TaxTMI 
TaxTMI 
2024 (5) TMI 633
X X X X Extracts X X X X
X X X X Extracts X X X X
....received as freight charges but the same was not shown in the profit and loss account of the assessee. (3) Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in not upholding the order u/s 201(1)/201(1A) of the Income Tax Act, 1961 ignoring the fact that the tripartite agreement between the PIH (Pepsi Co India Holding Pvt. Ltd.), the truck union and the assessee was constituted on 25.04.2016 i.e. after the completion of F.Y. 2015-16. Moreover, as per Column 1.2 of the agreement, the agreement is effective from 01.01.2016 and is therefore not applicable for first nine months of the F.Y. 2015-16. (4) The appellant craves leave to amend, add, alter or delete any of the aforesaid grounds till the disposal." 3. Briefly, the facts of the case are that a survey action under section 133A(2A) of the Act was carried out at the business premises of the assessee on 15/12/2016 and on examination of the assessee's records, it was noticed by the Survey Team that the assessee has made freight payment of Rs. 29,13,79,552/- to M/s Shree Guru Teg Bahadur Truck Operator Union Bhawanigarh for transport of goods of M/s Pepsico India Holding Pvt. Ltd. However, whi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee as to why it shouldn't be treated as assessee in default under section 201(1) r.w.s 201(1A) of the Act on account of non deduction of TDS under section 194C on freight payment of 29,13,79,552/-. 4.1 In response, the assessee submitted that it has not entered into any verbal or written contract for hiring of trucks with the Truck Operator Union and it is only acting as a transport commission agent for carriage of goods and no freight charges were paid to Truck Operator Union in pursuance of the contract for specific period, quantity or price. It was further submitted that M/s Pepsico India Holding Pvt. Ltd. paid commission to the assessee for rendering its services and the commission income has been duly reflected in the P&L Account. It was submitted that the assessee firm does not own any truck or vehicles and was merely working as a commission / liaison agent between M/s Pepsico India Holding Pvt. Ltd. who wishes to send its goods to the dealers located at different places and the Truck Operator Union who transport the goods. 4.2 It was submitted that only the payment is routed through assessee company and it is the M/s Pepsico India Holding Pvt. Ltd. who is responsible for p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the Truck Operator Union as per the tripartite agreement. 6.2 It was held by the Ld. CIT(A) that the role of the assessee company is largely as a monitoring and reporting agent and therefore the assessee company has merely acted as an agent of M/s Pepsico India Holding Pvt. Ltd. receiving commission for its services and not as a actual transporter and therefore the primary responsibility to deduct TDS for payment made to the Truck Operator Union is that of the M/s Pepsico India Holding Pvt. Ltd. and not that of the assessee company. 6.3 Further, the Ld. CIT(A) relied on the order of the Hon'ble Delhi High Court in case of CIT Vs. Hardarshan Singh (2013) 350 ITR 427 stating that the facts in the instant case are similar as in the case before the Hon'ble Delhi High Court where it was held that where the assessee acted as a mere facilitator or intermediary as per contract, there is no liability to deduct tax at source u/s 194C and therefore following the same, it was held that the assessee is not liable to deduct TDS on the payment made to Truck Operator Union and the order passed under section 201(1) read with 201(1A) was directed to be quashed. 7. Against the said findings an....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and in order to formalize and articulate the same, written agreement was entered into on 25/04/2016. 8.1 It was submitted that all along the understanding has been that the Truck Operator Union will provide the requisite trucks for transport of goods belonging to M/s Pepsico India Holding Pvt. Ltd. and the assessee company will facilitate and provide the necessary coordination and the logistical support as well as raise necessary invoices and collect payment and disburse the same subsequently to the Truck Operator Union. 8.2 It was further submitted that even the AO has referred to the tripartite agreement while giving his operative findings in the assessment order and therefore there is no basis to dispute the applicability of the tripartite agreement for the financial year under consideration. 8.3 It was submitted that the assessee firm was acting as an intermediary between M/s Pepsico India Holding Pvt. Ltd. and the Truck Operator Union and for its activity, it received commission income amounting to Rs. 66,81,696/- from M/s Pepsico India Holding Pvt. Ltd. which has been duly reflected in its P&L Account, as far as the freight receipts are concerned, the same have been recei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and airlines as it booked cargo for and on behalf of exporters and mainly facilitated contract for carrying goods-Above decision completely covered case in favour of assessee and against respondent-Tribunal had already found as a matter of fact that contract was between assessee's clients and transporters and that assessee had mainly acted as a facilitator or as an intermediary-Revenue's appeal dismissed" 8.5 It was submitted that the facts in the present case are similar to the facts contained in the aforesaid Judgement. In the present case, the Appellant Firm is acting as an intermediary between M/s. Pepsico Holdings India Pvt. Ltd. (PIH) and the Truck Union/Truck Owners which is demonstrated as under: "A. The Accounting Treatment adopted by the Appellant Firm in showing only the Commission Income from Lorry Booking Business (and not the Freight Receipts on behalf of the Transporters/Truck Union) in its Trading Account shows the intention of the Appellant Firm. B. Even the Tripartite Agreement, mentioned by the Ld. AO in the last Para of Page 10 of the Assessment Order, is in favour of the Appellant Firm and shows the intentions of all the Parties to such Agreement....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Minutes, signed by the Authorized Representatives of the PIH and the Union, clearly states that even the Freight Rates had been decided by the PIH and the Union directly. The engagement of the Appellant Firm is only for the purpose of Logistics Support to deal with the Union, for which it is paid a Commission. H. The Sample Copies of Bills raised by the Appellant Firm to M/s. Pepsico Holdings India Pvt. Ltd. are enclosed herewith at Pages No. 28 & 29 of the Paper Book. It can be seen that two types of Bills had been raised by the Appellant Firm to M/s. Pepsico Holdings India Pvt. Ltd. during the year under consideration. The first type of Bill is related to the total Freight amount to be received by the Appellant Firm on behalf of the Truck Union/Truck Owners with regard to the transportation of goods made by them. The above amount, when received, was passed on by the Appellant Firm to the Truck Union/Truck Owners. The second type of Bill is related to the Commission Amount charged by the Appellant Firm to M/s. Pepsico Holdings India Pvt. Ltd. for acting as an Intermediary in the above said "Lorry Booking Business". I. The List of Fixed Assets shown in the Audited Financial....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it becomes evident that vide Point page 2 (page 9 of paper book), Truck Union (Union) has represented to PIH that it is engaged in the Business of providing Trucks for transportation of goods and has offered its services to provide Trucks to PIH. PIH has vide terms Point D page 2 (page 9 of paper book) "On the representation of the Union PIH has agreed to engage it (the Truck Union) as a Truck Provider." 6.3 It also mentions as per Clause 2.1 that PIH is willing to utilize the services of the appellant " a s a service provider" on a non-exclusive basis and as per Clause 2.2 also use any other Service Provider to deal with the Truck Union, or deal with the Truck Union directly, which would be the determined by separate tripartite agreements. 6.4 As per Clause 2.3 the payments may be made through the Service Provider (the appellant) or even directly in the absence of the Service provider and the Service provider is required to intimate a confirmation to PIH on making any such payments. Thereafter Clauses 2.4 to 2.24 spell out the obligations of both the appellant and the Union together vis a vis the PIH as also the terms of the payments. As per Clause 2.7 any debarring of a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ges and damages is a matter of record. That the amount of Total Freight doses not enter the books of the appellant's as a receipt/ expense and is transferred directly to the Truck Union is a matter of record and not in dispute. That the appellant owns no trucks is also a matter of record and not in dispute. The Ld. AO's finding that the appellant was in earlier years showing the receipts from PIH in its books of accounts is not of consequence as the accounting treatment is as per the Tripartite agreement signed in Aril 2016 that is during the relevant FY of the impugned order. 6.9 It is my considered view that there is considerable merit in the appellant's submission that the primary liability to deduct tax at source for the payments made to the Truck Union is that of PIH. In fact Clause 5.2 of the Tripartite agreement clearly states that payments will be released by PIH after making adjustment for penalties (Clause 2.5) and deduction of tax at source. That the truck Union has not accounted for receipts from the Appellant Firm in its Profit and Loss Account for the FY under consideration is not relevant to the obligation on the appellant to deduct tax at source. That....
X X X X Extracts X X X X
X X X X Extracts X X X X
....all include- (a) ......... (b) (c) carriage of goods or passengers by any mode of transport other than by railways; (d) ........ (e) ......... 10. The aforesaid provisions have to be applied and appreciated in the context of the contractual understanding between the parties and in this regard, we refer to the tripartite agreement executed on 25/04/2016 between M/s Pepsico India Holding Pvt. Ltd., the Truck Operator Union and the assessee company wherein the scope of services are contained in Clause 2 of the said agreement and the contents thereof read as under: 11. Further, the Truck Operator Union's covenant are contained in Clause 3, matter relating to determination of freight rates and transit time are contained in Clause 5 and M/s Pepsico India Holding Pvt. Ltd.'s convenant are contained in Clause 6 and we deem it appropriate to reproduce the same as under: 12. On perusal of various clauses of the aforesaid tripartite agreement, we find that the goods being transported belong to M/s Pepsico India Holding Pvt. Ltd. and the work of carriage of goods through the trucks was carried out by the Truck Operator Union / Truck owners. The freight charges, transit time,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (Appeals) accepted the assessee's submissions. The Revenue appeal was dismissed by the Tribunal holding that the assessee was an intermediary between the exporters and the Airlines, it booked cargo on behalf of the exporters and mainly facilitated the contract for carrying goods and the principle contract was between the exporter and the Airlines. On further appeal, the Hon'ble High Court held that the Tribunal has rightly decided the nature of the contract between the parties concerned and it has been found as a matter of fact that the contract is actually between the exporters and the Airlines and the assessee is only an intermediary therefore it is not a person responsible for deduction of TDS in terms of Section 194C of the Act. In the instant case as well, the assessee acted as an intermediary between the Pepsico India Holding Pvt Ltd and the Trucker Operator Union/Truck owners and therefore, the ratio of the said decision applies in the instant case. 13. Following the said decision, Hon'ble Delhi High Court in its subsequent decision in case of CIT Vs. M/s Hardarshan Singh (Supra) has taken a similar view. Briefly the facts of the case were that the assessee was engaged....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he services rendered, the assessee charged commission from the airlines. According to the Assessing Officer, in that case, the assessee was liable to deduct tax at source on the payments made to the airlines. As can be noticed, the factual position is somewhat similar to the facts of the present case. Here also, the assessee collects freight charges from the clients who intended to transport their goods through separate transporters. The entire amount collected from the clients is paid to the transporters after deducting commission from the said amount. 8. In Cargo Linkers (supra), it was contended on behalf of the assessee that the assessee was not the 'person responsible' for making payment in terms of section 194C of the said Act. In that case, the Tribunal had also noted and found as a matter of fact that the assessee was nothing but an intermediary between the exporters and the airlines as it booked cargo for and on behalf of the exporters and mainly facilitated the contract for carrying goods. The principal contract was between the exporter and the airline. This court, in Cargo Linkers (supra), agreed with the view of the Tribunal which had mainly decided an issue of fact,....