INCOME TAX ACT, 1961

Section 194H

Tax deduction at source - Under section 194H - Post-sale discount offered to distributors -

Assessee-company engaged in trading and manufacturing of mobile handsets, spare parts and accessories into agreement for supply of cellular mobile phones with HCL. It offered post-sale discount to HCL. AO held the same to be in the nature of commission liable for TDS under section 194H. Assessee contended that mere fact that discounts were extended through debit notes and were not forming part of agreement between HCL and assesse, would not automatically convert underlying amount involved as a commission, particularly where the AO has not disputed the genuineness of the transaction. Held: As evident from terms of 'Agreement for Supply of Cellular Mobile Phones' between HCL and assesse, relationship between assessee and HCL was that of principal to principal and not that of principal to agent. The discount which was offered to distributors was given for promotion of sales. This element could not be treated as commission under section 194H. discounts were clearly mentioned in invoice generated upon original sales made by the assessee. Accordingly, no disallowance could be made for want of TDS.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11

INCOME TAX ACT, 1961

Section 37(1)

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