INCOME TAX ACT, 1961

Section 194C

Tax deduction at source - Under section 194C - Discount/rebate allowed to dealers/distributors on sale of products to them -

Assessee, company, engaged in importing and trading in electronic goods, such as, notebooks, tablets and mobile phones, etc., provided conditional rebate/discount of Rs. 42 crores to 229 distributors/dealers to whom various products, such as, notebooks, zenphones, tablets, zenpads, ecebooks, accessories, etc., were sold. AO disallowed rebate/discount given under section 40(a)(ia) on the reasoning that such payments come within the purview of section 194C. Held: A reading of section 194C would suggest that in respect of any payment made to a contractor/sub-contractor for carrying out any work, including supply of labour, would be subject to deduction of tax at source at the appropriate rate. In the instant case, assessee had entered into a sale contract, simpliciter, for sale of its products to dealers/distributors. Certainly, transaction between assessee and the dealers/distributors could not be termed as a contract for work. Assessee simply sold its products to dealers/distributors who, in turn, sold them to the end users. Accordingly, there was no element of work as defined under clause (iv) of Explanation to section 194C. Therefore, under no circumstances, section 194C would be applicable to the discount/rebate.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2016-17 & 2017-18

INCOME TAX ACT, 1961

Section 194H

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