Hindustan Coca Cola Beverages (P.) Ltd. v. CIT

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The Tax Publishers2017 TaxPub(DT) 5030 (Raj-HC) : (2018) 402 ITR 0539 : (2018) 303 CTR 0013 Hindustan Coca Cola Beverages (P.) Ltd. v. CIT INCOME TAX ACT, 1961 --Tax deduction at source--Under section 194HSale to distributor on principal-to-principal basis----Where assessee sold goods to distributor without retaining commission under the agreement which was principal-to-principal basis, provisions of section 194H could not be applied.--Assesee appointed its distributors on MRP basis under agreement. Regarding MRP, the findings which were arrived at was a price which had been fixed by the assessee company and other expenses, namely commission given to the retailer and everything was to be managed by the distributor. Distributor appoints retailers on its own and can reduce its margin. The distributor had all rights to reduce his margin. He could increase the margin of retailer and would reduce the margin from 10% to anything between 1% to 10%. There was no restriction by the assessee to give commission amount to the retailer by distributors. The transaction was principal-to-principal basis. Under the contract property were transferred to distributors and assessee had to provide special allowance or expenses to promote business. AO, CIT(A) and Tribunal all the authorities held that assessee was liable to withhold tax under section 194H out of amount on which goods were sold to distributor(s).Held: The Tribunal has travelled beyond the provisions of section 194H where the condition precedent is that the payment is to be made by the assessee and thereafter he is to make payment. In spite of specific query to department, it was not pointed out that any amount was paid by the assessee company. It was only the arrangement by which the amount which was to be received was reduced and no amount was paid as commission.There was no occasion of invoking provisions of section 194H, since the amount was not paid by the assessee.Conclusion of Tribunal that they are covered under section 194H and the income tax or the TDS is required to be deducted was not correct and accordingly disallowance on that basis was not correct. In that view of the matter, the findings arrived at by the Tribunal was erroneous. Section 194H pre-supposes the payment to be made to the third party namely, distributor or the Agency and if on a close scrutiny of section 182, Distributor is not an agent, therefore, the provisions of section 194H have wrongly been invoked. Income Tax Act, 1961 Section 194H *Applied:CIT v. Rajasthan Rajya Vidyut Prasaran Nigam Ltd. (2006) 287 ITR 354 (Raj.), Hindustan Coca Cola Beverage (P) Ltd. v. CIT (2007) 293 ITR 226 (SC), CIT v. NIIT Ltd. (2009) 318 ITR 289 (Del), CIT v. Career Launcher India Ltd. (2013) 358 ITR 179 (Del), Gujarat State Fertilizers & Chemicals Ltd. & Anr. v. CCE Civil Appeal No. 4066-4067/2015 decided on. 22-11-2016, CIT v. Mother Dairy India Ltd. (2013) 358 ITR 218 (Del), Bharti Airtel Ltd. v. Dy. CIT (2015) 372 ITR 33 (Karn), CIT v. Vegetable Products Ltd. (1973) 88 ITR 0192, CIT v. J.K. Hosiery Factory (1986) 159 ITR 0085 , Ajmer Vidyut Vitran Nigam Ltd. v. Authority for Advance & Ors. [D.B. Civil Writ Petition No. 20195/2012 decided on 19-10-2016], CIT v. Bharti Cellular Ltd. (2011) 330 ITR 239 (SC), UOI v. Satish Panalal Shah (2001) 249 ITR 221 (SC), CIT v. Jaipur Vidyut Vitran Nigam Ltd. ITA No. 579/2009, High Court of Judicature for Rajasthan, Jaipur, CIT v. Bharti Cellular Ltd. (2009) 319 ITR 139 (Del.), Skycell Communications Ltd. & Anr. v. Dy. CIT & Ors. (2001) 251 ITR 53 (Mad.) M.S. Jewellery v. Asstt. CIT (Assessment) Agricultural Income Tax and Sales Tax & Anr. (1994) 208 ITR 531 (Ker.), CIT v. Maharashtra State Electricity Distribution Co. Ltd. (2015) 119 DTR (Bom) 278 and CIT-II & Ors. v. Delhi Transport Ltd. Manu/DE/2199/2015. Relied:Ahmedabad Stamp Vendors Association v. UOI (2002) 257 ITR 202 (Guj.), CIT v. Ahmedabad Stamp Vendors Association,(2012) 348 ITR 378 (SC), Ghasiram Agarwalla v. State, AIR 1967 Calcutta 568, Government of Madras v. Simpson & Co. Ltd. (1968) 21 STC 21 (SC), Halsbury's Laws of England, Vol. 1, 4th Edn., in para 807, at page 485,Alwaye Agencies v. Dy. Commissioner of Agricultural Income Tax and Sales Tax, Ernakulam AIR 1988 SC 1250 : (1988) 70 STC 107 (SC), CIT v. Rishikesh Apartments Co-operative Housing Society Ltd. (2002) 253 ITR 310 (Guj.), CIT v. Bharti Cellular Ltd. (2009) 319 ITR 139 (Del) and Gujarat State Fertilizers & Chemicals Ltd. & Anr. v. CCE Civil Appeal No. 4066-4067/2015 decided on. 22-11-2016. REFERRED :* Ghasiram Agarwalla v. State, AIR 1967 Calcutta 568 (cal), Government of Madras v. Simpson & Co. Ltd. (1968) 21 STC 21 (SC), Venkateswara Timber and Bamboo Firm v. CTO (1968) 2 SCR 476, W.T. Lamb and Sons v. Goring Brick Co. Ltd. (1932) 1 K.B. 710, CIT v. Jai Drinks (P) Ltd. (2011) 336 ITR 383 (Del), Jagran Prakashan Ltd. v. Deputy Commissioner of Income Tax (TDS), (2012) 345 ITR 288 (All), UOI & Ors. v. Umosh Dhaimode (1997) 10 SCC 223, CIT v. Hindustan Zinc Ltd. (2012) 209 Taxman 519 (Raj.) and CIT v. Bharti Cellular Ltd. (2009) 319 ITR 139 (Del). FAVOUR : In assessee's favour. A.Y. : IN THE RAJASTHAN HIGH COURT INDERJEET SINGH & K.S. JHAVERI, JJ. Hindustan Coca Cola Beverages (P.) Ltd. v. CIT D.B. ITA Nos. 205, 206 of 2005 & Ors. 11 July, 2017 Assessees Allowed Appellant by: Ajay Vohra, Sudhanshu Kasliwal and N.M. Ranka, Sr. Counsels, Abhishek Sharma, Gaurav Jain, P.K. Verma, Anant Kasliwal, Vaibhav Kasliwal, Charu Pareek, N.K. Jain, Sanjay Jhanwar, Prakul Khurana, Archana and Akhil Simlote Respondent by: R.B. Mathur, K.D. Mathur, Nikhil Simlote, Prateek Kedawat, Tanvi Sahai, Meenal Ghiya and Prabhansh Sharma JUDGMENT *K.S. Jhaveri, J.* All these appeals arise out of the judgments delivered by the Income Tax Appellate Tribunal. In some of the appeals, the assessee is the appellant and in some of the matters, the Department has come by way of appeals. However, time and again the matter was adjourned and all these appeals are clubbed in view of the fact that questions of law involved in all these appeals are somewhat identical. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2017 TaxPub(DT) 5030 (Raj-HC) : (2018) 402 ITR 0539 : (2018) 303 CTR 0013

Hindustan Coca Cola Beverages (P.) Ltd. v. CIT

INCOME TAX ACT, 1961

--Tax deduction at source--Under section 194HSale to distributor on principal-to-principal basis----Where assessee sold goods to distributor without retaining commission under the agreement which was principal-to-principal basis, provisions of section 194H could not be applied.--Assesee appointed its distributors on MRP basis under agreement. Regarding MRP, the findings which were arrived at was a price which had been fixed by the assessee company and other expenses, namely commission given to the retailer and everything was to be managed by the distributor. Distributor appoints retailers on its own and can reduce its margin. The distributor had all rights to reduce his margin. He could increase the margin of retailer and would reduce the margin from 10% to anything between 1% to 10%. There was no restriction by the assessee to give commission amount to the retailer by distributors. The transaction was principal-to-principal basis. Under the contract property were transferred to distributors and assessee had to provide special allowance or expenses to promote business. AO, CIT(A) and Tribunal all the authorities held that assessee was liable to withhold tax under section 194H out of amount on which goods were sold to distributor(s).Held: The Tribunal has travelled beyond the provisions of section 194H where the condition precedent is that the payment is to be made by the assessee and thereafter he is to make payment. In spite of specific query to department, it was not pointed out that any amount was paid by the assessee company. It was only the arrangement by which the amount which was to be received was reduced and no amount was paid as commission.There was no occasion of invoking provisions of section 194H, since the amount was not paid by the assessee.Conclusion of Tribunal that they are covered under section 194H and the income tax or the TDS is required to be deducted was not correct and accordingly disallowance on that basis was not correct. In that view of the matter, the findings arrived at by the Tribunal was erroneous. Section 194H pre-supposes the payment to be made to the third party namely, distributor or the Agency and if on a close scrutiny of section 182, Distributor is not an agent, therefore, the provisions of section 194H have wrongly been invoked.

Income Tax Act, 1961 Section 194H

Applied:CIT v. Rajasthan Rajya Vidyut Prasaran Nigam Ltd. (2006) 287 ITR 354 (Raj.), Hindustan Coca Cola Beverage (P) Ltd. v. CIT (2007) 293 ITR 226 (SC), CIT v. NIIT Ltd. (2009) 318 ITR 289 (Del), CIT v. Career Launcher India Ltd. (2013) 358 ITR 179 (Del), Gujarat State Fertilizers & Chemicals Ltd. & Anr. v. CCE Civil Appeal No. 4066-4067/2015 decided on. 22-11-2016, CIT v. Mother Dairy India Ltd. (2013) 358 ITR 218 (Del), Bharti Airtel Ltd. v. Dy. CIT (2015) 372 ITR 33 (Karn), CIT v. Vegetable Products Ltd. (1973) 88 ITR 0192, CIT v. J.K. Hosiery Factory (1986) 159 ITR 0085 , Ajmer Vidyut Vitran Nigam Ltd. v. Authority for Advance & Ors. [D.B. Civil Writ Petition No. 20195/2012 decided on 19-10-2016], CIT v. Bharti Cellular Ltd. (2011) 330 ITR 239 (SC), UOI v. Satish Panalal Shah (2001) 249 ITR 221 (SC), CIT v. Jaipur Vidyut Vitran Nigam Ltd. ITA No. 579/2009, High Court of Judicature for Rajasthan, Jaipur, CIT v. Bharti Cellular Ltd. (2009) 319 ITR 139 (Del.), Skycell Communications Ltd. & Anr. v. Dy. CIT & Ors. (2001) 251 ITR 53 (Mad.) M.S. Jewellery v. Asstt. CIT (Assessment) Agricultural Income Tax and Sales Tax & Anr. (1994) 208 ITR 531 (Ker.), CIT v. Maharashtra State Electricity Distribution Co. Ltd. (2015) 119 DTR (Bom) 278 and CIT-II & Ors. v. Delhi Transport Ltd. Manu/DE/2199/2015. Relied:Ahmedabad Stamp Vendors Association v. UOI (2002) 257 ITR 202 (Guj.), CIT v. Ahmedabad Stamp Vendors Association,(2012) 348 ITR 378 (SC), Ghasiram Agarwalla v. State, AIR 1967 Calcutta 568, Government of Madras v. Simpson & Co. Ltd. (1968) 21 STC 21 (SC), Halsbury's Laws of England, Vol. 1, 4th Edn., in para 807, at page 485,Alwaye Agencies v. Dy. Commissioner of Agricultural Income Tax and Sales Tax, Ernakulam AIR 1988 SC 1250 : (1988) 70 STC 107 (SC), CIT v. Rishikesh Apartments Co-operative Housing Society Ltd. (2002) 253 ITR 310 (Guj.), CIT v. Bharti Cellular Ltd. (2009) 319 ITR 139 (Del) and Gujarat State Fertilizers & Chemicals Ltd. & Anr. v. CCE Civil Appeal No. 4066-4067/2015 decided on. 22-11-2016.

REFERRED : Ghasiram Agarwalla v. State, AIR 1967 Calcutta 568 (cal), Government of Madras v. Simpson & Co. Ltd. (1968) 21 STC 21 (SC), Venkateswara Timber and Bamboo Firm v. CTO (1968) 2 SCR 476, W.T. Lamb and Sons v. Goring Brick Co. Ltd. (1932) 1 K.B. 710, CIT v. Jai Drinks (P) Ltd. (2011) 336 ITR 383 (Del), Jagran Prakashan Ltd. v. Deputy Commissioner of Income Tax (TDS), (2012) 345 ITR 288 (All), UOI & Ors. v. Umosh Dhaimode (1997) 10 SCC 223, CIT v. Hindustan Zinc Ltd. (2012) 209 Taxman 519 (Raj.) and CIT v. Bharti Cellular Ltd. (2009) 319 ITR 139 (Del).

FAVOUR : In assessee's favour.

A.Y. :

IN THE RAJASTHAN HIGH COURT

INDERJEET SINGH & K.S. JHAVERI, JJ.

Hindustan Coca Cola Beverages (P.) Ltd. v. CIT

D.B. ITA Nos. 205, 206 of 2005 & Ors.

11 July, 2017

Assessees Allowed

Appellant by: Ajay Vohra, Sudhanshu Kasliwal and N.M. Ranka, Sr. Counsels, Abhishek Sharma, Gaurav Jain, P.K. Verma, Anant Kasliwal, Vaibhav Kasliwal, Charu Pareek, N.K. Jain, Sanjay Jhanwar, Prakul Khurana, Archana and Akhil Simlote

Respondent by: R.B. Mathur, K.D. Mathur, Nikhil Simlote, Prateek Kedawat, Tanvi Sahai, Meenal Ghiya and Prabhansh Sharma

JUDGMENT

K.S. Jhaveri, J.

All these appeals arise out of the judgments delivered by the Income Tax Appellate Tribunal. In some of the appeals, the assessee is the appellant and in some of the matters, the Department has come by way of appeals. However, time and again the matter was adjourned and all these appeals are clubbed in view of the fact that questions of law involved in all these appeals are somewhat identical.