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2016 (5) TMI 876 - AT - Income TaxTDS u/s 194H - whether payment of milk purchase price difference to the milk societies (DCS and PDCS) is a payment of commission/brokerage liable for deduction of tax at source? - Held that - The Coordinate Bench has considered the identical issue in A.Y. 2008- 09 and 2011-12, which is squarely applicable on the facts and circumstances of the case for the years under consideration as 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 the agent of the assessee. From the side of assessee, no amount has been paid in form of commission or brokerage and the case laws referred by the assessee are squarely applicable. Supply of milk and milk products by assessee to the distributors was a sale agreement on principal to principal basis not liable for deduction of tax at source u/s 194H of the IT Act, 1961. See Ajmer Zila Dugdh Utpadak Sangh Limited V. ITO 2009 (7) TMI 827 - ITAT JAIPUR-B and ACIT (TDS) V. M/s Jaipur Zila Dugadh Utpadak Sahakari Sangh Limited 2011 (9) TMI 1080 - ITAT JAIPUR - Decided in favour of assessee TCS U/s 206C - Non collection of tax at source on sale of scrap - Held that - The Coordinate Bench has considered this issue in earlier years and held that this scrap has not been generated during the manufacturing process and circular noted by the ld CIT(A) is also not applicable on the given facts and circumstances of the case. Accordingly, we delete the addition made by the ld Assessing Officer and confirmed by the ld CIT(A) - Decided in favour of assessee
Issues Involved:
1. Whether the payment of milk purchase price difference to milk societies constitutes commission/brokerage liable for TDS under Section 194H. 2. Whether the assessee is liable for interest under Section 201(1A) for non-deduction of TDS. 3. Whether the assessee is liable for TCS on the sale of scrap under Section 206C. 4. Whether the margin of distribution payments to distributors is commission liable for TDS under Section 194H. Detailed Analysis: Issue 1: Payment of Milk Purchase Price Difference as Commission/Brokerage The assessee, a Cooperative Society, was scrutinized for payments made to milk societies, which the Assessing Officer (AO) classified as commission/brokerage, thereby attracting TDS under Section 194H. The AO held the assessee in default for not deducting TDS, resulting in a demand of ?13,22,204 for A.Y. 2011-12 and similar amounts for subsequent years. The CIT(A) upheld the AO's decision, stating that the payments to milk societies included a commission element retained by these societies when paying cattle owners. However, the ITAT referred to its previous rulings (ITA No. 382/JP/2013 and ITA No. 87/JP/2015) where it was held that such payments were not liable for TDS under Section 194H, as the transactions were on a principal-to-principal basis. Consequently, the ITAT deleted the additions confirmed by the CIT(A) and ruled that no TDS was applicable under Section 194H. Issue 2: Interest Under Section 201(1A) Since the ITAT held that no TDS was required under Section 194H, it followed that the assessee was not liable for interest under Section 201(1A). The interest charges were thus annulled. Issue 3: TCS on Sale of Scrap The AO imposed demands for non-collection of TCS on scrap sales under Section 206C(6A) and Section 206C(7) for various assessment years. The CIT(A) confirmed these demands, citing a CBDT circular. However, the ITAT referred to its earlier decisions (ITA No. 82 to 86/JP/2015) where it was held that the scrap sold by the assessee was not generated from the manufacturing process and thus did not attract TCS under Section 206C. The ITAT ruled in favor of the assessee, deleting the TCS-related additions. Issue 4: Margin of Distribution Payments as Commission The revenue appealed against the CIT(A)'s decision that payments to distributors were not commission liable for TDS under Section 194H. The AO had considered these payments as commission based on the nature of transactions and a CBDT circular. The CIT(A) and subsequently the ITAT found that the transactions were on a principal-to-principal basis, with distributors bearing the cost and risk of distribution. The ITAT referred to its consistent rulings in similar cases (e.g., ITA No. 203 & 204/JP/2011) and upheld the CIT(A)'s decision, confirming that no TDS was required under Section 194H. Conclusion: The ITAT allowed all the assessee's appeals, ruling that the payments to milk societies and distributors were not commission liable for TDS under Section 194H and that the scrap sales did not attract TCS under Section 206C. Consequently, related interest and demands were also annulled. The revenue's appeals were dismissed. The judgment emphasizes the principal-to-principal nature of transactions in cooperative societies and the specific conditions under which TDS and TCS provisions apply.
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