ITO, New Delhi v. M/s. Mother Dairy Food Processing Ltd., New Delhi

ITA 385/DEL/2010 | 2005-2006
Pronouncement Date: 10-05-2010 | Result: Dismissed

Appeal Details

RSA Number 38520114 RSA 2010
Assessee PAN AADCM0501G
Bench Delhi
Appeal Number ITA 385/DEL/2010
Duration Of Justice 3 month(s) 13 day(s)
Appellant ITO, New Delhi
Respondent M/s. Mother Dairy Food Processing Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 10-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 10-05-2010
Date Of Final Hearing 10-05-2010
Next Hearing Date 10-05-2010
Assessment Year 2005-2006
Appeal Filed On 28-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI R.P. TOLANI JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NO.385/DEL./2010 (ASSESSMENT YEAR : 2004-05) ITO WARD 50 (4) VS. M/S. MOTHER DAIRY FOOD PROC ESSING LTD. NEW DELHI. (NOW AMALGAMATED WITH MOTHER DAIRY FRUIT & VEGETABLE P. LTD.) PATPARGANJ DELHI 110 092. (PAN : AADCM0501G) ITA NO.3468/DEL./2008 (ASSESSMENT YEAR : 2004-05) ITA NO.4831/DEL./2009 (ASSESSMENT YEAR : 2005-06) M/S. MOTHER DAIRY FOOD PROCESSING LTD. VS. ITO W ARD 50 (4) NOW AMALGAMATED WITH MOTHER DAIRY NEW DELHI. FRUIT & VEGETABLE P. LTD.) PATPARGANJ DELHI 110 092. (PAN : AADCM0501G) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI S.D. KAPILA R.R. MAURYA & KA RTIK ADVOCATES REVENUE BY : SHRI DEEPAK GARG SENIOR DR ORDER PER R.P. TOLANI JUDICIAL MEMBER : THIS GROUP OF APPEALS ONE BY REVENUE AND TWO BY AS SESSEE ARISING OUT OF RESPECTIVE ORDERS OF CIT (APPEALS) ARE DISPOSED OFF BY THIS COMMON ORDER AS THE ASSESSEE BEING THE SAME. 2. REVENUES APPEAL IN ASSESSMENT YEAR 2004-05 RAIS ES THE ISSUE ABOUT NON-REDUCTION OF TDS U/S 194H BY FOLLOWING GROUNDS : ITA NO.385/DEL./2010 ITA NO.3468/DEL./2008 ITA NO.4831/DEL./2009 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT (A) HAS ERRED IN 1) HOLDING THAT THE TRANSACTION BETWEEN THE ASSESSE E AND THE CONCESSIONAIRES IS A PRINCIPAL TO PRINCIPAL TRANSAC TION AND NOT PRINCIPAL TO AGENT TRANSACTION; 2) HOLDING THAT THE PAYMENTS MADE BY THE ASSESSEE T O ITS CONCESSIONAIRES FOR SELLING MILK/PRODUCTS IS NOT CO MMISSION AS DEFINED UNDER SECTION 194 H OF THE IT ACT 1961; 3) NOT CORRECTLY APPRECIATING THE TERMS OF THE AGRE EMENT AND CONDUCT OF THE PARTIES IN HOLDING THAT THE RELATION SHIP BETWEEN THE ASSESSEE AND CONCESSIONAIRES IS THAT OF PRINCIP AL TO PRINCIPAL. 3. LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER. 4. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT C IT (A) HELD THAT THE ASSESSEE WAS NOT LIABLE FOR DEDUCTION U/S 194H IN R ESPECT OF SALES MADE TO ITS VENDORS BY FOLLOWING OBSERVATIONS : 5. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A PPELLANT AND ALSO THE ORDER OF THE A.O. AND I FIND THAT AS F AR AS GROUND NO.3 IS CONCERNED A SIMILAR ORDER WAS PASSED BY TH E A.O. IN THIS CASE FOR THE F.Y. 2003-04 INVOLVING SIMILAR IS SUE. ALTHOUGH THE ORDER WAS CONFIRMED BY THE CIT (A) VID E ORDER IN APPEAL NO.25/08-09 DATED 31.07.08 BUT THIS ORDER HA S BEEN SET ASIDE BY THE HON'BLE ITAT VIDE ORDER IN ITA NO.2975 /DEL/08 DATED 12.12.08 UPHOLDING THE STAND TAKEN BY THE AS SESSEE THAT NO TAX WAS DEDUCTIBLE U/S 194H OF THE I.T. ACT FROM THE PAYMENT MADE TO ITS CONCESSIONAIRES. IT WAS POINTED OUT THAT THE ASSESSEE GROUP OF CONCE RNS IS COMMONLY KNOWN AS MOTHER DAIRY GROUP AND AT THE RELEVANT TIME INCLUD ED TWO MORE ENTITIES NAMELY MOTHER DAIRY INDIA LIMITED AND MOTHER DAIRY FOOD PROCESSING LIMITED. THE TRIBUNAL ORDER REFERRED IN CIT (A)S ORDER IS OF MOTHER DAIRY ITA NO.385/DEL./2010 ITA NO.3468/DEL./2008 ITA NO.4831/DEL./2009 3 INDIA LIMITED. THE ASSESSEE GROUP DEALS WITH MILK MILK PRODUCTS VEGETABLES ETC. VENDORS OF THESE ENTITIES ARE SAME AND A COMM ON AGREEMENT IS EXECUTED WITH THE ASSESSEES GROUP ENTITIES. ASSESSEE GROUP HAS VARIOUS OUTLETS UNDER ITS BRAND NAME WHICH ARE USED BY EX-ARMY MEN AS VE NDORS ON THESE OUTLETS. ASSESSEE SELLS THESE PRODUCTS TO SUCH VENDORS ON TH E BASIS OF ABOVE AGREEMENTS ON VARIOUS STIPULATIONS. THE GOODS ARE SOLD TO SUCH VENDORS AT A LESSER PRICE THAN MRP ON THE SALE OF GOODS ON PRINC IPAL-TO-PRINCIPAL BASIS. THESE VENDORS NEVER ACT AS AGENTS OF THE ASSESSEE A ND NO COMMISSION IS PAID TO THEM. THE ACTUAL SALE PRICE ON WHICH THE GOODS ARE SOLD TO THESE VENDORS IS CREDITED AS SALE PROCEEDS AND NOT ON THE BASIS OF M RP WITH SEPARATE COMMISSION PAYMENT. ITAT IN THE ABOVE ORDER WHICH IS IN THE CASE OF MOTHER DAIRY INDIA LIMITED AFTER CONSIDERING THE H ON'BLE DELHI HIGH COURT IN THE CASE OF DELHI MILK SCHEME VS. CIT 301 ITR 3 73 HAS CLEARLY HELD THAT ASSESSEES CASE DO NOT FALL U/S 194H AS THE RELATIO NSHIP WITH VENDORS IS CLEARLY A PRINCIPAL TO PRINCIPAL SALE. IT HAS BEEN HELD BY THE ITAT THAT ASSESSEE IS NOT LIABLE TO DEDUCT TDS U/S 194H BY FOLLOWING OBSERVAT IONS : 9. THUS IT WAS AFTER CONSIDERING THE AGREEMENTS FO UND IN THE COURSE OF SURVEY AND THE REDRAFTED AGREEMENT T HIS TRIBUNAL HAD COME TO A CONCLUSION IN THE CASE OF DELHI MILK SCHEME (SUPRA) THAT THE TRANSACTION BETWEEN DELHI MILK SCH EME AND ITS CONCESSIONAIRES WAS IN FACT ONE TO WHICH THE PROVIS IONS OF SECTION 194H ATTRACTED. IN THE PRESENT CASE IT IS FOUND THAT THERE HAS BEEN NO REDRAFTING OF THE AGREEMENTS AND THE AGREEMENTS AS PLACED BEFORE US BEING THE SAME AS WA S FOUND IN THE COURSE OF SURVEY AND AS PER THE TERMS OF THE AG REEMENT WHICH ARE IDENTICAL EVEN IN 1993 AS ALSO IN 2003 T HE DISCOUNT AS GIVEN BY THE ASSESSEE TO ITS CONCESSIONAIRES ARE NOTHING BUT DISCOUNT AND DO NOT HAVE ANY CHARACTERISTICS OF A C OMMISSION. CONSEQUENTLY WE ARE OF THE VIEW THAT THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT UPHOLDING THE ORD ER OF THIS TRIBUNAL IN THE CASE OF DELHI MILK SCHEME (SUPRA) W OULD HAVE NO APPLICATION TO THE ASSESSEES CASE INSOFAR AS TH E FACTS AS ITA NO.385/DEL./2010 ITA NO.3468/DEL./2008 ITA NO.4831/DEL./2009 4 ALSO THE TERMS OF THE AGREEMENT ARE COMPLETELY DIFF ERENT. FURTHER JUST BECAUSE THE ASSESSEE KEEPS A SUBSTANTI AL CONTROL OVER THE CONCESSIONAIRES IT CANNOT BE SAID THAT THE RELATIONSHIP IS ONE OF PRINCIPAL AND AGENT AS THE CONTROL WOULD HAVE TO BE SEEN WHEN THESE AGREEMENTS WERE DRAFTED. OBVIOUSLY ANY BODY WHO GIVES HIS SPACE MACHINERY AND EQUIPMENT T O ANOTHER WOULD LIKE TO PUT SUBSTANTIAL CLAUSES WHICH CAN BE INVOKED TO CANCEL SUCH AGREEMENTS IF IT IS FOUND TH AT THE PERSON THEY ARE DEALING WITH IS NOT TRUSTWORTHY OR IS DOI NG ANYTHING TO THE DETRIMENT OF THE ASSESSEE. IN SUCH CIRCUMSTANC ES IT CANNOT BE SAID THAT THE STRICT CONTROL CLAUSES OF THE AGRE EMENT MAKES THE TRANSACTION BETWEEN THE ASSESSEE AND THE CONCES SIONAIRES TO BE ONE OF PRINCIPAL AND AGENT. IF THE ACTUAL FUNCT IONAL AND OPERATIONAL CLAUSES OF THE AGREEMENTS ARE SEEN IT W OULD CLEARLY SHOW THAT IT IS ONE BETWEEN TWO PRINCIPALS TO WHICH THE PROVISIONS OF SECTION 194H WOULD NOT APPLY. IN THE SE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE PROVISIO NS OF SECTION 194H WOULD NOT BE ATTRACTED ON THE DISCOUNTS GIVEN BY THE ASSESSEE TO ITS CONCESSIONAIRES AND CONSEQUENTLY TH E ORDER OF THE LD. CIT (A) AS ALSO THE ASSESSING OFFICER PASSE D UNDER SECTION 201(1) AND 201(1A) ARE SET ASIDE. 10. IN THE CIRCUMSTANCES THE APPEAL OF THE ASSESSE E IS ALLOWED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND GONE THROUGH THE ORDERS RELIED UPON. IT HAS NOT BE EN DISPUTED THAT IN CASE OF MOTHER DAIRY INDIA LIMITED AND ASSESSEE I.E. MOTHE R DAIRY FOOD PROCESSING LIMITED THE TERMS AND CONDITIONS OF THE AGREEMENT ARE SAME WHICH INCLUDES THE RELATIONSHIP AND TRANSACTIONS BETWEEN ASSESSEE AND ITS VENDORS. AFTER ANALYZING THE TERMS AND CONDITIONS OF THE AGREEMENT AND HON'BLE DELHI HIGH COURT JUDGMENT WHICH IS PROPOSED TO BE AGAINST ASSE SSEE ITAT IN THE CASE OF MOTHER DAIRY INDIA LIMITED HAS CLEARLY HELD THAT TH E RELATIONSHIP BETWEEN ASSESSEE AND ITS VENDORS IS OF PRINCIPAL-TO-PRINCIP AL AND NOT OF PRINCIPAL AND COMMISSION AGENT. IN VIEW THEREOF RESPECTFULLY FO LLOWING THE AFORESAID ITAT ORDER IN ASSOCIATE CONCERN WHICH IS ON SAME F ACTS AND CIRCUMSTANCES ITA NO.385/DEL./2010 ITA NO.3468/DEL./2008 ITA NO.4831/DEL./2009 5 WE UPHOLD THE ORDER OF CIT (A) HOLDING ASSESSEE IS NOT LIABLE FOR TDS U/S 194H AND DISMISS THE REVENUES APPEAL FOR ASSESSMEN T YEAR 2005-06. 6. IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2004-05 THE ASSESSEE HAS TAKEN SO MANY GROUNDS TO CHALLENGE THE MAIN CONTROV ERSY. LD. COUNSEL CONTENDS THAT GROUND NO.3 WILL HIGHLIGHT THE ISSUE WHICH IS AS UNDER : 3. THAT THE LEARNED CIT (A) HAS ERRED IN CONCLUDIN G THAT THE DIFFERENCE BETWEEN MAXIMUM RETAIL PRICE (MRP) AND T HE SALE PRICE CHARGED BY THE APPELLANT AS COMMISSION TO T HE CONCESSIONAIRES WHICH IS LIABLE TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 194H OF THE ACT. IN FACT THE CIT (A) HAS FAILED TO APPRECIATE THAT THE OWNERSHIP IN GOODS SOLD VESTED WITH THE CONCESSIONAIRE WHEN THE SALES WERE MADE TO THEM AND SUCH STOCKS COULD BE UTILIZED BY THEM IN ANY MANNER WHAT SOEVER. THE OTHER ISSUE RAISED IN ASSESSMENT YEAR 2004-05 WHICH IS ALSO COMMON IN ASSESSMENT YEAR 2005-06 IS AS UNDER : THAT ON THE FATS AND THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT (A) HAS ERRED IN UPHOLDING THE FINDING S OF THE LEARNED A.O. THAT THE PAYMENT (AMOUNTING TO RS.1 27 60 358/- FOR A.Y. 2004-5 AND RS.11 32 69 092/- FOR A.Y. 2005 -06) MADE FOR PURCHASE OF PRINTED PACKING MATERIAL AS CONTRAC T UNDER SECTION 194C OF THE ACT LIABLE FOR DEDUCTION OF TAX AT SOURCE. 7. APROPOS THE ISSUE RELATING TO SECTION 194H IT W AS PLEADED THAT THE ISSUE IS CONCERNED IN FAVOUR OF THE ASSESSEE BY THE ABOVE ITAT DECISION DATED 12.12.2008 IN THE CASE OF MOTHER DAIRY INDIA LIMITE D. CIT (A) IN ASSESSMENT YEAR 2004-05 HELD THE ISSUE RELATING TO SECTION 194 H AGAINST THE ASSESSEE HOWEVER IN ASSESSMENT YEAR 2005-06 SAID ITAT DECISI ON WAS AVAILABLE AND FOLLOWING THE SAME CIT (A) HAS UPHELD THE ASSESSEE S CLAIM. 8. APROPOS THE ISSUE ABOUT 194C LEARNED COUNSEL FO R THE ASSESSEE CONTENDS THAT FOR ITS VARIOUS PRODUCTS ASSESSEE PU RCHASES PRINTED PACKING MATERIAL FROM VARIOUS SUPPLIERS WHICH ARE TRANSACT IONS OF PURCHASE AND SALE ITA NO.385/DEL./2010 ITA NO.3468/DEL./2008 ITA NO.4831/DEL./2009 6 OF GOODS AND NOT CONTRACT FOR SUPPLY. LOWER AUTHOR ITIES HAVE HELD THEM TO BE A CONTRACT FOR SUPPLY OF PACKING MATERIAL. LEARNED COUNSEL CONTENDS THAT THE ISSUE IN QUESTION IS COVERED BY HON'BLE DELHI HIGH COURT JUDGMENT IN THE CASE OF CIT VS. DABUR INDIA LIMITED 283 ITR 197 WHEREI N ITAT HELD THAT IN CASE OF SUCH PRINTED CONTRACTS THERE WAS NEITHER SPECIA L SKILL NOR SECRECY INVOLVED AND THE PREDOMINANT OBJECT UNDERLYING WAS SALE OF G OODS AND NOT CONTRACT WHICH WAS NOT UNDER THE PURVIEW OF SECTION 194C FOR DEDUCTION OF TAX. THIS VIEW OF THE ITAT WAS CONFIRMED BY THE HON'BLE DELHI HIGH COURT BY FOLLOWING OBSERVATIONS : WE HAVE CAREFULLY GONE THROUGH THE DECISION RELIE D UPON BY COUNSEL BUT FIND IT DIFFICULT TO ACCEPT THE SUBM ISSION MADE BY HER. IN THE CASE OF ANANDAM VISWANATHAN [1989] 73 STC 1 (SC) THE WORK ENTRUSTED TO THE ASSESSEE WAS PRINTIN G OF QUESTION PAPERS FOR UNIVERSITIES. THE QUESTION WAS WHETHER SUCH PRINTING WORK COULD BE TREATED TO BE A SIMPLE CASE OF CONTRA CT FOR SALE OF GOODS. ANSWERING THE QUESTION IN THE NEGATIVE THE COURT HELD THAT PRINTING OF QUESTION PAPERS AT THE BEHEST OF A UNIVERSITY OR EDUCATIONAL INSTITUTION IS A DELICATE AND CONFIDENT IAL TYPE OF WORK AND THE PRICE PAID FOR SUPPLYING SUCH PRINTED QUEST ION PAPERS OR PRINTED MATTER ENTAILS PRIMARILY THE CONFIDENCE AND SECONDLY THE SKILL AND TO A VERY SMALL EXTENT THE MATERIAL. HEN CE SUCH WORK UNDERTAKEN BY THE CONCERNED AGENCY COULD NOT BE CAT EGORIZED AS ENTAILING SALE OF GOODS. IT WAS INSTEAD A CONTRACT FOR WORKS DONE. THERE IS NO SIMILARITY BETWEEN THE FACTS WITH WHICH THE SUPREME COURT WAS DEALING IN VISWANATHANS CASE [1989] 73 S TC 1 (SC) AND THOSE IN THE PRESENT CASE. IT IS NOBODYS CASE BEFORE US THAT THE PRINTING OF THE LABELS ON THE CORRUGATED BOXES REQUIRED ANY SPECIAL SKILL OR INVOLVE ANY CONFIDENCE OR SECRECY. IN THE CIRCUMSTANCES THE TRIBUNAL WAS JUSTIFIED IN HOLDIN G THAT THE PREDOMINANT OBJECT UNDERLYING THE CONTRACT WAS ONE FOR SALE OF GOODS WHICH TOOK THE CONTRACT OUT OF THE PURVIEW OF SECTION 194C OF THE ACT. NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDER ATION. DISMISSED. ITA NO.385/DEL./2010 ITA NO.3468/DEL./2008 ITA NO.4831/DEL./2009 7 9. LEARNED DR RELIED ON THE ORDERS OF LOWER AUTHORI TIES. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE ABOUT ASSESSEES BEING NOT LIABLE FOR RED UCTION U/S 194H HAS ALREADY BEEN DECIDED IN REVENUES APPEAL FOR ASSESSMENT YEA R 2005-06. FOLLOWING OUR AFORESAID ORDER WE ALLOW THIS GROUND OF THE AS SESSEE. 11. APROPOS THE ISSUE ABOUT SECTION 194C IT HAS NO T BEEN CONTENDED BY LEARNED DR THAT THE PRINTING MATERIAL PURCHASED BY THE ASSESSEE CAN BE TREATED AS WORK OF ANY SPECIAL SKILL OR SECRECY THE TRANSA CTION BETWEEN THE ASSESSEE AND PRINTING MATERIAL SUPPLIERS BEING ONE OF SALE A ND PURCHASE OF GOODS UNDER SALE OF GOODS ACT THE SAME IS NOT LIABLE FOR REDUC TION U/S 194C. OUR VIEW IS FORTIFIED BY HON'BLE DELHI HIGH COURT JUDGMENT IN T HE CASE OF DABUR INDIA LIMITED (SUPRA). RESPECTFULLY FOLLOWING THE SAME WE HOLD THAT THE ASSESSEE IS NOT LIABLE FOR TDS IN RESPECT OF PRINTING MATERI AL PURCHASED BY IT AND THIS GROUND OF ASSESSEE FOR ASSESSMENT YEARS 2004-05 AND 2005-06 IS ALLOWED. IN THE RESULT THE APPEALS OF THE ASSESSEE FOR ASSESSM ENT YEARS 2004-05 AND 2005- 06 ARE ALLOWED. 12. TO SUM UP THE APPEAL OF THE REVENUE IS DISMISS ED AND BOTH THE ASSESSEES APPEALS ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 10 TH DAY OF MAY 2010 AFTER THE CONCLUSION OF THE HEARING. SD/- SD/- (SHAMIM YAHYA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 10 TH DAY OF MAY 2010 TS ITA NO.385/DEL./2010 ITA NO.3468/DEL./2008 ITA NO.4831/DEL./2009 8 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXX NEW DELHI. 5.CIT(ITAT) NEW DELHI. AR ITAT NEW DELHI.