HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 216 / 2016 Commissioner Of It Jaipur ----Appellant Versus M/S Sikar Jhunjhunu Zila Utpadak Sangh ----Respondent For Appellant(s) : Mr. K. D. Mathur on behalf of Mr. R. B. Mathur HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 26/04/2017 1. By way of this appeal, appellant has challenged judgment and order of Tribunal whereby Tribunal has allowed appeal preferred by assessee. 2. Counsel for appellant has framed followings substantial questions of law:- A. Whether in facts and circumstances of case ITAT has justified in law and has acted illegally and perversely in holding assessee not in default u/s. 201(1) for not deducting tax u/s. 194H on payment of commission/brokerage on price difference to milk societies (DCS & PDCS). B. Whether in facts and circumstances of case assessee it liable to deduct TDS u/s. 194H of AT Act on payment made by deductor to milk society (DCS) and (PDCS was in nature of commission/brokerage. C. Whether in facts and circumstances of case ITAT was justified in law in holding assessee not liable to deduction of tax u/s. 194H on margin of distribution to its distributors which was in fact commission and liable for TDS. (2 of 4) [ITA-216/2016] D. Whether in facts and circumstances of case assessee is liable to deduct TDS u/s. 194H of act on margin of distribution in payment made by assessee to its distributors. 3. However, in view of decision of this court in D. B. Income Tax Appeal No. 32/2016 (Pr. Commissioner of Income Tax, Jaipur-3 V/s Sikar & Jhunjhunu Zila Dugdh Utpadak Sahakari Sangh Ltd., N. H. 11, P. O. Palsana, Sikar AY 2011-12) decided on 16.11.2016 wherein identical issue was considered and it was held in Para 3 and 4 as under:- 3. Counsel for appellant has taken us to reasoning given by CIT (Appeals) and contended that issue which reads as under:- In lieu of Services Charges RCDF would be providing following services to Unions: (i) marketing Support as per requirement. (ii) Coordination with state/central government and financial institutions for various schemes. (iii) Finalising rate contracts for purchase of raw material for cattlefeed plants, packing material for milk and milk products and cattlefeed etc. (iv) Assist in plant management, engineering and quality assurance projects. (v) Preparation and monitoring of Integrated Business Planning and related financial analysis. (vi) Use of SARAS brand. (vii) Development and launching of new products. (viii) MIS/system support. It is evident from perusal of aforesaid documents that amount was paid by appellant to RCDF for various services rendred by RCDF to appellant. services was partly in nature of managerial services and partly for promotion and marketing of products of appellant. RCDF itself treated receipts as Service Charges . payment made by appellant was not in nature of reimbursement of expenses incurred by RCDF. It is clearly mention in aforesaid letter dated 04.11.1997 that RCDF will create reserve of maximum of 10% of its receipts for incurring specific expenditure for member societies. excess amount spent would be (3 of 4) [ITA-216/2016] recovered from member societies. It is not known that how much amount was spent by RCDF on behalf of appellant in this year. payment is made by appellant at fix percentage of its turnover, irrespective of expenditure incurred by RCDF. It is also evident from para 7 of assessment order that Rs.3,62,111/- was further paid to RCDF as sales promotion expenses . Hence, amount debited under head cess was not paid for any sales promotion or marketing activities undertook by RCDF. Considering all this facts and circumstances of case, I am of view that amount paid by appellant to RCDF is in nature of fees for professional or technical services on which provisions of section 194J is applicable. Since appellant has not deducted tax at source from such payment, expenditure is not allowable u/s 40(a)(ia) of Act. However, I agree with contention of ld. AR that provisions of sectioin 40(a)(ia) are not applicable on payments made before end of previous year, as held by Hon'ble ITAT, Jaipur in case of JVVNL (supra). A.O. is directed to verify actual payments made by appellant to RCDF during year and allow expenditure to that extent. 4. Tribunal reads order dated 21.07.2015, in para 3.13, has observed as under: I have heard rival contentions and perused materials available on record. Apropos payment to RCDF cess, it has not been demonstrated by Department that any managerial services in this connection have been rendered to assessee by RCDF qua this amount. RCDF is apex cooperative body and cess is paid to it by virtue of federal structure in Rajasthan cooperative set up. Thus as far as assessee's business is concerned, there is no rendering of any managerial services by RCDF as alleged by AO u/s 194H and upheld ld. CIT(A) u/s194J. Since there is no rendering of any services and payment is not made for any managerial services to RCDF, therefore, payment can neither be held as liable for TDS u/s 194H of Act as commission/brokerage as held by AO nor u/s 194J for rendering any managerial services as held by ld. CIT(A). In view thereof, we hold that assessee's impugned payment to RCDF are not liable for TDS. This ground of assessee is allowed. 4. In that view of matter, issue is answered in favour of (4 of 4) [ITA-216/2016] assessee and against department. appeal stands dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Gourav/18 Commissioner of Income-tax, Jaipur v. Sikar Jhunjhunu Zila Utpadak Sangh