No TDS applicable on salary, bonus, commission etc given to partner by partnership firm: ITAT

The Income Tax Appellate Tribunal, Gauhati Bench has upheld the finding of the ld. CIT(A) that considering the provisions of Explanation 2 to Section 15 of the Act which includes salary, bonus, commission or remuneration received by partner under the head ‘salary’ and considering the provisions of section 192 of the Act which talks about the salary given u/s. 15 of the Act, thus, there is no requirement under the provisions of the Act for deduction of tax at source by the partnership firm on salary, bonus, commission or remuneration etc or whatever name called given or credited to a partner of a firm.

Brief facts of the case are that the assessee is a partnership firm, engaged in construction business. Income of Rs.1,21,98,600/- declared in e-return filed on 16-10-2017 for the AY 2017-18. Case selected for scrutiny through CASS for high ratio of refund to TDS, large value claim of refund and large increase in capital in a year. Valid notices u/s. 143(2) & 142(1) of the Act were issued. One of the disallowance was based on non-deduction of tax at source on the commission paid to its partners.

This disallowance was deleted by Ld. Commissioner of Income Tax(Appeals), against which The ACIT has filed an appeal with the ITAT.

As per ACIT, the Ld. Commissioner of Income Tax(Appeals) erred in holding that the commission paid to partners shall not be regarded as Salary under Explanation to section 15 of the Act and that provision of Section 192 related to Salary would not be applicable in this case.

Further, the ACIT alleged that the Ld. Commissioner of Income Tax(Appeals) ignored the fact that payment of commission is covered u/s 194H of the Act and as such the assessee was liable to deduct TDS under that Section and as per provisions of section 197(2).

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