Dealer Discount Not Commission | No TDS u/s 194H – ITAT

Case Details: Bajaj Auto Ltd. vs. Deputy Commissioner of Income-tax - [2025] 175 taxmann.com 1074 (Mumbai-Trib.)

Judiciary and Counsel Details

• Pawan Singh, Judicial Member & Prabhash Shankar, Accountant Member
• Ms Vasantiben Patel, Adv. for the Appellant.
• Satyaprakash R. Singh, CIT-DR for the Respondent.

Facts of the Case

The assessee was a company engaged in the business of manufacturing automobiles and commercial vehicles, as well as distributing auto parts. During the year under consideration, the assessee paid certain amounts of discount to its dealers.

The Assessing Officer (AO) treated the discount as commission and disallowed it under Section 40(a)(ia) for the lack of TDS under Section 194H. On appeal, the CIT(A) upheld the additions made by the AO. Aggrieved by the order, the assessee filed the instant appeal before the Tribunal.

ITAT Held

The Mumbai Tribunal held that the fundamental principle and requirement for making TDS to arise is when a person is responsible for making a payment. However, the assessee was not responsible for making payments to its various dealers; instead, it sold the spare parts on certain terms and conditions. Such terms and conditions are agreed to regulate the price. The dealers made payment for the spare parts supplied to them by the assessee, as per the terms and conditions of the dealership.

There was no evidence or material on record to suggest that the discount allowed by the assessee was against the commission payment or that the dealers were not doing their business independently or merely acting as an agent of the assessee.

To bring any payment within the Explanation (i) to section 194H, the payment received or receivable, directly or indirectly, is by a person acting on behalf of another person for services rendered (not being professional services), or for any services in the course of buying or selling of goods, and/or concerning any transaction relating to any asset, valuable article or thing.

So there must be an element of agency to be there in case of all services or transactions contemplated by Explanation (i) to section 194H. Thus, there was no justification for treating the discount as a commission payment for attracting the provision of section 40(a)(ia).

List of Cases Reviewed

• CIT v. Ahmadabad Stamp Vendors Association [2012] 25 taxmann.com 201/210 Taxman 269/348 ITR 378 (SC)
• Ahmedabad Stamp Vendors Association v. Union of India [2002] 124 Taxman 628/257 ITR 202 (Gujarat)
• CIT v. Jai Drinks (P) Ltd. (2011) 336 ITR 383 (Delhi)
• Mahindra & Mahindra Ltd. v. DCIT in ITA No. 799/Mum/2011
• CIT v. Intervet India (P) Ltd. (2014) 49 taxmann.com 14 (Bombay) [Para 11] – followed
• SKOL Breweries Ltd. v. Asstt. CIT [2013] 29 taxmann.com 111/142 ITD 49 (Mumbai) [Para 12] – distinguished

List of Cases Referred to

• CIT v. Intervet India (P.) Ltd. [2014] 49 taxmann.com 14/227 Taxman 200/364 ITR 238 (Bombay) (para 2)
• CIT v. Ahmedabad Stamp Vendors Association [2012] 25 taxmann.com 201/210 Taxman 269/348 ITR 378 (SC) (para 2)
• CIT v. Jai Drinks (P.) Ltd. [2011] 10 taxmann.com 115/198 Taxman 271/336 ITR 383 (Delhi) (para 2)
• Asus India (P.) Ltd. v. Asstt. CIT [2022] 137 taxmann.com 407 (Mumbai – Trib.) (para 2)
• Bharti Cellular Ltd v. ACIT (2024) 160 taxmann.com 12 (SC) (para 5)
• Mahindra & Mahindra Ltd. v. Addl. CIT [2013] 40 taxmann.com 522/[2014] 29 ITR(T) 95 (Mumbai) (para 5)
• CIT v. Mahindra & Mahindra [SLP No. 1468 of 2018, dated 12-1-2018] (para 5)
• SKOL Breweries Ltd. v. Asstt. CIT [2013] 29 taxmann.com 111/142 ITD 49 (Mumbai) (para 6)
• CIT v. Ahmadabad Stamp Vendors Association (2012) 348 ITR 378 (SC) (para 9)
• Ahmedabad Stamp Vendors Association v. Union of India [2002] 124 Taxman 628/257 ITR 202 (Gujarat) (para 9).