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TMI Blog2024 (5) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Truck Operator Union and collect freight payment and disburse the same subsequently to the Truck Operator Union. We are of the view that the person responsible for making the freight payment and the responsibility to deduct TDS u/s 194C for freight payment made to the Truck Operator Union (through the assessee company) is that of the M/s Pepsico India Holding Pvt. Ltd. and not that of the assessee company. The provisions of Section 194C are not attracted where the assessee subsequently raises the invoices on behalf of the Truck Operator Union and collects and disburse the freight payment received from M/s Pepsico India Holding Pvt. Ltd to the Truck Operator Union. Appeal of the Revenue is dismissed. - SHRI. AAKASH DEEP JAIN, VP SHRI. VIKRAM SINGH YADAV, AM For the Appellant : Shri Tejmohan Singh, Advocate For the Respondent : Shri Dharam Vir, JCIT, Sr. DR Order PER VIKRAM SINGH YADAV, A.M. : 1. This is an appeal filed by the Revenue against the order of the Ld. CIT(A), Patiala dt. 04/04/2019 pertaining to Assessment Year 2016-17. 2. In the present appeal, the Revenue has raised the following revised grounds of appeal: (1) Whether on the facts and circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated by the AO that the Truck Operator Union has filed its return of income for A.Y. 2016-17 in the status of Association of Persons (AOP) and has only shown commission and interest income, however the freight receipt from the assessee company has not been shown in the return of income as well as in the P L Account. 3.3 Further the submission of the Truck Operator Union that it was just an association of truck owners for the purpose of securing equal work for all the truck owners and to avoid competition amongst the truck owners, it carries out necessary activities and the payment received on account of transportation is distributed among the truck owner was also not accepted. 3.4 As per the AO, the Truck Operator Union has filed its return of income in the status of AOP which falls in definition of person under section 2(31) of the Act and therefore all the necessary provisions of the Income Tax Act are applicable and in the said background, it was held that the assessee should have deducted TDS on freight payment made to the Truck Operator Union on which it has failed to do so. 3.5 As per the AO, the income of the Truck Operator Union is not exempt under section 12A or under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Truck Operator Union and which it has failed to do so. Accordingly, the assessee was held to be in default for failure to deduct TDS under section 201(1) and demand of Rs. 58,27,591/- was determined under section 201(1) on account of non deduction of TDS and interest for late payment of Rs. 9,83,310/- under section 201(1A) of the Act. 6. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A). The submissions made before the AO were reiterated. Further detailed written submission were filed which found mention in para 5.6 of the impugned order and besides that as part of the assessee s paper book, the audited financial statement, copy of Tripartite Agreement dt. 25/04/2016, copy of the Minutes of Meeting between M/s Pepsico India Holding Pvt. Ltd. and the Truck Operator Union dt. 12/12/2015 and copies of sample bills / invoices raised by the assessee on M/s Pepsico India Holding Pvt. Ltd. were submitted. 6.1 The Ld. CIT(A) referred to the terms of the tripartite agreement which was signed on 25/04/2016 and stated to have been effective from 01/01/2016 and after analyzing various clauses of the tripartite agreement as well as the rate revision agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended by the assessee before the Ld. CIT(A). 7.2 Further referring to the tripartite agreement, it was submitted that the said agreement was signed on 25/04/2016 which falls in the subsequent assessment year and even if the said agreement has to be read as effective from 01/01/2016, even then the said agreement is not relevant as far as the initial nine months of the current financial year is concerned. It was therefore submitted that the Ld. CIT(A) fell in error in relying on the tripartite agreement and basis the same recorded his findings which therefore deserves to be set aside and the order of the AO be sustained. 8. Per contra, the Ld AR relied on the findings of the Ld. CIT(A) and it was submitted that the Ld. CIT(A) has duly appreciated the facts of the case in the correct perspective. Referring to the contention advanced by the Ld. DR that the tripartite agreement was entered into 25/04/2016, It was submitted that firstly the agreement itself talks about the fact that the same is effective from 01/01/2016 and as far as the remaining initial period of nine months is concerned, it was submitted that it was always the same understanding between the three parties namely M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on behalf of PIH (Person responsible for paying any sum). So, this case is clearly a case of the Appellant Firm being a Commission Agent and that is why, the Appellant Firm had shown only Commission Income from PIH in its Trading Account. This is a basic difference from the two other Businesses carried out by the Appellant Firm, i.e. Clearing Forwarding Agency Business and Supply of Labour for Loading Unloading Services. In these businesses, the Appellant Firm has to incur the expenses on clearing forwarding and on wages of Labour, whether any advance has been received or not for providing the above Services. So in above two Businesses, the Appellant is not acting as an Intermediary and hence, full Receipts and Expenses of such Businesses are shown by the Appellant Firm in its Trading Account. 8.4 In support of his contention, the ld AR relied on the decision of the Hon ble Delhi High Court in case of CIT Vs. M/s Cargo Linkers 179 Taxman 151 and the subsequent decision in the case of CIT vs. Hardarshan Singh (2013) 350 ITR 427 (Del) wherein it has been held as under: TDS Commission received as an intermediary No contract of work TDS not deducted Liability- Assessee carried on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngaged in providing Logistics Support, i.e. managing/procuring/arranging Trucks from Union to be used for transportation of goods of PIH. C. The start of the Agreement clearly states that the Union is interested in providing Transport Services to PIH, to which the PIH agreed with the Support/Managerial Services of the Appellant Firm to avoid dealing directly with the Truck Drivers/Owners/Union, mostly of them being Illiterate. Therefore, the Appellant Firm has been engaged as an Intermediary between the main Parties to the Contract, i.e. PIH and Union. D. Point No. 2.2 at Page 3 of the above said Agreement further clarifies the above, as it is written that PIH may appoint any other Transport Contractor instead of the Appellant Firm and deal with the Union through such other Transport Contractor and the word through clearly states that the Appellant Firm is an Intermediary to PIH and Union. E. Point No. 2.3 at Page 3 of the above said Agreement further clarifies the above, as it is written that the payments to Union may be made through the Appellant Firm and that the Appellant Firm shall while making a payment to the Union, send a confirmation to PIH and the word throuqh and confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices .; and Lorry Booking Business on behalf of M/s Pepsico Holdings_Pvt. Ltd. It is the last activity which is the subject matter of the impugned order. The appellant claims that in the first two business activities it has accounted for the entire receipts and expenses thereon; however, with regards to the third activity the appellant claims that it is involved only as a service provider and the Booking Commission is the only receipt relevant to the appellant and the same has been shown in the Trading Account. The rest of the payments received relate only to the Truck Union and that the Appellant has acted only as a Commission Agent, Facilitator or as an Intermediary and are not covered under the provisions of Section 194C(1) as the Person responsible for paying any sum to the Truck Union. As per the appellant the person responsible is Pepsico India Holding Pvt. Ltd. (hereinafter called PIH). 6.1 I have carefully perused the submission of the appellant, the findings of the Ld. AO, the case laws cited and contextualized these to the facts of the case. To understand the nature of the business of the appellant qua PIH, it is important to will be relevant to construct the Tripartit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of law by the Truck Union. ( Clause 3.7 -3.8) v. Truck Union to Ensure Trucks are bottle sealed and penalty for non compliance (Clause 3.9) 6.6 Clause 5.2 requires the appellant to raise the invoices on PIH on behalf of itself and the Truck Union and that payments shall be made within 60 days after making adjustments as per clause 2.5 and deducting tax at Source. 6.7 The Rate Revision Agreement: The rate revision agreement or rate contract in December is negotiated directly between the PIH and Truck Union and signed between their representative alone. 6.8 The matrix of the facts that emerge on construction of the agreements lead me to a considered view that the goods being transported by the Truck Union belong to PIH. Further work is carried out by the Truck Union/Owners in is largely in terms of the covenants relevant to PIH and Union. That the appellant is required to raise the Invoice and receive the Freight payments agreed between the PIH and the Truck Union and pass these on to the Truck Union as per the Tripartite Agreement along with their role largely as a monitoring and reporting agent provides considerable support to the appellant's submission that the appellant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case are similar to those in the case of CIT vs. Hardarshan Singh(supra) 6.14 It is my considered view that the construction of the agreements/ rate revision as discussed supra and the entire matrix of facts and legal provision lead to the clear finding that the appellant is not liable to deduct tax at source on the payments to the Truck Union. The order u/s 201(1)/ 201(1A) is directed to be quashed. It is ordered accordingly. 9. We have heard the rival contentions and perused the material available on record. The relevant provisions which are under consideration read as under: Section 194C (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor 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 (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intermediary between M/s Pepsico India Holding Pvt. Ltd. and Truck Operator Union/Truck Owners and the person responsible for making the freight payment and the responsibility to deduct TDS for payment made to the Truck Operator Union is that of the M/s Pepsico India Holding Pvt. Ltd. and not that of the assessee company. 12.1 Further, we refer to the decision of Hon ble Delhi High Court in case of CIT Vs. M/s Cargo Linkers (Supra) wherein briefly the facts of the case were that the assessee was a partnership firm carrying on the business of clearing and forwarding agents (C F agents) and booking cargo for transportation abroad for various airlines operating in India. It had collected freight charges from the exporters who intended to send the goods through a particular airline and paid the amount to the airline or its general sales agents and for the services rendered, the assessee charged commission from the airlines. According to the Assessing Officer, the assessee was liable to deduct tax at source under section 194C on the payments made to the airlines. On appeal, the assessee contended that its job was mainly to transport goods belonging to exporters and it received a commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned counsel for the revenue sought to argue that the assessee was the person responsible for paying as provided in section 194C read with section 204 of the said Act. However, that would only apply if there was privity of contract of carriage between the assessee and its clients. On facts, the Tribunal has held that the assessee was merely a facilitator or an intermediary and that it did not enter into any contract for carriage of goods with its clients. 7. It is also the case of the assessee that it did not undertake any carriage of goods by itself through its trucks/lorries other than in respect of its own booking business which has already suffered TDS at the time of receipt of payments by the assessee. The learned counsel for the respondent/assessee referred to the decision of a Division Bench of this Court in the case of CIT v. Cargo Linkers: [2009] 179 Taxman 151 (Del). We find that the said decision covers the case of the assessee in its favour. In Cargo Linkers (supra), the assessee was a partnership firm carrying on the business of clearing and forwarding agents and booking cargo for the transportation abroad by various airlines operating in India. The assessee co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Truck Operator Union will provide the requisite trucks for transport of goods belonging to M/s Pepsico India Holding Pvt. Ltd. and the assessee company will facilitate and provide the necessary coordination and the logistical support as well as raise necessary invoices on behalf of the Truck Operator Union and collect freight payment and disburse the same subsequently to the Truck Operator Union. In view of the same, we are of the view that the person responsible for making the freight payment and the responsibility to deduct TDS u/s 194C for freight payment made to the Truck Operator Union (through the assessee company) is that of the M/s Pepsico India Holding Pvt. Ltd. and not that of the assessee company. The provisions of Section 194C are not attracted where the assessee subsequently raises the invoices on behalf of the Truck Operator Union and collects and disburse the freight payment received from M/s Pepsico India Holding Pvt. Ltd to the Truck Operator Union. In view of the same, we confirm the findings of the ld CIT(A) where he has set-aside the order so passed by the AO. The order of the ld CIT(A) is hereby affirmed and the appeal of the Revenue is dismissed. 15. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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