Bajaj Auto Limited Vs DCIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, considered the assessee’s appeal against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC) for Assessment Year 2021-22 concerning disallowance under Section 40(a)(ia) of the Income Tax Act, 1961 for alleged failure to deduct tax at source under Section 194H.
The assessee, engaged in the manufacture of automobiles, commercial vehicles and distribution of automobile spare parts, had claimed expenditure relating to target discounts, consistency discounts and cash discounts granted to spare parts dealers. During assessment, the Assessing Officer noted that discounts aggregating ₹183.93 crore had been provided to dealers, comprising target discounts of ₹90.72 crore, consistency discounts of ₹72.72 crore and cash discounts of ₹20.47 crore. Treating these discounts as commission, the Assessing Officer invoked Section 194H and disallowed 30% of the expenditure, amounting to ₹55.18 crore, under Section 40(a)(ia).
The assessee explained that the discounts were granted under predetermined schemes communicated to dealers in advance. Target and consistency discounts were linked to achievement of purchase targets and computed as a percentage of sales turnover, while cash discounts were granted for maintaining specified credit balances or making early payments. The assessee maintained that these were trade discounts extended to dealers purchasing spare parts in bulk. It further contended that transactions with dealers were on a principal-to-principal basis, dealers purchased goods independently, unsold goods were not returnable, losses on unsold inventory were borne by the dealers, and the assessee had no involvement in subsequent sales made by the dealers to customers. Accordingly, it asserted that Section 194H was inapplicable as the discounts did not constitute commission. The assessee also relied on dealership agreements and judicial precedents in support of its case.
