TDS Provisions Not Applicable To Commission Paid To Bank: ITAT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that TDS provisions are not applicable to commissions paid to banks.

The two-member bench of Saktijit Dey (Judicial Member) and Dr B.R.R. Kumar (Accountant Member) has observed that commission paid to partners is not covered under Section 194H of the Income Tax Act as there is no employer and employee or principal-agent relationship between the partners and the firm.

The assessee/respondent is a resident partnership firm engaged in the manufacturing of support goods. In the course of assessment proceedings, the assessing officer, after examining the details available on record, noticed that the assessee had claimed a deduction on account of payment of interest to the bank, partners and others, whereas, the assessee had given interest-free advances/loans to various persons.

The department objected to the deletion of the disallowance addition made under Section 40(a)(ia).In the course of assessment proceedings, the assessing officer noticed that the assessee had paid commission to various parties without deducting tax at source. Accordingly, he disallowed the amount under Section 40(a)(ia).

The tribunal held that the assessing officer had accepted that tax was duly deducted at source and paid to the government account within the prescribed time.

"As regards commission to the bank, the assessing officer has accepted that TDS provisions are not applicable to commission paid to the bank. Thus, this addition was also rightly deleted," the ITAT ruled.

Case Title: DCIT Versus M/s. Sareen Sports Industries

Citation: ITA No. 3777/Del/2016

Date: 04.10.2022

Counsel For Appellant: Advocate K. Sampth & V. Rajkumar

Counsel For Respondent: CIT DR T. Kipgen

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