The Delhi High Court, in a judgment in January 2012, held that Mother Dairy was not liable to deduct TDS on such payments.
On a couple of appeals filed by the income-tax department, the SC also issued notice to Mother Diary, which acts as selling agent and undertakes activities in connection with procurement, processing, storage and marketing, including retail sale of milk and other products.
The I-T department argued that the HC had erred in holding that the relationship between Mother Diary and its concessionaries was that of principal-to-principal and not principal-to-agent, thus the payment made by the dairy to its concessionaries for selling milk, milch products and vegetables was not commission and therefore, the assessee was not liable to deduct TDS u/s 194-H of the I-T Act.
According to the revenue authorities, the HC failed to appreciate that the asseesee had a right to enter the milk booth and take charge thereof any time without assigning any reason or without any intimation to the concessionaires. Further, the concessionaires were not paying any rent to the assessee, they added.
The department had treated the difference between the bill value and the MRP fixed by Mother Dairy as commission paid to the agents and accordingly treated the assessee as a defaulter and charged it to tax and interest.
While the CIT (Appeals) had affirmed the assessing officers order, the sectoral tribunal concluded that that the relationship between the assessee and the concessionaires was that of principal-to-principal and the difference between the price at which the assessee sold the milk and other products to the concessionaires and the MRP at which the concessionaires were to sell them to consumers was not liable to be treated as commission for tax purposes. The HC decision had also favoured the assessee.