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2015 (7) TMI 1074 - ITAT JAIPUR

2015 (7) TMI 1074 - ITAT JAIPUR - TMI - TDS u/s 194J or 194H - payment to RCDF cess - Held that:- 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 .....

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difference, the assessee society does not purchase milk from cattle owners as mistakenly held by ld. AO. 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 thereof, second ground of the assessee with regard to disallowance u/s 40(a)(ia) stands allowed. - Decided in favour of assessee - ITA No. 277/JP/2013, ITA No. 382/JP/2013 - Dated:- 21-7-2015 -

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ion Locked= false Priority= 32 SemiHidden= false UnhideWhenUsed= false QFormat= true Name= Intense Reference /> SHRI R.P. TOLANI, JUDICIAL MEMBER For the Appellant : Shri P. .....

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the action of the AO in holding that the same is not allowable u/s 40(a)(ia) of the Act since the assessee has not deducted the tax at source. 2. The ld. CIT(A) has erred on facts and in law in confirming that milk purchase difference paid to milk societies is commission, liable for deduction of tax u/s 194H and thereby confirming the action of the AO in holding that the same is not allowable u/s 40(a)(ia) of the Act since the assessee has not deducted the tax at source. 2.2 The Revenue has rai .....

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the decision of Hon'ble ITAT Jaipur Bench in case of M/s. JVNL vs. DCIT (ITA No. 132/JP/2009 dated 30-04-2009 for A.Y. 2006-07) even when this decision was based on different facts and circumstances of a unrelated assessee and even when the appeal before the Hon'ble High Court was pending in that case. (iv) The ld. CIT(A) has erred in restricting the disallowance to the amount remaining unpaid at the end of the year and directed the Assessing Officer to verify this. (v) The ld. CIT(A) ha .....

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F a parent cooperative society which according to the AO, constituted commission/ brokerage liable for TDS u/s 194H of the Act. The assessee was following its consistent past practice and did not deduct TDS holding it to be a statutory payment not liable for TDS. The AO however held it to be liable for TDS, as it was not deducted, disallowed the same u/s 40(a)(ia) r.w.s. 194H of the Act . 3.2 In first appeal, the ld. CIT(A) took a different opinion and held the cess paid to RCDF as fees for mana .....

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in appeal. The assessee is by way of Ground No. 1 and Revenue is by way of Ground No. 1. 3.3 The AO further enquired into the claim of expenditure of ₹ 54,73,480/- on account of milk purchase difference Cess. The assessee filed detailed reply contending that the amount was paid @ 2.5% to District Primary Cooperative Societies (for short DPCS' ) for maintaining their activities of collecting milk and to Primary District Cooperative Society (for short PDCS) @ 2% on milk purchased. Since .....

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ect milk from the cattle owners and supply the same to assessee. The payment is bade on quantum of purchase through these samities as it is a fixed percentage. The expenditure is obviously in the nature of commission/ brokerage as understood in common parlance and also as per the inclusive definition given in the Explanation to Section 194H. Since the assessee has failed to deduct tax at source on the payment, expenditure is disallowed u/s 40(a)(ia) of the Act. This results in an addition of  .....

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of Ground No. 2. 3.5 The Ground No. 3 and 4 of the Revenue are connected with Ground No. 1 and 2 inasmuch as to Ground No. 3 and 4 are in support of the contention that theory of paid and payable in view of SB judgment in the case of Merilyn Shipping & Transport (supra) as applied by the ld. CIT(A) is not tenable. 3.6 The remaining Ground No. 5 of the Department is in respect of deleting the disallowance of ₹ 4.52 lacs by holding that this expenditure was related only to purchase of g .....

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7,114/- under the head sales promotion. As per the details filed by the appellant, a sum of ₹ 3,62,111/- was paid to RCDF, ₹ 66,312/- was paid to Bansal Printers and ₹ 24,410/- was paid to M/s. Mahalaxmi Welding Workshop for advertisement. AO disallowed these expenditure u/s 40(a)(ia) since no tax was deducted at source on these payments. 04.2 Ld. AR submitted that the advertisement charges was actually incurred by RCDF and due TDS was made by RCDF at the time of making payment .....

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the payments were made for the purchase of printed banners and iron frame. The payment was not for the advertisement. 04.3 On due consideration of the appellants arguments and the evidences produced, the disallowance made by AO u/s 40(a)(ia) in respect of aforesaid expenditure, is deleted. The payments made to RCDF is not disallowable since the entire payment was made during the year itself, as held by Hon'ble ITAT Jaipur in the case of M/s. JVVNL (supra). The payments made to M/s. Bansal Pr .....

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e incurred by it for all these activities, it levy a cess of 1.25% of the turnover of the district societies. Thus, no specific service is rendered by the RCDF to societies. One cannot identify that payment made by the society as cess to RCDF is for any particular service more so managerial service. In fact, RCDF do not provide any managerial service as such to the society, rather it only develop the market, brand, liaison with government/ institutions, identify the new product etc. in general. .....

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ellip;…The payment of cess made by the assessee to RCDF is in the nature of reimbursement of expenses, whereupon no liability to deduction of tax arises. Therefore, no liability can be fastened upon the assessee within the meaning of section 194J of the Income Tax Act, 1961. 3.10 Apropos Ground No. 2 i.e. milk price difference, the assessee contends that the AO has misconceived entire issue while holding that society pays the amount to cattle owners. The fact of the mater is that milk pri .....

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urchases milk directly from the primary societies on principal to principal basis. Therefore, the payment of the milk to the primary co-operative societies along with the fixed margin called milk price difference is only a payment towards purchase of milk and not a payment of any commission or brokerage since the transaction is between principal to principal. Commission is paid to a person when he acts on behalf of other person. In such a case, the payment for value of the goods or service is ma .....

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he milk from the cattle owners and therefore payment of milk is made by the assessee to the primary society and not to the cattle owners. How the primary societies make payment to the cattle owners or from whom and at what rate the primary co-operative society procures the milk is there outlook with which the assessee is not at all concerned. The payment of fixed margin to the primary society is therefore not a payment of commission as envisaged u/s 194H of the Act. 3.11 Apropos Departmental gro .....

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ions and perused the materials available on record. 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 .....

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