DCIT Vs Wockhardt Ltd. (ITAT Mumbai)
The Revenue and the assessee filed appeal and cross-objection, respectively, against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2010-11. The assessee, a public limited company engaged in the manufacturing and trading of pharmaceutical products, had revised its return declaring total income of Rs. 74,24,76,938. A survey under Section 133A(2A) of the Income-tax Act was conducted to examine non-deduction of tax at source on payments made during the financial year 2009-10. Following notices under Sections 201(1) and 201(1A), the Assessing Officer passed an order determining a demand of Rs. 52,26,02,233, including interest of Rs. 24,82,58,610, relating to discounts to stockists, bonuses to stockists, and interest paid to MSMEs. The CIT(A) partly allowed the assessee’s appeal, leading to the Revenue’s appeal before the Tribunal.
The Revenue challenged the CIT(A)’s findings that transactions between the assessee and stockists were on a principal-to-principal basis, contending that discounts, bonuses and incentives paid to stockists were in the nature of commission attracting deduction of tax under Section 194H. It also argued that amounts described as interest were covered by Section 194A. Referring to the stockist agreement, the Revenue submitted that the assessee retained liability for expired goods and therefore the stockists acted as agents rather than independent purchasers.
