The main legal point established in the judgment is that the relationship between the assessee and the concessionaires was that of principal to principal and not that of principal and agent, and the difference between the price at which the assessee sold the 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 within the meaning of Section 194H.

R.V. EASWAR, J.

These are five appeals filed by the Revenue under Section 260A of the Income Tax, hereinafter referred to as the “Act”. ITA Nos.1925/2010 and 313/2011 relate to the assessee M/s Mother Dairy India Ltd. for the assessment years 2004-05 and 2005-06. ITA Nos.310/2011, 319/2011, 312/2011 have been filed by the Revenue in the case of connected assessee namely Mother Dairy Food Processing Ltd. for the assessment years 2004-05 and 2005-06. The issue in all the five appeals is the same and we shall refer to it in the succeeding paragraphs.

2. We may first take up the case of M/s Mother Dairy India Ltd. for the assessment year 2004-05. This company hereinafter referred to as “Dairy”, was incorporated on 1.4.2003 as wholly owned subsidiary of another company by name Mother Dairy Fruit and Vegetable Ltd. The main objects of the assessee are to act as selling agents, sale organizers and advisors and to undertake activities in connection with procurement, processing, storage and marketing including retail, sale of milk and other products. On 9.12.2004 there was a survey under Section 133A of the Act in the business premises of Ms/ Mother Dairy Food Processing Ltd., which is the other assessee in the appeals before us, at Parparganj, Delhi. In the course of the survey it was found that tax was not being deducted at source on the payment of commission to agents/concessionaires, who sold milk and other products of the assessee from the booths owned by the assessee. According to the revenue, the assessee ought to have deducted tax under Section 194H of the Act from the payments made to the concessionaires, on the footing that the payment represented commission within the meaning of Explanation (i) below the Section. According to the Explanation commission 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 case of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities. Accordingly, the assessee was called upon to explain why orders cannot be passed under Section 201(1)/201(1A) treating the assessee in default and charging interest for the period of the default in not deducting the taxes.

3. The assessee explained in writing that it sold the products to the concessionaires on a principal to principal basis, that the concessionaires buy the products at a given price after making full payment for the purchases on delivery, that the milk and other products once sold to the concessionaires became their property and cannot be taken back from them, that any loss on account of damage, pilferage and wastage is to the account of the concessionaires and that in these circumstances the payment made to the concessionaires cannot be treated as “commission” for services rendered and consequently there was no liability on the part of the assessee to deduct tax.

4. The above explanation was submitted by the assessee on 17.1.2005. Another letter was written on 28.3.2008 reiterating the earlier submissions. It was further stated in this letter that the word “commission”, which was said to have been used by the assessee in two circulars issued by it, which were found during the survey was used in the generic and popular sense and that it cannot be taken as a admission of the assessee that what was paid to the concessionaires represented commission requiring deduction of tax under Section 194H.

5. The Assessing Officer considered the submissions of the assessee. He noted that the booths were constructed by the assessee on its own and they were allotted to the concessionaires at its discretion. The milk and other products were sold from these booths by concessionaires during fixed hours of the day. An agreement was entered into between the assessee and the concessionaires. Clause 43 of the agreement provided that the a