M/s Seal India Pvt. Ltd., a domestic company, engaged in business of manufacturing and selling of washing powder and bars. For the purpose of…
CA Final · Direct Tax Laws and International Taxation · PYQS · May 2025
M/s Seal India Pvt. Ltd., a domestic company, engaged in business of manufacturing and selling of washing powder and bars. For the purpose of promoting and to boost sales of its products it hires agents, to whom incentives and commission is paid on the basis of percentage of sales made through them. During the P.Y. 2024-25, Mr. Prakash, a resident individual, is working as an agent for the company. The company paid him following commissions and incentives on the basis of target achieved by him: Date of payment/credit Particulars Amount (₹) 13-07-2024 Commission for achieving sales target of Quarter 1 1,75,000 10-01-2025 Commission for achieving sales target of Quarter 3 1,60,000 15-01-2025 Other Incentives 1,60,000 The figure of other incentives includes reimbursement of expenses of 1,00,000 incurred on booking of air tickets for an event in Singapore for Mr. Prakash and his family members who accompany him. The company has also given Mr. Prakash laptop worth - 60,000 for achieving sales target for the month of September, 2024 in October 2024.
Suggested Answer and Working Notes:
M/s Seal India Pvt. Ltd. is required to deduct tax at source on commission paid to Mr. Prakash under section 194H @5% till 30.9.2024 and @2% from 1.10.2024, being sum exceeding - 15,000. Reimbursement of expenses of 1lakh for booking air tickets for Mr. Prakash and his family other incentive of 60,000 and laptop of 60,000 for achieving sale target is benefit or perquisite arising to Mr. Prakash from his business or the exercise of his profession, being sum exceeding - 20,000. Accordingly, M/s Seal India Pvt. Ltd. is required to deduct tax at source under section 194R @10%. Tax to be deducted under section 194H = 5% on 1,75,000 + 2% on 1,60,000 = 11,950 Tax to be deducted under section 194R = 10% on 1,00,000 (Air tickets) +60,000 (other incentive) +60,000 (laptop) = 22,000
Topics: Deduction, Collection and Recovery of Tax
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