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TMI Blog2012 (5) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... ll dated 12-10-2011, in relation to assessment years 2007-08 to 2011-12. 2. Since the appeals involve common grounds of appeal, same set of facts, they are taken up together and disposed of by this consolidated order, for the sake of convenience. ITA No.7789/Mum/11 (AY 2007-08): 3. The brief facts of the case are that the assessee company is engaged in manufacturing, trading and distribution of drugs. On 05-09-2005, it entered into an Agreement with M/s. Zivon Marketing Services Pvt. Ltd., appointing the said firm as its 'super stockist'. The responsibility of the said super stockist as per Agreement was that it would be responsible for getting stock of the manufactured products of the assessee company, for onward transmission to the market, through the retailer. 4. In pursuance of the said Agreement, the assessee company sold the manufactured product to M/s. Zivon Marketing Services P. Ltd. for its onwards sale in the open market. Various stages of trading/supply chain of the products manufactured by the company, to a customer, is depicted down below (as has been stated in the record of the case): (1) Manufacturer (Assessee company) (Manufacture of the products in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manufactured. Therefore, the same was rather turnover based incentive. 6. In response to the said show cause notice, the assessee company filed reply before the Assessing Authority raising the following contentions : ( a ) The nature of the transactions in question was not on Principal to Manager basis. But the same was on principal to principal basis. ( b ) The so-called commission/remuneration of the super stockiest in question was 10% of the MRP of the drugs fixed as per the guidelines of All India Organization of Chemists Druggists. ( c ) Sale price of the drugs had already been disclosed on the invoices supplies to the distributor i.e. 70% of the MRP which had been duly paid by the super stockiest to the assessee. ( d ) The TDS provisions of the Act are only applicable when the assessee in default pays the remuneration to its employees or technical expert (i.e. managerial, legal, etc.). In the instant case, no such relation was there. In this case, there was no payment by assessee to the stockiest. Therefore, in view of the abovesaid contentions, the assessee submitted before the A.O. that the TDS provisions were not applicable in the instant case. 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... III The Appellant craves leave to add, to alter and/or amend all or any of the foregoing grounds of appeal." A bare perusal of the abovesaid grounds makes it amply clear the following question of law and fact has been sought to be raised by the assessee in the instant case : "Whether the status of the assessee that it is super stockiest is that of principal and Manager or manufacturer-super stockiest of Principle to Principle basis. If that is so, whether the provisions of section 194J are applicable ? The assessee has filed a paper book before us along with the following particulars running into 123 pages : Sr. No. Particulars Page No. 1. Note on Sales Cycle for Domestic Formulation 1-2 2. Copy of Agreement with Zivon Marketing Services Pvt. Ltd. dated 05.09.2005 3-33 3. Sample copies of Invoices alongwith Purchase Orders - Zivon Marketing Services Pvt. Ltd. 34-61 4. Sample copies of Invoices Others Distribotors 62-83 5. Compilation of all the MOU and agreement executed between All India Organization of Chemist and Druggist (AIDCD) dated 12.05.2009. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation. The assessee does not have any control over the super stockiest regarding his activities of sale etc. Contrary to this, it is the super stockiest itself who is paying the cost of the produce purchased from the assessee @ 70% of the MRP. In support, he also placed reliance on the clauses of the Agreement. In view of all the above submissions, he prayed that the orders of ld. AO as well as ld. CIT(A) are against law and fact and, therefore, the same deserve to be set aside. 10. On the other hand, rebutting the arguments of the ld. AR, the ld. DR for the Department relied on clauses 2, 2.4, 7.4 as well as all the other necessary conditions stipulated in the Agreement in question and submitted that the Agreement in question is more in the nature of appointment of stock manager instead of a super stockiest. Therefore, the relationship of Principal-Manager duly existed between the assessee and its super stockiest. Further, clauses 17 to 24 of the Agreements were referred by the ld. DR to contend that the alleged stockist was rather managing the business of the assessee company acting as its Manager. He took us through the order of the Assessing Officer as well as the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esponsible. The Contract and the transactions entered into between ZIVON and NPIL pursuant to the Contract shall be on a "Principal to Principal" basis. 10. PAYMENT 10.1 In Respect of the Products sold to ZIVON, ZIVON shall make the payment for the Product within Forty five (45) days from the date of Invoice. The discretion of NPIL on choice of mode of payment shall be final and binding upon ZIVON. Such payment against invoice shall always be the essence of the transaction, which NPIL may accept to execute in whole or in part on receipt of the written or oral order of supply from ZIVON. 10.2 For the same of administrative convenience and as a matter of facility and if permitted by NPIL, ZIVON may on its own accord and at its option keep with NPIL duly signed, crossed 'account payee only' cheque drawn in the name of NPIL, with the direction to the Company to fill up the amount of the bill/invoice of the Products dispatched/received/and confirmed by ZIVON. 10.3 The signed cheques, until and unless contramanded, shall be deemed to constitute a representative and assurance on the part of ZIVON to NPIL that ZIVON has sufficient funds with his banker to cover the amount of the ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces, or ( b ) fees for technical services, or ( c ) royalty, or ( d ) any sum referred to in clause (va) of section 28, shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax on income comprised therein ". ** ** ** A bare perusal of the above provision makes it clear that for the application of the said provisions, it is necessary that the assessee or the person concerned liable to deduct and pay the TDS must be responsible for paying to a resident any sum, by way of fees for professional services, fees for technical services, royalty or any sum referred to in clause (va) of sec. 28. Whereas just contrary to the said conditions, in the instant case, the assessee company has not paid even a single penny to its super stockiest. Rather, it is just the opposite. The super stockist is paying to the assessee company for the produce of Drugs. In turn, it is selling those goods at the rate of 80% of MRP and is earning income of 10% of MRP which is stipul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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