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2016 (4) TMI 418 - AT - Income TaxTDS u/s 194H - payment of cess made to RCDF is in the nature of technical and professional service - charging interest U/s 201(1A) - Held that - 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 Id. C1T(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 Id. CIT(A) - Decided in favour of assessee Conversion charges and audit fees liable to be deducted TDS - Held that - The conversion charges were paid on cost to cost basis and no profit has been charged as claimed by the assessee. When there is no element of profit, the TDS provisions are not applicable. The case law referred by the assessee i.e. ITO Vs. Dr. Willmar Schwabe India (P) Ltd. (2005 (3) TMI 398 - ITAT DELHI-D ) is squarely applicable. Therefore, we delete the addition confirmed by the ld CIT(A) under the head conversion charges. Audit fees is also paid on monthly basis to G.M. Gupta & Company, which is also below ₹ 20,000/- as well as also below the specified limit as per the TDS provisions, therefore, the same is not liable to be deducted TDS. Interest on TDS deductible on legal fees paid to Shri Bharat Vyas has been set aside by the ld CIT(A) for verification, if the recipient has paid advance tax and fulfill the condition of Hon ble Supreme Court decision of Hindustan Coca Cola Beverages Pvt. Ltd. 2007 (8) TMI 12 - SUPREME COURT OF INDIA then no interest is to be charged from the assessee U/s 201(1A) as the assessee claimed that on legal fees Shri Bharat Vyas, advocate had paid tax already by disclosing this income being nominal amount of interest, therefore, we delete the addition confirmed by the ld CIT(A).- Decided in favour of assessee Non deducting TCS - demand U/s 206C(6A) and levy of interest U/s 206C(7) - Held that - As per this definition, the item sold by the assessee in scrap i.e. Tin, iron scrap, plastic drum etc. is not scrap generated from manufacturing process. Therefore, it is not liable to be deducted TCS U/s 206C of the Act. - Decided in favour of assessee TDS u/s 194H - demand raised U/s 201(1) and interest U/s 201(1A) - Held that - The assessee s transaction with distributor is sale. The risk and reward is with the distributor. The transaction is principal to principal basis. The distributor is not agent of the assessee. From the side of assessee, no amount has been paid in form of commission or brokerage. The case laws referred by the assessee are squarely applicable, therefore, we uphold the order of the ld CIT(A).- Decided in favour of assessee Non deducting TDS U/s 194H on payment of milk purchase price difference to milk societies - disallowance U/s 40(a)(ia) - Held that - The assessee purchased milk from the primary society not from the cattle owners. The payments are made to the primary society. The price of the milk is decided on the basis of fats by the assessee, the milk is processed in the plant of the assessee but at the stage of testing, the risk and reward is with the primary society. The assessee paid 3% on cost of the purchase price of milk to the primary society. The relationship between the assessee and primary society is principal to principal basis. It is undisputed fact that the purchase price and purchase difference has been claimed by the assessee under two heads but expenses debited under the purchase difference is cost of goods purchased. By respectfully following the Coordinate Bench decision in assessee s own case for A.Y. 2008-09 we hold that the assessee is not liable to deduction TDS U/s 194H of the Act - Decided in favour of assessee
Issues Involved:
1. Nature of payment of cess to RCDF. 2. Deduction of tax at source on conversion charges, audit fees, and legal fees. 3. Tax collection at source (TCS) on sale of scrap. 4. Deduction of tax at source on milk purchase price difference to milk societies. 5. Applicability of Section 194H on margin retained by distributors. 6. Disallowance under Section 40(a)(ia) for non-deduction of TDS. Detailed Analysis: 1. Nature of Payment of Cess to RCDF: The primary issue was whether the payment of cess to RCDF is in the nature of technical and professional service, thereby attracting TDS under Section 194J. The Tribunal referred to its previous decision in the assessee's own case for A.Y. 2008-09, where it was held that the payment to RCDF was not for managerial services but was a part of the cooperative structure, and thus, not liable for TDS under Section 194J. Consequently, the Tribunal allowed the assessee's appeal on this ground for all the relevant years. 2. Deduction of Tax at Source on Conversion Charges, Audit Fees, and Legal Fees: The Tribunal examined whether TDS was required on conversion charges and audit fees. It was found that conversion charges paid to Alwar Dairy and Jaipur Dairy were on a cost-to-cost basis without any profit element, and thus, not liable for TDS. For audit fees, it was noted that the payments were below the threshold limit for TDS. Regarding legal fees, the Tribunal directed verification to ensure that the recipient had paid the due taxes, thereby nullifying the need for TDS. The Tribunal deleted the interest charged under Section 201(1A) for non-deduction of TDS on these payments. 3. Tax Collection at Source (TCS) on Sale of Scrap: The issue was whether the sale of items like tin, iron scrap, and plastic drums constituted scrap under Section 206C. The Tribunal held that these items were not generated from manufacturing or mechanical working processes and thus did not fall under the definition of scrap as per Section 206C. Therefore, the assessee was not liable to collect TCS on these sales, and the Tribunal allowed the assessee's appeal on this ground. 4. Deduction of Tax at Source on Milk Purchase Price Difference to Milk Societies: The Tribunal considered whether the milk purchase price difference paid to milk societies was in the nature of commission, thus attracting TDS under Section 194H. It was concluded that the relationship between the assessee and the primary societies was on a principal-to-principal basis, and the payment was part of the procurement cost, not commission. The Tribunal followed its earlier decision and held that the assessee was not liable for TDS under Section 194H. 5. Applicability of Section 194H on Margin Retained by Distributors: The revenue contended that the margin retained by distributors was commission liable for TDS under Section 194H. The Tribunal referred to its previous decisions, holding that the transactions were on a principal-to-principal basis, and the distributors were not agents of the assessee. Therefore, the margin retained by distributors was not commission, and no TDS was required under Section 194H. The Tribunal upheld the CIT(A)'s decision in favor of the assessee. 6. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS: The Tribunal addressed the disallowance under Section 40(a)(ia) for non-deduction of TDS on milk purchase price difference. It was argued that the amendment to Section 40(a)(ia) should apply retrospectively, limiting disallowance to 30% of the amount. The Tribunal, however, upheld the CIT(A)'s decision, which restricted disallowance to the amount payable as of the year-end, based on the jurisdictional ITAT's decision. The Tribunal allowed the assessee's appeal on this ground, dismissing the revenue's appeal. Conclusion: The Tribunal allowed all the appeals of the assessee, holding that the payments in question were not liable for TDS under the relevant sections, and dismissed all the appeals of the revenue. The Tribunal's decision was pronounced in the open court on 04/03/2016.
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