1 ITA No. 786/Del/2012 Asstt. Year: 2003-04 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `E' NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.No.786/Del/2012 Assessment Year : 2003-04 Asstt.Commissioner of Income Tax, vs Mother Dairy Food Processing Circle-50(1), Room NO. 503, (Now amalgamated with Mother Aaykar Bhawan, Laxmi Nagar, Dairy Fruit & Vegetable (P) Ltd., New Delhi. Patparganj, New Delhi-110092 (PAN: DELMO6688D) (Appellant) (Respondent) Appellant by: Mrs. Leena Srivastava Sr.DR Respondent by : Mrs. Manju Bhardwaj ORDER
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER This appeal has been preferred by the Revenue against the order of the Commissioner of Income Tax(A)-XXX, New Delhi dated 23.10.2011 passed u/s 250(6) of the Income Tax Act, 1961 (for short the Act) for AY 2003-04.
2. The main grounds raised in this appeal read as under:-
"On the facts and in the circumstances of the case as well as in law, the Ld. CIT(A) has erred:-
1. In holding that the transaction between the assessee and the concessionaires is a principal to principal transaction and not principal to agent transaction.
2. In holding that the payments made by the assessee to its concessionaires for selling milk/products is not 2 ITA No. 786/Del/2012 Asstt. Year: 2003-04 'commission' as defined under section 194H of the I.T.Act, 1961.
3. In not correctly appreciating the terms of the agreement and conduct of the parties in holding that the relationship between the asessee and concessionaires is that of principal to principal.
4. The appellant craves leave to add, alter or amend any of the grounds of appeal at the time of hearing."
3. Briefly stated, the facts of the case are that a survey operation u/s 133A of the Act was carried out on 9.12.2004 at the business premises of the assessee on the basis of the information that the assessee has not been deducting tax at source on the amount of commission paid to its agents/concessionaires who sell milk and other dairy products on behalf of MDFVL. During the course of survey operation, the facts of non deduction of tax at source on the payment of commission were found correct and the assessee was required to show cause as to why the provisions of section 194H be not applied to its case. The Assessing Officer dealt with the issue after affording due opportunity of hearing to the assessee and worked out the total TDS liability of the assessee company. The Assessing Officer finally held that the TDS on Rs.3,23,96,418 @5% + 0.25% surcharge amounting to Rs.16,23,871 ought to have been deducted. The Assessing Officer further held that TDS liability and interest u/s 201(1) and 201(1A) of the Act came to Rs. 33,28,936. 3 ITA No. 786/Del/2012 Asstt. Year: 2003-04
4. The aggrieved assessee filed an appeal before the Commissioner of Income Tax(A) which was allowed with the observations as reproduced below:-
"6. The AO had held that gross margins earned by the Concessionaires is "commission" under section 194H of the Act. Therefore, the appellant has defaulted in not deducting tax at source on such commission.
7. The Appellant submitted that on identical facts Hon'ble Income Tax Appellate Tribunal, New Delhi ("ITA T") vide order dated May 1 0, 2010 in the appellant's own case in the immediately succeeding years (A.Y .2004-05 and A.Y. 2005-
06), had decided the issue in favor of the appellant. Further, in case of one of the group companies of the appellant i.e. Mother Dairy India Ltd. in the immediately succeeding year (A.Y. 2004-05), ITAT has ruled on identical facts and provisions of section 194H would not be attracted on the discounts given by the appellant to its concessionaires. Both the orders were placed before me.
8. In the impugned order, the AO has relied on decision of Hon'ble Delhi High Court in the case of Delhi Milk Scheme (DMS). The AR was ked to explain as to how the facts of the appellant are different from the case of DMS.
9. The AR submitted that the facts of the case of the appellant& DMS are totally different. The AR took me through the order of ITAT in case of Mother India Ltd. for AY 2004-05 (supra). The major points of differences as noted in the referred order of IT AT are as below:
a. In case of DMS, sale collections were collected by cash clerk of DMS subsequently from the booth operators indicating that milk and milk products were in fact not sold by DMS to the agents/concessionaires but were only delivered to be sold by them on commission basis at the rates fixed in the agreements. In the case of the appellant, 4 ITA No. 786/Del/2012 Asstt. Year: 2003-04 payment by Concessionaire is immediately made at the time of delivery of goods.
b. In case of DMS unsold milk was taken back by DMS from the agents/concessionaires and the ownerships of the goods did not pass over to the agents/concessionaires as there was no sale to the agents/concessionaires. In case of the appellant sale of goods is made to the concessionaire and no goods are delivered back to the appellant.
10. I have perused the above facts and documents placed on record before me. The assessee's contention is correct that the ratio of decision of the Hon'ble Delhi High Court in the case of Delhi Milk Scheme is not applicable to the facts of the case of the appellant. Therefore, respectfully following the decision of Hon'ble ITAT in appellant's own case and in case of its group entity (referred supra), the demand of Rs.33,28,936/- raised by the Assessing Officer u/s 201(1)/201(1A) read with section 194H of the Act is hereby deleted.
In view of above, no adjudication is required on ground no. 3 and 4."
5. Now the aggrieved revenue is before this Tribunal with this appeal.
6. We have heard rival arguments of both the parties. Ld. DR supported the assessment order and submitted that the Commissioner of Income Tax(A) deleted the disputed addition u/s 194H of the Act on erroneous grounds. Therefore, he prayed that the order of the Commissioner of Income Tax(A) may be set aside restoring that of the Assessing Officer.
7. Replying to the above submissions, the assessee's representative submitted a paper book containing the orders of ITAT Delhi 'D' Bench in 5 ITA No. 786/Del/2012 Asstt. Year: 2003-04 ITA No. 2975/D/2008 for AY 2004-05 dated 12.12.2008 and another order of ITAT 'E' Bench in assessee's own case in ITA No. 385/D/2010 for AY 2004-05, ITA 3468/D/2008 for AY 2004-05, in ITA No. 4831/D/2009 for AY 2005-06 dated 10.05.2010. In ITA No. 2975/D/2008, it has been observed by 'E' Bench that the provisions of section 194H would not be attracted on the discounts given by the assessee to its concessionaires and consequently, the order of ld. Commissioner of Income Tax(A) and also the Assessing Officer passed u/s 201(1) and 201(1A) are set aside. The operative para no. 9 of above order reads as under:-
"9. Thus it was after considering the agreements found in the course of survey and the redrafted agreement, this Tribunal had come to a conclusion in the case of Delhi Milk Scheme that the transaction between Delhi Milk Scheme and its concessionaires was in fact one to which the provisions of section 194H attracted. In the presence case it is found that there has been no redrafting of the agreements and the agreements as placed before us being the same as was found in the courses of survey and as per the terms of the agreement which are identical even in 1993 as also in 2003, the discount as given by the assessee to its concessionaires are nothing but discount and do not have any characteristics of a commission. Consequently, we are of the view that the decision of the Hon'ble Jurisdictional High Court upholding the order of this Tribunal in the case of Delhi Milk Scheme would have no application to the assessee's case in so far as the facts as also the terms of the agreement are completely different. Further just because the assessee keeps a substantial control over the concessionaires it cannot be said that the relationship is one of principal and agent, as the control would have to be seen when these agreements were 6 ITA No. 786/Del/2012 Asstt. Year: 2003-04 drafted. Obviously any body who gives his space, machinery and equipment to another would like to put substantial clauses which can be invoked to cancel such agreements if it is found that the person they are dealing with is not trustworthy or is doing anything to the detriment of the assessee. In such circumstances it cannot be said that the strict control clauses of the agreement makes the transaction between the assessee and the concessionaires to be one of principal and agent if the actual functional and operational clauses of the agreements are seen it would clearly show that it is one between two principals to which the provisions of section 194H would not apply. In these circumstances we are of the view that the provisions of section 194H would not be attracted on the discounts given by the assessee to its concessionaires and consequently the order of the Ld. CIT (A) as also the AO passed under section 201(1) and 201(1A) are set aside."
8. In view of above discussion, we are inclined to hold that the issue to be decided in the present appeal is squarely covered by the above judgements of ITAT and we hold that a transaction between the assessee and concessionaires was a principal to principal transaction and not a transaction of principal to its agent. We also hold that the payments made by the assessee to its concessionaires for selling milk/products was not commission as defined u/s 194H of the Act. Accordingly, ld. Commissioner of Income Tax(A) rightly held that in terms of the agreement and contract of the parties, the relationship between the assessee and concessionaires was that of principal to principal. In the result, we are inclined to hold that this appeal 7 ITA No. 786/Del/2012 Asstt. Year: 2003-04 of the revenue is devoid of merits, therefore, ground no. 1 to 3 of the appeal are dismissed.
9. Ground no. 4 is general in nature which needs no adjudication and the same is dismissed.
10. In the result, the appeal of the revenue is dismissed.
Order pronounced in the Open Court on 24.1.2013.
-Sd/- -Sd/- (G.D. AGRAWAL) (CHANDRAMOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 24th JANUARY 2013 'GS' Copy forwarded to:- 1. Appellant 2. Respondent 3. C.I.T.(A) 4. C.I.T. 5. DR By Order Asstt.Registrar