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

Spt Securities Pvt. Ltd., Kolkata vs. DCIT, Circle - 5, Kolkata

In the result, appeal filed by the assessee (Ground no

ITA 265/KOL/2016[2009-2010]Status: DisposedITAT Kolkata12 Jan 2018AY 2009-2010

Bench: Shri A. T Varkey, Jm &Dr. A.L.Saini, Am आयकरअपीलसं./Ita No.265/Kol/2016 (िनधा"रणवष" / Assessment Year: 2009-10) Spt Securities Pvt. Ltd. Vs. Dcit, Circle-5, Kolkata 11, Clive Row, 2Nd Floor, Kolkata – 1. Ayakar Bhavan, P-7, Chowringhee Square, Kolkata – 69. "थायीलेखासं./जीआइआरसं./Pan/Gir No. :Aadcs 8015 P (Assessee) .. (Respondent) Assessee By : Shri Subash Agarwal, Advocate. Respondent By : None सुनवाईकीतारीख/ Date Of Hearing : 17/11/2017 घोषणाकीतारीख/Date Of Pronouncement : 12/01/2018 आदेश / O R D E R Per Dr. Arjun Lal Saini, Am: The Captioned Appeal Filed By The Assessee, Pertaining To Assessment Year 2009-10, Is Directed Against The Order Passed By The Ld. Commissioner Of Income Tax (Appeals)–2, Kolkata, In Appeal No.987/Cit(A)-2/C-5/14-15 Dated 14.12.2015, Which In Turn Arises Out Of An Order Passed By The Ao U/S.143(3) Of The Income Tax Act 1961 (Hereinafter Referred To As The ‘Act’) Dated 28.03.2011. The Assessee Has Raised The Following Grounds Of Appeal: 2. “1. That The Order Of The Ld. Commissioner Of Income Tax Is Bad In Law & On Facts Of The Case. 2.That The Ld. Commissioner Of Income Tax(Appeals) Erred In Upholding The Disallowance Of Sub-Brokerage Payments To Sub-Brokers On The Transactions Related To Shares & Securities Inspite Of Specific Exclusion Of The ‘Brokerage On Shares Trade’ From The Definition Of ‘Commission & Brokerage’ In The Explanation To Section 194H. 3.The Ld. Commissioner Of Income Tax(Appeal) Also Erred In Holding That The Appellant Could Not Prove The Transaction To Be Related To The Trading Of Shares Of Securities. 4.The Ld. Commissioner Of Income Tax(Appeals) Further Erred In Upholding The Addition U/S 14A In Respect Of Shares Held As Stock By The Appellant Company.

For Appellant: Shri Subash Agarwal, AdvocateFor Respondent: NONE
Section 143(1)Section 143(2)Section 143(3)Section 14ASection 194HSection 40

Prasanta Karmakar, Kolkata vs. JCIT, Range - 26, Kolkata

In the result, the appeal filed by the assessee, is allowed

ITA 258/KOL/2016[2011-2012]Status: DisposedITAT Kolkata10 Jan 2018AY 2011-2012

Bench: Shri N.V. Vasudevan, Jm &Dr. A.L.Saini, Am आयकरअपीलसं./Ita No.258/Kol/2016 (िनधा"रणवष" / Assessment Year: 2011-12) Prasanta Karmakar Vs. Jcit, Range-26, Kolkata R-26, Kol, Aykar Bhawan, 41, Bose Para Road, Barisha, Dakshin, Dhakuria, Kolkata – Kolkata – 700 008. 700 068. "थायीलेखासं./जीआइआरसं./Pan/Gir No. : Agapk 0496 Q (Assessee) .. (Respondent) Assessee By : Shri Monoj Dutta, Fca, S.K. Roy, Adv. Respondent By: Shri Soumyajit Dasgupta, Addl. Cit सुनवाईकीतारीख/ Date Of Hearing : 22/11/2017 घोषणाकीतारीख/Date Of Pronouncement : 10/01/2018 आदेश / O R D E R Per Dr. Arjun Lal Saini, Am: The Captioned Appeal Filed By The Assessee, Pertaining To Assessment Year 2011-12, Is Directed Against The Order Passed By The Ld. Commissioner Of Income Tax (Appeals)–7, Kolkata, In Appeal No.359/Cit(A)-7/Range- 26/14-15, Dated 28.01.2016, Which In Turn Arises Out Of An Order Passed By The Assessing Officer U/S.144/143(3) Of The Income Tax Act 1961 (Hereinafter Referred To As The ‘Act’), Dated 17.03.2014. 2. The Assessee Has Raised The Following Grounds Of Appeal: “1.That The Ld. Cit(A) Totally Erred In Law & On Facts In Confirming The Disallowance Of Rs.10,98,184/- U/S.40(A)(Ia)/194H Which Was Not The Issue In The Original Asst. Order Wherein The A.O. Made The Total Disallowance As Bogus Commission Payment & Rejected Books U/S.145(3) & Such Addition Has To Be Deleted Being Totally Injudicious & Out Of Context Especially When The Cit(A) Himself Has Admitted That Commission Payment Is Genuine & Is Required To Be Allowed. 2.That The Disallowance Of Rs.10,98,184/- Is Totally Bad & Uncalled For In View Of The Findings In The Asst. Order Dt. 20.01.2016 Of The Assessee U/S. 143(3) For The Asst. Year 2013-2014 & Hence Cannot Be Sustained. 3. That The Ld. Cit(A) Failed To Appreciate That The Retailer'S Commission Is Determined & Communicated By The Principal Ttsl Through E-Mail Every Month

For Appellant: Shri Monoj Dutta, FCA, S.K. Roy, AdvFor Respondent: Shri Soumyajit Dasgupta, Addl. CIT
Section 133(6)Section 143(1)Section 143(2)Section 143(3)Section 144Section 145(3)Section 40