Pr Commissioner Of Income Tax Jaipur-3 v. Sikar & Jhunjhunu Zila Dugdh Utpadak

IN THE HIGH COURT OF JUDICATURE FORRAJASTHAN BENCH AT JAIPUR D.B.INCOME TAX APPEAL NO. 184 / 2016 PR COMMISSIONER OF INCOME TAX JAIPUR-3 ----Appellant Versus SIKAR & JHUNJHUNU ZILA DUGDH UTPADAK ----Respondent __________________________________________ For Appellant :Mr. Sameer Jain __________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE DINESH MEHTAJudgment Per Hon’ble Mr. Jhaveri, J. 30/11/2016 1. By way of this appeal, the appellant has assailedthe judgment & order of the Tribunal whereby theTribunal has allowed the appeal preferred by theassessee and dismissed the appeal of the department. 2.The brief facts of the case are that therespondent-assessee is a co-operative society whichpurchases milk from primary co-operative society atvillage level which is pasteurized and sold toconsumer. The assessee e-filed its return of income on20/9/2011 for AY 2011-12 declaring income at Nil.Assessment was completed u/s 143(3) through orderdt. 31/12/2013 by the ACIT. Circle-Sikar, at total (2 of 4) income of Rs. 1,25,38,660/- making disallowances u/s40(a) (ia) read with section 194H of Rs. 1,32,22,045/-because the assessee made payment withoutdeducting TDS to milk societies from whom milk waspurchased in lieu of services rendered by them in theform of collection of milk from the cattle owners andsupply of the same to the assessee. 3.The issue raised in this appeal is squarelycovered by the judgment of the High Court in PrincipalCommissioner of Income Tax vs. Sikar & JhunjhunuZila Dugdh Utpadak Sahakari Sandh Ltd., Tax AppealNo. 32/2016, decided on 16/11/2016, wherein thisCourt in para 3, 4 & 5 has observed as under:- “3.Counsel for the appellant has taken usto the reasoning given by the CIT (Appeals)and contended that the issue which reads asunder: “In lieu of the Services Charges the RCDFwould be providing the following services tothe Unions: (i)marketing Support as perrequirement. (ii)Coordinationwiththestate/centralgovernmentandfinancial institutions for variousschemes. (iii)Finalising rate contracts forpurchase of raw material forcattlefeed plants, packing materialfor milk and milk products andcattlefeed etc. (iv)Assist in plant management,engineering and quality assuranceprojects. (3 of 4) (v)Preparation and monitoring ofIntegrated Business Planning andrelated financial analysis. (vi)Use of “SARAS” brand. (vii)Development and launching ofnew products. (viii)MIS/system support.” “In lieu of the Services Charges the RCDFwould be providing the following services tothe Unions: (i)marketing Support as perrequirement. (ii)Coordinationwiththestate/centralgovernmentandfinancial institutions for variousschemes. (iii)Finalising rate contracts forpurchase of raw material forcattlefeed plants, packing materialfor milk and milk products andcattlefeed etc. (iv)Assist in plant management,engineering and quality assuranceprojects. (3 of 4) (v)Preparation and monitoring ofIntegrated Business Planning andrelated financial analysis. (vi)Use of “SARAS” brand. (vii)Development and launching ofnew products. (viii)MIS/system support.” “It is evident from the perusal of aforesaiddocuments that the amount was paid bythe appellant to RCDF for various servicesrendred by RCDF to appellant. Theservices was partly in the nature ofmanagerial services and partly forpromotion and marketing of the productsof the appellant. RCDF itself treated thereceipts as “Service Charges”. Thepayment made by the appellant was not inthe nature of reimbursement of expensesincurred by RCDF. It is clearly mention inthe aforesaid letter dated 04.11.1997 thatRCDF will create a reserve of maximum of10% of its receipts for incurring specificexpenditure for the member societies. Theexcess amount spent would be recoveredfrom the member societies. It is notknown that how much amount was spentby RCDF on behalf of the appellant in thisyear. The payment is made by theappellant at a fix percentage of itsturnover, irrespective of the expenditureincurred by RCDF. It is also evident frompara 7 of the assessment order thatRs.3,62,111/- was further paid to RCDF as“sales promotion expenses”. Hence, theamount debited under the head “cess” wasnot paid for any sales promotion ormarketing activities undertook by RCDF.Consideringallthisfactsandcircumstances of the case, I am of theview that the amount paid by the appellantto RCDF is in the nature of “fees forprofessional or technical services” onwhich provisions of section 194J isapplicable. Since the appellant has notdeducted the tax at source from suchpayment, the expenditure is not allowableu/s 40(a)(ia) of the Act.” “However, I agree with the contention ofthe ld. AR that provisions of sectioin 40(a) (ia) are not applicable on the paymentsmade before the end of the previous year,as held by the Hon'ble ITAT, Jaipur in thecase of JVVNL (supra). A.O. is directed toverify the actual payments made by theappellant to RCDF during the year andallow the expenditure to that extent.” 4. The Tribunal reads order dated21.07.2015, in para 3.13, has observedas under: “I have heard the rival contentions andperused the materials available on record.Apropos the payment to RCDF cess, it hasnot been demonstrated by the Departmentthat any managerial services in thisconnection have been rendered toassessee by RCDF qua this amount. RCDFis an apex cooperative body and cess ispaid to it by virtue of federal structure inRajasthan cooperative set up. Thus as faras assessee's business is concerned, thereis no rendering of any managerial servicesby RCDF as alleged by the AO u/s 194Hand upheld ld. CIT(A) u/s194J. Sincethere is no rendering of any services andthe payment is not made for anymanagerial services to RCDF, therefore,payment can neither be held as liable forTDS u/s 194H of the Act ascommission/brokerage as held by the AOnor u/s 194J for rendering any managerialservices as held by the ld. CIT(A). In viewthereof, we hold that assessee's impugnedpayment to RCDF are not liable for TDS.This ground of the assessee is allowed.” 5. It is true that the counsel for theappellant contended that the paymentwhich has been made till 16.12.2013(Annexure-4) on completion of financialyear will be applied or not. 4.In this view of the matter, the appeal standsdisposed off. 5. It is true that the counsel for theappellant contended that the paymentwhich has been made till 16.12.2013(Annexure-4) on completion of financialyear will be applied or not. 4.In this view of the matter, the appeal standsdisposed off. (DINESH MEHTA)J. (K.S.JHAVERI)J.