Pr. Commissioner Of Income Tax, Jaipur-3, Statute Circle, C-Scheme, Jaipur v. Sikar & Jhunjhunu Zila Dugdh Utpadak Sahakari Sangh Ltd., V & P-Palsana, Sikar Ay 2012-13

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 53 / 2017 Pr. Commissioner of Income Tax, Jaipur-3, Statute Circle, C-Scheme, Jaipur. ----Appellant Versus Sikar & Jhunjhunu Zila Dugdh Utpadak Sahakari Sangh Ltd., V & P-Palsana, Sikar AY 2012-13. ----Respondent _____________________________________________________ For Appellant(s) : Mr. Daksh Pareek on behalf of Mr. Sameer Jain HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment Per Hon’ble Jhaveri, J. 12/04/2017 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasdismissed the appeal of the department. 2.Counsel for the appellant has contended that in another casebetween the same parties, in the case of Pr. Commissioner of Income Tax vs. Sikar & Jhunjhunu Zila Dugdh UtpadakSahakari Sangh Ltd. in DB Income Tax Appeal No.32/2016, decided on 16.11.2016, this Court has observed as under: “2.Counsel for the appellant has framedfollowing substantial questions of law forconsideration:following substantial questions of law forconsideration: “1. Whether on the facts and in thecircumstances of the case the ITAT isjustified in law in holding that payment ofRs.42,41,575/- made to RCDF is not liablefor TDS u/s 194H or u/s 194J of the IT Act, 1961?” “2.Whether on the facts and in thecircumstances of the case the ITAT isjustified in law in holding that payment ofRs.54,73,480/- made to various milsocieties on account of milk pricedifference, is not liable for TDS u/s 194H,ignoring the substance of the matter thatsuch milk societies provide service offacilitating purchase of milk by theassessee from cattle owners, and are liablefor TDS?” “3.Whether on the facts and in thecircumstances of the case the ITAT isjustified in law in holding that payment ofRs.4,52,833/-, debited to Profit and Lossaccountundertheheadsalespromotion/advertisement made to RCDFand others is not liable for TDS?” 3.Counsel for the appellant has takenus to the reasoning given by the CIT(Appeals) and contended that the issuewhich reads as under: “In lieu of the Services Charges the RCDFwould be providing the following servicesto the Unions: marketing Support as per requirement. Coordination with the state/centralgovernment and financial institutions forvarious schemes. Finalising rate contracts for purchase ofraw material for cattlefeed plants, packingmaterial for milk and milk products andcattlefeed etc. Assist in plant management, engineeringand quality assurance projects. Preparation and monitoring of IntegratedBusiness Planning and related financialanalysis. (i)Use of “SARAS” brand. (ii)Development and launching of newproducts. (iii)MIS/system support.” (iv)“It is evident from the perusal of aforesaiddocuments that the amount was paid by theappellant to RCDF for various services rendredby RCDF to appellant. The services was partly inthe nature of managerial services and partly forpromotion and marketing of the products of the Coordination with the state/centralgovernment and financial institutions forvarious schemes. Finalising rate contracts for purchase ofraw material for cattlefeed plants, packingmaterial for milk and milk products andcattlefeed etc. Assist in plant management, engineeringand quality assurance projects. Preparation and monitoring of IntegratedBusiness Planning and related financialanalysis. (i)Use of “SARAS” brand. (ii)Development and launching of newproducts. (iii)MIS/system support.” (iv)“It is evident from the perusal of aforesaiddocuments that the amount was paid by theappellant to RCDF for various services rendredby RCDF to appellant. The services was partly inthe nature of managerial services and partly forpromotion and marketing of the products of the appellant. RCDF itself treated the receipts as“Service Charges”. The payment made by theappellant was not in the nature ofreimbursement of expenses incurred by RCDF. Itis clearly mention in the aforesaid letter dated04.11.1997 that RCDF will create a reserve ofmaximum of 10% of its receipts for incurringspecific expenditure for the member societies.The excess amount spent would be recoveredfrom the member societies. It is not known thathow much amount was spent by RCDF on behalfof the appellant in this year. The payment ismade by the appellant at a fix percentage of itsturnover, irrespective of the expenditure incurredby RCDF. It is also evident from para 7 of theassessment order that Rs.3,62,111/- was furtherpaid to RCDF as “sales promotion expenses”.Hence, the amount debited under the head“cess” was not paid for any sales promotion ormarketing activities undertook by RCDF.Considering all this facts and circumstances ofthe case, I am of the view that the amount paidby the appellant to RCDF is in the nature of “feesfor professional or technical services” on whichprovisions of section 194J is applicable. Sincethe appellant has not deducted the tax at sourcefrom such payment, the expenditure is notallowable u/s 40(a)(ia) of the Act.” “However, I agree with the contention of the ld.AR that provisions of sectioin 40(a)(ia) are notapplicable on the payments made before the endof the previous year, as held by the Hon'ble ITAT,Jaipur in the case of JVVNL (supra). A.O. isdirected to verify the actual payments made bythe appellant to RCDF during the year and allowthe expenditure to that extent.” 4.The Tribunal reads order dated 21.07.2015,in para 3.13, has observed as under: “I have heard the rival contentions and perusedthe materials available on record. Apropos thepayment to RCDF cess, it has not beendemonstrated by the Department that anymanagerial services in this connection have beenrendered to assessee by RCDF qua this amount.RCDF is an apex cooperative body and cess ispaid to it by virtue of federal structure inRajasthan cooperative set up. Thus as far asassessee's business is concerned, there is norendering of any managerial services by RCDF asalleged by the AO u/s 194H and upheld ld.CIT(A) u/s194J. Since there is no rendering ofany services and the payment is not made for any managerial services to RCDF, therefore,payment can neither be held as liable for TDSu/s 194H of the Act as commission/brokerage asheld by the AO nor u/s 194J for rendering anymanagerial services as held by the ld. CIT(A). Inview thereof, we hold that assessee's impugnedpayment to RCDF are not liable for TDS. Thisground of the assessee is allowed.” 3.Taking into consideration the decision of aforesaid appeal, nosubstantial question of law arises in the present appeal forconsideration of this Court. 4.In that view of the matter, the appeal being devoid of anymerit deserves to be dismissed and the same is dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Asheesh Kr. Yadav/22