ITO Vs Welsh And Breton Blenders Private Limited (ITAT Hyderabad)
Sales incentives paid to retailers by an agent on behalf of principals are not “commission” under Section 194H: ITAT Hyderabad
Assessee is engaged in the business of promoting IML and Beer manufactured by M/s. Rhizone Distilleries Private Limited and M/s. Som Distilleries & Breweries Ltd. The appellant-company had entered into Delcredere Agreement with M/s. Rhizone Distilleries Private Limited and as per the said agreement, the responsibility of the appellant-company is to ascertain stock position of various brands at the Depots of Andhra Pradesh State Breweries Corporation Ltd., ensuring appropriate transport, arrangements and loading and unloading activities at the Depot level, liaison and inter-action with Excise Department Officials periodically, ascertaining of brand stock position and promotion of IML brands among the retailers and their representatives, for which, the appellant-company has been paid commission and also reimbursement of any expenditure incurred for payment of cash incentives and sales promotion expenditure to retailers. During the financial year consideration, relevant assessment year under the appellant-company has received Rs.3,91,82,326/- from M/s. Rhizone Distilleries Private Limited and M/s. Som Distilleries & Breweries Ltd., which includes commission payment, on which, TDS @ 10% has been deducted as per sec.194H and reimbursement of sales promotion and cash incentives paid to distilleries retailers, on which, TDS @ 2% has been deducted as per sec.194C of the Act. The appellant-company has paid sales promotion and cash incentives of Rs.3,71,85,000/- to retailers and also paid Rs.14,84,892/- to the Agents as commission. The appellant-company has deducted TDS as per sec.194H of the Act on commission payment to Agent, however, not deducted any TDS on sales promotion and cash incentives paid to the retailers. The Assessing Officer disallowed commission and sales incentives paid to the retailers u/sec.40(a)(ia) of the Act on the ground that the appellant company has failed to deduct TDS as per sec.194H of the Act and further observed that, the said expenditure is not deductible even on merit, because the appellant-company failed to prove the genuineness of the expenditure as it filed complete details of person/ parties along with confirmation and address-proof, in response to notices u/s 133 (6). Aggrived appeal was filed before CIT (A) who It was held that, payment made by the appellant-company to retailers for promotional expenses under a scheme of principal-company does not fall under the category of “commission”
