Delhi High Court
The Commissioner Of Income Tax, ... vs M/S Mmtc Ltd. on 20 September, 2010
Author: A.K.Sikri
UNREPORTED
I-1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 651/2006
THE COMMISSIONER OF INCOME TAX, DELHI-II ..... Appellant
Through: Mr. Sanjeev Sabharwal, Advocate
versus
M/S. M.M.T.C. LTD. ..... Respondent
Through: Mr. Ajay Vohra, Ms. Kavita Jha,
Ms. Akansha Aggarwal and
Mr. Somnath Shukla, Advocates
% DATE OF DECISION: September 20, 2010
CORAM:
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MS. JUSTICE REVA KHETRAPAL
1. Whether reporters of local papers may be allowed
to see the judgment?
2. To be referred to the Reporter or not?
3. Whether judgment should be reported in Digest?
A.K. SIKRI, J. (ORAL)
1. Notice in this appeal was issued limited to question No.(c) which
pertains to allowing loss of ` 5.90 crores claimed on account of
expenses/payment made by the assessee.
2. The Department of Fertilizers, Ministry of Chemicals and
Fertilizers, Government of India had awarded a contract to M/s.
Paradeep Phosphates Ltd. (PPL), Bhubaneswar, a public sector
undertaking. PPL, in turn, entered into Memorandum of Understanding
(MoU) with the respondent assessee/MMTC, which is also a public
sector undertaking. Vide this MoU, PPL appointed MMTC as its
consignment agent to make necessary arrangements for the clearance of
the cargo, bagging of material and dispatch to upcountry
godowns/distributors in various States as per the allocation of
Department of Fertilizers on behalf of PPL. This agreement specifically
provided that the MMTC would practically be in the total possession of
the goods right from the moment the vessel is on the high seas. To
safeguard the financial interest of PPL, MMTC was required to pay, as a
security, the costs of goods and all dues to the other agencies such as
port authorities, etc. Further obligation was cast upon MMTC to open a
Letter of Credit in the name of Department of Fertilizers and also on
behalf of PPL. Agreement also provided that on receipt of sale note
from PPL, MMTC would hold the title over the above material and
thereafter it shall dispose of the material through its own distributors in
the concerned States as per the guidelines of Government of India/State
Government. The liability arising out of this contract was also of the
MMTC.
3. It is in the execution of the aforesaid contract/MoU that the
MMTC/assessee suffered losses to the extent of ` 5.90 crores, which
was claimed as loss. The ITAT has allowed the same, as it found that
the assessee could not realize the ideal price and because of this losses
were suffered. Para 13 to 17 and 21 of the MoU are relevant for this
purpose and are reproduced below:-
"13. That on receipt of sale note from PPL, MMTC
shall hold the title over the above material and
thereafter MMTC shall dispose off the above
material through their distributors in the
concerned states as per the guidelines of the
GOI/State Govt.
14. That it has been agreed upon between PPL and
MMTC that the terms and conditions as
prescribed in the tender format (as amended
from time to time) by the DOF, Ministry of
Chemicals & Fertilizers for handling and
distribution of imported UREA during 95-96
vide their letter No. 1-1/95/FA-Urea dated
16.3.95, a copy of which was also handed over
at the time of discussions shall be applicable to
MMTC on back to back basis. In case DOF
instruct PPL not to operate through
consignment agent i.e. MMTC, PPL would
have its right to discontinue this arrangement
after the completion of vessel already under
discharge without assigning any reason
thereof.
Any liability arising out of this contract
shall be to the account of MMTC. In case, at
any stage, PPL has incur any expenses, the
same shall be made good to PPL by MMTC.
15. That any demurrage to the vessel, shortage of
the material in the vessel/ports, if any, shall be
to the account of MMTC.
16. That any demurrage payable to Railways on
account of delay/detention in railway wagons
at the loading port or at the destination end
shall be on MMTC's account.
17. That any liability arising out of this contract
with regard to payment of CST/SST at any
point of time during the currency of the
contract or afterwards till the assessment is
finalized shall be to the account of MMTC.
Further as per rules prevailing in the states of
operation w.r.t. sales tax formalities, MMTC is
required to take the sales tax registration
under both local ST/CST though PPL would be
giving tax paid invoices to MMTC in the states
where product is taxable at first point of sale.
21. MMTC would pay to PPL a service charges of
` 7.5/- PMT for the quantities handled at each
port on ship to ship basis."
4. It is clear from the above that on the execution of the aforesaid
MoU, it is the MMTC who assumed the entire responsibility for the
execution of the said contract and for disposal of the stocks which were
to be imported. Entire amount in that behalf right from beginning, i.e.,
from the stage of payment of security, opening the Letter of Credit,
incurring the other expenses including taxes, Central sales tax, State
sales tax, etc. were to be borne by the MMTC and the ultimate liability
of the contract was also assumed by the MMTC. In these circumstances,
the view taken by the ITAT that it is the assessee who had taken over the
contract and suffered the losses therein cannot be faulted.
5. We are of the opinion that no question of law arises. Dismissed.
A.K. SIKRI, J.
REVA KHETRAPAL, J.
SEPTEMBER 20, 2010
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