2017 (4) TMI 1366 - HC - Income Tax

TDS u/s 194H - not deducting the tax on payment of commission/brokerage on price difference to the milk societies (DCS & PDCS) - assessee in default - Held that - As decided in Pr. Commissioner of Income Tax, Jaipur-3 V/s Sikar & Jhunjhunu Zila Dugdh Utpadak Sahakari Sangh Ltd. 2017 (1) TMI 242 - RAJASTHAN HIGH COURT 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). In view thereof, we hold that assessee s impugned payment to RCDF are not liable for TDS. - Decided in favour of assessee.

Summary

Issues:
1. Challenge to Tribunal's judgment allowing the appeal by the assessee.
2. Substantial questions of law framed by the counsel for the appellant regarding TDS deductions under sections 194H and 194J.
3. Comparison with a previous court decision in a similar case.
4. Interpretation of payments made to RCDF for services and applicability of TDS provisions.

Analysis:

1. The appellant challenged the Tribunal's decision that favored the assessee. The Tribunal held that the appellant was not in default under section 201(1) for not deducting tax under section 194H on commission/brokerage payments to milk societies. The counsel framed substantial questions of law regarding the liability to deduct TDS under sections 194H and 194J on various payments.

2. The court compared the current case with a previous decision involving similar issues. In the previous case, the court analyzed payments made by the appellant to RCDF for various services, including managerial services and marketing support. The court concluded that the payments were in the nature of fees for professional or technical services, subject to section 194J. However, the court also noted that section 40(a)(ia) did not apply to payments made before the end of the previous year.

3. The Tribunal, in the current case, observed that the Department failed to demonstrate the rendering of managerial services by RCDF to the assessee in exchange for the cess payments. As RCDF was an apex cooperative body, the Tribunal held that the payments were not liable for TDS under sections 194H or 194J. Therefore, the Tribunal ruled in favor of the assessee, stating that the impugned payments to RCDF were not subject to TDS.

4. Based on the comparison with the previous decision and the Tribunal's findings, the court answered the issue in favor of the assessee and against the department. Consequently, the appeal was dismissed, upholding the Tribunal's decision in favor of the assessee regarding the TDS liability on payments made to RCDF for various services.