluding The Hearing : July 27, 2023 Date Of Pronouncing The Order : August 02, 2023 आदेश / Order संजय गग", "या"यक सद"य "वारा / Per Sanjay Garg: The Present Appeal Has Been Preferred By The Assessee Against The Order Dated 21.11.2022 Of The National Faceless Appeal Centre (Hereinafter Referred To As The ‘Cit(A)’) Passed U/S 250 Of The Income Tax Act (Hereinafter Referred To As The ‘Act’). 2. The Sole Issue Involved In This Appeal Is As To Whether Tax At Source (Tds) Was Liable To Be Deducted U/S 194 Of The Income Tax Act On The Discount Allowed To Retailers By The Assessee Dealer/Distributors On Sale Of Prepaid Sim Cards/Mobile Recharge Cards & Whether The Lower Authorities Were Justified In Making Disallowance U/S 40(A)(Ia) Of The Act

Section 194Section 194HSection 201Section 250Section 40

Greenstar Fertilizers Limited, Chennai vs. ACIT TDS Circle, Madurai

The appeals stand allowed in terms of our above order

ITA 275/CHNY/2023[2019-20]Status: DisposedITAT Chennai27 Jun 2023AY 2019-20

Bench: Hon’Ble Shri Mahavir Singh & Hon’Ble Shri Manoj Kumar Aggarwal, Am आयकर अपील सं./ Ita No.274/Chny/2023 (िनधाCरण वषC / Assessment Year: 2018-19) & आयकर अपील सं./ Ita No.275/Chny/2023 (िनधाCरण वषC / Assessment Year: 2019-20) M/S. Greenstar Fertilizers Limited, Acit बनाम Spic House, 7Th Floor, 88,Mount Road Tds Circle, / Vs. Guindy, Chennai-600 032. Madurai "थायी लेखा सं./जीआइ आर सं./Pan/Gir No. Aadcg-9451-D (अपीलाथ&/Appellant) : ('(थ& / Respondent) अपीलाथ& की ओरसे/ Appellant By : Shri R. Vijayaraghavan (Advocate)-Ld. Ar '(थ& की ओरसे/Respondent By : Shri D. Hema Bhupal(Jcit) –Ld.Dr सुनवाई की तारीख/Date Of Hearing : 21-06-2023 घोषणा की तारीख /Date Of Pronouncement : 27-06-2023 आदेश / O R D E R Manoj Kumar Aggarwal () 1. The Grievance Of The Assessee In Captioned Appeals For Assessment Years (Ay) 2018-19 & 2019-20 Is Identical I.E., Demand Raised U/S 201(1) / (1A) For Want Of Tax Deduction At Source (Tds) On Certain Payments In Terms Of Sec. 194H Of The Act. These Payments Are In The Nature Of Rebates Given By The Assessee To Its Dealers / Distributors. The Impugned Orders Have Been Passed By Learned

For Appellant: Shri R. Vijayaraghavan (Advocate)-Ld. ARFor Respondent: Shri D. Hema Bhupal(JCIT) –Ld.DR
Section 194HSection 201(1)

Greenstar Fertilizers Limited, Chennai vs. ACIT TDS Circle, Madurai

The appeals stand allowed in terms of our above order

ITA 274/CHNY/2023[2018-19]Status: DisposedITAT Chennai27 Jun 2023AY 2018-19

Bench: Hon’Ble Shri Mahavir Singh & Hon’Ble Shri Manoj Kumar Aggarwal, Am आयकर अपील सं./ Ita No.274/Chny/2023 (िनधाCरण वषC / Assessment Year: 2018-19) & आयकर अपील सं./ Ita No.275/Chny/2023 (िनधाCरण वषC / Assessment Year: 2019-20) M/S. Greenstar Fertilizers Limited, Acit बनाम Spic House, 7Th Floor, 88,Mount Road Tds Circle, / Vs. Guindy, Chennai-600 032. Madurai "थायी लेखा सं./जीआइ आर सं./Pan/Gir No. Aadcg-9451-D (अपीलाथ&/Appellant) : ('(थ& / Respondent) अपीलाथ& की ओरसे/ Appellant By : Shri R. Vijayaraghavan (Advocate)-Ld. Ar '(थ& की ओरसे/Respondent By : Shri D. Hema Bhupal(Jcit) –Ld.Dr सुनवाई की तारीख/Date Of Hearing : 21-06-2023 घोषणा की तारीख /Date Of Pronouncement : 27-06-2023 आदेश / O R D E R Manoj Kumar Aggarwal () 1. The Grievance Of The Assessee In Captioned Appeals For Assessment Years (Ay) 2018-19 & 2019-20 Is Identical I.E., Demand Raised U/S 201(1) / (1A) For Want Of Tax Deduction At Source (Tds) On Certain Payments In Terms Of Sec. 194H Of The Act. These Payments Are In The Nature Of Rebates Given By The Assessee To Its Dealers / Distributors. The Impugned Orders Have Been Passed By Learned

For Appellant: Shri R. Vijayaraghavan (Advocate)-Ld. ARFor Respondent: Shri D. Hema Bhupal(JCIT) –Ld.DR
Section 194HSection 201(1)