2017 (4) TMI 1368 - HC - Income Tax

TDS u/s 194H on payment of commission/brokerage on price difference to the milk societies (DCS & PDCS) - Held that - In view of the decision of this court in D. B. Income Tax Appeal No. 32/2016 (Pr. Commissioner of Income Tax, Jaipur-3 V/s Sikar & Jhunjhunu Zila Dugdh Utpadak Sahakari Sangh Ltd. 2017 (1) TMI 242 - RAJASTHAN HIGH COURT as held 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 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). 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.
3. Application of section 194H for tax deduction on commission/brokerage payments.
4. Determining liability for TDS under section 194H on payments made to milk societies.
5. Consideration of margin of distribution to distributors as commission and TDS liability.
6. Interpretation of services provided by RCDF and applicability of TDS provisions.
7. Dispute regarding payments to RCDF and tax deduction implications under sections 194H and 194J.

Analysis:
The appellant challenged the Tribunal's judgment allowing the appeal by the assessee. The counsel for the appellant framed substantial questions of law related to the application of section 194H for tax deduction on commission/brokerage payments, liability for TDS on payments to milk societies, and the interpretation of margin of distribution to distributors as commission and TDS liability. The court referred to a previous decision where it was held that payments made by the appellant to RCDF were in the nature of "fees for professional or technical services" falling under section 194J. The court noted that the appellant had not deducted tax at the source, leading to the disallowance of the expenditure under section 40(a)(ia) of the Act.

In another part of the judgment, the Tribunal observed that the Department failed to demonstrate any managerial services rendered by RCDF to the assessee in connection with the payment of cess. The Tribunal concluded that since no managerial services were provided, the payment could not be considered liable for TDS under section 194H or 194J. As a result, the Tribunal held that the appellant's payments to RCDF were not subject to TDS requirements. Consequently, the issue was decided in favor of the assessee, leading to the dismissal of the appeal.

In summary, the judgment addressed the dispute surrounding tax deduction implications on various payments made by the appellant, including commission/brokerage payments, payments to milk societies, and margin of distribution to distributors. The court's analysis focused on the nature of services provided by RCDF and the applicability of TDS provisions under sections 194H and 194J. Ultimately, the court ruled in favor of the assessee based on the specific circumstances and interpretations of the relevant tax deduction provisions.