ACIT, Jaipur V. JAIPUR ZILA DUGDH UTPADAK SAHAKARI, Jaipur

ITA 203/JPR/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54150 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD JOHARI
• Keywords: TDS
• Section: 194C; 201(1); 201; 154

Judgement Text

1 ITA 203(3)-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 203 & 204/JP/2011 ASSTT. YEAR : 2007-08 & 08-09. THE ACIT (TDS) VS. M/S. JAIPUR ZILA DUGADH UTPA DAK JAIPUR. SAHAKARI SANGH LTD., NEAR GANDHI NAGAR RAILWAY STATION, JAIPUR. (APPELLANT) (RESPONDENT) C.O. NO. 48/JP/2011 ( ARISING OUT OF ITA NO. 203/JP/2011 ) ASSTT. YEAR : 2007-08. M/S. JAIPUR ZILA DUGADH UTPADAK SAHAKARI VS. THE A CIT (TDS), JAIPUR. JAIPUR. (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY : SHRI VINOD JOHARI RESPONDENT BY : SHRI P.C. PARWAL DATE OF HEARING : 12.08.2011 DATE OF PRONOUNCEMENT : 02.09.2011. ORDER DATED : 02/09/2011. PER BENCH : THESE ARE TWO APPEALS BY DEPARTMENT FOR ASSESSMENT YEARS 2007-08 AND 09-10 AND A CROSS OBJECTION BY ASSESSEE FOR ASSESSMENT YE AR 2007-08, AGAINST THE ORDER OF LD. CIT (A). 2 2. IN BOTH THE APPEALS OF THE DEPARTMENT THE ISSUE IS AGAINST IN HOLDING THAT SUPPLYING MILK AND MILK PRODUCT BY THE ASSESSEE TO DISTRIBUTO RS WAS A SALE AGREEMENT AND PRINCIPAL TO PRINCIPAL BASIS AND WERE NOT LIABLE FOR TAX TO B E DEDUCTED AT SOURCE UNDER SECTION 194H OF THE IT ACT. 3. THE LD. D/R HAS PLACED RELIANCE ON THE ORDER OF THE AO. FURTHER RELIANCE WAS PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DELHI MILK SCHEME, 301 ITR 373 (DEL.). 4. THE LD. COUNSEL OF THE ASSESSEE PLACED RELIANCE ON THE ORDER OF LD. CIT (A). IT WAS FURTHER SUBMITTED THAT ON IDENTICAL FACTS IN THE CA SE OF AJMER ZILA DUGDH UTPADAK SANGH LTD., 30 DTR 418 (JPR.), THE JAIPUR BENCH OF THE TR IBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND LD. CIT (A) HAS FOLLOWED THE SA ME. THEREFORE, ORDER OF LD. CIT (A) IS LIABLE TO BE CONFIRMED. 5. REGARDING THE DECISION OF HONBLE DELHI HIGH COU RT IN THE CASE OF DELHI MILK SCHEME, (SUPRA), IT WAS STATED THAT THE FACTS ARE E NTIRELY DIFFERENT. DISTINGUISHABLE FACTS WERE ALSO EXPLAINED BY LD. A/R. FURTHER RELIANCE W AS PLACED ON THE DECISION IN THE CASE OF MOTHER DAIRY FOOD PROCESSING LTD., 28 SOT 42 (DE L.). 6. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, WE FIND THAT THE LD. CIT (A) WAS JUSTIFIED IN HOLDING THAT PROVISIONS OF SECTION 194H ARE NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. IN FA CT, THE ASSESSEE IS A CO-OPERATIVE SOCIETY POPULARLY KNOWN AS JAIPUR DAIRY, WHICH IS ENGAGED I N THE PRODUCTION AND DISTRIBUTION OF DAIRY PRODUCTS SUCH AS MILK, GHEE, CURD ETC. THE M ILK IS OBTAINED FROM DAIRY COOPERATIVE SOCIETIES FORMED BY MILK PRODUCERS. THE MILK IS PA STEURIZED BY THE ASSESSEE AND PROCESSED INTO VARIOUS PRODUCTS EITHER BY SELF OR T HROUGH CONTRACTS WITH VARIOUS PARTIES. 3 A TDS VERIFICATION WAS CARRIED OUT ON 10.2.2009. DU RING THE COURSE OF VERIFICATION PROCEEDINGS, IT WAS GATHERED THAT THE ASSESSEE HAS NOT DEDUCTED TDS FROM THE PAYMENTS MADE TO DISTRIBUTORS OF MILK PRODUCTS AND HAD ALSO DEDUCTED SHORT TAX ON SOURCE FROM THE PAYMENTS MADE TO CHILLING PLANTS. THEREFORE, THE AS SESSEE WAS REQUIRED TO SUBMIT DETAILS OF TDS MADE WITH REFERENCE TO VARIOUS PAYMENTS/EXPE NSES. ON VERIFICATION OF DETAILS FURNISHED, THE AO FOUND THAT ASSESSEE HAD ENTERED I NTO SEVERAL MILK DISTRIBUTION AGREEMENTS, WHEREBY THE DISTRIBUTOR WAS TO DISTRIB UTE THE MILK, GHEE AND CHACH TO VARIOUS BOOTHS/MILK BARS/SHOPS ETC IN A PRESCRIBED AREA AS PER TERMS AND CONDITIONS LAID DOWN IN THE AGREEMENT. AO ALSO OBSERVED THAT MILK AND OTHE R MILK PRODUCTS WERE TO BE DISTRIBUTED AT A FIXED MARGIN AS DETERMINED BY THE ASSESSEE. THE AO FURTHER OBSERVED THAT AS PER TERMS AND CONDITIONS OF THE AGREEMENT, IT WAS EVIDENT THAT THERE EXISTED A PRINCIPAL AND AGENT RELATIONSHIP BETWEEN THE ASSESS EE AND THE DISTRIBUTORS AND THAT THE FIXED MARGIN AT WHICH PRODUCTS ARE TO BE DISTRIBUTE D IS THE COMMISSION OF THE DISTRIBUTOR ON WHICH TDS UNDER SECTION 194H OF THE IT ACT WAS T O BE MADE. HOWEVER, THE ASSESSEE HAS NOT DEDUCTED TDS IN RESPECT OF THE AFORESAID PA YMENT OF COMMISSION. THEREFORE, A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE WHEREB Y IT WAS REQUIRED TO EXPLAIN AS TO WHY DEMAND SHOULD NOT BE RAISED UNDER SECTION 201(1 )/201(IA) READ WITH SECTION 194H. DETAILED SUBMISSIONS WERE FILED. HOWEVER, AO WAS N OT SATISFIED. ACCORDINGLY, THE AO WORKED OUT THE ASSESSEES LIABILITY AT RS. 2,80,77 2/- UNDER SECTION 201(1) AND AT RS. 5,03,137/- UNDER SECTION 201(1A) OF THE ACT. DETAI LS OF SUBMISSIONS WERE FILED BEFORE LD. CIT (A). RELIANCE WAS PLACED ON THE DECISION OF TR IBUNAL IN THE CASE OF AJMER ZILA DUGDH UTPADAK SANGH LTD. (SUPRA) AND IN CASE OF MOT HER DAIRY FOOD PROCESSING LTD. (SUPRA). 4 6.1. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, THE LD. CIT (A) FOUND THAT ON IDENTICAL FACTS IN CASE OF AJMER ZILA DUGDH UTPADAK SANGH LTD. (SUPRA) IT IS HELD THAT PROVISIONS OF SECTION 194 H WAS NOT APPLICABLE. ACCORDINGLY THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. THE FINDING OF LD. CIT (A) REMAINED UNCONTROVERTED EXCEPT PLACING RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF DELHI MILK SCHEME AND FOUND THAT FACTS ARE ENTIRELY DIFFE RENT. THEREFORE, THE RATIO OF DECISION OF HONBLE DELHI HIGH COURT IS NOT APPLICABLE ON TH E FACTS OF THE PRESENT CASE. SINCE ON IDENTICAL FACTS THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE I.E. IN CASE OF AJMER ZILA DUGDH UTPADAK SANGH LTD. (SUPRA), THEREF ORE, WE SEE NO REASON TO INTERFERE WITH THE FINDING OF LD. CIT (A) WHO AFTER FOLLOWING THE DECISION OF TRIBUNAL HAS ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, WE CONFIRM THE ORDER OF LD. CIT (A) FOR BOTH THE YEARS. GROUND OF THE DEPARTMENT FAILS. 7. NOW WE WILL TAKE THE CROSS OBJECTION OF THE ASSE SSEE. 8. THE AO INVOKED PROVISIONS OF SECTION 194-I BY HO LDING THAT ASSESSMENT OF CHILLING CHARGES WAS LIABLE FOR DEDUCTION OF TAX AT SOURCE UNDER SECTION 194-I AND NOT UNDER SECTION 194C OF THE ACT. ACCORDINGLY LIABILI TY OF RS. 1,12,80,258/- WAS CREATED UNDER SECTION 201(1)/201(IA) OF THE ACT. 9. THE BRIEF FACTS IN THIS REGARD ARE THAT DURING T HE ASSESSMENT PROCEEDINGS AO NOTED THAT ASSESSEE DEDUCTOR HAD ENTERED INTO AGREEMENT W ITH VARIOUS PERSONS FOR PROVIDING GODOWN WITH CHILLING AND STORAGE FACILITY FOR THE R AW MATERIAL AND FINAL PRODUCTS MANUFACTURED BY ASSESSEE. THE MAIN FEATURE OF THES E AGREEMENTS INCLUDE SPECIFICATIONS AS TO THE AREA OF PLOT WHERE CHILLING FACILITIES AR E TO BE PROVIDED, LOCATION, CONSTRUCTION AND INFRASTRUCTURE, SPECIFICATIONS, CHILLING SPECIF ICATIONS, MAINTENANCE FEATURES, MAN 5 POWER REQUIREMENT ETC. AS PER AGREEMENT THE ASSESS EE HAS TO PAY FIXED CHARGES ON PER DAY BASIS AND VARIABLE CHILLING CHARGES. HENCE THE PREMISES WAS DESIGNED AND USED EXCLUSIVELY BY ASSESSEE FOR STORAGE AND CHILLING OF ITS PRODUCTS. IN VIEW OF THE FACT THAT THE PREMISES ARE BEING USED FOR BOTH STORAGE AND AL SO FOR CHILLING, THE AO OBSERVED THAT TDS IS DEDUCTIBLE ON THE PAYMENTS MADE BY THE ASSES SEE UNDER SECTION 194-I OF THE ACT. THE ASSESSEE DEDUCTOR HAS DEDUCTED TDS UNDER SECTIO N 194C ON THESE PAYMENTS AND FROM FEBRUARY, 2008 ONWARD HAS DEDUCTED TAX UNDER S ECTION 194-I OF THE ACT. THE ASSESSEE WAS ASKED TO EXPLAIN WHY DEMAND SHOULD NOT BE RAISED UNDER SECTION 201(1) ON ACCOUNT OF SHORT DEDUCTION FOR FINANCIAL YEARS 2005 -06 TO 07-08 AND WHY INTEREST UNDER SECTION 201(IA) SHOULD NOT BE CHARGED. DETAILED RE PLY WAS GIVEN BY THE ASSESSEE BY WHICH IT WAS EXPLAINED THAT ASSESSEE HAS DEDUCTED T DS UNDER SECTION 194C AS PER CHILLING CONTRACT INSTEAD OF SECTION 194-I. IT WAS EXPLAINED THAT ASSESSEE HAS TAKEN CHILLING FACILITY FOR CHILLING AND STORING OF MILK AND MILK PRODUCTS AT VARIOUS PLACES. ACCORDINGLY ASSESSEE IS MAKING CHILLING CHARGES TO THESE CONTRACTORS AND DEDUCTED TDS UNDER SECTION 194C OF THE ACT. IT WAS ALSO SUBMITT ED THAT THIS ISSUE WAS EXAMINED BY THE CBDT AND VIDE CIRCULAR NO. 01/2008 DATED 10.1.2008 IT HAS BEEN CLARIFIED THAT MAIN FUNCTION OF COLD STORAGE TO PRESERVE PERISHABLE ITE MS BY MEANS OF MECHANICAL PROCESS AND STORAGE OF SUCH GOODS IS INCIDENTAL IN NATURE AND N OT RIGHT TO USE OF THE PREMISES HAS BEEN GRANTED. THE BOARD HAS CLARIFIED THAT AGREEMENT BE TWEEN THE CUSTOMERS AND COLD STORAGE OWNERS ARE BASICALLY CONTRACTUAL IN NATURE AND, THE REFORE, PROVISIONS OF SECTION 194C WILL BE APPLICABLE. COPY OF THE CIRCULAR WAS ALSO FILED . HOWEVER, THE AO WAS NOT SATISFIED. IN HIS VIEW THE ASSESSEE IS LIABLE TO DEDUCT TAX UN DER SECTION 194-I. IT WAS FURTHER NOTED THAT ASSESSEE HIMSELF IS DEDUCTING TAX UNDER SECTIO N 194-I FROM FEBRUARY, 2008 AND, 6 THEREFORE, THE ASSESSEE WAS LIABLE TO DEDUCT TDS UN DER SECTION 194-I. ACCORDINGLY, THE AO RAISED A LIABILITY OF RS. 76,65,744/- UNDER SECT ION 201(1) AND AT RS. 36,14,514/- UNDER SECTION 201(1A) OF THE ACT. DETAILED SUBMISSIONS W ERE FILED BEFORE LD. CIT (A) WHICH HAS BEEN TABULATED IN PARA 3.2 OF ORDER OF LD. CIT (A). ACCORDINGLY, THE LD. CIT (A) HELD THAT PROVISIONS OF SECTION 194-I ARE APPLICABLE AND THE ORDER OF AO WAS CONFIRMED. HOWEVER, REGARDING INTEREST UNDER SECTION 201(IA), THE ALTERNATE CONTENTION OF THE ASSESSEE THAT AS THE CONCERNED DEDUCTEE HAS MADE PA YMENT OF DUE TAXES OF THE PAYMENT RECEIVED FROM THE ASSESSEE AND IT WAS ALSO POINTED OUT THAT IN THIS REGARD ASSESSEE HAS ALREADY FILED AN APPLICATION UNDER SECTION 154 WHIC H IS PENDING BEFORE AO. ACCORDINGLY IT WAS REQUESTED THAT DEMAND OF RS. 76,65,744/- IS LIABLE TO BE DELETED OR THE AO BE DIRECTED TO DISPOSE OFF THE SAID APPLICATION AND GR ANT RELIEF IN VIEW OF DECISION OF HONBLE SUPREME COURT IN CASE OF HINDUSTAN COCA COLA BEVERA GES PVT. LTD. VS. CIT, 293 ITR 226 (SC). THE LD. CIT (A) WAS SATISFIED AND ACCORDINGL Y THE AO WAS DIRECTED TO DISPOSE OF THE SAID APPLICATION UNDER SECTION 154. HOWEVER, R EGARDING CHARGING OF INTEREST UNDER SECTION 201(1A), THE CONTENTION OF THE ASSESSEE WAS NOT FOUND FULLY ACCEPTABLE. 10. AFTER TAKING INTO CONSIDERATION THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES PVT. LTD. (SUPRA), THE LD. CIT (A) HELD THAT ASSESSEE IS LIABLE TO PAY INTEREST UNDER SECTION 201(1A) OF THE ACT ON THE SHORT DEDUCTION AMOUNT OF TAX FROM THE DATE ON WHICH THE TDS WAS TO BE MADE T ILL THE DATE OF ACTUAL PAYMENT OF TAX BY THE CONCERNED DEDUCTEE, WHICH IS TO BE REASONABL Y TAKEN AS THE DATE OF FILING OF RETURN OF INCOME BY THE CONCERNED DEDUCTEE BECAUSE ONLY ON THAT DATE IT CAME TO THE NOTICE OF THE DEPARTMENT THAT THE CONCERNED DEDUCTEE HAS PAID DUE TAX AS PER THE RETURNED INCOME FILED BY IT. ACCORDINGLY, THE AO WAS DIRECTED TO AL LOW RELIEF TO THE ASSESSEE. 7 11. THE CONTENTIONS RAISED BEFORE LD. CIT (A) WERE REITERATED HERE BEFORE THE TRIBUNAL BY LD. A/R. IT WAS SUBMITTED THAT ASSESSEE HAS NOT PAID ANY HIRING CHARGES BUT HAS PAID FIXED RATE AND VARIABLE RATE AS PER AGREEMENT. THE ASSESSEE IS LIABLE TO DEDUCT TAX IN VIEW OF SECTION 194C AND NOT UNDER SECTION 194-I. ALL T HE CONDITIONS FOR DEDUCTING TAX UNDER SECTION 194C HAS BEEN SATISFIED AND IT HAS ALREADY BEEN DEDUCTED UNDER SECTION 194C. THEREFORE, THE AO SHOULD BE DIRECTED NOT TO CHARGE ANY TAX UNDER SECTION 201 AND INTEREST UNDER SECTION 201(1A). AGAIN BOARD CIRCULAR WAS AL SO RELIED UPON. 12. ON THE OTHER HAND, THE LD. D/R HAS PLACED RELIA NCE ON THE ORDER OF LD. CIT (A). 13. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT ASSESSEE DESERVES TO SUCCEED ON THIS ISSUE. IT IS NOTICED THAT THE PLANT AND MACHINERY DOES NOT BELONG TO THE ASSESSEE, NEITHER ANY MAINTE NANCE OF PLANT AND MACHINERY IS DONE BY THE ASSESSEE. AS PER AGREEMENT, A FIXED RATE FO R CHILLING THE ITEMS IS PAID. WHATEVER THE ACTIVITIES HAVE BEEN DONE FOR CHILLING WORK I.E . CHILLED WATER AT A PARTICULAR TEMPERATURE, STEAM BOILER, NECESSARY MANPOWER, UNIN TERRUPTED ELECTRICITY, MANAGE BREAKDOWN OF PLANT AND MACHINERY, MANAGE DISPOSAL O F EFFLUENT AND PROVIDE CHILLED MILK TO THE ASSESSEE, ARE DONE BY THE PRINCIPAL WHO OWNS THE PLANT AND MACHINERY. THE ASSESSEE ALSO PROVIDES MILK AND OTHER CONSUMABLE WH ICH IS CHILLED BY THE CONTRACTOR AS PER REQUIREMENT OF THE ASSESSEE. THUS IT IS A CASE OF CARRYING OUT A WORK AND NOT LETTING OUT THE PLANT AND MACHINERY. FROM THE ABOVE FACTS IT IS AMPLY PROVED THAT ASSESSEE HAS NOT HIRED THE PLANT BUT HAS PAID THE AGREED RATE FO R CARRYING OUT THE WORK ON CONTRACT, NEITHER MAINTENANCE WORK IS DONE BY THE ASSESSEE NO R ANY SUPERVISION DONE BY THE ASSESSEE, NEITHER THERE IS A CONTROL OVER THE PLANT AND MACHINERY OF THE ASSESSEE. LOCK AND KEY OF THE PLANT AND MACHINERIES ARE WITH THE C ONTRACTOR AND NOT WITH THE ASSESSEE. 8 THEREFORE, IT CANNOT BE SAID THAT ASSESSEE HAS TAKE N THE PLANT AND MACHINERY ON HIRE AND USED BY IT FOR ITS OWN PURPOSE. THE ASSESSEE HAS P AID ONLY CHILLING CHARGES WHICH IS ON ACCOUNT OF STORAGE OF MILK BY IT. PAYMENT OF GODOWN CHARGES IS PAID AS PER AGREEMENT. THEREFORE, WE ARE OF THE VIEW THAT AO WAS NOT CORRE CT IN HOLDING THAT PROVISIONS OF SECTION 194-I IS APPLICABLE. PROVISIONS OF SECTION 194C WILL BE APPLICABLE ON THE FACTS OF THE PRESENT CASE AND AS PER PROVISIONS OF SECTION 1 94C, THE ASSESSEE HAS ALREADY DEDUCTED TAX. BOARD CIRCULAR IS ALSO IN SUPPORT OF THE CAS E OF THE ASSESSEE. THEREFORE, WE ARE OF THE VIEW THAT AO AND LD. CIT (A) WERE NOT JUSTIFIED IN HOLDING THAT PROVISIONS OF SECTION 194-I ARE APPLICABLE AND NOT PROVISIONS OF SECTION 194C. ACCORDINGLY WE ALLOW THESE GROUNDS OF THE ASSESSEE. 14. NEXT GROUND RELATES TO CONFIRMING THE LEVY OF I NTEREST UNDER SECTION 201(1A) ON THE ALLEGED SHORT FALL IN DEDUCTION OF TAX AT SOURC E. 15. WE HAVE ALREADY DECIDED GROUND NO. 1 AND THIS I S A CONSEQUENTIAL GROUND. THEREFORE, WE HOLD THAT INTEREST UNDER SECTION 201( 1A) CANNOT BE CHARGED. EVEN ON MERIT ALSO THE ASSESSEE HAS PAID FULL TAX. 16. ON THE OTHER HAND, THE PRINCIPAL HAS ALSO PAID TAX ON THE AMOUNT RECEIVED BY THEM. THE ASSESSEE HAS CLAIMED REFUND. IT MEANS THERE IS NO TAX LIABILITY. FOR THIS REASON ALSO NO INTEREST UNDER SECTION 201(1A) CAN BE CHARGED AS HELD BY HONBLE SUPREME COURT IN THE CASE OF CIT VS. BHARTI CELLULAR LTD., 330 ITR 2 39 (SC) AND IN CASE OF CIT VS. ELI LILY & COMPANY PVT. LTD., 312 ITR 225 AND IN CASE O F RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD., 287 ITR 354. ACCORDINGLY THIS GROUND O F THE ASSESSEE IS ALSO ALLOWED. 17. IN THE RESULT, APPEALS OF THE DEPARTMENT ARE DI SMISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 9 18. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 02 .09.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/ COPY FORWARDED TO :- THE DCIT, (TDS) JAIPUR. M/S. JAIPUR ZILA DUGADH UTPADAK SAHAKARI SANGH LTD. , JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 203(3)/JP/2011) BY ORDER, AR ITAT JAIPUR.