Case Law Details
Wockhardt Limited Vs PCIT (ITAT Pune)
it is seen that the assessee company sold its products to distributors at a price lower than the Maximum Retail Price (MRP), which difference has been opined by the ld. PCIT as Commission requiring deduction of tax at source u/s 194H of the Act. It is simple and plain that a manufacturer would sell his goods to Stockists or Distributors at a price below the MRP, who, in turn, will add up their margin and then sell the products to the retailers. The MRP is the price which is charged by a Retailer from the ultimate consumers. All the intermediaries between the Manufacturer and ultimate consumer are to be compensated within the overall MRP of the product.
The assessee sold its products to Stockists obviously at a price below the MRP, which the Stockists were to sell to Retailers and from Retailers to ultimate consumers. The difference between the MRP and the price sold to Stockists, by no stretch of imagination, can be considered as commission or brokerage paid by the assessee to its Stockists. In order to get covered u/s.194H, it is apparent that principal and agent relation must be established. If the transaction is done on principal-to-principal basis, there can be no scope for payment of commission requiring deduction of tax at source u/s.194H of the Act. Here is a case in which the assessee sold its products to Stockists on principal-to-principal basis, who, in turn, sold the same products to Retailers again on principal-to-principal basis for onward sale to customers again on principal-to-principal basis. In that view of the matter, the relation between the assessee and its stockists cannot be described as that of principal and agent. We, therefore, hold that the ld. PCIT was not justified in holding the assessment order to be erroneous and prejudicial to the interest of the Revenue on account non-deduction of tax at source from such amount warranting any disallowance u/s.40(a)(ia) of the Act. As there is no involvement of any commission payment to Stockists on this score, we hold that the AO correctly accepted the assessee’s claim in this regard even though impliedly. The impugned order is overturned on this score.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal by the assessee is directed against the order dated 28-03-2019 passed by the Pr.CIT-2, Aurangabad u/s.263 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2012-13.
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