TMI Blog2016 (4) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... conversion charges were paid on cost to cost basis and no profit has been charged as claimed by the assessee. When there is no element of profit, the TDS provisions are not applicable. The case law referred by the assessee i.e. ITO Vs. Dr. Willmar Schwabe India (P) Ltd. (2005 (3) TMI 398 - ITAT DELHI-D ) 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 ₹ 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. [2007 (8) TMI 12 - SUPREME COURT OF INDIA ] 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 add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A)-III, Jaipur for A.Y. 2006-07 to 2010-11. ITA No. 87/JP/2015 filed by the assessee and cross appeal being ITA No. 96/JP/2015 filed by the revenue are against the order dated 20/11/2014 passed by the ld CIT(A)-III, Jaipur for A.Y. 2011-12. The effective grounds of all the appeals are as under:- Grounds of ITA No. 82/JP/2015 (A.Y. 2006-07) (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 ₹ 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 ₹ 656/- and ₹ 228/- u/s 201(1A). He has further erred in confirming the levy of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Tax is to be deducted at source in respect of conversion charges and thereby confirming the levy of interest of ₹ 3,332/- u/s 201(1A). He has further erred in confirming the levy of interest u/s 201(1 A) even when the payee has paid tax more than that due as per return and there is no loss of interest to the Revenue. 3. 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 collected at source in respect of sale of scrap and thereby confirming the demand of tax of ₹ 1,048/- u/s 206C(6A) and interest ₹ 503/- u/s 206C(7). He has further erred 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 ₹ 503/- u/s 201(1 A) and interest of ₹ 480 u/s 201(1A) on account of non deduction of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at source in respect of sale of scrap and thereby confirming the demand of tax of ₹ 3,139/- u/s 206C(6A) and interest ₹ 752/- u/s 206C(7). He has further erred 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. Grounds of ITA No. 87/JP/2015 (A.Y. 2011-12) (Assessee s appeal) 1. The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the action of AO in holding that payment of milk purchase price difference to milk societies (DCS PDCS) is payment of commission/brokerage liable for deduction of tax at source u/s 194H which the assessee has failed to declare and thereby confirming the disallowance u/s 40(a)(ia)(though restricting it to the amount of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee claimed before the Assessing Officer that it is reimbursement of expenditure but the assessee could not clarify particulars of expenditure for which reimbursement had made before the Assessing Officer. The RCDF had passed expertise and technical knowledge to its member s society. These services makes the member cooperative society profitable and viable in lieu of these services, the member society paid RCDF a certain amount of money, which is clarified on the basis of a fixed percentage of the total sales made by each members of the cooperative society. Such payment has been shown the nomenclature cess in the above background, he found that these payments of cess was nothing but a demand in lieu of the professional/technical services covered U/s 194J of the Act, which is liable 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest u/s 201(1A) of IT Act was to be charged / recovered from the assessee deductor. The above finding finds support from the following case laws: (i) CIT Vs. Eli Lilly Company (I) Pvt. Ltd. (312ITR 225) (SC) (ii) Hindustan Coca Cola Beverage Ltd. Vs. CIT, 293 ITR 163 (SC) (iii) ITO, W-TDS-2, Jaipur Vs. M/s Vodafone Essar Digilink Ltd. (iv) ITA No.239/JPR/2012, ITAs No. 250 to 252/JPR/2012 (ITAT Jaipur) Keeping in view the facts and circumstances discussed above as also placing reliance on the case laws referred above the action of the AO in charging of interest u/s 201(1A) is confirmed. 4. Now the assessee is appeals before us. The ld AR of the assessee has submitted that the issue of charging interest U/s 201(1A) arises only if the assessee is liable for deduction U/s 194J of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Audit Fees Reimbursement of expenses 2006-07 27600 8988 228 2007-08 27600 20202 241 8. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the addition by observing that the appellant made payment to Alwar Dairy and Jaipur Dairy for conversion of milk into ghee for milk powder. The appellant s case is that such payments were made to these milk dairies on cost to cost basis without adding any profit margin and that TDS U/s 194C was not to be deducted. On the other hand, the Assessing Officer s case is that such payments were of contractual nature for getting specific work done and that even if no profit is given. The TDS was to be deducted, the ld CIT(A) has held that the assessee had conducted some specific work of conversion of milk into ghee and milk powder as per his own specification. It is also a fact that the milk was provided by the assessee, therefore, he held these payments as contractual in nature and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the details of monthly payment which is at Pg 41 of the CIT(A) order. Thus, when no tax is liable to be deducted on payment of audit fees, question of levy of interest does not arise. He has further submitted that the CIT(A) has directed the AO to verify whether Shri Bharat Vyas, Advocate to whom payment is made has paid due taxes on such amount. If he has paid that tax, demand u/s 201(1) be reduced but interest u/s 201(1A) be charged. It is submitted that when the recipient has paid the tax on the legal fees paid to him and there is no loss of revenue to the department, no interest u/s 201(1 A) be levied. In view of above, the interest levied u/s 201(1 A) is uncalled for and be deleted. 10. At the outset, the ld DR has vehemently supported the order of the ld CIT(A). 11. We have heard the rival contentions of both the parties and perused the material available on the record. The conversion charges were paid on cost to cost basis and no profit has been charged as claimed by the assessee. When there is no element of profit, the TDS provisions are not applicable. The case law referred by the assessee i.e. ITO Vs. Dr. Willmar Schwabe India (P) Ltd. (supra) is squarely applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore were not covered under the definition of scrap u/s 206C of the Act. The assessee, alternatively, claimed that the purchaser had already paid due tax on such transaction, therefore, there is no default U/s 206C of the Act whereas the Assessing Officer held that the assessee sold scrap and is covered U/s 206 of the Act. 13. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had dismissed the ground of appeal by observing as under:- The assessee has sold some scraps items and as per A.O. TCS was to be made U/s 206C of IT Act. On the other hand the appellant case is that provisions of Sec. 206C will be applicable only in respect of that scraps which is originated from manufacturing or mechanical working. On careful consideration of relevant facts stated above, it may be mentioned that there is no distinction in the definition of scrap which may indicate that the scrap originated from the manufacturing process was only to be considered for collection of TCS. In fact this issue has already been clarified by the CBDT vide circular No. F. No. 275/86/2011-IT(B) dated 18/05/2012. Keeping in view the clarification issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee s appeal for A.Y. 2008-09 is against interest on TDS U/s 194C of the Act, advertisement expenses at ₹ 503 in A.Y. 2008-09. The ld Assessing Officer observed that the assessee purchased printed banner and iron frame is a contract for advertisement is covered U/s 194C of the Act for which the assessee has made payment to M/s Bansal Printers at ₹ 66,312/- and Mahalaxmi Welding at ₹ 24,410/-. The assessee submitted that the assessee had paid VAT on printed banner purchased from M/s Bansal Printers and Mahalaxmi Welding, therefore, Section 194C is not applicable. The ld CIT(A) has not given any findings on it, therefore, he prayed to delete the interest charged at ₹ 503/-. After considering the finding of both the lower authorities, we do not find any merit in the case of revenue that such payments are covered U/s 194C. Being a nominal amount and finding given by the lower authorities, we delete the addition confirmed by the ld CIT(A). 18. Now we take revenue s appeals. Regarding revenue s appeal from A.Y. 2006-07 to 2010-11, the ld Assessing Officer observed that the assessee being in the dairy marketing through diary cooperative societies, it fixe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge 32 to 35 of the order. Accordingly, he deleted the demand raised U/s 201(1) and interest U/s 201(1A) of the Act. 19. Now the revenue is in appeals before us. The ld DR has vehemently supported the order of the Assessing Officer. At the outset, the ld AR of the assessee has argued that the issue is identical to Ajmer Zila Dugdh Utpadak Sangh Limited Vs. ITO 30 DTR 418 and ACIT (TDS) Vs M/s Jaipur Zila Dugdh Utpadak Sahakari Sangh Limited (supra) wherein the Hon ble ITAT has decided that any sale of milk by the assessee to the distributor is sale agreement on principal to principal basis and not liable for deduction of tax U/s 194H of the Act. Recently, the Hon ble ITAT, Jaipur Bench in ITA No. 277/JP/2013 A.Y. 2008-09 in assessee s own case order dated 21/7/2015 wherein in paragraph 3.14 has held that the assessee society does not purchase milk from cattle owners as mistakenly held by the ld Assessing Officer. Since the liability has been fastened under misconception of facts, we hold that this payment also is not liable U/s 194H of the Act. In view of this, the Hon ble ITAT has allowed the appeal against the addition made U/s 40(a)(ia) of the Act. 20. We have heard the riv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which he relied on the decision of Hon'ble Allahabad High Court in the case of CIT Vs. Vector Shipping Service (P) Ltd. 94 DTR 101 (All) and other cases also. It is further submitted before the ld CIT(A) that Section 40(a)(ia) has been amended w.e.f. 1/4/2005 to remove on intended hardship, therefore, it should be applied retrospectively. Accordingly, disallowance should be 30% of total outstanding amount of ₹ 9,83,914/-. After considering the various decisions of Hon ble ITAT and High Courts. The CBDT has issued a circular No. 10/DV/2013, F. No. 279/Misc./M-61/2012-ITJ(Vol-II) on Section 40(a)(ia) of the Act and clarified that disallowance U/s 40(a)(ia) is to be made not only on payable but paid amount. He further considered the Hon'ble Supreme Court decision in the case of CIT Vs/ Hero Cycles P. Ltd. (1997) 228 ITR 463 wherein it has been held that the circular issued by the Board is binding on ITO not on appellate authority or Tribunal or Court or even the assessee. Keeping in view of these facts, particularly placing reliance on the decision of Hon ble Jurisdictional ITAT in the case of JVVNL Vs. DCIT (supra), it has been held that disallowance U/s 40(a)(ia) sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and not a payment of commission to them as the relationship between the assessee and the primary society is on principal to principal basis and not on principal agent basis. He has further drawn our attention on definition of sales as per the VAT Act, 2003 and argued that the commission is paid to a person when he acts on behalf of the other person. In such a case, the payment for value of the goods or service is made directly to the owner of goods/provider of service and the payment of commission is made separately to the person who is acting on behalf of the owner of goods or provider of service. In the present case, the assessee is making payment of the milk to the primary society and not to the cattle owners. Therefore, the observation of the A.O. that the assessee purchases milk from individual cattle owners is factually incorrect. In fact, the assessee purchased the milk from the primary societies and the primary societies purchased milk from cattle owners. The payment made to the cattle owner is not concerned of the assessee. Thus the payment made to the primary society is not a commission covered U/s 194H of the Act. The ld Assessing Officer relied on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
