INCOME TAX ACT, 1961

Section 194H

Tax deduction at source - Under section 194H - Provision of facilities/services such as travel/accommodation/equipment to the stockiest/field staff/distributors and doctors - Assesee company engaged in manufacturing and trading of pharmaceutical

Assessee company engaged in manufacturing and trading of pharmaceuticals, incurred expenses on account of provisioning of facilities/services such as travel/accommodation/equipment to the stockiest/field staff/distributors and doctors. AO held the expenses as in the nature of commission and accordingly disallowed deduction for want of TDS under section 194H. Held: Regarding benefit extended to doctors, doctors were not bound to prescribe medicine as suggested by assessee. It was because there was no legal compulsion on part of doctor to prescribe the particular medicine as suggested by the assessee. As such the doctor was not acting as an agent of assessee. Regarding benefit extended to other stakeholders, i.e., stockiest, dealers and field staff, AO had not brought anything on record suggesting that there existed any agency relationship between assessee and other stakeholders. It is also pertinent to note that in normal business practice business organizes various functions and tour and extend gift etc. for their distributor, retailer and marketing personal in order to encourage them for better performance which help the business in achieving larger turnover and brand value. Accordingly, expenses in question were incurred exclusively for purposes of business and product promotion and by no means these could be classified as commission as envisaged under section 194H.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12, 2012-13 & 2013-14

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