Sales discount to stockists/wholesalers, not commission, not liable to TDS under section 194H

Mumbai ITAT holds that the transaction between the Assessee (Novartis Healthcare (P) Ltd. - A pharmaceutical trading company) and stockist/wholesalers was on principal to principal basis, thus the Assessee cannot be said to be in default for non-deduction of tax at source on discount offered by the Assessee to the stockist as it would not come under the ambit of Section 194H; In present case, Revenue was of the view that the discount given by the Assessee was in the nature of commission, which was liable to TDS under Section 194H; ITAT observes:
(i) Assessee’s sale invoices to stockists clearly show that the goods were forwarded as sale and not as commission, because GST was paid by the Assessee,
(ii) Assessee’s control on the aspects such as, transaction pricing, invoicing format, margin rates, territorial allocations, and transfer menthods, is only as per the guidelines of Medical Council of India and once the goods are sold to stockists, they are kept with them at their risk only,
(iii) stockists are showing the said transaction as their ‘purchases’,
(iv) stockists are at liberty to sell the goods as per MRP mentioned and they only earns their margin, expenditure would be incurred by them and they filed their ITRs;

ITAT places reliance on Bombay High Court Piramal Healthcare (2015) 55 Taxman,com 534 (Bom.) wherein (under similar circumstances) it was held that the relationship is akin to Principal to Principal, hence Section 194H or 194J are not applicable and TDS need not be deducted by Assessee; ITAT infers that for TDS provisions to be applicable, the Assessee must be the one making payment of commission or brokerage, however in the present case, the Assessee was receiving sale price and not paying to stockist; Thus the ITAT opines the relationship between the Assessee and stockists is not that of the Principal to Agent but of Principal to Principal and hence, the TDS provisions are not applicable and the Assessee need not deduct TDS.

[In favour of assessee]
(Related Assessment year : 202-21) –
[Novartis Healthcare (P) Ltd. v. DCIT(TDS) [TS-1697-ITAT-2025(Mum)] – Date of Judgement : 08.12.2025 (ITAT Mumbai)]