Motor & General Sales Ltd Vs ITO (TDS)-II (ITAT Lucknow)
Golden Harvest Scheme Discount ≠ Interest; No TDS u/s 194A, 201 Default Quashed
The ITAT, Lucknow Bench, held that discount/compensation given to customers under the Golden Harvest Scheme (GHS) is not “interest”, and therefore no TDS is deductible u/s 194A. Consequently, the assessee—a franchise agent of Tanishq (Titan Industries Ltd.)—cannot be treated as assessee-in-default u/s 201(1)/(1A).
In this case (AY 2012-13), customers deposited monthly instalments for 11 months towards purchase of jewellery, and at the time of purchase in the 12th month, one instalment was contributed by the company as discount. The AO treated this benefit as interest on deposits, invoked s.2(28A), and raised TDS demand of ₹4.78 lakh plus interest. The CIT(A) affirmed, holding that since the assessee was an agent, TDS obligation rested on it.
The Tribunal rejected this approach and held that:
- The scheme represents advance towards purchase in ordinary course of business, not a fixed deposit.
- The benefit is redeemable only through purchase of jewellery, not in cash—hence lacks the essential character of interest.
- As per RBI Act & Companies (Acceptance of Deposits) Rules applicable for the year, advances against goods are excluded from “deposit”.
- The so-called “interest” is merely a sales incentive/price discount, not consideration for use of money.
Relying on co-ordinate bench rulings (including Khazana Jewellery Pvt. Ltd. and Venkatesh Paper Agencies), the ITAT held that s.194A is not attracted, and therefore 201(1)/(1A) proceedings fail.
Accordingly, TDS demand was deleted, and the assessee’s appeal was partly allowed
FULL TEXT OF THE ORDER OF ITAT LUCKNOW
