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I-T - Wholesale dealers are not liable to TDS on commission directly made by mobile operators to retailers or sub-dealers as they are only intermediaries for accounting purpose: ITAT

 

By TIOL News Service

JAIPUR, OCT 22, 2018: THE ISSUE IS - Whether wholesale dealer is liable to deduct tax on payment of commission directly made by the mobile operator companies to the retailer/sub-dealer already after deduction of TDS as wholesale dealer is only an intermediary for accounting entries purpose. NO IS THE VERDICT.

Facts of the case

The assessee, an individual, wholesale dealer of M/s Sistema Shyam Teleservices Pvt. Ltd. and Idea Cellular Ltd, engaged in purchase and sale of mobile & accessories, had filed return for relevant AY. During assessment, the AO noted that the assessee had not deducted tax at source on the commission paid to the retailer/sub-dealer to the tune of Rs. 28,00,946/-. In response the assessee submitted that the mobile service provider companies had already deducted TDS as per the provisions of Section 194H on behalf of the assessee on commission paid to the retailer. The assessee explained that the Commission was directly paid to the retailer/sub-dealer by the mobile companies though for account purpose the assessee was showing the payment of commission to the retailer/sub-dealer in his books of account. The AO did not accept the contention of the assessee and made disallowance u/s 40(a)(ia) for want of deduction of TDS by the assessee. The assessee challenged the action of the AO before the CIT(A) but could not succeed.

Tribunal held that,

++ it was noted that the Coordinate Bench of this Tribunal in case of M/s Chocopack Enterprises vs. ITO has dealt with this issue of disallowance U/s 40(a)(ia) for want of deduction of TDS U/s 194H in respect of the commission paid to the retailer/sub-dealer. The said decision was subsequently followed by the Tribunal in case of Shri Virendra Kumar Jain vs. ITO. Thus, it is clear that the Tribunal has been taking a consistent view that when the assessee is only an intermediatory between the cellular/mobile operator and retailer and the payment of commission was directly made by the cellular/mobile operator companies to the retailer/sub-dealer after deduction of TDS then, the assessee is not required to deduct any TDS on the said amount directly paid by the company and only the accounting entries were carried out by the assessee. Therefore, following the decisions of the Coordinate Bench of this Tribunal it was decided to delete the disallowance made by the AO u/s 40(a)(ia) of the Act.

(See 2018-TIOL-1881-ITAT-JAIPUR)


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