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2005 (9) TMI 295 - AT - Income TaxNon-deduction of TDS u/s 194H - Assessee in default - Government Milk Scheme - Commission paid to Milk Federations and Kiosk Owners and on transportation - difference between the procurement price and the maximum retail price for the Kiosk owner - relationship between Government Milk Scheme and Milk Centres - 'Principal to Principal' Or 'Principal to Agent' - HELD THAT:- According to the factual matrix, the appellant used to procure milk from various milk federations. After proper processing of milk, the same was meant for sale in the open market. For this purpose, milk centres or milk booths (kiosks) were contacted, so the milk was sold in 500 or 100 ml. pouches. At the time of procurement, the appellant pass 90 paise per litre to such Unions or Federations towards transport cost, container charges, management expenses, and chilling charges. The bifurcation of this 90 paise being incurred on such various heads has also been discussed above. The next phase was selling of milk through milk booths. Appellant used to sell 1000 ml pouch of milk to Kiosk owner at the rate of 11.10 paise per litre and expected to sell the milk at Rs. 12 per litre. So, there was a margin of 90 paise per litre. This difference between the procurement price and the maximum retail price for the Kiosk owner was stated to be reimbursement of transport cost, container charges, management expenses and chilling charges. In respect of both these transactions, the revenue authorities have held the appellant was liable for TDS and held the assessee a defaulter. Whether the federations or the booth owners were acting on behalf of the appellant i.e., the Government Milk Scheme - We have perused few clauses and have found that in either case apparently the parties are independent not acting on behalf of the appellant. Though the Government is running a Public Welfare Activity by way of giving employment to youth and physically handicapped persons but such welfare activity was not binding in nature but rather optional only, on one hand, to ensure the farmers to get a fair price of their milk produced and, on the other hand, to ensure the people at large to get good quality of milk at reasonable rate to be supplied through milk booths. We have also examined some of the clauses, according to which, it is evident that the product once sold should not be taken back by the Milk Scheme. The Electricity Bill and the ownership of the kiosks having other incidental expenses shall be the responsibility of the booth owners. One more aspect was brought to our notice that the cost of the milk has always been paid in advance every day along with the indent for the requirement of the milk for the next day. This clause thus makes it clear that the activity was purely of trading in nature and the goods were procured on payment and there was transfer of ownership of the said good i.e., milk. So the transaction was purely on 'Principal to Principal' basis and there was no existence of an agency as the goods either procured or disbursed at every stage of transaction was on actual payment basis. Once the buyer become the owner of the property and the seller has no vestige of title left in the property, the concept of sale prevails. Resultantly, applying the aforesaid definitions and the judicial pronouncements to the facts of present case and in the backdrop of the discussion on facts, we hereby hold that the transaction was on principal to principal basis and the appellant was not liable for deduction of tax at source, hence there was no infringement of section 194H of the IT. Act. With the result, the liability created by an order u/s 201(1) and 201(1A) was bad in law. The appellant succeeds and grounds allowed. In the result, the appeal is allowed.
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