I manufacture liquor and settle volume-linked scheme discounts with my distributors by credit note. The TDS officer says those credit notes are commission under s.194H and has made me an assessee in default. Is he right?
No, on these facts. The Kolkata Bench held that a post-sale discount in cash or in kind, given to a buyer with whom the seller deals on a principal-to-principal basis, is a normal sales discount that reduces the sale price and is not commission or brokerage within Explanation (i) to s.194H, so there was no obligation to deduct and no default under s.201(1) or interest under s.201(1A); the consequential s.271C penalty went with it. Note what this order is not: although the assessee argued s.194R and s.194Q at length, the Tribunal decided the case entirely on s.194H and its operative paragraphs say nothing about either provision.
Decided by the ITAT (Income Tax Appellate Tribunal, Kolkata 'A' Bench - Sri Pradip Kumar Choubey, Judicial Member, and Sri Rakesh Mishra, Accountant Member; order authored by Rakesh Mishra, Accountant Member) on 2024-12-27, reported as I.T.A. No. 1925/KOL/2024 and I.T.A. No. 1947/KOL/2024, Assessment Year 2015-16, Kolkata 'A' Bench; hearing concluded 12 November 2024, order pronounced 27 December 2024. No reporter citation is stated in the order.. It bears on section 194H, section 201(1), section 201(1A), section 271C, section 28(iv) of the Income Tax Act 1961, in TDS Defaults and Penalty matters.
The order is useful for two separate reasons, and they should not be run together. On s.194H it is a clean statement that clause (iv) of the Explanation - the suspense-account deeming clause - is not a source of liability: it fixes when a credit counts as a credit to the payee, and it only bites if the payment is commission or brokerage in the first place. The department's route here was to read clause (iv) together with s.28(iv), reason that the discount was a 'benefit or perquisite' taxable as business income in the distributor's hands, and conclude that it must therefore be commission. The Tribunal cut that off: nobody had established a principal-agent relationship, and without agency Explanation (i) is not satisfied whatever the payment is called. The department's usual counter - that the nomenclature 'incentive' is a premeditated disguise, and that the assessee produced no purchase targets, no confirmations from customers and no rate history - is set out in full at para 6.2.5 of the CIT(A)'s order as reproduced, and it did not carry the day here, but an assessee whose scheme documents are thin should expect it. On s.194R and s.194Q the order is worth reading only for what it records, not for what it holds. The assessee put before the Bench the point that s.194R was inserted with effect from 01.07.2022 by the Finance Act 2022 and that answer 4 in CBDT Circular No. 12/2022 dated 16.06.2022 says no tax is required to be deducted under s.194R on sales discount, cash discount and rebates allowed to customers; and that s.194Q, on purchase of goods above Rs 50,00,000, came in from 01.07.2021 with Circular No. 13/2021 dated 30.06.2021. The Tribunal recorded all of that in the narrative and then decided the appeal on s.194H alone. There is no finding on either provision. On the successor legislation, the official 1961-to-2025 concordance maps s.194Q, s.194R and s.194S all to s.393 of the Income-tax Act 2025 (Tax to be deducted at source), with s.400 (power to relax) and s.402 (interpretation) alongside; the 2025 counterpart of s.194H has not been established, so this entry does not state one.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee manufactures and sells alcoholic beverages in West Bengal and supplies the canteen stores department at Bagdogra for West Bengal, Sikkim and Bhutan. It sells to distributors, who sell on to retailers, and it floats primary and secondary schemes under which distributors earn discounts of roughly 1 to 2 per cent depending on the brand and volume, settled from time to time by credit notes in the distributors' running accounts. A survey under s.133A(2A) was carried out at its business premises on 25 February 2020 and a notice under s.201(1) followed for FY 2014-15, relevant to AY 2015-16. From the accounts for the year ended 31 March 2015 the Assessing Officer picked up a consolidated selling expense of Rs 10,26,38,557 debited on account of credit notes and other incentives to buyers for achieving sales targets, made up of primary schemes (non-kind) Rs 6,68,495, schemes - service paid to distributors Rs 56,68,304, scheme special discount Rs 19,589, scheme tie-up Rs 4,56,716, secondary scheme (kind 5212) Rs 1,44,01,732 and secondary scheme (non-kind 5212) Rs 8,14,23,721. Excluding the special discount of Rs 19,589, he treated Rs 10,26,18,968 as covered by clause (iv) of the Explanation to s.194H read with s.28(iv), held the assessee in default under s.201(1) for failing to deduct at 10 per cent, charged interest under s.201(1A) and initiated penalty under s.271C. The Commissioner (Appeals)-27, Kolkata upheld a total of Rs 1,98,05,460 by orders dated 23 August 2024 and 24 August 2024 - a s.201 demand of Rs 1,02,61,897 and interest of Rs 95,43,563 on the assessee's own numbering of its grounds. Before the Tribunal the assessee showed from the paper book that it had collected tax at source on liquor sales, a turnover of Rs 3,58,17,40,410 carrying TCS of Rs 2,58,97,337, and that the sale price was fixed by the Government and not printed on the product. Two appeals were filed, one against the s.201 order and one against the s.271C penalty order dated 8 August 2022, and were heard and disposed of together.
Both appeals were allowed. Section 194H was held not applicable to the discount on sales, which was in the nature of trade discount and not commission or brokerage; the assessee could not therefore be treated as an assessee in default under s.201 and no interest under s.201(1A) was leviable. Because there was no default, the s.271C penalty was deleted as well, the Tribunal holding that no penalty is liable to be imposed where the assessee is not an assessee in default. Ground 5 in the quantum appeal, on recovery where the recipients had paid their own tax, was left unadjudicated as academic.
The Bench set out s.194H with its four Explanation clauses and then read them in the order the statute puts them. Explanation (i) defines commission or brokerage as a payment received by a person acting on behalf of another for services rendered, or for services in the course of buying or selling goods, or in relation to a transaction in an asset, valuable article or thing not being securities; the Bench treated the words 'acting on behalf of another person' as requiring a relationship of principal and agent, agreeing with the assessee that the section applies only where there is such a relationship and income by way of commission or brokerage is paid. Clause (iv), on which the Assessing Officer had built the demand, was held to be no answer: it deems a credit to a suspense account or any other account to be a credit to the payee, but the provisions apply only if the payment is in the nature of commission or brokerage as Explanation (i) defines it. On the facts, the discount in cash or in kind was a normal sales discount reducing the sale price, and the relationship between the assessee and its buyers was principal to principal. Neither the Assessing Officer nor the Commissioner (Appeals) had made out a case that a principal-agent relationship subsisted, and that omission was decisive. The conclusion at para 4 is expressed as following from 'the judicial pronouncements relied upon by the assessee (supra)' - the Bench did not discuss those authorities one by one, so the reader should treat the reliance as adoption by reference of the line of cases reproduced in the assessee's submissions rather than as independent analysis of each. The penalty appeal was decided in two sentences, purely as a consequence of the finding on default.
Thus, the discount in cash/kind was a normal sales discount which was made to reduce the sale price and there was a relationship of principal to principal between the assessee and the buyers. Neither the Ld. AO nor the Ld. CIT(A) had made out the case that the relationship of principal and agent subsisted between the assessee and the buyers so as to attract the provisions of Section 194H of the Act.
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Handle my notice → Ask a CA on WhatsAppNo, on these facts. The Kolkata Bench held that a post-sale discount in cash or in kind, given to a buyer with whom the seller deals on a principal-to-principal basis, is a normal sales discount that reduces the sale price and is not commission or brokerage within Explanation (i) to s.194H, so there was no obligation to deduct and no default under s.201(1) or interest under s.201(1A); the consequential s.271C penalty went with it. Note what this order is not: although the assessee argued s.194R and s.194Q at length, the Tribunal decided the case entirely on s.194H and its operative paragraphs say nothing about either provision. This was decided by the ITAT (Income Tax Appellate Tribunal, Kolkata 'A' Bench - Sri Pradip Kumar Choubey, Judicial Member, and Sri Rakesh Mishra, Accountant Member; order authored by Rakesh Mishra, Accountant Member) and bears on section 194H, section 201(1), section 201(1A), section 271C, section 28(iv) of the Income Tax Act 1961. It is reported as I.T.A. No. 1925/KOL/2024 and I.T.A. No. 1947/KOL/2024, Assessment Year 2015-16, Kolkata 'A' Bench; hearing concluded 12 November 2024, order pronounced 27 December 2024. No reporter citation is stated in the order.. The order is useful for two separate reasons, and they should not be run together. On s.194H it is a clean statement that clause (iv) of the Explanation - the suspense-account deeming clause - is not a source of liability: it fixes when a credit counts as a credit to the payee, and it only bites if the payment is commission or brokerage in the first place. The department's route here was to read clause (iv) together with s.28(iv), reason that the discount was a 'benefit or perquisite' taxable as business income in the distributor's hands, and conclude that it must therefore be commission. The Tribunal cut that off: nobody had established a principal-agent relationship, and without agency Explanation (i) is not satisfied whatever the payment is called. The department's usual counter - that the nomenclature 'incentive' is a premeditated disguise, and that the assessee produced no purchase targets, no confirmations from customers and no rate history - is set out in full at para 6.2.5 of the CIT(A)'s order as reproduced, and it did not carry the day here, but an assessee whose scheme documents are thin should expect it. On s.194R and s.194Q the order is worth reading only for what it records, not for what it holds. The assessee put before the Bench the point that s.194R was inserted with effect from 01.07.2022 by the Finance Act 2022 and that answer 4 in CBDT Circular No. 12/2022 dated 16.06.2022 says no tax is required to be deducted under s.194R on sales discount, cash discount and rebates allowed to customers; and that s.194Q, on purchase of goods above Rs 50,00,000, came in from 01.07.2021 with Circular No. 13/2021 dated 30.06.2021. The Tribunal recorded all of that in the narrative and then decided the appeal on s.194H alone. There is no finding on either provision. On the successor legislation, the official 1961-to-2025 concordance maps s.194Q, s.194R and s.194S all to s.393 of the Income-tax Act 2025 (Tax to be deducted at source), with s.400 (power to relax) and s.402 (interpretation) alongside; the 2025 counterpart of s.194H has not been established, so this entry does not state one. If it applies to you, the first step is this: Build the principal-to-principal case on documents before you argue characterisation: the sale invoices, the credit notes settling the scheme amounts, the running account with each distributor, and proof that title and risk passed on sale. The Bench allowed the appeal because neither the Assessing Officer nor the Commissioner (Appeals) had made out an agency relationship, so the burden of that finding is where you want to keep it.
The assessee manufactures and sells alcoholic beverages in West Bengal and supplies the canteen stores department at Bagdogra for West Bengal, Sikkim and Bhutan. It sells to distributors, who sell on to retailers, and it floats primary and secondary schemes under which distributors earn discounts of roughly 1 to 2 per cent depending on the brand and volume, settled from time to time by credit notes in the distributors' running accounts. A survey under s.133A(2A) was carried out at its business premises on 25 February 2020 and a notice under s.201(1) followed for FY 2014-15, relevant to AY 2015-16. From the accounts for the year ended 31 March 2015 the Assessing Officer picked up a consolidated selling expense of Rs 10,26,38,557 debited on account of credit notes and other incentives to buyers for achieving sales targets, made up of primary schemes (non-kind) Rs 6,68,495, schemes - service paid to distributors Rs 56,68,304, scheme special discount Rs 19,589, scheme tie-up Rs 4,56,716, secondary scheme (kind 5212) Rs 1,44,01,732 and secondary scheme (non-kind 5212) Rs 8,14,23,721. Excluding the special discount of Rs 19,589, he treated Rs 10,26,18,968 as covered by clause (iv) of the Explanation to s.194H read with s.28(iv), held the assessee in default under s.201(1) for failing to deduct at 10 per cent, charged interest under s.201(1A) and initiated penalty under s.271C. The Commissioner (Appeals)-27, Kolkata upheld a total of Rs 1,98,05,460 by orders dated 23 August 2024 and 24 August 2024 - a s.201 demand of Rs 1,02,61,897 and interest of Rs 95,43,563 on the assessee's own numbering of its grounds. Before the Tribunal the assessee showed from the paper book that it had collected tax at source on liquor sales, a turnover of Rs 3,58,17,40,410 carrying TCS of Rs 2,58,97,337, and that the sale price was fixed by the Government and not printed on the product. Two appeals were filed, one against the s.201 order and one against the s.271C penalty order dated 8 August 2022, and were heard and disposed of together. The matter was decided on 2024-12-27 by the ITAT (Income Tax Appellate Tribunal, Kolkata 'A' Bench - Sri Pradip Kumar Choubey, Judicial Member, and Sri Rakesh Mishra, Accountant Member; order authored by Rakesh Mishra, Accountant Member). On those facts the ITAT held as follows. Both appeals were allowed. Section 194H was held not applicable to the discount on sales, which was in the nature of trade discount and not commission or brokerage; the assessee could not therefore be treated as an assessee in default under s.201 and no interest under s.201(1A) was leviable. Because there was no default, the s.271C penalty was deleted as well, the Tribunal holding that no penalty is liable to be imposed where the assessee is not an assessee in default. Ground 5 in the quantum appeal, on recovery where the recipients had paid their own tax, was left unadjudicated as academic.
The Bench set out s.194H with its four Explanation clauses and then read them in the order the statute puts them. Explanation (i) defines commission or brokerage as a payment received by a person acting on behalf of another for services rendered, or for services in the course of buying or selling goods, or in relation to a transaction in an asset, valuable article or thing not being securities; the Bench treated the words 'acting on behalf of another person' as requiring a relationship of principal and agent, agreeing with the assessee that the section applies only where there is such a relationship and income by way of commission or brokerage is paid. Clause (iv), on which the Assessing Officer had built the demand, was held to be no answer: it deems a credit to a suspense account or any other account to be a credit to the payee, but the provisions apply only if the payment is in the nature of commission or brokerage as Explanation (i) defines it. On the facts, the discount in cash or in kind was a normal sales discount reducing the sale price, and the relationship between the assessee and its buyers was principal to principal. Neither the Assessing Officer nor the Commissioner (Appeals) had made out a case that a principal-agent relationship subsisted, and that omission was decisive. The conclusion at para 4 is expressed as following from 'the judicial pronouncements relied upon by the assessee (supra)' - the Bench did not discuss those authorities one by one, so the reader should treat the reliance as adoption by reference of the line of cases reproduced in the assessee's submissions rather than as independent analysis of each. The penalty appeal was decided in two sentences, purely as a consequence of the finding on default. In the words reproduced by the source cited on this page: "Thus, the discount in cash/kind was a normal sales discount which was made to reduce the sale price and there was a relationship of principal to principal between the assessee and the buyers. Neither the Ld. AO nor the Ld. CIT(A) had made out the case that the relationship of principal and agent subsisted between the assessee and the buyers so as to attract the provisions of Section 194H of the Act." The decision followed or applied Bharti Cellular Ltd. v. ACIT [2024] 160 taxmann.com 12 (SC) - relied on by the assessee and reproduced at para 18 of its written submission for the proposition that the obligation to deduct under s.194H arises only when the legal relationship of principal and agent is established, tested by s.182 of the Contract Act, 1872; CIT (TDS) v. United Breweries Ltd. [2016] 387 ITR 150 (Andhra Pradesh and Telangana) - relied on by the assessee, incentives under a sales promotion scheme paid to retail dealers held not to be commission under s.194H; Ahmedabad Stamp Vendors Assn v. Union of India [2002] 257 ITR 202 (Guj), stated in the submission to have been upheld by the Supreme Court in civil appeal no 10270 of 2003 - relied on for the proposition that the element of agency must be present in all the services or transactions contemplated by Explanation (i); CIT v. Intervet India (P.) Ltd. [2014] 49 taxmann.com 14 (Bombay) - relied on, sales promotion incentives to stockists and dealers held not commission under Explanation (i); Also cited in the assessee's list and adopted by reference at para 4: All India Radio Commercial Broadcasting Service, Prasar Bharti v. ITO [2006] 8 SOT 513 (Delhi ITAT); Bharti Airtel Limited v. DCIT [2015] 372 ITR 33 (Karnataka); Addl. CIT v. Pearl Bottling (P.) Ltd. [2011] 10 taxmann.com 47 (Visakhapatnam ITAT); Government Milk Scheme v. ACIT [2006] 98 ITD 306 (Pune ITAT); Mother Dairy India Ltd. v. ITO [2009] 28 SOT 42 (Delhi ITAT); Fosters India Pvt. Ltd. v. ITO [2008] 117 TTJ 346 (Pune ITAT); ITO v. Moving Picture Co. [2008] 20 SOT 120 (Delhi ITAT). The Tribunal did not discuss any of these separately.; Hindustan Coca Cola Beverage (P.) Ltd. v. CIT [2007] 163 Taxman 355 (SC) and CIT v. Rishikesh Apartments Co-op. Housing Society Ltd. [2001] 119 Taxman 239 (Gujarat) - cited by the assessee on the no-further-recovery point, which the Tribunal expressly did not adjudicate.
It was decided by the ITAT on 2024-12-27 and is reported as I.T.A. No. 1925/KOL/2024 and I.T.A. No. 1947/KOL/2024, Assessment Year 2015-16, Kolkata 'A' Bench; hearing concluded 12 November 2024, order pronounced 27 December 2024. No reporter citation is stated in the order.. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 194H, section 201(1), section 201(1A), section 271C, section 28(iv), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. Both appeals were allowed. Section 194H was held not applicable to the discount on sales, which was in the nature of trade discount and not commission or brokerage; the assessee could not therefore be treated as an assessee in default under s.201 and no interest under s.201(1A) was leviable. Because there was no default, the s.271C penalty was deleted as well, the Tribunal holding that no penalty is liable to be imposed where the assessee is not an assessee in default. Ground 5 in the quantum appeal, on recovery where the recipients had paid their own tax, was left unadjudicated as academic. It arises in TDS Defaults and Penalty matters, on section 194H, section 201(1), section 201(1A), section 271C, section 28(iv) of the Income Tax Act 1961, and was decided by Income Tax Appellate Tribunal, Kolkata 'A' Bench - Sri Pradip Kumar Choubey, Judicial Member, and Sri Rakesh Mishra, Accountant Member; order authored by Rakesh Mishra, Accountant Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Meet the clause (iv) argument head on. Clause (iv) of the Explanation to s.194H deems a credit to a suspense account or any other account to be a credit to the payee; it does not decide what the payment is. Point out, as this assessee did, that the discounts were credited to the named parties' own accounts and not to any suspense account, so the clause has nothing to operate on. Do not cite this order as authority on s.194R or s.194Q. It decides neither. If your year is after 01.07.2022 and the officer is on s.194R, the live question is whether a volume discount is a 'benefit or perquisite' and how far answer 4 of Circular No. 12/2022 protects you - and that question is untouched here. Keep the s.28(iv) point separate in your own file. The Tribunal held only that the payment was not commission for s.194H purposes. It made no finding on whether the discount is or is not a benefit or perquisite chargeable under s.28(iv) in the distributor's hands, and that characterisation is the hinge of any later s.194R dispute. If a s.271C penalty is running alongside a s.201(1) order on the same payments, press the s.201 appeal first. The penalty appeal here was allowed purely as a consequence of the s.201 finding, without the Bench reaching the DIN ground or the s.273B reasonable-cause ground.
Still good law. This is an order of a Division Bench of the Income Tax Appellate Tribunal, Kolkata. No search for later treatment has been carried out, so nothing is asserted about whether the Revenue appealed to the Calcutta High Court under s.260A or whether any Bench has since followed, distinguished or dissented from it. Treat the status accordingly: it is good law in the sense that nothing has been found against it, not in the sense that it has been tested. Weigh what the order actually rests on. The holding is that neither the Assessing Officer nor the Commissioner (Appeals) had made out a case that a principal-agent relationship subsisted between the assessee and its distributors, and that without agency Explanation (i) to s.194H is not satisfied whatever the payment is called. That is a failure of proof by the department rather than a rule of law, and an officer who does make out an agency relationship is not answered by it. What would displace it: an appeal decided against the assessee by the jurisdictional High Court; a High Court or Supreme Court decision holding that clause (iv) of the Explanation to s.194H can operate independently of the agency requirement in clause (i); or, on facts, a finding in another case that the distributor was in truth an agent. What would not displace it: the insertion of s.194R or s.194Q. The order decides neither, the year in dispute predates both, and the gaps field sets out how much about those provisions this page leaves open. That finding was checked against a published source, which is linked on this page, on 2026-09-05. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Read in full from the text of the order. The central caution: this is not a judgment on s.194R or s.194Q. Those provisions appear only in the Tribunal's recital of the assessee's arguments (paras 3.3, 3.5 and the prayer at 3.6) and in the list of circulars the assessee filed. The operative discussion, paras 3.7 to 4, reproduces s.194H and its Explanation, holds that agency is a precondition, and allows the appeal; it does not mention s.194R, s.194Q, Circular No. 12/2022 or Circular No. 13/2021. Anyone citing this order for a proposition about deduction on benefits or perquisites is citing a submission, not a holding. Three textual points a reader should see for himself. First, para 3.5 records the assessee as saying there was no provision 'to mandate withholding taxes on discounts/incentives u/s 194R of the Act incorporated on 01.07.2021' — the date is a slip, and para 3.3 of the same order correctly records s.194R as brought in with effect from 01.07.2022 by the Finance Act 2022 and s.194Q with effect from 01.07.2021. Second, the text of s.194H reproduced at para 3.7 carries the rate as '92[two] per cent', which is the amended rate and not the rate in force for FY 2014-15; the demand under appeal was computed at 10 per cent and the Bench did not comment on the discrepancy. Third, the order contains two paragraphs numbered 3.4. No reporter citation appears anywhere in the file, so `reported` carries only the appeal numbers, the bench and the assessment year. The order does not state the amount of the s.271C penalty; it gives the s.271C order's date as 08 August 2022 only through the assessee's ground of appeal. Grounds 2, 3, 3.1, 3.2 and 4 in the quantum appeal were allowed together in one line at para 4, so the natural-justice ground about the absence of a show cause notice was disposed of without separate reasoning. Ground 5, the argument that the recipients had paid their own tax and further recovery would be unjust enrichment, was expressly left unadjudicated as academic (para 4.1), and the reliance on Hindustan Coca Cola Beverage (P.) Ltd. and Rishikesh Apartments therefore produced no ruling. The argument that TDS cannot be demanded where TCS has already been collected on the same amount was recorded at paras 3.5 and 3.6 and was also not decided. The largest gap is the one a searcher will most want filled. This order does not decide anything about s.194R or s.194Q. It does not decide whether a volume-linked trade discount settled by credit note is a 'benefit or perquisite' for s.194R; it does not decide the weight or the correctness of answer 4 in CBDT Circular No. 12/2022 dated 16 June 2022, which the assessee cited for the proposition that no deduction is required under s.194R on sales discount, cash discount and rebates allowed to customers; it does not address the parts of that circular dealing with discounts in kind, free samples or the requirement to ensure tax is paid before a benefit in kind is released; it does not decide what happens where a discount is partly in cash and partly in kind, even though the schemes here included kind items; and it says nothing about the s.194R threshold, the second proviso for small payers, or who bears the tax where the benefit is non-monetary. On s.194Q it is silent beyond noting the commencement date - nothing on the Rs 50,00,000 threshold, nothing on the buyer-side obligation, nothing on the interaction between s.194Q and s.206C(1H), and nothing on Circular No. 13/2021 dated 30 June 2021 beyond the fact that it was filed. Nor does the order decide whether TDS can be demanded on an amount on which TCS has already been collected under s.206C, an argument the assessee made twice and which the Bench passed over. It leaves the s.28(iv) characterisation open: the Commissioner (Appeals) had held the discount to be a benefit or perquisite chargeable as business income in the distributor's hands, and the Tribunal disagreed only about the s.194H consequence, not about the chargeability. It gives no ruling on whether a s.201 order can be passed without a show cause notice, on whether an order lacking a valid DIN is invalid, or on s.273B and bona fide belief as a defence to s.271C, because the penalty fell away consequentially. It does not decide the first proviso to s.201(1) point about recipients having paid their own tax, which was left as academic. And it turns on a failure of proof by the department rather than on a rule: an officer who does make out an agency relationship, or an assessee who cannot produce the scheme terms, credit notes and running accounts, is not protected by it. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Both appeals were allowed. Section 194H was held not applicable to the discount on sales, which was in the nature of trade discount and not commission or brokerage; the assessee could not therefore be treated as an assessee in default under s.201 and no interest under s.201(1A) was leviable. Because there was no default, the s.271C penalty was deleted as well, the Tribunal holding that no penalty is liable to be imposed where the assessee is not an assessee in default. Ground 5 in the quantum appeal, on recovery where the recipients had paid their own tax, was left unadjudicated as academic.
TaxSphere, “N C Shaw and Co Beverages P Ltd v ITO (TDS)”, https://taxnotice.vittsphere.com/caselaw/case/nc-shaw-beverages-trade-discount-to-distributors-not-commission-194h/ (validity last checked 2026-09-05)
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My agents keep the difference between the price they charge customers and the net price they pay me — do I have to deduct TDS on money that never passed through my hands?
I have paid the short-deducted tax and the interest to close the matter — can the department still levy penalty under section 271C?
The TDS officer says I under-deducted under s.192. If my estimate was made honestly, does that answer the demand, the interest and the penalty?
Our restaurant and banquet bills carry a tip that the customer adds on the card. The money lands in our bank account and we hand it to the staff with their wages. The department says that is salary we should have deducted on. Is it?
