TaxTMI 
TaxTMI 
2015 (11) TMI 1133
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....of production and sale of milk, icecream and other Dairy products. The Assessee sells its milk and other products to the public through franchises who have different retail outlets (booths). The Assessee enters into agreement with Franchisee setting out the terms and conditions under which they were to act as franchisees of Assessee's products. The Assessee fixes the maximum retail price(MRP) for each of the products sold through the franchisee. The Assessee collects price of the product from the franchisees which is less than the MRP. The difference between the MRP and the price that the franchisees pay to the Assessee according to the Assessee was nothing but discount or margin allowed by it to the franchisee so that they may ear profit from their business of sale of dairy products of the Assessee to the public. According to the revenue such difference is nothing but in the nature of "Commission" and therefore the Assessee was bound to deduct tax at source u/s.194H of the Act on the difference between the MRP and the price which the franchisee pay to the Assessee. Sec.194-H of the Act reads thus: "Section 194H: COMMISSION, BROKERAGE, ETC. (1) Any person, not....
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....ted at source by a person responsible for paying any income by way of commission or brokerage. The expression "commission" or "brokerage" has been defined in the explanation, which includes any payment received or receivable directly or indirectly by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying and selling of goods or in relation to any transaction relating to following: (i) For services rendered (not being professional); (ii) For any services in the course of buying and selling of goods or in relation to any transaction relating to any asset, valuable article or thing 5. Sec. 201(1) of the Act provides that where a person is obliged to deduct tax at source in accordance with the aforesaid provisions fails to deduct tax at source or after deducting tax at source fails to pay it to the Government then such person will be deemed to be an Assessee in default and is liable to pay the tax not so deducted or not paid. Further Sec.201(1A) provides that such person shall also be liable to pay interest on the tax not so deducted or paid from the date on which such tax ough....
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....ssion agent. The Assessee pointed out that para 2 of the Franchisee Agreement provided that the Assessee will sell milk and the franchisee will purchase the same. This was very important as an agent would only take stock of goods of his principal and never purchase it. Para 8 and 9.2 of the Agreement provided that the franchisee has to make payment for the products and only than the goods would be supplied to the franchisee. The Assessee pointed out that para 13 and 14 of the agreement provided that title to the goods passes on the franchisee on delivery and risk also passes along with such passing of title. The franchisee was responsible for unsold or damaged stock. The license for running the business had to be obtained by the franchisee in its own name and cost. Storage of the products was the responsibility of the Assessee. The agreement also specifically provided that the arrangement should not be mistaken to consider the franchisee an agent, servant or employee of the Assessee. 8. The Assessee relied on the decision of the Hon'ble Delhi ITAT in the case of Mother Diary India Ltd. Vs. ITO 28 SOT 42(del) wherein on identical facts the Hon'ble ITAT held that the provi....
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....tionship of principal to principal or relationship of principal to agent. On a fair reading of all the clauses of the agreement as have been referred to in the orders of the Tribunal as well as those of the income tax authorities, we are unable to say that the view taken by the Tribunal is erroneous. It is a well-settled proposition that if the property in the goods is transferred and gets vested in the concessionaire at the time of the delivery then he is thereafter liable for the same and would be dealing with them in his own right as a principal and not as an agent of the Dairy. The clauses of the agreements show that there is an actual sale, and not mere delivery of the milk and the other products to the concessionaire. The concessionaire purchases the milk from the Dairy. The Dairy raises a bill on the concessionaire and the amount is paid for. The Dairy merely fixed the MRP at which the concessionaire can sell the milk. Under the agreement the concessionaire cannot return the milk under any circumstance, which is another clear indication that the relationship was that of principal to principal. Even if the milk gets spoiled for any reason after delivery is taken, that is to t....
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....airy and the concessionaires with regard to the sale of the milk and other products. They were licencees of the premises and were permitted the use of the equipment and furniture for the purpose of selling the milk and other products. But so far as the milk and the other products are concerned, these items became their property the moment they took delivery of them. They were selling the milk and the other products in their own right as owners. These are two separate legal relationships. The income-tax authorities were not justified or correct in law in mixing up the two distinct relationships or telescoping one into the other to hold that because the concessionaires were selling the milk and other products from the booths owned by the Diary and were using the equipment and furniture in the course of the sale of the milk and other products, they were carrying on the business only as agents of the Diary. 14. We may refer to the judgment of this Court in the case of Delhi Milk Scheme vs CIT (Supra.) In that case the facts were different. Under the terms of agreement entered into between DMS and its concessionaires, the milk and other products did not become the property of t....