Dismissed

Pr. Commissioner of Income TAX-10 v. Indofil Industries Limited

Bombay HC16 Dec 2021ITXA/2027/2017

Case brief

AI extract

What is this about?

The High Court Bench dismissed an appeal questioning the ITAT's holding that a commission payment treated as salary in the assessee's books and Form-16 did not attract TDS under Section 194H but Section 192, and rejecting claims of perversity in the lower authorities' acquittal of the tax official.

What did the court decide?

The appeal was dismissed with no order as to costs.

Pr. Commissioner of Income TAX-10 Vs Indofil Industries Limited — Income Tax | Bombay HC (2021)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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INCOME TAX APPEAL NO.2027 OF 2017

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Pr. Commissioner of Income Tax-10...Appellant

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vs.

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Indofil Industries Limited ...Respondent

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Mr. Akhileshwar Sharma for Appellant.
Mr. Harsh M. Kapadia i/b Mr. Balasaheb G. Yewale for Respondent.

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CORAM : K. R. SHRIRAM AND
 AMIT B. BORKAR, JJ.

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DATE : 16 DECEMBER 2021.

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P. C. :

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The following questions of law are proposed in this appeal:

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1. Whether the payment in the nature of commission made

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to directors of the assessee company is liable for tax deduction
under Section 194H of the Income Tax Act, 1961 (the said Act)
being in the nature of commission ?

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2. Whether on the facts and circumstances of the case and

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in law, the Hon'ble ITAT erred in holding that non-deduction of

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TDS under Section 194H by the Assessee company on
commission payment to the directors is not liable for

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disallowance under Section 40(a)(ia) of the said Act ?

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3.Whether on the facts and circumstances of the case and
in Law, the order of the Hon'ble ITAT is perverse in law as it is
based on wrong findings of facts ignoring that the assessee
company has itself treated the payment as commission expenses
in its audited books of accounts and not as part of salary paid to
directors ?"

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2.The issue herein is regarding disallowance under Section 40(a)
(ia) of the said Act for amount of Rs.1,08,00,000/-. The Assessing Officer
had noted that Respondent had made a provision for commission for the
Chairman and the Managing Director (CMD) of the Company for
Rs.1,08,00,000/- at the year end but not deducted TDS under Section
194H of the said Act. The commission was paid to the CMD in the
subsequent year, i.e., during the Assessment Year 2010-2011 after
deducting TDS. According to Shri Sharma commission provision calls for
disallowance under Section 40(a)(ia) in the impugned Assessment Year.

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3.Before Commissioner of Income Tax (Appeals) (CIT (A)),
respondent had contended that CMD was full time employee of the
company and hence this payment was nothing but salary covered by TDS
provision under Section 192 and under Section 194H of the said Act which
deals with TDS on commission payments. As per Section 192 of the said
Act, TDS is deductible from salary payment only at the time of payment
and not at the time of making provision and therefore no disallowance is
called for in the given circumstances. CIT (A) accepted the contentions of
Respondent and allowed this ground of appeal.

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4.Shri Sharma has contended that this payment being
commission in nature is covered by Section 194H of the said Act and hence
TDS was deductible at the time of making provision at the year end and as
Respondent had failed to do so, the same called for disallowance under
Section 40(A)(ia) of the said Act.

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5.Shri Kapadia tendered copy of Form-16 of CMD which is taken

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on record and pointed out that Form-16 of the CMD for the Assessment
Year 2010-2011 showed that commission was part of overall
compensation/salary of the CMD and hence TDS in respect thereof is
covered under Section 192 of the said Act.

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6.Having considered the memo of appeal and the orders
annexed thereto and after hearing Shri Sharma and Shri Kapadia, we find
that the commission paid to the CMD has been shown as part of salary in
Form-16 for Assessment Year 2010-2011. Total salary paid for the Financial
Year 2009-2010 as it appears from the impugned order is Rs.1,72,15,959/-
which includes commission for Rs.1,08,00,000/- paid by assessee in the
Assessment Year in question.

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7.Section 192 of the said Act, unlike other TDS provisions
require deduction of tax at source under the head “Salary only at the time
of payment and not otherwise." We also find that the quantum of accrual of
expenses is not disputed by Revenue and Shri Sharma also stated the same.
Since Shri Sharma had in fairness stated that the quantum or accrual of
expenses is not disputed, there cannot be any perversity in the order passed
by CIT(A) or by ITAT in concurring with the findings of CIT (A).

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8.Commissioner of Income tax, Delhi, Ajmer, Rajasthan and
Madhya Bharat vs. Nagri Mills Co. Ltd.1, this Court has observed as under:
"We have often wondered why the Income-tax authorities, in a

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matter such as this where the deduction is obviously a

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permissible deduction under the Income-tax Act, raise disputes

1 33 ITR 681

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as to the year in which the deduction should be allowed. The
question as to the year in which a deduction is allowable may
be material when the rate of tax chargeable on the assessee in
two different years is different; but in the case of income of a
company, tax is attracted at a uniform rate, and whether the
deduction in respect of bonus was granted in the assessment
year 1952-53 or in the assessment year corresponding to the
accounting year 1952, that is in the assessment year 1953-54,
should be a matter of no consequence to the Department; and
one should have thought that the Department would not fritter
away its energies in fighting matters of this kind. But, obviously,
judging from the references that come up to us every now and
then, the Department appears to delight in raising points of this
character which do not affect the taxability of the assessee or
the tax that the Department is likely to collect from him
whether in one year or the other."

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9.In our view, the Tribunal has not committed any perversity or
applied incorrect principles to the given facts and when the facts and
circumstances are properly analysed and correct test is applied to decide
the issue at hand, then, we do not think that questions as pressed raises

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any substantial question of law.

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10.The appeal is devoid of merits and it is dismissed with no

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order as to costs.

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(AMIT B. BORKAR, J)

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 (K. R. SHRIRAM, J.)

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Digitally signed by RAJESHWARI RAJESHWARI SUBODH SUBODH KARVE KARVE Date: 2021.12.18 11:00:35 +0530

Pr. Commissioner of Income TAX-10 v. Indofil Industries Limited

Case brief

What is this about?

What did the court decide?

Pr. Commissioner of Income TAX-10 v. Indofil Industries Limited

Case brief

What is this about?

What did the court decide?

What the court decided

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