1. Commissioner
of Income Tax, Coimbatore Vs. M/s. Pricol Ltd., Tax Case (Appeal) No.
343 of 2007, Date of Order: 01.04.2014, High Court of Madras
Provision
for retirement benefit created on the basis of service weight age of an
employee couldn't be allowed to be deducted as it was just a provision
and could not be termed as gratuity fund or any other welfare fund under
section 40A(9).
In a case the
scheme is not a recognised one, but one reached as per the agreement
between the parties. It is not denied by the assessee that a provision
was made in the accounts as regards the gratuity payable based on the
service weightage. Being a provision made for payment of gratuity to the
employees on the retirement or termination of their employment, the
claim stands clearly hit by Section 40A(7)(a).When the question of
deductibility is a matter of dispute and being a pure question of law,
on the facts found, the Court has the jurisdiction to consider the
applicability of section 40A(7) too to the facts of the case. What was
created was admittedly only a provision in the books of accounts, hence,
not a fund or a contribution to a fund to be considered under Section
40A(9). The only other provision, which would hit the claim of the
assessee herein would be section 40A(7). Thus, even though the assessee
succeeds on the applicability of section 40A (9), the case of the
assessee fails in view of section 40A(7).
(Please click here for Judgment)
2. CIT Vs. Intervet India Pvt. Ltd., ITA No. 1616/2011, Date of Pronouncement: 01.04.2014, High Court of Bombay
Section 194H of the Income Tax Act, 1961
Whether the provisions of section 194 H of the Act are applicable to all sales promotional expenditure incurred by the assessee.
Held: No
In brief, the
assessee is engaged in the business of manufacturing & trading and
sells its products either through consignment, commission agents or
directly through the distributors/ stockists. The stock of its products
are transferred to the consignment agents who in turn sale the products
under its own name to the distributors/ dealers/ stockists. The assessee
claimed Sales promotion expenditure incurred under the product discount
scheme and the product campaign and contended that the expenditure
under the said claims are only for promotion of sales and hence had no
relation to payment of any commission on sales. Thus, TDS is not
required to be deducted as did not fell within the ambit of Section
40(a)(ia). However, the AO held that as the assessee was paying the
dealers/ stockist/ agent for the services rendered by them for buying
and selling of goods, on the basis of quantum of sale made by them, such
expenditure cannot be considered as sales promotion expenditure and was
required to be considered as commission payment and liable to TDS.
The Hon’ble
court has held that as per the fact, the distributors were the customers
of the assessee to whom the sales were effected either directly or
through the consignment agent. As the distributor / stockists were the
persons to whom the product was sold, no services were offered by the
assessee and what was offered by the distributor was a discount under
the product distribution scheme or product campaign scheme to buy the
assessee's product. The distributors / stockists were not acting on
behalf of the assessee and thus the relationship between the assessee
and the distributor / stockists was that of principal to principal and
hence, it could not be said to be a commission payment within the
meaning of explanation (i) to Section 194H of the Act. The contention of
the Revenue in regard to the application of Explanation (i) below
Section 194H being applicable to all categories of sales expenditure
cannot be accepted.
(Please click here for Judgment)
New User? 
Subscribe Now