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

Kimberly Clark Lever P.Ltd., Pune vs. ACIT, Pune

In the result, the appeal of the assessee stands allowed

ITA 2481/PUN/2012[2008-09]Status: DisposedITAT Pune22 Feb 2021AY 2008-09

Bench: Shri Inturi Rama Rao, Am & Shri Partha Sarathi Chaudhury, Jm आयकर अपील सं. / Ita No.2481/Pun/2012 िनधा"रण वष" / Assessment Year : 2008-09 Kimberly Clark Lever P. Ltd., Gat No.934 To 937, Village Sanaswadi Off Nagar Road, Ta- Shirur, Pune-412208. .......अपीलाथ" / Appellant Pan : Aaack4647E बनाम / V/S. Acit, Circle-Xi(I), ……""यथ" / Respondent Pune. Assessee By : Shri Percy Pardiwalla Revenue By : Shri Sandeep Garg सुनवाई क" तारीख / Date Of Hearing : 08.02.2021 घोषणा क" तारीख / Date Of Pronouncement : 22.02.2021 आदेश / Order Per Inturi Rama Rao, Am: This Is An Appeal Filed By The Assessee Directed Against The Final Assessment Order U/S 143(3) R.W.S. 144C Of The Income Tax Act, 1961 (‘The Act’ For Short) Of The Asstt. Commissioner Of Income Tax, Circle-11(1), Pune (‘The Assessing Officer’ For Short) Dated 29.10.2012 For The Assessment Year 2008-09. 2. The Appellant Raised The Following Grounds Of Appeal :- “The Appellant Objects To The Order Dated 29 October 2012 Passed Under Section 143(3) R.W.S. 144(C) Of The Income-Tax Act, 1961 (‘The Act’) By The Assistant Commissioner Of Income Tax, Circle 11(1), Pune [‘Acit’ Or ‘Ao’] Following The Directions Issued By The Dispute Resolution Panel (‘Drp’) In Respect Of The Aforesaid Assessment Year On The Following Among Other Grounds:

For Appellant: Shri Percy PardiwallaFor Respondent: Shri Sandeep Garg
Section 143(3)Section 194HSection 194JSection 40Section 9(1)(vii)