Commissioner of Income Tax Del v. Sara International Ltd

V. B. GUPTA, J.

MADAN B. LOKUR, J. March 27, 2008 rs

* HIGH COURT OF DELHI : NEW DELHI % Judgment reserved on: 18th March, 2008 Judgment delivered on: 27th March, 2008 Commissioner of Income Tax Delhi-XVII Mayur Bhawan Connaught Circus New Delhi ..... Petitioner. Through: Mr. R.D. Jolly, Adv. Vs. Sara International Ltd. A-31, Hauz Khaz, Delhi ..... Respondent Through: Mr. K. Sampath, Adv. Coram: HON'BLE MR. JUSTICE MADAN B. LOKUR HON'BLE MR. JUSTICE V.B. GUPTA 1. Whether the Reporters of local papers may be allowed to see the judgment? Yes 2. To be referred to Reporter or not? Yes 3. Whether the judgment should be reported in the Digest? Yes V.B.Gupta, J. The Revenue has filed this appeal under Section 260A of the Income Tax Act, 1961 (for short as "Act") against the impugned order dated 2nd December, 2005 passed by the Income Tax Appellate Tribunal, Delhi Bench "A" in ITA T.D.S. No.212/Del/2003 for the assessment year 2001-02 vide which the appeal filed by the Assessee was allowed. 2. Brief facts of this case are that the Assessee filed TDS return on Form No.26-C and the same was selected for scrutiny by the Assessing Officer. During the course of the proceedings, it was seen as per the details and copies of Ledger Account that the Assessee had shown expenses of Rs.87,27,705/- as commission under the head "Salary Expenses". Out of these expenses, a sum of Rs.62,60,705/- was paid to M/s. PEC Ltd, Rs.1,64,000/- to M/s. Bhura Export Ltd. and Rs.23,03,000/- to M/s. Ayusa International. The Assessee had submitted documents as far as M/s. Bhura Export Ltd. and M/s. Ayusa International were concerned but no agency agreement with M/s. PEC Ltd. was filed. The Assessee explained that commission was paid to M/s. PEC Ltd. for export of wheat. The Assessing Officer asked the Assessee to furnish evidence in support of its explanation. The Assessee filed copy of agreement dated 10th February, 2001. After examining the agreement, Assessing Officer came to the conclusion that the payment made by the Assessee was covered within the meaning of fee for technical services and it was not a case of payment of commission and as such Assessee was liable to deduct tax at source under Section 194-J of the Act and since the Assessee has failed to make the deduction, it was Assessee in default within the meaning of Section 201(1) of the Act and also liable to pay interest. 3. Against the order passed by the Assessing Officer, Assessee filed an appeal before the Commissioner of Income Tax (Appeal) (for short as "CIT[A]") and the CIT(A) vide its order dated 6th October, 2003 upheld the order of the Assessing Officer. Against the order of the CIT(A), the Assessee filed an appeal before the Tribunal and vide the impugned order the Tribunal accepted the appeal of the Assessee and set aside the orders of the lower authorities. Now, the Revenue is before this Court. 4. It has been contended by learned counsel for the Revenue that the relevant clauses of the agreement clearly show that there was no relationship of Principal and agent between the Assessee and M/s. PEC Ltd. Further, no commission was received by M/s. PEC Ltd. and the services rendered by it were professional and technical in nature. 5. On the other hand, it has been contended by learned counsel for the Assessee that the Assessee had paid commission to M/s. PEC Ltd. which was exempt from TDS deduction and M/s. PEC Ltd. had transferred a simple contract of supplies to the Assessee against the payment and M/s. PEC Ltd. was not rendering any kind of professional/technical services. 6. Relevant clauses of the agreement dated 10th January, 2001 entered between M/s. PEC Limited and the Assessee has been reproduced by the Tribunal in the impugned order. 7. Sec. 194H of the Act defines the expression "commission" 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 or selling of goods or in r