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TMI Blog2016 (4) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... and professional service and thereby confirming the levy of interest u/s 201(1A) at Rs. 10,268/-. He has further erred in confirming the levy of interest u/s 201(1A) even when RCDF has paid tax more than that due as per return and there is no loss of interest to the Revenue. 2. The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the action of the AO in holding that Tax is to be deducted at source in respect of conversion charges and audit fees and thereby confirming the levy of interest of Rs. 656/- and Rs. 228/- u/s 201(1A). He has further erred in confirming the levy of interest u/s 201(1A) even when the respective payees have paid tax more than that due as per return and there is no loss of interest to the Revenue. Grounds of ITA No. 83/JP/2015 (A.Y. 2007-08) (Assessee's appeal) 1. The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the action of the AO in holding that payment of cess made to RCDF is in the nature of technical and professional service and thereby confirming the levy of interest u/s 201(1A) at Rs. 11,240/-. He has further erred in confirming the levy of interest u/s 201(1A) even when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in confirming the levy of interest u/s 206C(7) even when the payee has paid tax more than that due as per return and there is no loss of interest to the Revenue. 4. The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in not giving any decision regarding the action of the AO in holding that purchase of printed banners and iron frame is a contract for advertisement covered u/s 194C and thereby levying tax of Rs. 503/- u/s 201(1 A) and interest of Rs. 480 u/s 201(1A) on account of non deduction of tax at source on such purchase. He has further erred in confirming the levy of interest u/s 201 (1A) even when the payee has paid tax more than that due as per return and there is no loss of interest to the Revenue. Grounds of ITA No. 85/JP/2015 (A.Y. 2009-10) (Assessee's appeal) 1. The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the action of the AO in holding that payment of cess made to RCDF is in the nature of technical and professional service and thereby confirming the levy of interest u/s 201(1A) at Rs. 30,771/-. He has further erred in confirming the levy of interest u/s 201(1 A) even when RCDF has paid tax more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby confirming the disallowance u/s 40(a)(ia)(though restricting it to the amount of Rs. 9,83,914/- which remained payable at the close of the year). 2. The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in holding that amendment to Sec. 40(a)(ia) by Finance Act 2012,w.e.f. 1/04/2015 has no retrospective effect and thereby not restricting the disallowance to 30% of the amount covered u/s 40(a)(ia). Common Grounds of ITA No. 104 to 108/JP/2015 (A.Y. 2006-07 to 2010-11) (Revenue's appeal) 1. "Whether on facts and in law, Ld. CIT(A) erred in holding that the margin of distribution in the payments made by the assessee to its distributors is not commission liable for deduction u/s 194H of the Income-tax Act, 1961?" 2. "Whether on facts and in law, Ld. CIT(A) erred in holding that the assessee was not liable to pay interest u/s 201(1A) of the Income-Tax Act, 1961 as there was no tax liability on the income of the deductee ? Ground of ITA No. 96/JP/2015 (A.Y. 2011-12) (Revenue's appeal) "On the facts and circumstances of the case and in law, the ld CIT(A) has erred in deleting the addition of Rs. 1,22,38,131/- made by the A.O. on account of non dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable to deduct TDS. Accordingly, the ld Assessing Officer held that the assessee defaulted U/s 201(1) in respect of such tax which ought to have been deducted thereon and interest U/s 201(1A) is also charged. However, as the payees had paid due tax on such receipts/income, therefore, keeping in view the decision of Hon'ble Apex Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd., no demand was raised U/s 201(1) of the Act and demand was raised u/s 201(1A) of the Act on account of interest as under:- 3. The assessee challenged the interest charged U/s 201(1A) of the Act for all the years before the ld CIT(A), who had confirmed the action of the Assessing Officer by observing as under:- "4.3 I have carefully considered the submission of the appellant as also the findings of the A.O. It may be noted that the main dispute under consideration was whether TDS was to be deducted or not u/s 194J of IT Act on account of cess payment to M/s RCDF1but the appellant in the ground of appeal has objected only to the raising of demand on account of interest u/s 201(1 A) of IT Act because of the fact that the AO though held the assessee to be assessee in default for non deduction of TDS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act but the cess paid to the RCDF. This issue is covered by the decision of the Hon'ble ITAT, Jaipur Bench dated 21/07/2015 passed in assessee's own case in ITA No. 277 & 382/JP/2013 for A.Y. 2008-09. He particularly referred page No. 9 and 10 of the Coordinate Bench decision wherein it has been held as under:- "Apropos the payment to RCDF cess, it has not been demonstrated by the Department that any managerial services in this connection have been rendered to assessee by RCDF qua this amount. RCDF is an apex cooperative body and cess is paid to it by virtue of federal structure in Rajasthan cooperative set up. Thus as far as assessee's business is concerned, there is no rendering of any managerial services by RCDF as alleged by the AO u/s 194H and upheld Id. C1T(A) u/s 194J. Since there is no rendering of any services and the payment is not made for any managerial services to RCDF, therefore, payment can neither be held as liable for TDS U/s 194H of the Act as commission/ brokerage as held by the AO nor u/s 194Jfor rendering any managerial services as held by the Id. CIT(A). In view thereof, we hold that assessee's impugned payments to RCDF are not liable for TDS. " 5. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, therefore, he held these payments as contractual in nature and also is liable for TDS. 8.1 For legal fees, it has been held that the assessee is liable to deduct TDS in A.Y. 2006-07 and 2007-08 as audit fees was paid @ Rs. 2300 per month as claimed by the assessee. However, these facts had not been proved by the assessee before both the authorities. Therefore, he confirmed the interest on non deduction of TDS U/s 194J on audit fees by raising the demand U/s 201(1A) of the Act. 9. Now the assessee is appeals before us. The ld AR of the assessee has submitted that the payment of conversion charges is made to Alwar Dairy and Jaipur Dairy for conversion of milk into ghee and milk powder. Milk is procured from primary societies and processed by district level societies. To make available the milk at all places, surplus milk from one union to another transferred or some time milk is processed to make the milk powder or ghee. All these transfer activities from one union to another is done on cost to cost basis without adding any profit margin or rather the actual cost incurred by other milk union is just reimbursed without giving any profit. The assessee has reimbursed only actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hwabe India (P) Ltd. (supra) is squarely applicable. Therefore, we delete the addition confirmed by the ld CIT(A) under the head conversion charges. Audit fees is also paid on monthly basis to G.M. Gupta & Company, which is also below Rs. 20,000/- as well as also below the specified limit as per the TDS provisions, therefore, the same is not liable to be deducted TDS. Interest on TDS deductible on legal fees paid to Shri Bharat Vyas has been set aside by the ld CIT(A) for verification, if the recipient has paid advance tax and fulfill the condition of Hon'ble Supreme Court decision of Hindustan Coca Cola Beverages Pvt. Ltd. then no interest is to be charged from the assessee U/s 201(1A) as the assessee claimed that on legal fees Shri Bharat Vyas, advocate had paid tax already by disclosing this income being nominal amount of interest, therefore, we delete the addition confirmed by the ld CIT(A). 12. Ground No. 3 of the assessee's appeal in A.Y. 2007-08 is against confirming the demand of Rs. 1423/- U/s 206C(6A) not deducting TCS and levy of interest U/s 206C(7) of the Act of Rs. 854 in A.Y. 2007-08, Rs. 503 in A.Y. 2008-09, Rs. 304/- in A.Y. 2009-10 and Rs. 752/- in A.Y. 2010- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and raised a demand u/s 206C(6A) and u/s 206C(7). CIT(A) confirmed the action of AO by relying on CBDT Circular dated 18.05.2012. It is submitted that provision of section 206C is applicable in respect of sale of scrap. The word 'Scrap' has been defined in explanation to section 206C as under: "Scrap means waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons." The item like tin, iron scrap, plastic drum, iron scrap sold by assessee are not generated during the manufacturing or mechanical working of material. The assessee is processing milk and selling the same to customers in 'Saras Brand'. None of these scrap are generated during the manufacturing or mechanical process of material. Hence provision of section 206C is not applicable in the present case. The CBDT Circular only clarifies that even trader of scrap are liable for TCS. Therefore, this circular is not applicable. In view of above, the demand u/s 206C(6A)& u/s 206C(7) is uncalled for and be deleted. 15. At the outset, the ld DR has vehemently supported the order of the ld CIT(A). 16. We have heard the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brokerage or commission was paid to the distributor. The assessee entered into an agreement between various distributors on principal to principal basis and that the transaction with the distributor was for purchase and sale of goods for a price paid or promised to be paid. As per agreement, the risk and reward relating to milk and other product were transferred to the distributor and the assessee was not responsible for losses relating to transit loss, pilferage, weight and loss etc. The assessee relied upon various cases before the Assessing Officer. He also alternatively stated before the Assessing Officer that the TDS is a transiable tax and it is a mode of collection and recovery of tax and the tax deducted at source by payer is to be allowed credit in the hands of payee. The payee already paid tax due on the demand received from the assessee further recovery cannot be made from the assessee. The payee had paid more tax than the due and claimed refund also. He relied on the decision in the case of Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CIT (Supra). However, the ld Assessing Officer not convinced with the submission of the assessee but calculated the interest U/s 201(1A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the ld CIT(A). 21. In the result, all the revenue's appeals i.e. for A.Y. 2007-08 to 2010-11 are dismissed. 22. Now we take ITA No. 87/JP/2015 of the assessee for A.Y. 2011- 12 and cross appeal being ITA No. 96/JP/2015 for A.Y. 2011-12. Grounds of both the appeals are against not deducting TDS U/s 194H on payment of milk purchase price difference to milk societies and disallowance U/s 40(a)(ia) of the Act. The ld Assessing Officer observed that the assessee is a Cooperative Society engaged in manufacturing and trading of milk and milk product etc. The assessee had claimed expenditure of Rs. 1,32,22,045/- on account of milk purchase price difference. He further held that these payments were in the nature of commission/brokerage and was liable for deduction of TDS but the assessee has not deducted TDS. Therefore, he disallowed U/s 40(a)(ia) of the Act. After considering the assessee's reply, he made addition of same amount in the income of the assessee. The assessee challenged this issue before the ld CIT(A), who has allowed the appeal partly after considering the assessee's reply and case laws on it. Before the ld CIT(A), the assessee submitted that the milk was purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untry through dairy cooperatives. The diary cooperative follow vertical integrated three tier structure as under: - Primary Society i.e. village Diary Co-operative at the bottom - Union i.e. District processing union at the middle level - Federal Socieity i.e. State Co-operative Dairy Federation. Each of these societies is having different functional responsibilities. The primary society collect the milk, the union i.e. district society process the milk collected by the primary societies and distribute it to the consumers and the federal society market the milk and milk products of their member. The above system is followed throughout the country by the entire dairy sector. The assessee is procuring milk from the primary societies. The rate of milk is based on the fat and SNF content in the milk. Collected milk is tested and processed in the plant of the assessee. On the basis of quality of the milk, the amount payable to the primary society against the cost of the milk is determined. To this cost 3% is added as milk purchase price difference against the margin of the primary societies. This amount alongwith the cost of the milk is paid to the primary societies. In the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer. After considering the assessee's argument, the Hon'ble ITAT allowed the assessee's appeal on this issue. Alternatively, the ld AR has also argued that if no TDS is deducted U/s 194H, paid and payable aspect is to be examined. The assessee claimed that there was no amount payable during the year under consideration to the primary society, for he relied on the decisions in the case of CIT Vs. Vector Shipping Services (P) Ltd. (supra), DCIT Vs. Ananda Marakala (2014) 150 ITD 323 (Bang.)(Trib) and ITO Vs. M/s Theekathir Press (Chennai) (Trib) ITA No. 2076/(Mds)/2012 dated 18/09/2013. It is further argued that if two opinions have been expressed by the various courts, the favourable view of the assessee is to be considered as held by the Hon'ble Supreme Court in the case of Cit Vs. Vegetable products Ltd. 88 ITR 192 and recently in the case of CIT Vs. Vatika Township P Ltd. (2014) 367 ITR 466 (SC). Therefore, he prayed to delete the addition confirmed by the ld CIT(A). 24. The ld DR has vehemently supported the order of the Assessing Officer and argued that the payments made by the assessee to the primary society is a commission and is covered U/s 194H of the Act. 25. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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