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TMI Blog2016 (5) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... ayments to the retail agents, through whom sale of milk is effected under three different heads viz. trade discounts, maintenance charges and compensation for leaked milk packets @ 1%, 3.2% and 0.3% respectively. It was further noticed that though these payments are in the nature of commission as defined u/s 194H of the Act, the assessee has not deducted TDS on such payments. Hence, a show cause notice was issued to the assessee on 30.12.2009 and asked to explain why it should not be treated as assessee in default u/s 201(1) of the Act. In response to show cause notice, the assessee has filed its written submissions on 19.3.2010 and 28.3.2011 and raised objection to the proposed action of the assessing officer u/s 201(1) of the Act. The assessee submitted that the relationship between retailers and assessee is not a principal to agent relationship, but it is a principal to principal relationship. The assessee further submitted that it sells the goods to the retail sellers and the ownership and risk involved in the goods is transferred to the retail dealers. It was further submitted that it has entered into an agreement with the retail dealers for sale of milk with certain condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, held that the payments made by the assessee to its retail dealers such as trade discount, maintenance charges and compensation or in the nature of commission, which attracts TDS u/s 194H of the Act. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee reiterated the stand taken before the assessing officer. The assessee further submitted that the agreement between the assessee and its retailers is merely a contract for sale and not a contract for service. The assessee further submitted that it has sold the goods to its retailers and raised invoice. The risk and ownership in the goods is transferred to the retail outlets and also there is no provision for return of unsold goods. The product sold to retail outlets is exclusive property of the retailers. The retail dealers should sell milk on their own right and do not render any service to the assessee. Therefore, the transaction between the assessee and the retailers is a sale of principal to principal basis does not involve any payment of commission. The assessee further submitted that though it has entered into an agreement with the retailers and certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) order, the revenue is in appeal before us. 6. The Ld. D.R. submitted that the CIT(A) was erred in deleting the additions made by the A.O. u/s 201(1) & 201(1A) of the Act. The D.R. further submitted that the CIT(A) was erred in holding that the relation between the assessee and its concessionaire is nothing but principal to principal basis and as such the provisions of section 194H of the Act are not applicable. The D.R. further argued that it is clearly an agreement of agency, therefore, any payment made by the assessee to its retailers attracts TDS u/s 194H of the Act. The D.R. further referring to the agreement entered into by the assessee with his concessionaire argued that the conditions specified in the agreement clearly suggest that it is an agreement for agency. As per the said agreement, the assessee has exclusive right of terminating the agreement in the event the retailers have violated the conditions specified in the agreement without assigning any reasons. The assessee has collected security deposit and also directed the retailers to sell the goods at specified point and also at specified rate. The D.R. further submitted that the assessee has paid the amount on a fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st with the retailers. Therefore, any payment made to its retail concessionaires does not attract TDS u/s 194H of the Act. 9. The only issue came up for our consideration is whether or not the amount paid by the assessee to retail concessionaires is in the nature of commission as defined u/s 194H of the Act which attracts TDS provisions. On going through the agreement copy entered into by the assessee with its retail concessionaires which is available in paper book filed by the assessee, we find that it is only a contract for sale and not a contract for service. On perusal of the agreement copy, we find that the milk and milk product shall be exclusive property, once they were delivered to the retailers and it is the responsibility of the retailers to sell the goods on its own. The risk and right involved in the goods is transferred to the retailers as and when the goods were delivered. There was no provision in the agreement to take back the unsold goods. Though certain conditions in the agreement suggest that it is an agreement for contract for agency, it was the contention of the assessee that these conditions are imposed for easy facilitation of business. The assessee further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e risk involved in the property has been transferred to the retailers as and when goods are delivered. The goods sold or not, the retailer has to pay the amount as per the bill. Though assessee pays fixed percentage of margin to the retailers, it is only to facilitate the business and not for any reasons. Therefore, we are of the opinion that on perusal of the documents available on record, no document suggest that the arrangement between the assessee and its retail concessionaires is a principal to agency and the payments made by the assessee to its retail concessionaires is in the nature of commission which attracts TDS u/s 194H of the Act. 11. It is pertinent to discuss here the case law relied upon by the assessee. The assessee relied upon the decision of Hon'ble High Court of Delhi, in the case of CIT Vs. Mother Diary India and ANR (2012) 206 Taxman 157. The Hon'ble High Court of Delhi, under similar circumstances held that the arrangement between the assessee and its retailers is not a principal to agent relationship and hence, any payment made to the retailers is not in the nature of commission which attracts TDS u/s 194H of the Act. Relevant portion is reproduced hereunder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein were owned by the Dairy is of no relevance in deciding the nature of relationship between the assessee and the concessionaire. Further, the fact that the Dairy can inspect the booths and check the records maintained by the concessionaire is also no4 decisive. As rightly pointed out by the tribunal the Dairy having given space, machinery and equipment to the concessionaire would naturally like to incorporate clauses in the agreement to ensure that its property is properly maintained by the concessionaire, particularly because milk and the other products are consumed in large quantities by the general public and any defect in the storage facilities which remains unattended can cause serious health hazards. These are only tenhT5 included in the agreement to ensure that the system operates safely and smoothly. From the mere existence of these clauses it cannot be said that the relationship between the assessee and the concessionaire is that of a principal and an agent. That question must be decided, as has been rightly decided by the Tribunal, on the basis of the fact as to when and at what point of time the property in the goods passed to the concessionaire. In the cases before us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no sale of the milk or milk products to them. Further the unsold milk was to be taken back by the DMS from the concessionaires. The agreement also provided that the daily cash collection of the concessionaires was to be handed over to DMS. On these facts, it was held by the Tribunal that the concessionaires only tendered a service to VMS For selling milk to the customers and, therefore, the relationship between DMS and the concessionaires was that of a principal and an agent. This attracted the provisions of section 194/1. This is apart from the fact, as noticed earlier, that the OMS redrafted the agreements and filed them before the CIT(A) and the Tribunal and such redrafted agreements were found to be different from the agreements found during the survey under section 133,4. This Court, on the above facts - !Je/d that section 194/4 was attracted. As already pointed out, the terms of the agreement entered into between the present assessees and their concessionaires are different in crucial aspects. Therefore, the judgment of this Court in the case of DMS (Supra) is not applicable to the present cases." 12. The assessee relied upon the decision of coordinate bench of V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me as commission or brokerage attracting provisions of section 194H of the Act. The Tribunal remitted matter back to the A.O. to ascertain as to whether trade discount allowed to dealers by assessee was commission or discount. The High Court could not interfere with the order of the Tribunal and declined to answer the question of law raised before it. Therefore, the case law relied upon by Ld. D.R. is not applicable to the present case. 15. Considering the facts and circumstances of the case and also respectfully following the decision of Hon'ble High Court of Delhi in the case of CIT Vs. Mother Diary India Ltd.(supra), we are of the opinion that the arrangement between assessee and its retail concessionaire is not in the nature of principal to agency basis and which is principal to principal basis. Therefore, the amount paid by the assessee to its retail concessionaires is not in the nature of commission which attract the provisions of section 194H of the Act. The CIT(A) has rightly deleted the additions made by the A.O. We do not see any reasons to interfere with the order passed by the CIT(A). Hence, we are inclined to uphold the order of the CIT(A) and reject the appeal filed ..... 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