15 January 2012
Sir I am BSNL franchisee and selling all bsnl products Whenever we buy stock (like Recharge vouchers, sim cards and easy recharge talk time etc) from BSNL we deposit amount in their account by cash or by cheque payment after deducting our discount/ commission. BSNL deduct TDS from us at the time of purchase on the commission /discount further we keep little percentage of this discount with us and rest we pass to retailers as per the terms and conditions of our agreement with BSNL. That 80% of commission should be passed to retailers who purchases stock from us; moreover we give different percentage to different retailers depending on their stock lifting capacity Sir as per one clause in our agreement it is mentioned that Franchisee as independent entity “”The Franchisee, its employees, agents and representatives shall provide services as an independent “entity” on a exclusive basis and nothing contained herein shall be deemed to create any partnership, joint venture, employment or relationship of principal and agent between the parties hereto or between BSNL and the Franchisee representatives and employees or to provide service with any right, power or Authority, or to provide the Franchisee with any right, power or authority, whether express or implied to create any such duty or obligation.””
The point I wanted to clear is that should we also deduct TDS from the retailers on this discount on which BSNL has already deducted TDS from us as we are giving the part of that discount only which we get from BSNL . will this not be considered as double taxations on the same product ,( more over in my view our relation with retailers is of Principal to principal basis as when any retailer purchases stock from us they become the owner of that stock and when the ownership changes the difference between the sale price and dealer price is considered as discount not as commission) Sir above is my view I wanted to know your views on this as Income tax department has issued show cause notice in the case of year 2008-09 regarding that we have not deducted TDS from retailers, and as per notice they have disallowed the commission we have given to retailers , sir I have retailer network of more than 1000 retailers. So please let me know what is right regarding this matter Thanking you ANIL DHAWAN
22 January 2012
check if the following 2 case laws can help you - CA Sanjeev Jain - 9811274429
Decision No 1
Existence of a Principal – Agent relationship must for applicability of the provisions of Section 194H SRL Ranbaxy Ltd vs. ACIT (ITAT Delhi) – In the present case, no income was found credited to the account of the collection centers. The loss on account of any damage was to be borne by the collection centers. The expenditure on salary/staff of the collection centers was to be borne by the collection centers on their own and the collection centers were free to charge any amount from the customers/patients. In view of the above discussion, we hold that (i) there is no Principal-Agent relationship between the assessee and the Collection Centres and that being so, the provisions of section 194H of the Act have been wrongly invoked; (ii) The provisions of section 194 H of the Act could, even otherwise, not have been met, since no payment has been shown to have been made by the assessee to the Collection Centres; (iii) The payment made to the assessee by the Collection Centres was at the rates agreed to inter se between them; and (iv) The ld. CIT(A) erred in confirming the disallowance of Rs. 11,78,24,030/- made u/s 40(a)(ia) of the Act for the alleged failure of TDS by the assessee u/s 194H of the Act. Read more: Existence of a Principal – Agent relationship must for applicability of the provisions of Section 194H
TDS under section 194H is not deductible from discount offered by a medical testing laboratory to collection centres -[2011] 16 taxmann.com 343 (Delhi - Trib.)
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