Nikhil Sharma Vs ITO (ITAT Jaipur)
Conclusion: Assessee was not liable to deduct TDS under section 194H as relationship between e-commerce platform and assessee was not of an agency but that of two independent parties on principal to principal basis. Moreso, e-commerce platform was not involved in buying or selling goods, and the amount retained was a fee for e-commerce services, not commission or brokerage.
Held: Assessee was prop. of M/s. Ratnavali Jewels, engaged in the trading of selling products on e-commerce platforms like Amazon, Flipkart and Snapdeal etc. The case of the assessee was selected for scrutiny under CASS for complete scrutiny for the reason “Large Commission Expenses and Low Net Profit”. During the year under consideration, assessee filed his return of income declaring total income at Rs. 17, 45,090/-. During the assessment proceedings it was observed by AO that the turnover of assessee during the previous year was Rs. 1, 25, 92,493/- and Rs. 2, 94, 62,792/- for the current year under consideration, hence assessee was under obligation to deduct T.D.S. u/s. 194H @ 10% on commission payments made to the e-commerce platforms mentioned. Consequently, applying the provisions of section 40(a)(ia) disallowance @ 30% amounting to Rs. 30,18,426/- was made. Assessee being aggrieved with this order of the AO preferred an appeal before CIT (A), who in turn confirmed the order of the AO. On appeal before Tribunal. It was held that once the payment was made by the customer, it was received and credited to the account of the assessee. In the process, a small fee was deducted by the e-commerce platform, whose platform was used. The relationship between e-commerce platform and the assessee was not of an agency but that of two independent parties on principal to principal basis. The e-commerce platform was not involved in buying or selling goods, and the amount retained was a fee for e-commerce services, not commission or brokerage. The disallowance made by AO was held to be illegal and unjustified. Section 194H was inapplicable because the payments to the e-commerce platform were not commission or brokerage.
