INCOME TAX ACT, 1961

Section 194H

Tax deduction at source - Under section 194H - Transaction between assessee and stockist - In nature of principal to principal

The AO noticed that as per the modus operandi of the assessee, the stockiest placed orders and goods were transferred to the clearing and forwarding agent. The clearing and forwarding agent booked and dispatched the goods to stockiest against cheques received by them. Being of the view that the payments made to stockiest was in the nature of commission, hence, subject to TDS under section 194H of the Act, the AO issued show cause notice to the assessee. After perusing the explanation of the assessee, the AO concluded that stockiest's margine was 2% of the sales. Since the assessee had not deducted tax on the stockiest's margin, the assessing officer treated the assessee as an assessee in default under section 201(1) of the Act. Against the original order passed under section 201(1)/201(1A) of the Act, the assessee had preferred appeal before the CIT(A). While deciding the said appeal, CIT(A) held that the transaction between the assessee and the stockiest was in the nature of sale. Therefore, there was no need to deduct tax at source under section 194H of the Act on margin allowed to the stockiest. Held: Pertinently, the aforesaid decision of CIT(A) was contested by the Revenue before the Tribunal. While deciding the issue in ITA No. 3938/Mum./2018, vide Order, dated 27-11-2019, the Tribunal has upheld the decision of the CIT(A). Thus, it has been held that the provisions of section 194H of the Act would not be applicable to the margin allowed to the stockiest.

REFERRED : DCIT (TDS) -2 (1) v. Pfizer Ltd. (Vice-Versa) 2019 TaxPub(DT) 8139 (Mum-Trib) and M/s. Pfizer Limited v. JCIT 2019 TaxPub(DT) 8309 (Mum-Trib.

FAVOUR : In assessee's favour

A.Y. : 2012-13

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