Case Law Details
Indofil Industries Limited Vs CIT (ITAT Mumbai)
ITAT Mumbai held that assessee is liable to deduct tax at source in respect of commission expenses payable to the whole time directors under section 192 of the Income Tax Act only, as the same shall form part of their salary payment only.
Facts- The assessee company is engaged in the business of manufacture and sale of chemical items. During the course of assessment proceedings, AO noticed that the assessee has booked commission expenses payable to its whole-time directors.
AO noticed that the assessee has not deducted tax at source from the said commission expenses under section 194H of the Income Tax Act 1961. He further noticed that the assessee had paid similar commission payments to the above said directors and the said payments have been disallowed under section 40(a)(ia) of the Income Tax Act 1961 for non-deduction of tax at source under section 194H of the Income Tax Act 1961. In absence of any explanation by the assessee before AO, it disallowed the said commission expense.
Before CIT(A), assessee contended that the commission expense is in the nature of salary paid to directors and hence TDS provisions of section 194H will no apply to these payments. Assessee has deducted TDS under section 192 of the Act treating the said payments as part of ‘salary’. However, CIT(A) upheld the disallowance made u/s 40(a)(ia) of the Act on the ground that the assessee has failed to deduct tax u/s 194J of the Act at the time of booking of commission expenses, even though the case of the AO was that the TDS is liable to be deducted on commission expenses u/s 194H of the Act.
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