M/S HINDUSTHAN COCO COLA BARVE vs. C I T JAIPUR

Appeals are allowed.

The impugned orders passed by the authorities are hereby set aside.

The matter is remitted back to the assessing authority only to find out how the books are maintained and how the sale price and the sale discount is treated and whether the sale discount is reflected in their books. If the accounts are not reflected as set out above, in para 60, Section 194H of the Act is not attracted. Ordered accordingly."

He has also relied upon the decision of Calcutta High Court in the case of Hutchison Telecom East Ltd. Vs. Commissioner of Income-Tax- (2015) 375 ITR 566 (Cal) wherein it is held as under:

The terms and conditions noticed above leave no manner of doubt that the relationship

The judgments cited by Mr. Khaitan do not really provide any assistance to him in deciding the matter in one way or the other. In the case of Daruvala Bros. (P) Ltd. (Supra), the question for consideration was whether the compensation received by the assessee was a revenue receipt or a capital receipt. The contention was that the compensation had been received by the assessee because the agency was surrendered for some of the territories. In lieu of such surrender, the compensation was paid by the principal. It is in that context, the question was considered and it was held that the sum paid to the assessee did not partake the character of compensation at all. We do not find any applicability of this judgment to the issue before us.”

We have heard learned counsel for the parties.

Now, the first question which has come up for our consideration is, ‘whether in the facts and circumstances of the case the learned Tribunal was right and justified in holding that assessee was liable to withhold tax at source under S. 194H of the Income Tax Act, 1961 amounting to Rs.19,74,842/- (including interest) in respect of sales to its distributors, which are on principal to principal basis and wherein property in the goods is (128 of 139) [ITA-205/2005]

Taking into account the provisions of Section 182 of the Contract Act and the arrangement which has been entered into between the company and the distributor and taking into account the provisions of Section 194H, the Tribunal while considering the evidence on record, in our considered opinion, has misdirected itself in considering the case from an angle other than the angle which was required to be considered by the Tribunal under the Income Tax Act. 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 our specific query to the counsel for the 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.

In that view of the matter, if we look at the provisions of Section 194H and even if explanation is taken into consideration, there is no occasion of invoking provisions of Section 194H, since the amount is not paid by the assessee.

Taking into account the conclusion which has been arrived at by the Tribunal is misdirected in view of the arrangement which has been arrived at between the company and the Distributor. Assuming without admitting, if the contention which has been raised before the Tribunal is accepted, the same can be at the most expenses which are not allowable under the (129 of 139) [ITA-205/2005]

In our considered opinion, 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, in our considered opinion, the provisions of Section 194H have wrongly been invoked, and therefore, the first issue is answered in favour of assessee and against the Department.

The second issue which has been raised for our consideration, as discussed hereinabove, the Management Information System was not a part of their books of accounts nor could have been relied upon by the Income Tax Authorities. The basis on which the proceedings were initiated, in our considered opinion, the Statutory Audit Report is final conclusion over the authorities under the Income Tax Act, therefore, the second issue

Regarding third issue whether 201A or 201(1A), in view of the decisions of different High Courts, the argument canvassed by counsel for the appellant pre-supposes deduction out of the payment. In our conclusion in issue No.1, the amount was not required to be deducted since they have not made any payment. In that view of the matter any proceedings under Section 201 or 201(1A) are misconceived. In that view of the matter, this issue is also answered in favour of assessee.

Contention regarding provisions of Section 271 of the Act,in view of our answer in favour of assessee, this issue is also required to be answered in favour of assessee. Even otherwise as rightly held by the Supreme Court in CIT Vs. Eli Lilly & Co. (India) P. Ltd.(supra), the penalty could not have been levied in all the appeals filed by assessee Coca Cola. M/s Bharti Hexacom Ltd.

Regarding the other appeals of Cellular Companies the questions are required to be answered as discussed hereinabove. The relationship is not of agent. It is principal to principal basis. The payment is received by the company and the amount of commission is never paid to the agent or the Distributor. Therefore, no TDS is required to be deducted. We also accept the contention raised by Mr. Jhanwar that even otherwise in view of divergent judicial views, one in favour of the assessee is required to be adopted as per settled law. Taking into consideration the above conclusion, the first issue is required to be answered in (133 of 139) [ITA-205/2005]

Regarding Section 194J of the Act, in view of the Kerala High Court decisions, the issue is answered in favour of assessee and third issue even as per the statutory definition, there is no service and Sections 201 and 194H would not apply in view of the agreement as referred hereinabove. Tata Teleservices

In view of agreement the issue regarding 194H and 194J as held in other cases, both the issues are answered in favour of the assessee. Vodafone

Issues regarding Sections 194H, 194J and 201 of the Act, they are answered in favour of assessee.

Additional questions are framed in the case of Department. There are 5 issues in favour of assessee (issue Nos. 1 and 2 are wrongly framed by the Court). However, in view of our above discussion, they are required to be answered in favour of the assessee.

In case of appeal preferred by the assessee, issue No.4 is required to be answered in favour of assessee that the CIT (A) has all jurisdiction to restore or set aside the judgment of AO since it is a statutory appeal, the appellate court has all powers to deal with the same. All other issues are answered in favour of the assessee.

As the agreement is produced, issues are answered in favour of assessee in the departmental appeals.

Even the contention which has been raised by the counsel for the assessee that the final tax is paid by the Distributor and not by the agent, the revenue is not at loss in any form.

In view of above, all the issues in each appeal are answered in tabular form as follows: Sr. No. Appeal No. Ques.1 Ques.2 Ques.3 Ques.4 Ques.5 1. 205/2005 In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department -- -- 2. 206/2005 In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department -- -- 3. 10/2007 In favour of assessee and against the department In favour of assessee and against the department In favour of assessee and against the department -- – 4. 55/2007 In favour of assessee and against the department In favour of assessee and against the department – -- -- 5. 6/2008 In favour of assessee and against the department In favour of assessee and against the department – -- – 6. 7/2008 In favour of assessee and against the department In favour of assessee and against the department – -- -- 7. 540/2009 In favour of In favour of – -- --

106/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- – – 37. 107/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- – -- 38. 108/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- – -- 39. 199/2016 Against the department and In favour of assessee Against the department and In favour of assessee -- – -- 40. 200/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee – -- 41. 204/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee – -- 42. 209/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee – -- 43. 210/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee – -- 44. 217/2016 Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee Against the department and In favour of assessee

In view of the above discussion, all the appeals of assessees are allowed and those of Department are dismissed. A copy of this judgment be placed in each file. (INDERJEET SINGH),J. (K.S. JHAVERI),J. BM Gandhi