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Tax Publishers Intas Pharmaceuticals Ltd. v. ACIT [ITA Nos. 1269, 1270, 1271, 11184, 1185 & 1197/Ahd/2017, dt. 26-11-2020] : 2020 TaxPub(DT) 4993 (Ahd.-Trib.) Payment for sponsorship/promotional material to Doctors whether Commission/Brokerage under section 194-H? *Facts:* Arising out of a survey on the assessee; a listed Pharma entity, it was alleged by the revenue that the promotional material and the sponsoring of doctors for conferences and similar payouts (hit by section 37(1) under unethical practices of payments of promotional spend to Doctors by Pharma industry which are to be disallowed) was held to be commission as there was an obligation from the doctors to write more prescriptions of the products sold by the assessee thus bringing forth a principal -- agent nexus implicitly. Since the assessee failed to deduct TDS under section 194-H they were held to be in default under section 201(1)/201(1A). On higher cross appeals by both assessee and revenue -- Held in favour of the assessee that the recharacterization of promotional spends to doctors/sponsorships as commission is incorrect. There was no obligation on the doctors to promote the product of the assessee. They being a disallowable spend is a detached issue outside of TDS obligations. To fasten TDS under section 194-H there ought to be a payment which was missing by a principal to an agent, identity of the agency was also missing so was the recipient. The scheme of TDS envisages TDS deduction only on establishing the identity of the payee under some contractual obligation. This was found missing here. The payments are on principal to principal basis. *Editorial Note:* The recharacterization for the purposes of TDS makes the decision a unique one.

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Intas Pharmaceuticals Ltd. v. ACIT [ITA Nos. 1269, 1270, 1271, 11184, 1185 & 1197/Ahd/2017, dt. 26-11-2020] : 2020 TaxPub(DT) 4993 (Ahd.-Trib.)

Payment for sponsorship/promotional material to Doctors whether Commission/Brokerage under section 194-H?

Facts:

Arising out of a survey on the assessee; a listed Pharma entity, it was alleged by the revenue that the promotional material and the sponsoring of doctors for conferences and similar payouts (hit by section 37(1) under unethical practices of payments of promotional spend to Doctors by Pharma industry which are to be disallowed) was held to be commission as there was an obligation from the doctors to write more prescriptions of the products sold by the assessee thus bringing forth a principal -- agent nexus implicitly. Since the assessee failed to deduct TDS under section 194-H they were held to be in default under section 201(1)/201(1A). On higher cross appeals by both assessee and revenue --

Held in favour of the assessee that the recharacterization of promotional spends to doctors/sponsorships as commission is incorrect. There was no obligation on the doctors to promote the product of the assessee. They being a disallowable spend is a detached issue outside of TDS obligations. To fasten TDS under section 194-H there ought to be a payment which was missing by a principal to an agent, identity of the agency was also missing so was the recipient. The scheme of TDS envisages TDS deduction only on establishing the identity of the payee under some contractual obligation. This was found missing here. The payments are on principal to principal basis.

Editorial Note: The recharacterization for the purposes of TDS makes the decision a unique one.