DCIT (TDS) Vs Novartis Healthcare Private Limited (ITAT Mumbai)
The Mumbai ITAT decided the Revenue’s appeal and the assessee’s Cross Objection arising from orders passed after a survey under Section 133A(2A) of the Income-tax Act for verification of TDS compliance. The Revenue had concluded that the respondent company had failed to deduct tax at source on (i) margins or discounts allowed to stockists under Section 194H, (ii) payments under the Employee Stock Ownership Plan (ESOP) under Section 192, and (iii) interest relating to delayed payments to Micro, Small and Medium Enterprises (MSMEs). Consequently, orders under Sections 201 and 201(1A) treated the respondent as an assessee in default. The CIT(A) deleted the additions relating to Sections 194H and 192, while concurring with the Assessing Officer regarding TDS on delayed payment interest to MSMEs. The Revenue appealed against the relief granted by the CIT(A), and the respondent filed a Cross Objection on the MSME issue.
With respect to Sections 194H, the Revenue contended that the relationship between the respondent company and its stockists was that of principal and agent rather than principal to principal. According to the Revenue, the respondent controlled pricing, invoicing, margins, payment terms, territorial allocation, transportation, stock monitoring and reporting obligations, and retailer feedback, demonstrating that the stockists functioned as agents. It was further argued that the discount allowed to stockists represented commission attracting deduction of tax under Section 194H.
