2017 (4) TMI 1361 - HC - Income Tax

TDS u/s 194H - non deduction TDS on payment of commission/brokerage on price difference to the milk societies (DCS & PDCS) - assessee in default u/s. 201(1) - Held that - Identical issue was consideredPR. COMMISSIONER OF INCOME TAX, JAIPUR-3, STATUTE CIRCLE, C -SCHEME, JAIPUR. VERSUS SIKAR & JHUNJHUNU ZILA DUGDH UTPADAK SAHAKARI SANGH LTD. 2017 (1) TMI 242 - RAJASTHAN HIGH COURT as held , there is no rendering of any managerial services by RCDF as alleged by the AO u/s 194H and upheld ld. CIT(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 194J for rendering any managerial services as held by the ld. CIT(A). We hold that assessee s impugned payment are not liable for TDS. - Decided in favour of assessee.

Summary

Issues:
Challenge to Tribunal's order allowing the appeal by the assessee; Substantial questions of law framed regarding TDS deduction under sections 201(1) and 194H on payments to milk societies, distributors, and RCDF; Interpretation of services provided and payments made by the appellant to RCDF; Tribunal's observation on the payment to RCDF and its liability for TDS under sections 194H and 194J.

Analysis:
The appellant challenged the Tribunal's decision allowing the appeal by the assessee. The substantial questions of law framed included issues related to the deduction of TDS under sections 201(1) and 194H on payments to milk societies, distributors, and Rajasthan Cooperative Dairy Federation (RCDF). The court referred to a previous decision where similar issues were considered, emphasizing the nature of services provided by RCDF to the appellant. The court highlighted that the payment made to RCDF was not a reimbursement of expenses but was for specific services, including managerial and promotional activities. The court determined that the amount paid to RCDF fell under "fees for professional or technical services," making it subject to TDS under section 194J. However, the court also noted that the provisions of section 40(a)(ia) were not applicable to payments made before the end of the previous year.

Regarding the Tribunal's observation on the payment to RCDF, it was noted that the Department failed to demonstrate the rendering of managerial services by RCDF to the assessee. The Tribunal held that since no managerial services were provided, the payment could not be considered liable for TDS under sections 194H or 194J. As a result, the Tribunal concluded that the appellant's payments to RCDF were not subject to TDS. Consequently, the issue was decided in favor of the assessee, leading to the dismissal of the appeal.