TaxTMI 
TaxTMI 
TaxTMI 
2012 (5) TMI 203
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.... market, through the retailer. 4. In pursuance of the said Agreement, the assessee company sold the manufactured product to M/s. Zivon Marketing Services P. Ltd. for its onwards sale in the open market. Various stages of trading/supply chain of the products manufactured by the company, to a customer, is depicted down below (as has been stated in the record of the case): (1) Manufacturer (Assessee company) (Manufacture of the products in its plant/machinery). Produce sent to HUB. (2) HUB (Remuneration paid by the assessee company by way of commission). Produce sent to CFA. (3) CFA (Clearing & Forwarding Agent) (Remuneration paid by the assessee company by way of commission. Forwards the produce to Super Stockist. (4) Super Stockist (M/s. Zivon Marketing Services P. Ltd.) appointed by way of Agreement but paid nothing by the company. Gets remuneration @ 10% of the Market price of the manufactured produce. Responsible for onward supply of the manufactured produce to the retailer. Hence, the super stockiest neither gets any payment from the manufacturer/assessee company nor it receives any remuneration by way of commission at all. Rather, it purchases th....
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....the assessee. (d) The TDS provisions of the Act are only applicable when the assessee in default pays the remuneration to its employees or technical expert (i.e. managerial, legal, etc.). In the instant case, no such relation was there. In this case, there was no payment by assessee to the stockiest. Therefore, in view of the abovesaid contentions, the assessee submitted before the A.O. that the TDS provisions were not applicable in the instant case. 7. Thereafter, having heard the assessee, by referring to the details of the Agreement and other evidence vide order dated 22.03.2011 available on record, the pleas of the assessee company were negated. The ld. A.O. held that the super stockist in question was, in fact, the Manager of the assessee company. Therefore, sec. 194J of the Act was applicable. Furthermore, the A.O. also sent a proposal for initiation of penalty proceedings to the Addl. CIT (TDS), Range-2, Mumbai. He raised demand of tax payable by the assessee to the tune of Rs. 13,54,02,632/- [inclusive of tax payable u/s.201(1) of the Act plus interest u/s.201(1A) for 48 months]. 8. Aggrieved by the said order, on 13-04-2011, the assessee company filed an appeal b....
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....1-2 2. Copy of Agreement with Zivon Marketing Services Pvt. Ltd. dated 05.09.2005 3-33 3. Sample copies of Invoices alongwith Purchase Orders - Zivon Marketing Services Pvt. Ltd. 34-61 4. Sample copies of Invoices - Others Distribotors 62-83 5. Compilation of all the MOU and agreement executed between All India Organization of Chemist and Druggist (AIDCD) dated 12.05.2009. 84-90 6. Statement of Shri Pravin Shinde recorded u/s. 131 91-99 7. Statement of Shri N. Santhanam recorded u/s.131 100-105 8. Submission vide letter dated 31.12.2010 106-108 9. Submission vide letter dated 23.02.2011 109-110 10. Submission vide letter dated 21.03.2011 111-113 11. Copy of Written Submission filed before Commissioner of Income Tax (Appeal)-14. 114-123 Opening his arguments, the ld. AR for the assessee company referred to clause 5.1 of the Agreement and contended that from the Agreement in question, no relationship of principal and Manager emanated. The assessee company has not paid even a single penny to the super stockiest by way of remuneration. Rather, the super stockiest in question had been purchasing the drugs manufactured by the assessee @ 70% of the M.R.P. an....
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....er, clauses 17 to 24 of the Agreements were referred by the ld. DR to contend that the alleged stockist was rather managing the business of the assessee company acting as its Manager. He took us through the order of the Assessing Officer as well as the CIT(A) and relied on the same. Therefore, the provisions of sec. 194J of the Act are duly applicable. Hence, he prayed that appeal of the appellant may be dismissed. 11. We have heard both the Representatives of parties. Since in the instant case the issue involved is of relationship of the parties to the Agreement dated 05-09-2005, in the light of the 6-tier trading chain reproduced above from the paper book submitted by the assessee company, which fact has not been disputed at all by the Department. In our considered opinion, on a perusal of the agreement, invoices and other records, simply because the Agreement talks about appointment of stockiest, who maintains the stock for its onward transmission to the market, it can be said that this is a case of a colour managerial appointment. In this regard, clauses of the Agreement itself are very clear which are reproduced as under : "3. PURPOSE The purpose of this Agreement is to set....
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....d confirmed by ZIVON. 10.3 The signed cheques, until and unless contramanded, shall be deemed to constitute a representative and assurance on the part of ZIVON to NPIL that ZIVON has sufficient funds with his banker to cover the amount of the cheque. When the facility of payment by cheque is extended by NPIL, ZIVON makes a representation that the cheque will be honoured when presented without any delay and ZIVON shall not directly or indirectly involve in delaying payment or the honouring of the cheque. In the event of the Cheque not being deposited by NPIL, ZIVON shall ensure that the Products are held in trust by it and in its custody and inform NPIL about the non presentation for payment of the cheque issued against the Products received by it. 11. LIEN ON GOODS Till the full payment in respect of the Products sold to ZIVON is received, NPIL shall have a lien on the Products if the Products are in the possession of NPIL or shall have a charge over the Products if the same is in possession of ZIVON or the value thereof and/or any other goods/stocks and other materials which are in possession with ZIVON." 12. The covenants in the agreement clearly stipulate that the relationsh....