Manoj Kumar Aggarwal ORDER
Manoj Kumar Aggarwal, Member (A)
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 Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] on 09.01.2023 in the matter of separate orders passed by learned Assessing Officer u/s 201(1) / 201(IA) of the Act on 19-02-2020.
2. The Ld. AR, drawing our attention to copies of invoices, credit notes and ledger extracts, submitted that the transactions were carried out on principal-to-principal basis and there was no agency relationship between the assessee and its customers. Therefore, the assessee was not obligated to deduct TDS on the impugned payments. The Ld.AR submitted that rebate was given on sales turnover and it was not in the nature of agency commission. The Ld. Sr. DR, on the other hand, submitted that payments were in the nature of commission only. Having heard rival submissions and upon perusal of case records, our adjudication would be as under.
3. In AY 2018-19, an order was passed u/s. 201(1) / 201(1A) pursuant to TDS inspection carried out in the business premises of the assessee. The assessee is stated to be engaged in manufacturing and selling of fertilizers in India. The assessee sold fertilizers through network of dealers. It transpired that the assessee offered annual rebate to selected dealers upon achieving targets. The same was given in the shape of credit notes and gold coins which aggregated to Rs.451.24 Lacs. The assessee submitted that credit notes were given in order to promote the sales. The Ld. AO held that such credits were in the nature of commission which would require TDS u/s.194H and accordingly, the assessee was deemed to be assessee-in-default. Finally, impugned demands were raised against the assessee u/s 201(1) / (1A).
4. The Ld. CIT(A), after perusal of relevant agreement between the assessee and the dealers, upheld the action of Ld. AO by observing as under: -
1. The dealer sell fertilizers manufactured by the appellant (principal) and the appellant has the power to terminate the agreement.
2. The Distributor/ Dealer has agreed to undertake the trade or sale of Products as per the trade terms communicated to him I her by the principal and at the price fixed by the principal from time to time.
3. The Principal will pass on to the Distributor/ Dealer such trade margins, discounts or commissions currently in vogue and as modified periodically by the Principal to the Distributor/ Dealer.
4. The Distributor/ Dealer or their authorized agent shall ensure, during the currency of this agreement, to promote the distribution of Product within the prescribed location.
5. The Principal shall have and does reserve the rights at all times during the currency of this agreement to appoint other Distributor/ Dealer, Agents or to open marketing points besides effecting distribution directly by themselves by opening and operating their own depots and distribution points or otherwise.
6. The Distributor/ Dealer will abide by and follow such instruction and directives that the principal may issue from time to time regarding the procedures to be adopted pertaining to transactions under this Agreement........