M/S DELHI MILK SCHEME vs. COMMISSIONER OF INCOME TAX DEL

Commissioner of Income-tax, Delhi-II

Deputy Commissioner of Income Tax

ITA No. 636 of 2007

Deputy Commissioner of Income Tax

Whether the Reporters of local papers may be allowed to see the judgment?

To be referred to Reporter or not?

Whether the judgment should be reported

The issue that arises in this case is whether the assessee was liable to deduct tax at source on milk and milk products sold by it through `concessionaires‟ appointed by it.

According to the assessee, there was no principal to agent relationship between the assessee and the concessionaires but it was a principal to principal relationship and, therefore, commission as defined in the Explanation to Section 194-H of the Act was not applicable.

It was submitted by learned counsel for the assessee that in fact the assessee was giving a discount to the concessionaires and there was no question of any commission being paid to them.

Looking to the facts of the case, namely, that the ownership of the milk booth rests with the assessee who does not charge any rent for the use of the booths from the concessionaires; the unsold milk is taken back by the assessee from the concessionaires who are prohibited from selling any other product of any other brand; the sale collections of the concessionaires are collected in cash by the concerned clerk of the assessee from them on a daily basis, there can be no doubt that the concessionaires are selling milk for and on behalf of the assessee and are being paid a commission for it.

The expression „commission‟ has been defined in the

On the other hand, the word „discount‟ had come up for consideration in Harihar Cotton Pressing Factory v. Commissioner of Income-tax, [1960] 39 ITR 594. In that decision, it was held that a discount or a drawback is another word for a rebate which is a remission or a payment back and of the nature of a deduction from the gross amount. In other words, it includes a refund to the purchaser of a thing or commodity of a portion of the price paid by him.

In a slightly different but nevertheless an apposite context, the Supreme Court described a `trade discount‟ in A.K. Roy v. Voltas

On the facts of the case, it is quite clear that the milk and milk products are not sold by the assessee to the concessionaires. On the contrary, unsold milk is taken back by the assessee from the concessionaires, without any price reduction. Therefore, whichever way one looks at the matter, from the point of view of the definition of the word „commission‟, as appearing in the Explanation to Section 194-H of the Act or from the meaning of the word „discount‟, the transaction between the assessee and the concessionaires is a principal to agent transaction and not a principal to principal transaction.

The Tribunal has found, as a matter of fact, that the milk booths are owned by the assessee; the assessee has a right to enter the milk booth and take charge thereof any time without assigning any reason or without any intimation to the concessionaires; unsold milk is taken back by the assessee from the concessionaires; cash collection is daily handed over to the assessee by the concessionaires; the concessionaires only render a service to the assessee for selling milk to

We also do not find any perversity in the findings of fact that have been arrived at by the Tribunal on the basis of the agreement entered into between the assessee and the concessionaires and the terms of their appointment.

That being the position, we are of the opinion that no substantial question of law arises.

The appeal is dismissed. No costs.