Commission or
brokerage.
194H. Any
person, not being an individual or a Hindu undivided family, who is responsible
for paying, on or after the 1st day of June, 2001, to a resident, any income by
way of commission (not being insurance commission referred to in section
194D) or brokerage, shall, at the time of credit of such income to the
account of the payee or at the time of payment of such income in cash or by the
issue of a cheque or draft or by any other mode, whichever is earlier, deduct
income-tax thereon at the rate of [ten]
per cent :
Provided that no deduction shall be made under this section in a
case where the amount of such income or, as the case may be, the aggregate of
the amounts of such income credited or paid or likely to be credited or paid
during the financial year to the account of, or to, the payee, does not exceed [five thousand rupees] :
[Provided further that an individual or a Hindu
undivided family, whose total sales, gross receipts or turnover from the
business or profession carried on by him exceed the monetary limits specified
under clause (a) or clause (b) of section
44AB during the financial
year immediately preceding the financial year in which such commission or
brokerage is credited or paid, shall be liable to deduct income-tax under this
section:]
[Provided also that no deduction shall be made
under this section on any commission or brokerage payable by Bharat Sanchar
Nigam Limited or Mahanagar Telephone Nigam Limited to their public call office
franchisees.]
Explanation.—For the purposes of this section,—
(i)
"commission or brokerage" includes any payment received or
receivable, directly or indirectly, 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 or in relation to any
transaction relating to any asset, valuable article or thing, not being
securities;
(ii) the
expression "professional services" means services rendered by a
person in the course of carrying on a legal, medical, engineering or architectural
profession or the profession of accountancy or technical consultancy or
interior decoration or such other profession as is notified by the Board for
the purposes of section
44AA;
(iii) the
expression "securities" shall have the meaning assigned to it in
clause (h) of section 2 of the Securities Contracts (Regulation) Act,
1956 (42 of 1956);
(iv) where
any income is credited to any account, whether called "Suspense
account" or by any other name, in the books of account of the person
liable to pay such income, such crediting shall be deemed to be credit of such
income to the account of the payee and the provisions of this section shall
apply accordingly.]
Q What is the meaning if Commission and how
it is different from Discount ?
Answer; In Black's Law Dictionary,
"Commission" and "Discount" are defined and explained as
under:
"Commission:
The recompense, compensation or
reward of an agent, salesman, executor, trustee, receiver, factor, broker, or
bailee, when the same is calculated as a percentage on the amount of his
transactions or on the profit to the principal. Weiner v. Swales 217 Md. 123. A fee paid to an agent or
employee for transacting a piece of business or performing a service. Prayer v. Currin App. 280 SC 241. Compensation to an
administrator or other fiduciary for the faithful discharge of his duties.
Discount:
In a general sense, an allowance or
deduction made from a gross sum on any account whatever. In a more limited and
technical sense, the taking of interest in advance.
A deduction from an original price
or debt, allowed for paying promptly or in cash. Method of selling securities (e.g.,
treasury bills) which are issued below face value and redeemed at face value
...
To purchase an instrument or other
right to the payment of money, usually for an amount less than the face amount
or value of the right."
Harihar Cotton Pressing Factory v. CIT [1960] 39 ITR 594 (Bom.) - The Bombay High Court explained the
distinction between Commission and Discount as under:
"The expression 'commission'
has no technical meaning but both in legal and commercial acceptation of the
term it has definite signification and is understood as an allowance for
service or labour in discharging certain duties such as of an agent, factor, broker
or any other person who manages the affairs or undertakes to do some work or
renders some service to another. Mostly it is a percentage on price or value or
upon the amount of money involved in any transaction of sale or service or the
quantum of work involved in a transaction. It can be for a variety of services
and is of the nature of recompense or reward for such services. 'Rebate', on
the other hand, is a remission or a payment back and of the nature of a
deduction from the gross amount. It is sometimes spoken of as a discount or a
draw-back. The dictionary meaning of the term
includes a refund to the purchaser of a thing or commodity of a portion of the
price paid by him. It is not confined to a transaction of sale and includes any
deduction or discount from a stipulated payment, charge or rate. It need not
necessarily be taken out in advance of payment but may be handed back to the
payer after he has paid the stipulated sum. The repayment need not be
immediate. It can be made later and in case of persons who have continuous
dealings with one another it is nothing unusual to do so.
Coromandel Fertilisers Ltd. v. UOT - In Coromandel Fertilisers Ltd. v. Union of India 1984 (17) ELT 607 (SC) (para. 12) and in Moped India Ltd. v. Asstt. Collector of Central Excise 1986 (23) ELT 8 (SC) (para. 6), the Apex Court applied the
aforesaid principles while considering the question of arriving at the
excisable value of mopeds. The trade discounts given to the dealers by the
manufacturer were held to be liable to be deducted from the price charged to
the dealers for the purpose of arriving at the excisable value of the goods,
but the commissions given to the agents were held to be not deductible from the
price for the purpose of arriving at the excisable value of the goods.
Q : Whether the sale of stamp paper
to licensed vendor at
discount of one per cent would amount to
commission and, therefore, Chief Treasury
Officer was required to deduct tax at source under section 194-H ?
Answer No, Section 194H of the Income-tax Act, 1961 -
Deduction of tax at source - Commission or brokerage etc. - Whether discount
given to stamp vendors for
purchasing stamps in bulk quantity was in nature of
cash discount in transaction of sale, and, therefore, section194H has no application to that transaction
- Held, yes [2012] 25 taxmann.com 201 (SC) SUPREME COURT OF
INDIA Commissioner of Income-tax v. Ahmedabad Stamp Vendors Association
Section 194H of the Income-tax Act, 1961, read withRule 161 of U.P. Stamp Rules, 1942 - Deduction
of tax at source - Commission or brokerage, etc. [Discount to Stamp Vendors] - Whether sale of stamp paper
by Treasury Office to licensed vendor is
a sale on principal to principal basis and there does not exist a relationship
of agency in between them - Held, yes - Whether, therefore, sale of stamp paper to licensed vendor at discount of one per
cent would not amount to commission and, therefore, Chief Treasury Officer was
not required to deduct tax at source under section 194-H - Held, yes
[2013] 37 taxmann.com 391 (Allahabad) HIGH
COURT OF ALLAHABAD
Chief
Treasury Officer v.Union
of India
Section
194H of the Income-tax Act, 1961 - Deduction of tax at source - Commission or
brokerage, etc. - Petitioner was registered association of stamp vendors -
Income-tax Department called upon State Government to deduct tax at source
under section 194H from commission or brokerage paid to persons carrying on
business as stamp vendors - Whether element of agency is to be there in case of
all services or transactions contemplated by Explanation (i) to section 194H -
Held, yes - Whether service in course of buying or selling of goods has to be
something more than act of buying or selling of goods - Held, yes - Whether,
where licensed stamp vendors take delivery of stamp papers on payment of full
price less discount and they sell such stamp papers to retail customers,
neither of two activities (buying from Government and selling to customers) can
be termed as service in course of buying or selling of goods - Held, yes -
Whether, therefore, discount made available to licensed stamp vendors under
provisions of the Gujarat Stamp Supply and Sales Rules, 1987 is outside
expression ‘commission or brokerage’ under section 194H and as such, no
deduction of tax at source is required to be made from discount - Held, yes
[2002]
124 TAXMAN 628 (GUJ.) HIGH COURT OF GUJARAT Ahmedabad Stamp Vendors Association v. Union of India
Q Commission paid by Mother Dairy to
concessionaires who sell milk of assessee from booths owned by assessee are liable for TDS u/s 194H ?
Answer No, Section 194H of the Income-tax Act 1961 - Deduction
of tax at source - Commission or brokerage - Assessment Years 2004-05 and
2005-06 - Whether relationship between assessee-company (Dairy) and
concessionaire, who sold milk and other products of assessee from booths owned
by assessee, was principal-to-principal relationship inasmuch as milk and other
products became property of concessionaire moment they took delivery of them
and they were selling milk and other products in their own right as owners -
Held, yes - Whether fact that concessionaires, were selling milk and other
products from booths owned by assessee and were using assessee's equipment and
furniture in course of sale of milk was not determinative of relationship
between assessee and concessionaire with regard to sale of milk and other
products - Held, yes - Whether, therefore, difference between MRP and price
which concessionaire paid to assessee was his income from business and it could
not be categorized as commission within meaning of section 194H - Held, yes [2012]
18 taxmann.com 49 (Delhi) HIGH COURT OF DELHI Commissioner of Income-tax v. Mother
Dairy India Ltd.
Q Whether the Export Commission paid to foreing agent for procuring order and pursuing payment
from foreign buyer, is liable for tax Deduction?
Answer No, Section 9, read with sections 195 and 40(a)(i), of the Income-tax Act,
1961 - Income - Deemed to accrue or arise in India [Export commission to
foreign agent] - Assessment year 2008-09 - Whether, export commission paid to
foreign agent for procuring order and pursuing payment from foreign buyer did
not accrue or arise in India as no services were rendered in India - Held, yes [2013]
37 taxmann.com 135 (Delhi - Trib.) IN THE ITAT DELHI BENCH 'A' Allied Nippon
Ltd. v. Deputy Commissioner of Income-tax, Circle-1(1), New Delhi
Q When the agents of an airline had
been given discretion to sell tickets at any rate between fixed minimum
commercial price and published price, whether the amount which agent earned
over and above fixed minimum commercial price would amount to commission or
brokerage and liable for tax deduction u/s 194H ?
Answer:No, Section 194H of the Income-tax Act, 1961 -
Deduction of tax at source - Commission or brokerage etc. - Where agents of an
airline had been given discretion to sell tickets at any rate between fixed minimum
commercial price and published price, amount which agent earned over and above
fixed minimum commercial price would neither amount to commission nor brokerage
at hands of agent, and, therefore, tax at source was not deductible on that
amount under section 194H [In favour of assessee] [2012]
20 taxmann.com 598 (Bom.) HIGH COURT
OF BOMBAY
Commissioner
of Income-tax v. Qatar Airways
Q Whether Trade discount given by newspaper
agencies to advertising agencies working for advertisers, is in nature of
'commission' as per provisions of Explanation (i) to section 194H invoking TDS obligation of newspaper ?
[2012]
21 taxmann.com 489 (All.) HIGH COURT OF ALLAHABAD
Jagran
Prakashan Ltd. v. Deputy Commissioner of Income-tax (TDS)
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