TMI Blog2009 (7) TMI 836X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, the said modalities of payment are not the deciding factor to determine the nature of transaction - Issue in favour of the assessee - No TDS - 145, 146 & 147 (Vizag.) of 2006 - - - Dated:- 20-7-2009 - Sunil Kumar Yadav, Br Baskaran, JJ. C.S. Subramanyam for the Appellant. B. Sasmal for the Respondent. Order Per Shri B.R. Baskaran, Accountant Member. These three appeals filed by the assessee are directed against the order dated 06-02-2006 passed by Ld. CIT(A)-II, Visakhapatnam and it relates to the financial years 2003-04, 2004-05 and 2005-06. Since identical issues are contested in these appeals, we find it convenient to dispose them of by this common order. 2. The grounds raised by the assessee in these three years give rise to the following two issues: (a) Whether Ld. CIT(A) is justified in holding that the assessee has entered into business transactions with the company MMTC on Principal to Agent basis and consequently, the payment made by the company to MMTC is liable for deduction of tax at source under section 194H or 194J of the Act. (b) Whether Ld. CIT(A) is justified in upholding the levy of penalty under section 201 of the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar lines. This indicates that the NMDC is involved upto the final delivery of goods to the buyers identified, by MMTC. (c) The payment for load port analysis as well as for draft survey is also made by NMDC directly to the agencies performing the job at Chennai and Vizag. However the discharge port charges including analysing, draft survey etc., are paid by MMTC to the respective agencies are adjusted by MMTC while making the final payment by producing relevant documentary evidence. (d) Para 6.1 of the Minutes reproduced above clearly indicate that MMTC is entitled to a service charge of 3 per cent only on the FOB value. (e) Though the MMTC is accounting the impugned transaction as purchase and sale, yet it accounts for the purchase value in its books only after effecting the sale. The company, MMTC, had accounted the transactions as purchase and sale of iron ore. However, the TDS officer, by placing reliance on the decision of Hon ble Supreme Court in the case of Chowringhe Sales Bureau, opined that it is not relevant how the accounting entries are made but it is important to look into the actual nature of transactions. Accordingly, by giving stress to the minutes ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of agency differs from a contract of sale in as much as an agent, after taking delivery of the property, does not sell it as his own but sells it as the property of the principal under his instructions and directions. While interpreting the terms of an agreement, the court has to look to the substance rather than the form of the agreement. Use of words like agent or agency , buyer and seller is not sufficient to lead to the inference that the parties did in fact intend that the said status would be conferred. In certain trades, the word agent is often used without any reference to the law of principal and agent. In the instant case, the evidence furnished by the agreement was sufficient to conclude (a) that the goods were supplied not on consignment basis but by way of outright sale; (b) that the agreement was to sell petrol and other oils, after the dealer had bought the property from Caltex, at prices fixed by that company; (c) that stipulation of sale price was to protect the company s goodwill and to ensure quality of goods to be distributed-in fact stipulation of price which is generally a common term in all agreements between monopolistic companies and their di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ixed percentage benefited both the parties. (7) The para was intended to provide a methodology to determine the selling price and not to define the relationship between NMDC and MMTC. (8) Please refer to the preamble which clearly states the purpose of the document. This document is meant to establishing certain roles and responsibilities and to effect payments. This is not a document for establishing a contractual relationship of a principal and agent. (9) The transactions with MMTC, which is another Govt. of India undertaking, are principal to principal basis. The iron ore is sold to MMTC and in turn MMTC is exporting the iron ore purchased from NMDC to foreign buyers. (10) The MMTC has only entered into contract for the sale of iron ore to the foreign buyers and NMDC is not a party to it. The risks rest with MMTC. (11) In respect of sales to MMTC for exports, such sale is shown in sales tax return but no sales tax is payable, as MMTC issues Form H as the buyer under the provisions of CST Act. (12) Further, MMTC is also issuing Disclaimer certificate in the prescribed form under the provisions of the Income-tax Act to NMDC for the value of iron ore purchased b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince MMTC is entitled to a fixed profit margin, all the expenses in connection with the export were borne by the assessee company. According to Ld. AR, it is only a modality of the compensation and hence the same cannot be treated as that of an Agency agreement. 4.3 We find force in the argument of the assessee. First of all, the department has not controverted the claim of the assessee that:- (a) The title to the iron ore is effectively transferred to MMTC upon shipment of the goods. (b) The Record note of discussion is meant for establishing certain roles and responsibilities in the transactions between the companies and to finalise the mode of payment. (c) Only MMTC has exported the goods to the foreign buyers in its capacity as principal and not as the agent of the assessee. MMTC is responsible for the bad debts, if any. (d) The MMTC has issued Form H under Sales tax Act and also the Disclaimer certificate to enable the assessee to claim deduction under section 80HHC and the claim made by the assessee was also allowed. In the preamble to the Record note of discussions, it has been clearly mentioned that the meeting was held to finalize the modalities and guideli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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