Branch Manager,National Agri.Co.Op.Mktg. Federation of India Ltd.(NAFED),, Ahmedabad v. The Income tax Officer,TDS-4,, Ahmedabad

ITA 2891/AHD/2010 | 2006-2007
Pronouncement Date: 23-09-2011 | Result: Allowed

Appeal Details

RSA Number 289120514 RSA 2010
Assessee PAN AHMNO1916F
Bench Ahmedabad
Appeal Number ITA 2891/AHD/2010
Duration Of Justice 11 month(s) 5 day(s)
Appellant Branch Manager,National Agri.Co.Op.Mktg. Federation of India Ltd.(NAFED),, Ahmedabad
Respondent The Income tax Officer,TDS-4,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 23-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 23-09-2011
Date Of Final Hearing 21-09-2011
Next Hearing Date 21-09-2011
Assessment Year 2006-2007
Appeal Filed On 18-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND A. K. GARODIA AM) ITA NO.2891 2892 2893 2894 & 2895/AHD/2010 A. Y.: 2006-07 2007-08 2008-09 2009-10 & 2010-11 THE BRANCH MANAGER NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERATION OF INDIA LTD. (NAFED) 6 TH FLOOR A WING MARADIA PLAZA C. G. ROAD AHMEDABAD VS THE INCOME TAX OFFICER WARD- TDS-4 2 ND FLOOR AMRUT JAYANTI BHAVAN NAVJVAN TRUST BUILDING OFF. ASHRAM ROAD AHMEDABAD PA /TA NO. AHMNO 1916 F (APPELLANT) (RESPONDENT) APPELLANT BY SHRI PRITESH SHAH AR RESPONDENT BY SHRI O. P. BATHEJA DR DATE OF HEARING: 21-09-2011 DATE OF PRONOUNCEMENT: 23-09-2011 O R D E R PER BENCH: ALL THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-VI AHMEDAB AD DATED 05 TH AUGUST 2010 FOR ASSESSMENT YEARS 2006-07 2007-08 2008-09 2009-10 AND 2010-11 ON THE FOLLOWING COMMON GROUND S: THE LD. CIT(A) HAS ERRED IN FACTS AND IN LAW IN H OLDING THAT MARKUP/MARGIN OF PROFIT CHARGES IN THE SALES B ILLS RAISED BY VARIOUS PRIMARY PRODUCER CO-OPERATIVE SOC IETIES AND STATE LEVEL MARKETING CO-OPERATIVE FEDERATION IN THE NAME OF SOCIETY COMMISSION/SERVICE CHARGES IS PAYME NT OF COMMISSION U/S 194-H OF THE ACT LIABLE FOR DEDU CTION OF TAX AT SOURCE. ITA NO.2891 TO 2895/AHD/2010 NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERAT ION OF INDIA (NAFED) LTD. 2 THE LD. CIT(A) HAS ERRED IN FACTS AND LAW IN CONFIR MING THE LEVY OF INTEREST U/S 201(1A) OF THE ACT FROM TH E DATE THE TAX WAS DEDUCTIBLE TO THE DATE OF ORDER U/S 201 (1) OF THE ACT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT IN THE ORDER PASSED U/S 201(1) AND 201(1A) THE ITO TDS-4 NOTICED THAT THE ASSESSEE WAS PURCHASING AGRICULTURAL PRODUCE THROUGH VARIOUS COO PERATIVE SOCIETIES ON MINIMUM SUPPORT PRICE DECLARED BY GOVT . OF INDIA. THE PROCUREMENT WAS DONE ON COST-PLUS BASIS. THE AO WAS OF THE VIEW THAT IN SUCH PROCUREMENT AT MSP THE ASSESSEE WAS B EING PAID COMMISSION FOR SUCH SERVICES ON WHICH TDS WAS DEDU CTIBLE U/S 194H OF THE IT ACT. THE ASSESSEE ARGUED THAT THE PU RCHASES WERE MADE ON PRINCIPAL TO PRINCIPAL BASIS. HOWEVER THE AO WAS OF THE VIEW ASSESSEE ACTED AS AN AGENT. THE ASSESSEE FURTH ER ARGUED THAT SOCIETIES DECLARED GOODS IN THEIR VAT INVOICES AND IN THEIR BOOKS AND THE ASSESSEE DECLARED THE SAME AS PURCHASE IN ITS B OOKS. TO THIS THE AO STATED THAT ENTRIES IN THE BOOKS OF ACCOUNTS DID NOT ALWAYS REFLECT TRUE NATURE OF TRANSACTION. THE AO RELIED U PON THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF SBI VS. CI T 157 ITR 67 KEDARNATH JUTE MANUFACTURING CO. LTD. VS. CIT 82 I TR 363 AND SATLUJ COTTON MILLS VS. CIT 116 ITR 01 AND CONCLUD ED THAT THE ENTRIES IN BOOKS OF ACCOUNTS WERE NOT DETERMINATIVE OF ANY TRANSACTION. THE TRUE NATURE OF TRANSACTION COULD ONLY BE KNOWN FROM THE ACTUAL CONDUCT OF THE PARTY AND SUBSTANCE OF THE TRANSACTI ON. THE TRANSACTION BETWEEN NAFED AND SOCIETIES WAS ON PRIN CIPAL TO AGENT BASIS. THE AO CONSIDERED THE COMMISSION PAYMENT TO THE SOCIETIES LIABLE FOR DEDUCTION U/S 194H OF THE IT ACT. HE HE LD THAT SINCE NAFED ITA NO.2891 TO 2895/AHD/2010 NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERAT ION OF INDIA (NAFED) LTD. 3 HAS NOT MADE ANY DEDUCTION OF TAX FROM THE PAYMENT OF COMMISSION PROVISIONS OF SECTIONS 201(1) AND 201(1A) OF THE IT ACT ARE APPLICABLE. THE AO CONSIDERED TAX AND INTEREST ON S UCH NON- DEDUCTION OF TDS AND WORKED OUT THE DEMAND PAYABLE BY THE ASSESSEE FOR ALL THE FIVE YEARS. THE ASSESSEE SUBMI TTED THAT COST OF PROCUREMENT OF AGRICULTURAL PRODUCE WAS BORNE BY TH E GOVT. NAFED UNDERTAKES THE PURCHASE/PROCUREMENT OF AGRICULTURAL COMMODITIES BY UTILIZING THE INFRASTRUCTURE AND NET WORK OF STATE LEVEL COOPERATIVE SOCIETIES. SOCIETIES AT DISTRICT AND STATE LEVEL DE LIVERED THE GOODS AT DIRECTED WAREHOUSE AND RAISED THEIR SALE INVOICES O N NAFED FOR QUANTITY DELIVERED. THE RESPONSIBILITY IN RESPECT O F QUALITY WEIGHT PACKING AND STORAGE LIES WITH THE PROCURING COOPERA TIVE SOCIETIES. IN CASE OF LOSS OF GOODS DUE TO MANY REASONS BEFORE TH E DELIVERY OF GOODS AT THE WAREHOUSE DIRECTED BY NAFED IT WAS TO THE ACCOUNT OF COOPERATIVE SOCIETIES THEREFORE RELATIONSHIP BETW EEN NAFED AND THE COOPERATIVE SOCIETY WAS ON PRINCIPAL TO PRINCIP AL AND NOT OF PRINCIPAL TO AGENT. THE FIXED MARGIN OF PROFIT OF T HESE SOCIETIES WERE REFLECTED IN THEIR BILL TO NAFED WHICH WAS LOOSELY MENTIONED AS COMMISSION IN THEIR RECORD BUT THE SAME WAS NOT COM MISSION IN THE LEGAL SENSE OF THE TERM. THE ASSESSEE SUBMITTED THA T THE TRANSACTION BETWEEN NAFED AND THE SOCIETY WAS ON PRINCIPAL TO P RINCIPAL BASIS WHICH WAS FURTHER SUPPORTED BY THE FACT THAT IN PUR CHASES THE NAME OF NAFED WAS NOT RECORDED. IN THE MARKET YARD NAME OF SOCIETY APPEARED AND NOT OF THE NAFED. THE SOCIETIES RAISED SALES BILLS AND THEY WERE ALSO RESPONSIBLE FOR ANY LOSS DAMAGE OR FREIGHT OF GOODS. SERVICE CHARGE TAKEN BY THE SOCIETIES WAS PROCUREME NT COST AND NOT PAYMENT OF COMMISSION SINCE RELATIONSHIP WAS PRINCI PAL TO PRINCIPAL. ITA NO.2891 TO 2895/AHD/2010 NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERAT ION OF INDIA (NAFED) LTD. 4 SINCE VAT WAS CHARGED THESE WERE PURE PURCHASE- SA LE TRANSACTION COVERED UNDER THE GOODS ACT. THE SOCIETY MIGHT PURC HASE FROM THE MARKET YARD FROM THE FARMERS ON THEIR ACCOUNT AND T HE GOODS WERE THEIR PROPERTY TILL IT REMAINED IN THEIR CUSTODY. A FTER THE PURCHASE THE SOCIETY DEPOSITED ITS STOCK AT THE SPECIFIED WAREHO USE OF THE ASSESSEE. THE SOCIETIES RAISED ITS VAT INVOICES HAV ING ACTUAL COST EXPENSES INCURRED AND THEIR FIXED MARGIN. THE SOCIE TY CHARGES/ COMMISSION/ THE MARGIN OF PROFIT CHARGED BY THESE S OCIETIES WHICH THEY DECLARED IN THE BILLS RAISED BY THEM BUT FOR T HE ASSESSEE IT WAS COST OF PURCHASE AND NOTHING ELSE. THE PERSONS HAND LING THESE MATTERS AT MANDI LEVEL WERE NOT WELL EDUCATED IN LE GAL MATTERS AND HAVE TERMED THEIR FIXED MARGIN OF PROFIT AS SOCIETY CHARGES OR COMMISSION BUT THE REAL CHARACTER WAS SAME. THE PRI CE FOR PURCHASE WAS PAID TO THE SOCIETIES AS PER SALE BILL AND THER E WAS NO DIFFERENCE PAID TO THE SOCIETIES FOR COMMISSION. SINCE SOCIETI ES SOLD AGRICULTURAL PRODUCE ON PRINCIPAL TO PRINCIPAL BASIS UNDER SCHEM ES OF THE GOVT. WHICH WAS ON COST PLUS BASIS AND DISCLOSED THEIR MARGIN/PROFIT/COMMISSION FOR THE PURPOSE OF VERIFIC ATION BY GOVT. AND THE SAME WAS NOT COMMISSION/BROKERAGE AS DEFINED I N IT ACT AS WELL AS THE MEANING GIVEN TO IT IN COMMERCIAL PARLANCES SO AS TO FALL WITHIN THE SCOPE OF SECTION 194H OF THE IT ACT. IT WAS ALS O ARGUED THAT ALL THE SOCIETIES HAVE FILED THEIR TAX RETURNS AND PAID THE TAXES ON THEIR INCOME INCLUDING THE PROFIT EARNED ON SALE OF GOODS TO THE ASSESSEE. THEREFORE THE TAX LIABILITY U/S 201 (1) AND 201 (1 A) OF THE IT ACT SHOULD NOT BE LEVIED ON THE ASSESSEE. THE ASSESSEE ALSO RELIED ON THAT CERTAIN DECISIONS SUPPORTING ITS ARGUMENT THAT IF THE DEDUCTEES HAVE SUBMITTED THE TAX RETURN ASSESSEE COULD NOT B E REGARDED AS ITA NO.2891 TO 2895/AHD/2010 NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERAT ION OF INDIA (NAFED) LTD. 5 ASSESSEE IN DEFAULT. IN THIS REGARD FOLLOWING DECIS IONS WERE REFERRED TO: (I) HINDUSTHAN COCOCOLA VS CIT 293 ITR 226(SC) (IIJ CIT VS DIVANCHAND 178TAXMAN 173 (DELHI) (III) J.C.BENSAL VS TRO 122TTJ 872 (INDORE) 3. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION O F THE ASSESSEE IN THE LIGHT OF THE FINDINGS OF THE AO CO NFIRMED THE ORDER OF THE AO AND HELD THAT THE PROVISIONS OF SECTION 194 H OF THE IT ACT ARE APPLICABLE IN THE CASE OF THE ASSESSEE. HOWEVER ON ADDITIONAL GROUND THE ITO - TDS WAS DIRECTED TO VERIFY THE AS SESSEES CLAIM. ACCORDINGLY THE APPEALS OF THE ASSESSEE WERE PARTL Y ALLOWED. HIS FINDINGS IN PARA 2.3 TO 3 ARE REPRODUCED AS UNDER: 2.3 I HAVE CONSIDERED THE ORDER OF THE A.O. FACTS OF THE CASE AND APPELLANT'S SUBMISSION. IT IS NOT IN DISPU TE THAT APPELLANT IS PROCURING FOOD GRAINS FROM FARMERS AND GROWERS THROUGH COOPERATIVES UNDER SCHEME OF GOVT. OF INDIA. PROCUREMENT IS DONE AT THE PRICE FIXED BY GO VT. SUCH PROCUREMENT IS DONE BY CO.OP. SOCIETIES ON PAYMENT OF COST + PROFIT FOR THE APPELLANT. THOUGH THE BILLS FOR PURCHASE AND SALES ARE ISSUED BY COOPERATIVES B UT THE SAME IS AT THE FIXED PRICE AND FOR THE FIXED BU YERS I.E. THE APPELLANT. APPELLANT CLAMED THAT THE COOPERATIVES ARE ACTING AS PRINCIPAL AND NOT AGENT THEREFORE THERE IS NO PAYMENT OF COMMISSION TO THE COOPERATIVES INVOLVING LIABILITIES TO DEDUCT TAX U/S 194H. THE MAIN THRUST OF APPELLANT'S ARGUMENT IS ON THE TRANSACTION AT PRINC IPAL TO PRINCIPAL BASIS AND THE SALE INVOICES ISSUED BY THE COOPERATIVES. I AM NOT IMPRESSED WITH THE MAIN ARGUMENTS OF THE APPELLANT THAT THE TRANSACTION BETWEEN THE APPELLAN T AND ITA NO.2891 TO 2895/AHD/2010 NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERAT ION OF INDIA (NAFED) LTD. 6 COOPERATIVES ARE ON PRINCIPAL TO PRINCIPAL BASIS SI NCE SALE BILLS ARE ISSUED BY COOPERATIVES AND VAT IS PAID ON THE SAME. THIS IS IN VIEW OF THE FOLLOWING FACTS EMERGE D FROM THE NATURE OF TRANSACTIONS. . (1) APPELLANT IS PROCURING FOOD GRAINS AND AGRICULTURAL PRODUCTS UNDER THE GOVT. SCHEME. THE PRICES ON WHICH THE PRODUCTS ARE TO BE PROCURED ARE FIXED. (2) THE MARK UP OR PROFIT/COMMISSION TO BE GIVEN TO COOPERATIVES IS ALSO FIXED PERCENTAGE OF COST. (3) THE PRODUCTS ARE PROCURED FOR AND ON BEHALF O F THE APPELLANT WHICH IS CLEAR FROM THE CONDUCT OF TH E COOPERATIVES THAT THEY DO NOT KEEP ANY STOCK OF THESE PRODUCTS IN THEIR BOOKS. PROCURED PRODUCTS ARE SIMULTANEOUSLY TRANSFERRED TO THE APPELLANT (4) THE COOPERATIVES HAVE NO DISCRETION REGARDING THE PRICE QUANTIFY ETC. THEY ARE ALSO NOT EXPOSED TO ANY RISK OR LOSS IN SUCH PROCUREMENT WHICH MEANS THEY ARE NOT ACTING AS INDEPENDENT TRADER BUT WORKING AS SERVICE PROVIDER TO THE APPELLANT. APPELLANT MENTIONED ABOUT RISK OF COOPERATIVES BUT NO SUCH RISK CAN BE SEEN FROM THE FACTS OF THE CASE . THE SERVICE PROVIDED BY THESE COOPERATIVE IS IN THE FORM OF PROCUREMENT OF FOOD GRAINS ETC. FOR THE APPELLANT FOR WHICH FIXED PERCENTAGE OF COMMISSION IS PAID. SUCH COMMISSION IS SPECIFICALLY MENTIONED IN THE BILLS ISSUED BY THE COOPERATIVES. (5) THE SUPPLIER/SELLERS OF THE PRODUCTS ARE THE GROWERS AND ACTUAL SELLERS WHO OWNED THESE PRODUCTS. THEY FINALLY RECEIVED THE SALE CONSIDERATION. COOPERATIVES ARE ACTING AS INTERMEDIARY BETWEEN GROWERS AND APPELLANT FACILITATING THE PROCUREMENT. ITA NO.2891 TO 2895/AHD/2010 NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERAT ION OF INDIA (NAFED) LTD. 7 (6) THE ISSUE OF SALE BILL BY COOPERATIVES AND PAYMENT OF VAT DOES NOT MAKE THESE COOPERATIVES PRINCIPAL SINCE THEY EARN/ NO RISK AND THEY DO NOT HAVE ANY DISCRETION REGARDING PRICE QUANTITY AND DELIVERY OF FOOD GRAINS. PRINCIPAL TO ANY TRANSACTI ON USUALLY CARRY THE RISK OF TRANSACTION AND DECIDE TH E PRICE AND QUANTITY. RENDERING OF SERVICE OF PROCUREMENT WILL NOT MAKE THESE COOPERATIVES PRINCIPAL JUST BECAUSE THEY RAISED SALE INVOICE. SA LE INVOICES ARE RAISED BY COOPERATIVES SINCE THE GROWERS OR FARMERS DO NOT HAVE ANY SALE INVOICE. THE PROCUREMENT IS DONE IN MANDI WHERE COOPERATIVES ARE SHOWN AS BUYERS WHO IN TURN HAVE TO ISSUE SALE INVOICE TO SQUARE OFF THEIR POSITION. THE MODE OF ACCOUNTING WILL NOT DETERMINE THE REAL NATURE OF TRANSACTION. VARIOUS COURTS INCLUDING APE X COURT HAVE HELD THAT ACCOUNTING ENTRIES AND THE FORM OF TRANSACTION WILL NOT DETERMINE THE REAL NATURE. SINCE ALL THE CIRCUMSTANCES AND THE FACTS RELATING TO TRANSACTION CLEARLY PROVED THAT COOPERATIVE IS MIDDLE MAN ACTING AS AN AGENT FOR THE APPELLANT ON A FIXED COMMISSION. PRINCIPALS IN THE PROCUREMENT BUSINESS ARE THE ACTUAL SUPPLIER OF THE PRODUCE AND THE COOPERATIVES ARE JUST INTERMEDIARIES FACILITATING THE PROCUREMEN T PROCESS. THEREFORE PAYMENT OVER AND ABOVE COST MADE TO THEM IS NOTHING BUT COMMISSION FOR WHICH PROVISIONS OF SEC. 194H IS APPLICABLE. BY NOT DEDUCTING TAX APPELLANT HAS DEFAULTED WITHIN THE MEANING OF SEC. 201(1) OF THE IT ACT AND ACCORDINGLY APPELLANT IS LIABLE FOR TAX AND INTERES T ON THE SAME. IN VIEW OF THIS THE RAISED BY ITO-TDS IS CONFIRMED SUBJECT TO THE DISCUSSION/DECISION IN SUBSEQUENT PARA. 2.4 APPELLANT TOOK ADDITIONAL GROUND IN ALL THE AP PEALS THAT SINCE DEDUCTEES HAVE ALREADY PAID TAXES ON THE INCOME RECEIVED FROM THE APPELLANT THE SAME WOULD NOT BE RECOVERABLE FROM THE DEDUCTOR I.E. APPELLANT AS ITA NO.2891 TO 2895/AHD/2010 NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERAT ION OF INDIA (NAFED) LTD. 8 DECIDED IN THE CASE OF HINDUSTAN COCA-COLA VS. CIT 293 ITR 226 (S.C). IN THIS REGARD APPELLANT SUBMITTED DETAILS PAN OF THE SOCIETIES AND CLAIMED THAT THEY HAVE FILED INCOME T AX RETURNS ON THE INCOME RECEIVED FROM THE APPELLANT. THE OBSERVATION OF HON'BLE APEX COURT IN THE CASE OF M/ S HINDUSTAN COCA-COLA VS. CIT IS RELEVANT ON THE ISSU E IN WHICH IT IS STATED THAT - THE CIRCULAR NO.275/201/95-IT(B) DT. 9 TH JAN. J997 ISSUED BY THE CBDJ IN OUR CONSIDERED OPINION SHOULD PUT AN END TO THE CONTROVERSY. THE CIRCULAR DECLARES 'NO DEMAND VISUALIZED U/S 201(1') OF THE IT ACT SHOULD BE ENFORCED AFTER THE TAX DEDUCTOR HAS SATISFIED THE OFFICER-IN-CHARGE OF TDS THAT TAXES DUE HAVE BEEN PAID BY THE DEUDCTEE ASSESSEE. HOWEVER THIS WILL NOT ALTER THE LIABILITY TO CHARG E INTEREST U/S 201(1 A OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCTEE-ASSESSEE OR THE LIABILITY FOR PENALTY U/S 271C OF THE IT ACT.' IN VIEW OF THE ABOVE THE ITO TDS IS DIRECTED TO VERIFY THE APPELLANTS CLAIM THAT THE SOCIETIES HAV E OFFERED THE COMMISSION INCOME FROM THE APPELLANT FOR TAXATI ON AND PAID THE TAXES DUE ON SUCH INCOME. IF HE IS SAT ISFIED THEN HE WILL REDUCE DEMAND U/S 201(1) OF IT ACT. HOWEVER THE LIABILITY OF INTEREST U/S 201 (1A) WIL L REMAIN. THIS GROUND IS DISPOSED OFF ACCORDINGLY. 3. IN THE FINAL RESULT ALL THE FIVE APPEALS ARE P ARTLY ALLOWED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT THE TRANSACTIONS WERE CONDUCTED ON PRINCIPAL TO PRI NCIPAL BASIS AND NO COMMISSION WAS INVOLVED. HE HAS REVERED TO PB-28 AN D 29 WHICH ARE SPECIMEN AGREEMENTS THROUGH WHICH THE SOCIETIES WERE RESPONSIBLE FOR ITA NO.2891 TO 2895/AHD/2010 NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERAT ION OF INDIA (NAFED) LTD. 9 QUALITY AND QUANTITY FOR WHICH SERVICE CHARGES HAVE BEEN PAID TO THEM. HE HAS SUBMITTED THAT IDENTICAL GROUND OF APP EAL WAS IN ISSUE BEFORE THE ITAT JAIPUR BENCH IN THE CASE OF T HE BRANCH MANAGER NATIONAL AGRICULTURAL COOPERATIVE MARKETIN G FEDERATION OF INDIA LTD. VS DCIT (TDS) IN ITA NO.23 24 50 & 51/ JP/2010 COPY OF WHICH IS FILED AT PAGE 51 OF THE PAPER BOOK IN WHIC H THE APPEALS OF THE ASSESSEE ON IDENTICAL QUESTION HAVE BEEN ALLOWED VI DE ORDER DATED 31-08-2010. THE LEARNED COUNSEL FOR THE ASSESSEE AD MITTED THAT THE ORDER OF ITAT JAIPUR BENCH WAS PASSED AFTER PASSING OF THE IMPUGNED ORDER AND FURTHER ADMITTED THAT OTHER EVID ENCES AND COPIES OF THE BILLS AND VOUCHERS HAVE NOT BEEN FILED IN TH E PAPER BOOK BECAUSE THE PAPER BOOK CONTAINED ONLY THE CASE LAWS AND THE WRITTEN SUBMISSIONS OF THE ASSESSEE ONLY. ON THE OTHER HAND THE LEARNED DR RELIED UPON THE ORDER OF THE AO. 5. ON CONSIDERATION OF THE SUBMISSIONS OF THE PARTI ES IN THE LIGHT OF THE DECISION OF ITAT JAIPUR BENCH IN THE CASE OF THE BRANCH MANAGER NATIONAL AGRICULTURAL COOPERATIVE MARKETIN G FEDERATION OF INDIA LTD. (SUPRA) WE ARE OF THE VIEW THE MATTER R EQUIRES RECONSIDERATION AT THE LEVEL OF THE AO. WE FIND THA T ITAT JAIPUR BENCH CONSIDERING THE IDENTICAL ISSUE ON THE ABOVE GROUND OF APPEAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE FI NDINGS OF THE TRIBUNAL IN PARA 7 TO 10 ARE REPRODUCED AS UNDER: 7. AFTER HEARING BOTH THE PARTIES AS WELL AS CONSI DERING THE ABOVE SUBMISSIONS AND ORDERS OF THE AUTHORITIES BELOW AND ALSO THE PAPER BOOK FILED BY THE LD. AR IT IS NOTED THAT SECTION 194 H IS APPLICABLE WHERE ANY PE RSON PAYS ANY INCOME BY WAY OF COMMISSION OR BROKERAGE. ITA NO.2891 TO 2895/AHD/2010 NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERAT ION OF INDIA (NAFED) LTD. 10 EXPLANATION PROVIDES THAT COMMISSION OR BROKERAGE INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE DIRECT LY OR INDIRECTLY BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR ANY SERVICES IN COURSE OF BUYING OR SELLING OF GOODS. THE PROVISION OF SECTION 194H IS NOT APPLICABLE ON THE SOCIETIES COMMISSION REFLECTED BY THE SOCIETIES IN THERE SALE BILLS FOR THE REASONS STATED HERE UNDER:- (A) THE TRANSACTION BETWEEN THE ASSESSEE AND THE SOCIETIES IS ON PRINCIPAL TO PRINCIPAL BASIS AND NOT ON PRINCIPAL AND AGENT RELATIONSHIP. (B) THE SOCIETIES WHILE PROCURING THE GOODS FROM THE MANDI NO WHERE DISCLOSE THAT THE PURCHASES ARE MADE BY THEM FOR OR ON BEHALF OF THE ASSESSEE. THIS IS ALSO EVIDENT FROM THE AUCTION REGISTER OF KRISHI UPAJ MANDI SAMITEE WHERE NAME OF THE SOCIETIES ARE MENTIONED AS A PURCHASING PARTY. THE NAME OF THE ASSESSEE NO WHERE APPEARS IN THIS REGISTER. (C) AFTER PURCHASE OF GOODS BY THE SOCIETIES BUT BEFORE DELIVERY OF THE SAME TO THE SPECIFIED WAREHOUSE OF THE ASSESSEE IF THERE IS ANY SHORTAGE/PILFERAGE OR DAMAGE TO THE GOODS IT IS ON ACCOUNT OF THE SOCIETIES AND NOT OF THE ASSESSEE. IT BECOMES THE PROPERTY OF THE ASSESSEE ONLY AFTER GOODS ARE DEPOSITED IN THE WAREHOUSE. (D) THE SOCIETIES DECLARE THE GOODS WHICH ARE MENTIONED IN THERE VAT INVOICE (IN WHICH SOCIETIES COMMISSION IS REFLECTED) AS SALES IN THERE BOOKS OF ACCOUNTS AND THE ASSESSEE DECLARE THE SAME AS PURCHASE IN ITS BOOKS OF ACCOUNTS. THUS THE TRANSACTION IS OF PURCHASE AND SALES AND NOT A PAYMENT OF COMMISSION. THE SOCIETIES COMMISSION IS THUS ONLY THE DISCLOSED MARGIN OF PROFIT OF THE SOCIETIES. IT IS ITA NO.2891 TO 2895/AHD/2010 NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERAT ION OF INDIA (NAFED) LTD. 11 JUST LIKE PROFIT PLUS AGREEMENT/ARRANGEMENT FOR PURCHASE OF GOODS. (E) IN THE VAT INVOICE RAISED BY THE SOCIETIES THEY SEPARATELY DISCLOSE THE NAKED COST OF THE GOODS PURCHASED BY THEM THE MANDI TAX PAID BY THEM THE EXPENSES INCURRED BY THEM FOR BRINGING THE GOODS TO THE SPECIFIED WAREHOUSE OF THE ASSESSEE AND THEIR PROFIT MARGIN NAMED AS SOCIETIES COMMISSION/CHARGES. ALL THESE COMPONENTS ARE SEPARATELY DISCLOSED IN VAT INVOICE AS PER THE REQUIREMENT OF THE GOVERNMENT AS PER PSS/MIS SCHEME. ON THE ENTIRE TOTAL OF THE ABOVE ITEMS VAT IS CHARGED AS PER THE APPLICABLE RATES. SECTION 2(36) OF THE RAJASTHAN VAT ACT 2003 WHICH DEFINE SALES PRICE ALSO SPECIFIES THAT THE AMOUNT PAID OR PAYABLE TO A DEALER AS CONSIDERATION FOR SALE OF ANY GOODS INCLUSIVE OF ANY STATUTORY LEVY OR ANY SUM CHARGED FOR ANY THING DONE BY THE DEALER IN RESPECT OF THE GOODS OR SERVICES RENDERED AT THE TIME OF OR BEFORE THE DELIVERY THEREOF WOULD BE TAKEN AS SALES PRICE. THUS ASSESSEE ONLY PURCHASES THE GOODS FROM THE SOCIETIES WHEREIN THE MARGIN OF PROFIT OF THE SOCIETIES IS SEPARATELY DISCLOSED AS SOCIETIES COMMISSION/CHARGES. 7.1 FROM THE ABOVE IT IS HELD THAT THE SOCIETIES COMMISSION/CHARGED MENTIONED IN THE VAT INVOICE OF THE SOCIETIES SELLING GOODS TO THE ASSESSEE IS NOT A PAYMENT OF THE COMMISSION AS ENVISAGED IN SECTION 194H AND THEREFORE THERE IS NO LIABILITY ON THE ASSESSEE TO DEDUCT TAX AT SOURCE ON SUCH PAYMENT OF PURCHASE PRICE WHI CH INCLUDES THE PAYMENT OF SOCIETIES CHARES. VERY RECE NTLY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT (TDS) VS. ASSISTANT MANAGER (ACCOUNTS) FOOD CORPORATION OF INDIA 326 ITR 106 ON IDENTICAL FACT S HAS OBSERVED AS UNDER:- ITA NO.2891 TO 2895/AHD/2010 NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERAT ION OF INDIA (NAFED) LTD. 12 THE ASSESSEE IN THE PRESENT CASE IS FOOD CORPORATION OF INDIA WHICH IS ENGAGED IN PROCUREMENT OF FOOD GRAINS FOR THE CENTRAL POOL. TH E FOOD GRAINS IS PROCURED THROUGH THE STATE AGENCIES AND DIRECTLY AS WELL. PROCEEDINGS WERE INITIATED U/ S 201 OF THE INCOME-TAX ACT 1961 WITH THE ALLEGATION THAT THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURC E ON THE INTEREST RENT AND TRANSPORTATION CHARGES PA ID BY IT TO VARIOUS AGENCIES. THE ORDER CAME TO BE PASSED BY THE ITO (TDS) ON FEB 25 2005 RAISING A DEMAND OF RS.12 34 814/-. THE ORDER WAS UPHELD BY THE COMMISSIONER OF INCOME TAX (APPEALS). IN FURTHER APPEAL BEFORE THE TRIBUNAL THE PLEA SET UP BY THE ASSESSEE WAS ACCEPTED. IT WAS NOTICED THAT IN THE INVOICES RAISED BY VARIOUS STATE AGENCIES WHO PROCURED FOOD GRAINS ON BEHALF OF THE ASSESSEE THE COST OF WHEAT HAS BEEN SHOWN APART FROM THE COST ON ACCOUNT OF OTHER INCIDENTAL EXPENSES INCURRED BY THE PROCUREMENT AGENCIES. VAT HAD ALSO BEEN CHARGED. IT WAS NOT EVIDENT FROM THERE THAT THE EXPENSES SO INCURRED BY THE PROCUREMENT AGENCIES WERE ON BEHALF OF THE ASSESSEE RATHER IT WAS FOUND TO BE PART OF THE COST AT WHICH THE FOOD GRAINS WERE TO BE TRANSFERRED BY THE PROCUREMENT AGENCIES TO THE ASSESSEE. WITH THIS FACTS IT WAS FOUND THAT AS THE ASSESSEE HAD N OT PAID ANY AMOUNT TO THE PROCUREMENT AGENCIES ON ACCOUNT OF TRANSPORTATION INTEREST OR SHORTAGE CHARGES AS SUCH ACCORDINGLY THERE WAS NO LIABILITY FOR DEDUCTION OF TAX. THE CONTENTION OF THE LEARNED COUNSEL FOR THE REVENUE THAT IN FACT ALL THESE FACTORS HAD BEEN TAKEN CARE OF WHILE FIXING THE PRICE AT WHICH THE F OOD GRAIN WAS TO BE BILLED TO THE ASSESSEE CARRIES NO WEIGHT. IF EXPENSES INCURRED BY A PERSON ON ACCOUNT OF TRANSPORTATION INTEREST STORAGE ETC. ARE ADDED TO THE COST OF THE GOODS IT CANNOT BE INFERRED THAT T HE PERSON WHO IS BILLED HAD PAID CERTAIN AMOUNT ON ITA NO.2891 TO 2895/AHD/2010 NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERAT ION OF INDIA (NAFED) LTD. 13 ACCOUNT OF THOSE SERVICES SEPARATELY AS THE SAME BECOMES PART OF THE COMMODITY SO SOLD. FOR THE REASONS MENTIONED ABOVE WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW ARISES IN THE PRESENT APPEAL. THE SAME IS ACCORDINGLY DISMISSED. PLACING RELIANCE ON THE ABOVE DECISION AND THE FACT S AND CIRCUMSTANCES DISCUSSED IN FOREGOING PARAGRAPHS WE ARE OF TH4E VIEW THAT THE FINDING OF LOWER AUTHORITIES THAT SOCIETY COMMISSION CHARGED IN THE SALE BILLS BY THE SE SOCIETIES IS A PAYMENT OF COMMISSION BY ASSESSEE IN TERMS OF SECTION 194H IS NOT CORRECT AS PER LAW AND ACCORDINGLY THE ISSUE IS DECIDED AGAINST THE REVENU E. THUS GROUND NO.1 OF ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. 8. THE SECOND GROUND OF APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN FACTS AND LAW IN C ONFIRMING THE LEVY OF INTEREST U/S 201(1A) FROM THE DATE OF T AX WAS DEDUCTIBLE TO THE DATE OF FILING OF RETURN BY THE S OCIETIES. 9. SINCE WE HAVE ALREADY HELD IN FOREGOING PARAGRAP HS THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT THE TAX AT SOURCE U/S 194H OF THE ACT THEREFORE QUESTION OF CHARGING OF INTEREST U/S 201(1A) DOES NOT ARISE. HE NCE THE SECOND GROUND OF APPEAL IN ALL THE FOUR APPEALS ARE ALLOWED. 10. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE ALLOWED. 6. THE LEARNED COUNSEL FOR THE ASSESSEE ADMITTED TH AT THE ABOVE DECISION WAS DELIVERED AFTER THE ORDER PASSED BY TH E LEARNED CIT(A) AND FURTHER THE RELEVANT DOCUMENTS AND EVIDENCES HA VE NOT BEEN FILED IN THE PAPER BOOK. ONLY ONE SPECIMEN AGREEMEN T IS FILED IN THE PAPER BOOK. NO OTHER DOCUMENTS/MATERIALS HAVE BEEN FILED IN THE ITA NO.2891 TO 2895/AHD/2010 NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERAT ION OF INDIA (NAFED) LTD. 14 PAPER BOOK. THE PAPER BOOK CONTAINED ONLY THE CASE LAWS WHICH MAY NOT BE RELEVANT IN VIEW OF THE DEFINITION OF COMMIS SION GIVEN IN EXPLANATION TO SECTION 194H OF THE IT ACT. THEREFOR E THE CASE OF THE ASSESSEE COULD NOT BE EXAMINED AT THIS STAGE IN THE LIGHT OF THE DECISION OF ITAT JAIPUR BENCH. HOWEVER CONSIDERING THE FACTS NOTED BY THE AUTHORITIES BELOW IN THE LIGHT OF THE DECISI ON OF ITAT JAIPUR BENCH (SUPRA) WE ARE OF THE VIEW THE MATTER REQUIR ES RECONSIDERATION AT THE LEVEL OF THE AO. FURTHER THE AUTHORITIES BE LOW HAD NO OCCASION TO CONSIDER THE ISSUE BECAUSE THE ORDER OF ITAT JAI PUR BENCH WAS DELIVERED LATER ON AFTER PASSING OF THE IMPUGNED OR DERS. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND RESTORE THIS ISSUE TO THE FILE OF THE AO WITH DIRECTION TO DECIDE THE ISSUE INVOLVED IN THIS CASE AFRESH IN THE LIGHT OF THE DE CISION OF THE ITAT JAIPUR BENCH IN THE CASE OF THE BRANCH MANAGER NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERATION OF IN DIA LTD. (SUPRA) ON EXAMINING THE FACTS AND MATERIALS ON RECORD OF THE AO BY GIVING REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A. K. GARODIA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- ITA NO.2891 TO 2895/AHD/2010 NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERAT ION OF INDIA (NAFED) LTD. 15 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD