PR. COMMISSIONER OF INCOME TAX - 18 V. M/S NATIONAL AGRICULTURAL COOPERATIVE

ITA/527/2019

AI Insights

The case revolves around an appeal by the Principal Commissioner of Income Tax against the judgment of the Income Tax Appellate Tribunal, which had deleted an addition of Rs. 5,82,52,900 made by the Assessing Officer under Section 40(a)(ia) of the Income Tax Act. The dispute centered on the applicability of Section 194H, which pertains to the deduction of tax at source on commission or brokerage payments. The respondent, a national level cooperative agricultural marketing federation, had engaged state and district level cooperative societies as procurement agents under specific agreements. The Tribunal found that these societies acted as independent principals and not as agents of the respondent, thus not falling under the purview of Section 194H. The High Court, after reviewing the agreements and the nature of the transactions, concurred with the Tribunal's decision and dismissed the appeal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 731743 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 09-09-2024
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SATYEN SETHI; ARTA PANDA
• Assessee Lawyers: INDRUJ RAI; SANJEEV MENON; RAHUL SINGH; ANMOL JAGGA
• Keywords: Cooperative Societies; Income Tax; Principal and Agent; Service charges; TDS
• Section: 40(a)(ia); 194H

Judgement Text

"$~17 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 527/2019 PR. COMMISSIONER OF INCOME TAX – 18 .....Appellant Through: Mr.Indruj Singh Rai, Sr.SC with Mr.Sanjeev Menon and Mr.Rahul Singh, JSCs and Mr.Anmol Jagga, Advocate versus M/S NATIONAL AGRICULTURAL COOPERATIVE .....Respondent Through: Mr.Satyen Sethi and Mr.Arta Trana Panda, Advocates CORAM: HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MR. JUSTICE RAVINDER DUDEJA O R D E R % 09.09.2024 1. The Principal Commissioner seeks to challenge the judgment rendered by the Income Tax Appellate Tribunal [“Tribunal”] dated 11 July 2018 and has posited the following questions of law for our consideration. “A. Whether the Hon'ble ITAT was justified in deleting addition of Rs. 5,82,52,900/- made by the AO u/s 40(a)(ia) when the assessee had been paying service charges/ society charges/ samiti charges and commission, without deducting TDS, to various district level/ primary level and state level cooperative societies and there was relation of Principal and Agent between the two as per Agreement and when state/ district/ primary level co-operatives were working as procurement agents of the assessee and the provisions of section 194H read with section 40(a)(ia) of I.T. Act were clearly applicable?” 2. The dispute pertaining to Section 194H of the Income Tax Act, This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/09/2024 at 12:27:45 1961 [“Act”] and its applicability appears to have arisen in the context of the respondent-assessee which is a National Level Cooperative Agricultural Marketing Federation, having pursuant to the directives framed by the Government of India acted as the nodal agency for purchase of agricultural produce under the Price System Support Scheme and Marketing Intervention Scheme. 3. We take note of the following pertinent clauses which appear in the Agreement between the respondent-assessee and the State Level Supporters for “Price Support Operations Rabi Season 2007” and which also formed the subject matter of scrutiny of the Assessing Officer:- “3. RELATIONSHIP OF THE SUPPORTER WITH THIRD PARTIES All transactions between the Supporter and third parties other than procuring societies shall be carried out as between the two principals without reference in any event to the NAFED. The Supporter also undertakes to make such third parties fully aware of the position aforesaid. NAFED will not be liable for any default or acts of omission or commission of the Supporter towards third parties and the Supporter agrees to indemnify NAFED in the event of any such claim against NAFED by the third parties. All persons employed by the Supporter shall be engaged by them as their own servants in all respects. xxxx xxxx xxxx 16. INFORMATION/DOCUMENTS i. The Supporter understands that the Price Support Operations of mustard seed is in the account and on behalf of the Ministry of Agriculture, Government of India. They shall ensure that the same is undertaken by them on behalf of NAFED efficiently so that its maximum possible benefit is reaped by the farmers. The Supporter shall maintain all records/accounts of the said operation properly, making available timely information/ documents, etc. as and when required by NAFED/ Government of India. This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/09/2024 at 12:27:45 ii. It is clearly understood by both the parties that this agreement does not confer the status of an agent of NAFED on the second part but it extends full authority to facilitate and support procurement of the commodities covered, subject to the terms and conditions specified herein.” 4. Bearing in mind the aforesaid and the complete absence of any material which may have even remotely indicated that a relationship of “principal” and “agent” existed, we find that the provisions of Section 194H were correctly found to be inapplicable. Consequently, there would be no justification to resort of Section 40(a)(ia) of the Act. 5. The appeal fails to raise any substantial question of law. It shall, consequently, stand dismissed. YASHWANT VARMA, J. RAVINDER DUDEJA, J. SEPTEMBER 9, 2024 /sv This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 18/09/2024 at 12:27:45 "