TaxTMI 
TaxTMI 
2009 (7) TMI 836
X X X X Extracts X X X X
X X X X Extracts X X X X
....fied in upholding the levy of penalty under section 201 of the fact by disregarding the fact that the recipient company, i.e., MMTC has already paid the tax due on its income. 3. The facts relating to the issue are stated in brief. The assessee herein, M/s National Mineral Development Corporation (NMDC) and the other company M/s MMTC are Government of India (GOI) Undertakings. M/s NMDC is in the business of extracting minerals such as iron ores, diamonds, silica sand etc. It was stated that according to the EXIM policy framed by the GOI, iron ores with Fe content of 65 per cent and above have to be exported only through MMTC, since the GOI has appointed MMTC as the canalizing agency. Accordingly NMDC is supplying the iron ore to MMTC which was then exported to foreign countries by MMTC. 3.1 The department carried out an inspection at the premises of MMTC to ascertain about the compliance of TDS provisions of the Act. At that time, it came to the knowledge of the TDS officials that MMTC is receiving goods from NMDC and the same is exported. In that connection, they carried out inspection at the business premises of NMDC located at Visakhapatnam. During the course of inspection....
X X X X Extracts X X X X
X X X X Extracts X X X X
....portant to look into the actual nature of transactions. Accordingly, by giving stress to the minutes cited above, the TDS officer treated that the payment of 3 per cent as service charges is actually commission paid by NMDC to MMTC on a principal to agent relationship basis which is liable for deduction of tax at source under section 194H of the Act. Alternatively, the TDS officer has opined that since MMTC is also providing services in relation to market exploration and tie up with buyers the said payment may also be viewed as fee for technical services liable for deduction of tax at source under section 194J of the Act. Accordingly, the TDS officer levied penalty equal to the amount of TDS to be deducted under section 201(1) of the Act and also levied interest under section 201(1A) of the Act. The assessee could not succeed in its appeal filed before Ld. CIT(A). Hence, the assessee is in appeal before us. 4. We have heard the counsel and carefully perused the record. The Assessing Officer has placed his reliance to the following observations of Hon'ble Apex Court in the case Bhopal Sugar Industries Ltd. v. STO AIR 1977 SC 1275. "The relation of principal and agent raises by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lation of price which is generally a common term in all agreements between monopolistic companies and their distributors did not detract from the freedom of contract of sale; (d) sale by the appellant to other customers did not disclose that the property belonged to Caltex; (e) it was the appellant that bore losses due to leakage, diage and evaporation in storage; and (f) reimbursement by the company of transport charges and handling expenses and also reimbursement of supplies made by the appellant to certain designated customers showed that the agreement was a contract of sale and not of agency. Further, the term requiring the dealer to furnish statements of sales and other matters showed that the company wanted to keep itself fully informed of the proper conduct of the business in order to maintain its goodwill and to terminate the agreement in case it found that the appellant was misusing the privilege given to it. The term "commission and allowances" indicated that certain special benefits were conferred by the company on its distributors. It did not show that it was an agency nor was the term requiring the appellant to furnish security for the due observance and performance of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....provisions of CST Act. (12) Further, MMTC is also issuing Disclaimer certificate in the prescribed form under the provisions of the Income-tax Act to NMDC for the value of iron ore purchased by MMTC from NMDC to enable NMDC to claim deduction under section 80HHC of the IT Act. MMTC cannot issue the disclaimer certificate to NMDC unless there is a sale transaction between MMTC and NMDC. (13) The invoice raised to the foreign buyers are issued by MMTC in the capacity of owner of the goods and not as agent of the NMDC. The relevant documents and other issues are negotiated through the bank by MMTC. (14) Sale proceeds are received by MMTC against the LOs opened by the foreign buyers in their name and not by NMDC. LO is opened to the account of MMTC only. (15) Overseas risks are taken by MMTC. NMDC is raising invoices for the amount of sale proceeds excluding the trade margin and the amount is accounted for as sales in the books of NMDC Ltd. There is no amount as commission or as service charges paid to MMTC in the books of NMDC. Similarly, MMTC also accounts for the total sales realizations from foreign buyers as 'sales' in their books and amount pai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee to claim deduction under section 80HHC and the claim made by the assessee was also allowed. In the preamble to the Record note of discussions, it has been clearly mentioned that the meeting was held to finalize the modalities and guidelines for financial and operational arrangements between the two companies in the back ground of the decision of the Union Cabinet. According to the said agreement, the assessee has taken responsibility for the operations connected with export up to the level of the shipment of the goods. In our opinion, such responsibility cannot be taken as the deciding factor in determining the nature of the contract between the assessee and MMTC. The most important deciding factors are whether the property in the goods is transferred to the other party; whether the other party sells the goods as his own or as the property of the principal under his instructions and directions. 4.4 It is very pertinent to note that the Ld. CIT(A) has noted the fact that the assessee has routed the transaction of export through MMTC only because the assessee was not allowed to effect the export on account of Government regulations. It is the most striking feature ....