Dy. CIT, CIRCLE - 3(1)(TDS), Vijayawada V. M/s Sudalagunta Sugars Ltd.,

ITA 129/VIZ/2013

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9679 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-12-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 25-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATYANADHAM
• Assessee Lawyers: K J D SRINIVAS
• Keywords: Cost of acquisition
• Section: 143(3); 133A; 194C; 201(1)

Judgement Text

ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NOS.127, 128 & 129/VIZAG/2013 ( / ASSESSMENT YEARS: 2009-10, 2010-11 & 2011-12) DCIT, CIRCLE - 3(1)(TDS), VIJAYAWADA VS. SUDALAGUNTA SUGARS LTD., CHITTOOR DIST. [TAN: HYDS05706B ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI SATYANADHAM, D R / RESPONDENT BY : SHRI K.J.D. SRINIVAS, A R / DATE OF HEARING : 03.10.2016 / DATE OF PRONOUNCEMENT : 09.12.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE ARE THREE APPEALS FILED BY THE REVENUE ARE D IRECTED AGAINST COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX (APP EALS), VIJAYAWADA DATED 06-12-2012 AND IT PERTAINS TO THE A.Y. 2009-10, 2010-11 AND 2011-12. SINCE, THE FACTS ARE IDENTICAL AND ISSUE IS ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 2 COMMON, THEY ARE HEAD TOGETHER AND DISPOSED OFF, BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF SUGAR AND ALLIED PRODUCTS. A SURVEY UNDER SEC. 133A WAS CONDUCTED IN THE BUSINES S PREMISES OF THE ASSESSEE ON 23-12-2010. DURING SURVEY OPERATION, IT WAS COME TO THE LIGHT OF THE A.O. THAT THE ASSESSEE HAS BEEN ENGAGE D CONTRACTORS FOR THE PURPOSE OF HARVESTING AND TRANSPORTING SUGAR CANE F ROM FARMERS FIELDS TO ITS FACTORY AND MAKING PAYMENTS TO SUCH CONTRACT ORS. TO ASCERTAIN THE NATURE OF PAYMENTS TO CONTRACTORS AND ALSO TO EXAMI NE THE APPLICABILITY OF TDS PROVISIONS OF SEC. 194C, THE A.O. ISSUED A D ETAILED NOTICE AND ASKED EXPLAIN THE NATURE OF CONTRACT AND COMPLIANCE WITH RELATED TDS PROVISIONS. IN RESPONSE TO NOTICE, THE ASSESSEE SUB MITTED THAT IT IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF SUGAR. IT WAS FURTHER SUBMITTED THAT TO GET RAW MATERIAL BEING SUGAR CANE TO ITS FACTORY IT ENTERS INTO AGREEMENT WITH FARMERS GROWING SUGAR CA NE IN COMMAND AREA FOR SUPPLY OF SUGAR CANE AS PER THE SUGARCANE CONTROL ORDER ISSUED BY THE GOVT. THE ASSESSEE FURTHER SUBMITTED THAT AS PER THE AGREEMENT ENTERED WITH THE FARMERS, THE FARMERS SHALL SUPPLY SUGARCANE AT FACTORY GATE FOR A AGREED PRICE FIXED BY THE STATE GOVT. HO WEVER, AS PER THE REQUEST OF FARMERS AND ALSO TO FACILITATE SMOOTH SU PPLY OF SUGAR CANE, IT ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 3 HAS EMPLOYED HARVESTING GANG LABOURS FOR CUTTING SU GARCANE AND TRANSPORTERS FOR TRANSPORTING SUGARCANE TO THE FACT ORY GATE ON BEHALF OF THE FARMERS AND PAID AMOUNT TO SUCH CONTRACTORS OUT OF AMOUNT PAYABLE TO FARMERS TOWARDS SUGARCANE PURCHASE PRICE. THE AS SESSEE FURTHER SUBMITTED THAT THE WHOLE IDEA BEHIND THIS ARRANGEME NT IS TO HELP FARMERS TO HARVEST SUGARCANE AT RIGHT SEASON, OTHER WISE SUGARCANE WOULD DRIED UP AND FARMERS WOULD LOSE MONEY IN TERM S OF WEIGHT. THE COMPANY ENTERED IN TO AGREEMENT WITH HARVEST GANG L ABOURS AND TRANSPORTERS ON BEHALF OF FARMERS AND PAID MONEY ON BEHALF OF FARMERS AND FINALLY ADJUSTED AGAINST SUGARCANE PRICE PAYABL E TO THE FARMERS, THEREFORE PAYMENTS MADE TO HARVEST GANG LABOURS AND TRANSPORTERS ARE NOT COMING WITHIN THE AMBIT OF SECTION 194C OF THE ACT. IN SUPPORT OF ITS ARGUMENTS RELIED UPON THE DECISION OF ITAT, AHMEDAB AD REPORTED IN 394 ITR 1. 3. THE ASSESSING OFFICER AFTER CONSIDERING SUBMISS IONS OF ASSESSEE AND ALSO ANALYSIS OF THE PROVISIONS OF SECTION 194C , HELD THAT THE TRANSACTION BETWEEN THE ASSESSEE AND HARVEST GANG L ABOURS AND TRANSPORTERS IS IN THE NATURE OF WORK AS DEFINED UN DER SECTION 194C OF THE ACT. THE A.O. FURTHER OBSERVED THAT THEIR EXIST ED A VALID CONTRACT BETWEEN THE ASSESSEE COMPANY AND THE HGLS AND TRANS PORTERS FOR CARRYING OUT WORK OF HARVESTING AND TRANSPORTATION OF SUGAR CANE. ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 4 THE A.O., AFTER ANALYZING THE PROVISIONS OF SECTION 194C, COME TO THE CONCLUSION THAT ARRANGEMENT BETWEEN THE ASSESSEE AN D HARVESTING GANG LABOURS AND TRANSPORTERS IS UNDOUBTEDLY COMING WITH IN THE AMBIT OF WORK AS DEFINED UNDER SEC. 194C AND ACCORDINGLY, PA YMENTS TO HGLS AND TRANSPORTERS IS LIABLE FOR TDS U/S 194C OF THE ACT. THE A.O. HAS ELABORATELY DISCUSSED THE PROVISIONS OF SEC. 194C, CLAUSE (3) OF SUGAR CONTROL ORDER AND CASE LAW RELIED UPON BY THE ASSES SEE. ACCORDING TO THE A.O., AS PER THE PROVISIONS OF SEC. 194C, THE LIABI LITY TO DEDUCT TAX AT SOURCE ARISES TO THE PERSON RESPONSIBLE FOR MAKING PAYMENT WHETHER OR NOT SAID PERSON MAKING PAYMENT FOR ITSELF OR ON BEH ALF OF THIRD PARTY. THE MOMENT PAYMENTS ARE COVERED U/S 194C, ANY PERSO N MAKING PAYMENTS SHALL DEDUCT TDS AS PER THE RATES PRESCRIB ED THEREUNDER. THE A.O. DRAWN SUPPORT FROM THE CBDT CIRCULAR NO. 8/200 9 DATED 24-11- 2009 AND ALSO APPLIED THE RATIO OF THE DECISION OF BOMBAY HIGH COURT, IN THE CASE OF DEDICATED HEATH CARE SERVICES TPA (INDI A) PVT LTD. REPORTED IN 232 ITR 41(BOM), AND OBSERVED THAT THIRD PARTY A DMINISTRATORS ACTING ON BEHALF OF INSURANCE COMPANIES AND ENTERING INTO CONTRACTS WITH HOSPITALS FOR SETTLEMENT INSURANCE CLAIMS ARE RESPO NSIBLE FOR DEDUCTING TDS ON PAYMENTS MADE TO HOSPITALS ON BEHALF OF INSU RANCE COMPANIES. THE A.O. ALSO DISTINGUISHED CASE LAW RELIED UPON BY THE ASSESSEE IN THE CASE OF SHRI KAMRAJ VIBAGH SAHAKARI KHANDI UDYOG MA NDLI LTD, REPORTED ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 5 IN 394 ITR 1 (AHD) AND OBSERVED THAT FACTS ARE ENTI RELY DIFFERENT FROM THE PRESENT CASE. THE A.O. FURTHER OBSERVED THAT IN THE CASE BEFORE ITAT, AHMEDABD, IN ADDITION TO SUGAR FACTORY AND TH E FARMERS THERE WAS ANOTHER ENTITY KNOWN AS ZONE SAMITHI WHICH MADE P AYMENTS TO THE FARMERS, BUT NOT THE SUGAR FACTORY. WITH THESE OBSE RVATIONS, HELD THAT SINCE, THE ASSESSEE COMPANY MADE PAYMENTS IN PURSUA NCE OF A AGREEMENT WITH HGLS AND TRANSPORTERS, WHETHER OR NO T SAID PAYMENTS OR MADE ON BEHALF OF FARMERS, THE PAYMENTS ARE CLEARLY COVERED UNDER THE PROVISIONS OF SEC. 194C. SINCE, THE ASSESSEE FAILED TO DEDUCT TDS ON SUCH PAYMENTS, HELD ASSESSEE AS AN ASSESSEE IN DEFA ULT U/S 201(1) FOR THE A.Y. 2009-10 TO 2011-12. 4. AGGRIEVED BY THE ORDER, THE ASSESSEE PREFERRED A N APPEAL BEFORE THE CIT(A). BEFORE, THE CIT(A), THE ASSESSEE FILED ELAB ORATE WRITTEN SUBMISSION. THE ASSESSEE FURTHER SUBMITTED THAT RES PONSIBILITY OF HARVESTING AND TRANSPORTING SUGAR CANE TO THE FACTO RY IS PRIMARILY ON THE FARMERS. THE ASSESSEE COMPANY BUYS SUGARCANE FROM F ARMERS AT EX FACTORY GATE AND FARMERS ARE PAID A PRICE FIXED BY THE STATE GOVT. THE COMPANY ARRANGES HARVESTING GANG LABOURS AND TRANSP ORTERS TO FACILITATE SMOOTH HARVESTING AND TRANSPORTATION OF SUGAR CANE TO THE FACTORY. ALL THE HGLS ARE ENGAGED BY THE COMPANY ON BEHALF OF FARMERS AND THE PAYMENT TO HGLS AND TRANSPORTERS ARE DEBITE D TO INDIVIDUAL ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 6 FARMERS ACCOUNT AND FINALLY GET ADJUSTED AGAINST PU RCHASE PRICE PAYABLE TO THE FARMERS. IT WAS FURTHER SUBMITTED THAT ALL A MOUNTS PAID TO HGLS AND TRANSPORTERS IS ACCOUNTED AS ADVANCE GIVEN TO F ARMERS AND THE COMPANY DID NOT CLAIM IT AS ITS EXPENDITURE. IT WAS FURTHER SUBMITTED THAT EVEN ASSUMING FOR A MOMENT, THE PAYMENTS ARE C OVERED UNDER SEC. 194C, IN ANY CASE INDIVIDUAL PAYMENT OR AGGREGATE O F SUCH PAYMENT IN A FINANCIAL YEAR TO ANY LABOUR DOES NOT EXCEED THE LI MIT SPECIFIED U/S 194C, THEREFORE QUESTION OF TDS DOES NOT ARISE. THE ASSES SEE ALSO MADE A ALTERNATIVE PLEA IN AS MUCH THE PROVISSONS OF SEC. 194C APPLICABLE TO ANY PERSON MAKING PAYMENT FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT. IN THIS CASE THE PERSON MAKING PAYMENTS A RE FARMERS OUT OF AGRICULTURAL INCOME AND ANY EXPENDITURE INCURRED AG AINST AGRICULTURAL INCOME IS ALSO NOT FARMING PART OF INCOME AND AS SU CH THE PAYMENTS ARE NOT COMING WITHIN THE DEFINITION OF WORK U/S 194C O F THE ACT. 5. THE CIT(A), AFTER CONSIDERING SUBMISSIONS OF THE ASSESSEE, HELD THAT PAYMENTS TO HARVESTING GANG LABOURS AND TRANSPORTER S ARE ON ACCOUNT OF AGRICULTURAL CANE GROWING FARMERS, FORMS PART OF PU RCHASE PRICE OF SUGARCANE, INCURRED BY THE FARMERS AND PAID BY THE ASSESSEE ON BEHALF OF FARMERS TO BE FINALLY ADJUSTED AGAINST PURCHASE PRICE ARE NOT COMING WITHIN THE AMBIT OF THE PROVISIONS OF SECTION 194C OF THE ACT. THE CIT(A) FURTHER HELD THAT FROM THE RECORDS IT TRANSPIRES TH AT IT IS THE RESPONSIBILITY ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 7 OF THE FARMERS TO BRING SUGARCANE TO THE FACTORY ON THEIR OWN COST. THE ASSESSEE PURCHASES SUGAR CANE FOR PRICE FIXED BY TH E STATE GOVT. IT IS ALSO AN ADMITTED FACT THAT AMOUNTS PAID TO HGLS AND TRANSPORTERS IS DEBITED TO FARMERS ACCOUNT AS ADVANCE AND FINALLY A DJUSTED AGAINST PURCHASE PRICE PAYABLE TO THE FARMERS, THEREFORE PA YMENTS TO HGLS AND TRANSPORTERS IS NOT COMING WITHIN THE AMBIT OF SECT ION 194C OF THE ACT. THE CIT(A) FURTHER HELD THAT ALTERNATIVELY, THERE I S A MERIT IN THE ARGUMENTS OF THE ASSESSEE THAT THE END RECEIVER IS FARMER WHOSE INCOME IS AGRICULTURAL INCOME EXEMPT FROM TAX, AS SUCH ANY EXPENDITURES AGAINST SUCH INCOME IS NOT COMING WITHIN THE DEFINI TION OF WORK U/S 194C OF THE ACT. THUS, THERE IS NO TDS LIABILITY ON THE ASSESSEE ON THE PAYMENTS TO HARVESTING GANG LABOURS AND TRANSPORTER S. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US. 6. THE LD. D. R. SUBMITTED THAT THE LD. CIT(A) ERR ED IN HOLDING THAT THERE IS NO TDS LIABILITY ON THE ASSESSEE ON THE PA YMENTS MADE TO HGL AND TRANSPORTERS. THE LD. CIT(A) ERRED IN ACCEPTING THAT WHEN SUGARCANE IS CONSIDERED AS CASH CROP AND PART OF SUGARCANE IN COME IS FARMS PART OF TOTAL INCOME LIABLE FOR TAX, THEN ALSO NO FARMER CO MES UNDER TAX NET. THE D.R. FURTHER SUBMITTED THAT THE A.O. CLEARLY BROUGH T OUT THE FACTS THAT THE ARRANGEMENT BETWEEN THE ASSESSEE AND HGL AND TR ANSPORTERS IS COMING WITHIN THE DEFINITION OF WORK AS DEFINED U/S 194C AND THE ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 8 RESULTANT PAYMENTS ARE LIABLE FOR TDS, FAILED TO AP PRECIATE THE FACTS, SIMPLY HELD THAT THE PAYMENTS ARE NOT LIABLE FOR TD S U/S 194C WITHOUT NARRATING HOW THE IMPUGNED PAYMENTS ARE NOT ATTRACT ED TDS PROVISIONS. SINCE, THE ASSESSEE COMPANY MADE THE PAYMENTS IN PU RSUANCE OF A AGREEMENT WITH HGLS AND TRANSPORTERS, WHETHER OR NO T SAID PAYMENTS ARE MADE ON BEHALF OF FARMERS, THE PAYMENTS ARE CLE ARLY COVERED UNDER THE PROVISIONS OF SEC. 194C. SINCE, THE ASSESSEE FA ILED TO DEDUCT TDS ON SUCH PAYMENTS, THE A.O. HELD ASSESSEE AS AN ASSESSE E IN DEFAULT U/S 201(1) AND HIS ORDER SHOULD BE UPHELD. 7. THE LD. A.R. FOR THE ASSESSEE STRONGLY SUPPORTED ORDER OF THE CIT(A). THE A.R. SUBMITTED THAT THE A.O. WITHOUT AP PRECIATING FACTS IN PROPER PERSPECTIVE, HELD ASSESSEE AS AN ASSESSEE IN DEFAULT, DESPITE SUBMITTING ALL RELEVANT FACTS TO THE A.O. AND EXPLA IN HOW THE PAYMENTS ARE NOT HIT BY THE PROVISIONS OF SEC. 194C OF THE A CT. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS PAID AMOUNT TO HGL AND TRANSPORTERS ON BEHALF OF FARMERS OUT OF ADVANCE/ARREARS PAYABLE TO THE FARMERS TOWARDS SUGARCANE PURCHASE COST AS PER THE AUTHORIZ ATION/INSTRUCTIONS OF THE FARMERS. THE ASSESSEE ONLY ARRANGED THE HGL AND TRANSPORTERS FOR THE BENEFIT OF FARMERS TO FACILITATE SMOOTH HARVEST ING AND TRANSPORTATION OF SUGARCANE. THE WHOLE IDEA BEHIND THIS EXERCISE I S TO HELP FARMERS FOR SMOOTH HARVESTING SUGARCANE AND ALSO TIMELY TRANSPO RTATION OF ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 9 SUGARCANE WITHOUT ANY DELAY SO AS TO AVOID LOSS TO THE FARMERS BECAUSE PERISHABLE NATURE OF CROP. THE A.R. REFERRING TO TH E INDIVIDUAL FARMERS LEDGER ACCOUNT, FURTHER SUBMITTED THAT ALL THE HGLS ARE ENGAGED BY THE COMPANY ON BEHALF OF FARMERS AND PAYMENT TO HGLS AN D TRANSPORTERS ARE DEBITED TO INDIVIDUAL FARMERS ACCOUNT AND FINAL LY GET ADJUSTED AGAINST PURCHASE PRICE PAYABLE TO THE FARMERS. IT W AS FURTHER SUBMITTED THAT ALL AMOUNTS PAID TO HGLS AND TRANSPORTERS IS A CCOUNTED AS ADVANCE GIVEN TO FARMERS AND THE COMPANY DID NOT CLAIM IT A S ITS EXPENDITURE. IN SUPPORT OF HIS ARGUMENTS RELIED UPON THE DECISION O F ITAT, AHMEDABAD IN THE CASE OF SHRI KAMRAJ VIBAGH SAHAKARI KHANDI U DYOG MANDLI LTD, REPORTED IN 394 ITR 1 (AHD) AND SUBMITTED THAT WHEN HARVESTING GANG LABOUR CHARGES AND TRANSPORTATION CHARGES PAID BY T HE ASSESSEE COMPANY ON BEHALF OF FARMERS AND DEBITED TO FARMERS ACCOUNT AND FINALLY ADJUSTED AGAINST PURCHASE COST OF SUGARCANE , THE PAYMENTS TO HGL AND TRANSPORTERS ARE NOT HIT BY THE PROVISIONS OF SEC. 194C OF THE ACT. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIAL S AVAILABLE ON RECORD AND GONE THROUGH THE AUTHORITIES BELOW. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSESSEE A SUGAR MANUFACTURING COM PANY PURCHASED SUGARCANE FROM THE FARMERS OF COMMAND AREA. THE ASS ESSEE ENTERED INTO A AGREEMENT WITH COMMAND AREA FARMERS FOR PURC HASE OF SUGARCANE ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 10 FOR A PURCHASE PRICE FIXED BY THE GOVT. THE ASSESSE E COMPANY ENGAGED THE SERVICES OF HARVESTING GANG LABOURS AND TRANSPO RTERS FOR HARVESTING AND TRANSPORTING SUGARCANE FROM FARMERS FIELD TO AS SESSEE COMPANY FACTORY. THE ASSESSEE HAD PAID HGL AND TRANSPORTERS AS PER THE RATES FIXED IN CONSULTATION WITH FARMERS AND HGL AND ALSO TRANSPORTERS ASSOCIATION. THE AMOUNT PAID TO HGL AND TRANSPORTER S HAVE BEEN DEBITED TO INDIVIDUAL FARMER ACCOUNT AND FINALLY AD JUSTED AGAINST PURCHASE COST OF SUGARCANE PAYABLE TO THE FARMERS. THE A.O. HELD ASSESSEE AS AN ASSESSEE IN DEFAULT U/S 201(1) OF TH E ACT, FOR THE REASON THAT THE PAYMENTS TO HGL AND TRANSPORTERS ARE COMIN G WITHIN THE DEFINITION OF WORK AS DEFINED U/S 194C OF THE ACT. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE OUGHT TO HAVE DEDUCTED T DS U/S 194C ON PAYMENTS TO HGL AND TRANSPORTERS, BUT FAILED TO DED UCT SUCH TDS. THE A.O. WAS OF THE OPINION THAT THE ARRANGEMENT BETWEE N ASSESSEE COMPANY, HGL AND TRANSPORTERS IS NOTHING BUT A WORK CONTRACT AS DEIFIED U/S 194C OF THE ACT. 9. THE A.O. HAS MADE ELABORATE DISCUSSION ON THE PR OVISIONS OF SEC. 194C, CLAUSE (3) OF SUGAR CONTROL ORDER AND CASE LA W RELIED UPON BY THE ASSESSEE. ACCORDING TO THE A.O., AS PER THE PROVISI ONS OF SEC. 194C, THE LIABILITY TO DEDUCT TAX AT SOURCE ARISES TO THE PER SON RESPONSIBLE FOR MAKING PAYMENT WHETHER OR NOT SAID PERSON MAKING PA YMENT FOR ITSELF ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 11 OR ON BEHALF OF THIRD PARTY. THE MOMENT PAYMENTS AR E COVERED U/S 194C, ANY PERSON MAKING PAYMENTS SHALL DEDUCT TDS A S PER THE RATES PRESCRIBED THERE UNDER. THE A.O. DRAWN SUPPORT FROM THE CBDT CIRCULAR NO. 8/2009 DATED 24-11-2009 AND ALSO APPLIED THE RA TIO OF THE DECISION OF BOMBAY HIGH COURT, IN THE CASE OF DEDICATED HEAT H CARE SERVICES TPA (INDIA) PVT LTD. REPORTED IN 232 ITR 41(BOM), A ND OBSERVED THAT THIRD PARTY ADMINISTRATORS ACTING ON BEHALF OF INSU RANCE COMPANIES AND ENTERING INTO CONTRACTS WITH HOSPITALS FOR SETTLEME NT INSURANCE CLAIMS ARE RESPONSIBLE FOR DEDUCTING TDS ON PAYMENTS MADE TO H OSPITALS ON BEHALF OF INSURANCE COMPANIES AND FINALLY CONCLUDED THAT T HE FACTS OF THE CASE SQUARELY APPLIES TO THE FACTS AND CIRCUMSTANCES OF ASSESSEE CASE. 10. THE ASSESSEE CLAIMS THAT THE IMPUGNED PAYMENTS TO HGL AND TRANSPORTERS HAVE BEEN PAID AS PER THE AUTHORIZATIO N/INSTRUCTIONS AND ALSO ON BEHALF OF THE FARMERS, TO BE PAYABLE TOWARD S COST OF SUGARCANE PRICE WHICH WAS FINALLY ADJUSTED AGAINST FARMERS AC COUNTS. THE ASSESSEE HAS FILED PAPER BOOK WHICH CONTAINS LEDGER ACCOUNT COPIES OF FARMERS, HGL LABOURS SETTLEMENT BILLS, GENERAL LEDGER ACCOUN TS OF HGL LABOURS AND TRANSPORTERS. ON PERUSAL OF RYOTS ACCOUNTS, WE FIND THAT THE ASSESSEE HAS DEBITED TO FARMER ACCOUNT PAYMENTS TOW ARDS HGL AND TRANSPORTATION AND FINALLY ADJUSTED AGAINST TOTAL A MOUNT PAYABLE TO THE RYOTS TOWARDS PURCHASE PRICE OF SUGARCANE. WE FURTH ER OBSERVED FROM ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 12 THE HGL SETTLEMENT ACCOUNT AND GENERAL LEDGER ACCOU NTS COPIES OF TRANSPORTERS, THE AMOUNT PAID TO INDIVIDUAL HGL AND TRANSPORTERS HAVE BEEN CONSIDERED AS ADVANCE PAYMENTS TO RYOTS AND AS SIGNED TO CONCERNED FARMERS ACCOUNT BASED ON THE CODE NUMBER OF THE FARMERS. WE FURTHER NOTICED FROM THE GENERAL LEDGER ACCOUNT C OPIES OF HGL LABOUR AND TRANSPORTATION, THE NARRATION GIVEN TO I NDIVIDUAL PAYMENT EXPLAINS TO WHICH FARMERS ACCOUNT THE PAYMENT IS MA DE. THE ASSESSEE ALSO PROVED WITH NECESSARY EVIDENCE THAT THE AMOUNT PAID TO HGL AND TRANSPORTERS HAS NOT BEEN CONSIDERED AS ITS EXPENDI TURE. IN FACT, THIS FACT WAS NOT DISPUTED BY THE ASSESSING OFFICER. THE REFORE, FROM THESE UNDISPUTED FACTS, WE ARE OF THE VIEW THAT THE IMPUG NED PAYMENTS TO HGL AND TRANSPORTERS HAVE BEEN MADE ON BEHALF OF TH E FARMERS OUT OF ADVANCE/ARREARS PAYABLE TO FARMERS TOWARDS PURCHASE PRICE OF SUGARCANE. 11. HAVING SAID, LET US EXAMINE THE APPLICABILITY O F THE PROVISIONS OF SECTION 194C OF THE ACT. THERE IS NO DISPUTE WITH R EGARD TO PAYMENTS TO HGL AND TRANSPORTERS. THE A.O. HIMSELF ADMITTED THA T THE ASSESSEE HAS PAID AMOUNT ON BEHALF OF FARMERS OUT OF AMOUNT PAYA BLE TOWARDS PURCHASE PRICE TO BE PAYABLE TO THE FARMERS. BUT, T HE A.O. WAS OF THE OPINION THAT AS PER THE PROVISIONS OF SECTION 194C, ANY PERSON RESPONSIBLE FOR MAKING ANY PAYMENT TO A CONTRACTOR IN PURSUANCE OF A ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 13 WORK CONTRACT IS UNDER OBLIGATION TO DEDUCT TDS, WH ETHER OR NOT SAID PAYMENTS ARE MADE ON BEHALF OF THIRD PARTIES. NO DO UBT, THE PROVISIONS OF SECTION 194C APPLIES WHERE ANY PERSON RESPONSIBL E FOR MAKING PAYMENTS TO ANY RESIDENT FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND THE SPECIFIED P ERSON. THE PERSON HAS BEEN DEFINED IN SEC. 2(31), WHICH INCLUDE AN IN DIVIDUAL, HUF .ETC. SIMILARLY, THE WORD ASSESSEE HAS BEEN DEFINED IN SE CTION 2(7) TO MEAN A PERSON BY WHOM ANY TAX OR ANY OTHER SUM OF MONEY IS PAYABLE UNDER THIS ACT AND INCLUDES EVERY PERSON IN RESPECT OF WH OM ANY PROCEEDINGS UNDER THIS ACT HAS BEEN TAKEN FOR THE ASSESSMENT OF HIS INCOME. IF YOU READ THE DEFINITION OF ASSESSEE AND PERSON TOGETHER , IT IS ABUNDANTLY CLEAR THAT ANY PERSON MEANS AN ASSESSEE BY WHOM ANY TAX OR ANY OTHER SUM OF MONEY IS PAYABLE UNDER THIS ACT. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT FOR THE PURPOSE OF SECTION 194 C, ANY PERSON MEANS AN ASSESSEE BY WHOM ANY TAX OR ANY OTHER SUM OF MON EY IS PAYABLE UNDER THIS ACT, WHO MAKES ANY PAYMENT TO A CONTRACT OR IN PURSUANCE OF A WORK CONTRACT. 12. COMING TO THE FACTS OF THE PRESENT CASE. IN THI S CASE UNDOUBTEDLY, THE ASSESSEE IN NOT THE PERSON WHO MAKES THE PAYMEN T DIRECTLY TO HGL AND TRANSPORTERS. THE ASSESSEE CATEGORICALLY PROVED WITH NECESSARY PROOF THAT IT HAD MADE PAYMENTS ON BEHALF OF THE FA RMERS OUT OF AMOUNT ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 14 PAYABLE TO THE FARMERS TOWARDS COST OF SUGARCANE. T HE ASSESSEE ALSO PROVED WITH EVIDENCE THAT THE IMPUGNED PAYMENTS TO HGL AND TRANSPORTERS IS NOT ITS EXPENDITURE, BUT ONLY ADVAN CE PAYMENT TO FARMERS WHICH WAS FINALLY ADJUSTED AGAINST COST OF SUGARCAN E PAYABLE TO THE ASSESSEE. WE, THEREFORE, OF THE OPINION THAT WHERE A SSESSEE A SUGAR MANUFACTURER MADE PAYMENT OF HARVESTING AND TRANSPO RTATION CHARGES TO HARVESTING AND TRANSPORT CONTRACTORS ON BEHALF O F FARMERS WHICH FORMED PART OF PURCHASE PRICE OF SUGAR CANE FOR ASS ESSEE, AND SAME HAD NOT BEEN CLAIMED AS SEPARATE DEDUCTION, PROVISIONS OF SECTIONS 194C OF THE ACT IS NOT APPLICABLE, CONSEQUENTLY THE ASSESSE E IS NOT LIABLE TO DEDUCT TDS ON SUCH PAYMENTS. 13. IN SO FAR AS ALTERNATIVE PLEA OF THE ASSESSEE, THE ASESSEE MADE A ALTERNATIVE PLEA IN AS MUCH THE PAYER OF THE IMPUGN ED PAYMENT BEING A FARMER AND THE IMPUGNED PAYMENTS ARE EXPENDITURE IN CURRED AGAINST AGRICULTURAL INCOME, SUCH PAYMENTS AGAINST EXEMPT I NCOME IS OUTSIDE THE PURVIEW OF THE PROVISIONS OF SECTION 194C OF TH E ACT. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT, ON CAREFULLY ANALYSES OF THE DEFINITION OF THE ASSESSEE AS DEFINED U/S 2( 7), THE PERSON AS DEFINED U/S 2(31) AND THE PROVISIONS OF SECTION 194 C, IT IS ABUNDANTLY CLEAR THAT THE PROVISIONS OF SECTION 194C IS APPLIC ABLE TO A PERSON BY WHOM ANY TAX OR OTHER SUM OF MONEY IS PAYABLE UNDER THIS ACT. IN THIS ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 15 CASE, IT IS UNDOUBTEDLY CLEAR THAT THOUGH THE ASSES SEE PAID AMOUNTS TO HGL AND TRANSPORTERS, FOR THE PURPOSE OF SECTION 19 4C, THE PAYER IS FARMERS. THE INCOME OF THE FARMER BEING AGRICULTURA L INCOME EXEMPT FROM INCOME TAX, THE IMPUGNED PAYMENTS ARE NOT HIT BY THE PROVISIONS OF SECTION 194C OF THE ACT. 14. COMING TO THE CASE LAWS RELIED UPON BY THE ASSE SSEE. THE ASSESSEE RELIED UPON THE DECISION OF ITAT, AHMEDABAD SPECIAL BENCH, IN THE CASE OF SHRI KAMREJ VIBHAG SAHAKARI KHAND UDYOG MANDLI LTD. V. ITO (2008) 116 TTJ (AHD.) (SB) 425, WHEREIN UNDER SIMILAR CIRC UMSTANCES, IT IS HELD THAT THE SUGAR FACTORY IS NOT LIABLE TO MAKE TDS, W HERE PAYMENTS TOWARDS HARVESTING GANG LABOUR AND TRANSPORT CHARGE S ARE MADE AS A PART OF THE SUGARCANE PRICE. THE RELEVANT PORTION O F ORDER IS REPRODUCED BELOW. SEC. 194C APPLIES WHEN THE PAYMENTS ARE MADE FOR CA RRYING OUT ANY WORK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY SUC H WORK IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND THE PERSONS STA TED THEREIN. BY SUB-S. (1) OF S. 194C A LIABILITY TO DEDUCT TAX AT SOURCE IS C AST UPON THE PERSON RESPONSIBLE FOR PAYING ANY SUCH SUM. HERE, THE RESP ONSIBILITY OF PAYING THE SUM FOR HARVESTING, CUTTING AND TRANSPORTING IS OF THE CANE GROWERS. THE PAYMENTS ARE, NO DOUBT, MADE TO THE LABOUR HIRED FO R THIS PURPOSE BUT THESE PAYMENTS WERE MADE BY THE SAMITI OR BY THE ASSESSEE AS ALLEGED BY THE REVENUE, NOT ON ITS OWN ACCOUNT; THEY WERE FOR AND ON BEHALF OF THE CANE GROWERS. THIS IS CLEARLY ESTABLISHED BY THE FACT TH AT(1) THE ASSESSEE WAS REQUIRED TO PAY THE FIXED PRICE AND MAKE THE PAYMEN T TO THE CANE GROWERS FOR THE COST OF THE CANE; (2) THE PAYMENTS, THOUGH IN I NSTALMENTS, WERE DEBITED TO THE CANE GROWERS ADVANCE ACCOUNT AND ADJUSTED U LTIMATELY TO AS COST OF THE CANE; (3) THE ASSESSEE HAD GIVEN AND SAMITIS HA VE TAKEN THE AMOUNT FROM THE ASSESSEE FOR AND ON BEHALF OF THE CANE GRO WERS AND ON THEIR BEHALF; (4) SAMITIS HAVE ALSO PAID THAT AMOUNT TO THE LABOU RERS ON ACCOUNT OF CANE ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 16 GROWERS; (5) SURPLUS AND DEFICIT IS ULTIMATELY ADJU STED IN THE CANE GROWERS ACCOUNT THROUGH THE SAMITIS WHO HAVE PAID AND RECEI VED THAT AMOUNT FROM THE ASSESSEE COMPANY. THESE FACTS ARE CLEARLY A POI NTER OF THE FACT THAT IT WAS THEIR RESPONSIBILITY AS PER THE GOVERNMENT ORDER AN D THE BOARDS RESOLUTION OF THE SOCIETY TO MAKE PAYMENT TO THE CANE GROWERS AND IT WERE THEY WHO ACTUALLY MADE THE PAYMENTS FOR HARVESTING, CUTTING AND TRANSPORTING THE CANE TO THE GATE OF THE ASSESSEES FACTORY, THOUGH THROU GH THE MEDIUM OF THE ASSESSEE AND THE SAMITIS. EVERY OFFICER OF THE TWO FACTORIES AND THE TWO SAMITIS ALMOST UNANIMOUSLY HAS AVERRED THAT SAMITIS WERE WORKING INDEPENDENTLY AND IT WAS THE SAMITI WHO WAS HARVEST ING, CUTTING AND TRANSPORTING SUGARCANE TO THE GATES OF THE TWO FACT ORIES. THEY WERE TAKING MONEY FROM THE FACTORY AS ADVANCE BEING RS. 190/195 OUT OF THE COST AGREED TO BE PAID FOR THE PURCHASE OF SUGARCANE BY THE FAC TORIES FOR AND ON BEHALF OF THE CANE GROWERS WHO WERE SUPPLYING THE SUGARCANE T O THE ASSESSEE. THE SUPPLY OF SUGARCANE AT THE GATE OF THE TWO FACTORIE S AS PER AGREEMENTS, RULES AND NOTIFICATIONS OF THE GOVERNMENT, WAS THE RESPON SIBILITY OF THE CANE GROWERS. SURPLUS OR DEFICIT WAS ACCOUNTED FOR IN TH E ACCOUNTS OF THE CANE SUPPLIERS AND IN ALL THESE MATTERS THE TWO FACTORY STAFF INCLUDING THE ACCOUNTS CLERKS AND THE CHIEF ACCOUNTANTS WERE HELPING THEM EITHER FREE OF COST OR FOR COST RECOVERED. THE SAMITIS ARE MAINTAINING SEPARAT E RECORDS AND THEY WERE AUDITED. THE ASSESSEE SOCIETY ALSO MAINTAINS THE IN DIVIDUAL FARMERS ACCOUNT BY DEBITING AND CREDITING INDIVIDUAL FARMER ACCOUNT ON THE BASIS OF ADVANCE PAYMENTS MADE IN INSTALMENTS. THE ABOVE DETAILS OF EACH INSTALMENT PAID FOR PURCHASE OF SUGARCANE WERE POSTED IN RESPECTIVE ACC OUNTS IN THE AUDITED BOOKS OF ACCOUNTS OF ASSESSEE SOCIETY. WHETHER THE SAMITIS WERE VALID OR NOT OR WHETHER THEY WERE NOT LEGALLY FORMED OR REGISTER ED WITH ANY STATE OR CENTRAL GOVERNMENT, AUTHORITY OR THAT THEY WERE BEI NG LOOKED AFTER FOR EVERYTHING BY THE ASSESSEE, WOULD ALSO NOT MAKE MUC H OF DIFFERENCE, SO LONG AS THEY ARE MAKING THE PAYMENTS FOR AND ON BEHALF O F THE CANE GROWERS AND AT THEIR DIRECTIONS AND ULTIMATELY ADJUSTING THE LI ABILITY OF THE CANE GROWERS. IT WERE THEY WHO WERE RESPONSIBLE FOR MAKING THE PAYME NTS AND NOT THE ASSESSEES, WHO ONLY PAID THE AMOUNT TO THE CANE GRO WERS FOR THE COST OF THE SUGARCANE AT EX-FACTORY GATE PRICE FIXED AS THE SUG ARCANE MINIMUM PRICE AS PER THE NOTIFICATIONS ISSUED BY THE GOVERNMENT. THE RE IS A REASON FOR EXTENDING THE HELP IN ADMINISTERING THE SAMITIS BY THE ASSESSEE, AND THAT IS, THAT THE CANE GROWERS ARE ILLITERATE PEOPLE AND MIG HT NOT BE CAPABLE OF INDEPENDENTLY HANDLING THE WORK OF HARVESTING, CUTT ING AND TRANSPORTING THE CANE TO THE ASSESSEES FACTORY SO EFFECTIVELY AS WI THOUT THE INTERVENTION OF THE ASSESSEE WHO ARE BETTER PLACED IN THEIR MANAGERIAL SKILLS. ONE OF THE OTHER REASONS WAS ALSO THAT THE COMPANY IS INTERESTED IN REGULAR AND TIMELY SUPPLY OF CANE. THEY ARE ALSO INTERESTED IN GOOD QUALITY O F CANE WHICH IS ENSURED BY DEPUTING THE TECHNICAL BOYS TO SEE THAT GOOD CROP I S GROWN AND SUPPLIED AS RAW MATERIAL TO THE ASSESSEE WHICH ULTIMATELY ENHAN CES ITS PRODUCTIVITY AND PROFITS. THAT ASSISTANCE IS EXPECTED, THE SAME BEIN G IN MUTUAL INTEREST. IN THE BEGINNING OF THE SEASON OF CUTTING, HARVESTING AND TRANSPORTING OF SUGARCANE THE ASSESSEE SOCIETY PASSED A RESOLUTION IN THE MEE TING OF BOARD OF DIRECTORS FOR PAYMENT OF ADVANCE FOR HARVESTING AND TRANSPORT ING AND TO DECIDE THE 1ST INSTALMENT FOLLOWED BY SUBSEQUENT RESOLUTION FOR PA YMENT OF 2ND INSTALMENT ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 17 OF THE PRICE OF SUGARCANE AND LASTLY TO DECIDE THE SUGARCANE PRICE TO BE PAID TO THE FARMER MEMBERS. WHEN IT WAS RESOLVED TO PAY ADVANCE OF RS. 190/195 PER MT OF SUGARCANE TO FARMER MEMBERS TOWARDS CUTTI NG, HARVESTING AND TRANSPORTING ADVANCE THE SAME IS DEBITED IN SABASAD SHERDI ADVANCE NO. II ACCOUNT AND THE AMOUNT WAS CREDITED IN SUGARCANE MA NAGEMENT ACCOUNT. SIMULTANEOUSLY, THE 1ST INSTALMENT IS ALSO PAID WHI CH IS DEBITED IN SABASAD SHERDI ADVANCE NO. I ACCOUNT AND THE AMOUNT IS PAID TO FARMERS IN CASH BY CREDITING THE CASH ACCOUNT. SIMILARLY, THE 2ND INST ALMENT OF RS. 325 IS DEBITED IN SABASAD SHERDI ADVANCE NO. II AND CREDITED IN CAS H ACCOUNT BY MAKING PAYMENT TO THE FARMER MEMBERS. ZONE SAMITI RECEIVED THE FUNDS FROM THE ASSESSEE SOCIETY AS AND WHEN IT REQUIRED OUT OF THE ADVANCE AMOUNT LYING CREDITED IN SUGARCANE MANAGEMENT ACCOUNT. AT THAT P OINT OF TIME THE SUGARCANE MANAGEMENT ACCOUNT IS DEBITED BY MAKING P AYMENTS TO ZONE SAMITI TO MAKE PAYMENTS FOR CUTTING, HARVESTING AND TRANSPORTING ON BEHALF OF THE FARMER MEMBERS. AT THE END OF THE SEASON THE BA LANCE IN THE SUGARCANE MANAGEMENT ACCOUNT IS TRANSFERRED TO SUGARCANE ADVA NCE ACCOUNT NO. II BY DEBITING OR CREDITING THE SAME AND THE SUGARCANE MA NAGEMENT ACCOUNT IS SQUARED UP. THE BALANCES IN BOTH THE ADVANCE ACCOUN TS ARE THEREAFTER TRANSFERRED TO SUGARCANE PURCHASE ACCOUNT. IN VIEW O F THE ABOVE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ASSESSEES ARE NOT LIABLE TO DEDUCT THE TAX AT SOURCE UNDER S. 194C FROM THE PAYMENT MA DE TO MUKAMDAMS AND TRANSPORTERS BY ZONE SAMITI; THAT THE ASSESSEES ARE NOT LIABLE FOR DEDUCTION OF TAX UNDER S. 194C FROM THE PAYMENTS MADE AS ADVANCE S TO ITS MEMBER FARMERS FOR PURCHASE OF SUGARCANE BECAUSE AS PER TH E AGREEMENT IT IS FOR THE CANE GROWER TO BRING THE SUGARCANE TO ASSESSEES FA CTORY AND THAT THE INGREDIENTS OF S. 194C ARE NOT ATTRACTED TO MAKE TH E ASSESSEES LIABLE TO DEDUCT THE TAX AT SOURCE FROM THE PAYMENTS MADE TO MUKAMDAMS AND TRANSPORTERS WHO ARE MEMBER FARMERS OF THE ZONE SAM ITI AND WHO HAVE NO CONTRACT WITH THE ASSESSEE. 15. THE ASSESSEE RELIED UPON THE DECISION OF ITAT, PUNE BENCH, IN THE CASE OF DCIT VS. DWARKADHEESH SAKHAR KARKHANA LTD, [2015] 55 TAXMANN.COM 471 (PUNE - TRIB.). THE ITAT, PUNE BENC H UNDER SIMILAR CIRCUMSTANCES HELD AS UNDER. 8.2 FROM THE DETAILS FURNISHED BY THE LEARNED COUNSEL FOR THE ASSESSEE IN ME PAPER BOOK (P. 149) WE FIND FROM THE DETAILS OF CAN E PURCHASE PRICE THAT THESE PURCHASES INCLUDE TRANSPORTATION AND HARVESTI NG CHARGES. SIMILARLY, WE FIND FROM THE PAPER BOOK PP. 186 AND 187, WHICH SHO WS THE CHART GIVING THE DETAILS OF THE GROSS AMOUNTS OF PURCHASE PRICE PAYA BLE TO EACH FARMER FOR THE SUGARCANE AND DEDUCTIONS THEREFROM ON ACCOUNT OF HA RVESTING AND TRANSPORTATION CHARGES, ETC., THAT THE FARMERS HAVE BEEN PAID THE NET AMOUNT ONLY. ALL THESE INDICATE THAT THE HARVESTING AND TR ANSPORTATION CHARGES FORM ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 18 THE PART OF THE PURCHASE COST OF THE SUGARCANE FOR THE ASSESSEE. SINCE THE RESPONSIBILITY OF MAKING THE PAYMENTS TO THE HARVES TING CONTRACTORS AND TRUCK OPERATORS IS BASICALLY OF THE FARMERS AND IT IS ONL Y FOR THE SAKE OF CONVENIENCE THE ASSESSEE COMPANY HAS MADE THE PAYMENTS TO THEM WHICH HAS SUBSEQUENTLY BEEN DEDUCTED FROM THE AMOUNTS PAYABLE TO THE FARMERS, THEREFORE, THE QUESTION OF THE ASSESSEE DEDUCTING T HE TDS ON SUCH PAYMENT, IN OUR OPINION, DOES NOT ARISE. THE FINDING GIVEN B Y THE LEARNED CIT(A) THAT THE DOCUMENTS ON RECORD, I.E., THE NOTIFICATION ISS UED BY THE CENTRAL GOVT. PRESCRIBING THE MINIMUM CANE PRICE, THE CIRCULAR LE TTER OF SAKHAR SANGH (A STATE LEVEL BODY OF CO-OPERATIVE SUGAR FACTORIES) A ND THE TERMS OF AGREEMENT WITH THE CANE GROWER FARMERS SHOW THAT THE PRICE FI XED FOR SUGARCANE IS NEGOTIATED ON EX-FACTORY GATE BASIS AND THE RESPONS IBILITY OF HARVESTING AND TRANSPORTING THE SUGARCANE IS ON THE FARMER COULD N OT BE CONTROVERTED BY THE REVENUE. 8.6 SINCE IN THE INSTANT CASE IT HAS BEEN CATEGORICALLY OBSERVED THAT THE PRICE FIXED FOR SUGARCANE IS NEGOTIATED ON EX-FACTORY GAT E BASIS AND THE RESPONSIBILITY TO HARVEST AND TRANSPORT THE SUGARCA NE IS ON THE CANE GROWING FARMERS AND SINCE SUCH TRANSPORTATION AND HARVESTIN G CHARGES AND COMMISSION PAID BY THE ASSESSEE HAVE NOT BEEN CLAIM ED AS SEPARATE DEDUCTION BY THE ASSESSEE AND THE SAME HAVE BEEN DE DUCTED FROM THE PURCHASE PRICE OF CANE PAID TO THE FARMER AND THE A SSESSEE ONLY HAS MADE THE PAYMENT ON BEHALF OF THE FARMER TO THE HARVESTI NG AND TRANSPORT CONTRACTORS, THEREFORE, THE PROVISIONS OF SS. 194C AND 194H, IN OUR OPINION, ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE . WE FIND FROM THE ASSESSMENT ORDER FOR THE ASST. YR. 2005-06 PASSED U NDER S. 143(3) ON 15TH DEC, 2008 THAT NO SUCH DISALLOWANCE WAS MADE IN THE SAID SCRUTINY ASSESSMENT ORDER. FURTHER, THE SUBMISSION OF THE LE ARNED COUNSEL FOR THE ASSESSEE THAT IN THE PAST YEARS ALSO THERE WAS NO S UCH DISALLOWANCE UNDER S. 40(A)(IA) COULD NOT BE CONTROVERTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. THE VARIOUS DECISIONS RELIED ON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ARE DISTINGUISHABLE AND NOT APPLICAB LE TO THE FACTS OF THE PRESENT CASE. IN THIS VIEW OF THE MATTER AND IN THE LIGHT OF OUR REASONING'S GIVEN IN THE PRECEDING PARAS AND IN VIEW OF THE DET AILED REASONING GIVEN BY THE LEARNED CIT(A), WE FIND NO INFIRMITY IN THE SAM E. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DI SMISSED 16. COMING TO THE CASE LAW RELIED UPON BY THE REVEN UE. THE A.O. RELIED UPON THE DECISION OF HIGH COURT OF BOMBAY, IN THE C ASE OF DEDICATED HEATH CARE SERVICES TPA (INDIA) PVT LTD. REPORTED I N 232 ITR 41(BOM), AND OBSERVED THAT THIRD PARTY ADMINISTRATORS ACTING ON BEHALF OF INSURANCE COMPANIES AND ENTERING INTO CONTRACTS WIT H HOSPITALS FOR ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 19 SETTLEMENT INSURANCE CLAIMS ARE RESPONSIBLE FOR DED UCTING TDS ON PAYMENTS MADE TO HOSPITALS ON BEHALF OF INSURANCE C OMPANIES. WE HAVE GONE THROUGH THE FACTS OF THE CASE LAW RELIED UPON BY THE A.O. IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND FIND THA T THE CASE LAW RELIED UPON BY THE A.O. IS RENDERED UNDER DIFFERENT FACTS. IN THE CASE BEFORE THE HONBLE BOMBAY HIGH COURT, IT IS THE BUSINESS O F THE THIRD PARTY ADMINISTRATORS TO ENTER INTO AGREEMENT WITH INSURAN CE COMPANIES FOR WHICH THE TPAS ARE PAID CHARGES FOR THEIR SERVICES. UNDER THOSE CIRCUMSTANCES, THE COURT HELD THAT, THE PAYMENTS AR E COVERED UNDER SEC. 194C OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE CATEGORICALLY PROVED THAT THE IMPUGNED PAYMENTS ARE MADE ON BEHALF OF TH E FARMERS TO FACILITATE SMOOTH HARVESTING AND TRANSPORTATION OF SUGAR CANE WITHOUT ANY CHARGES. THEREFORE, WE ARE OF THE VIEW THAT THE CASE LAW RELIED UPON BY THE A.O. IS NOT APPLICABLE TO THE FACTS OF THE C ASE. 17. IN THIS VIEW OF THE MATTER, WE ARE OF THE VIEW THAT THE IMPUGNED PAYMENTS TO HGLS AND TRANSPORTERS PAID BY THE ASSES SEE COMPANY ON BEHALF OF FARMERS ARE NOT HIT BY THE PROVISIONS OF SEC. 194C OF THE ACT. THE CIT(A) AFTER CONSIDERING RELEVANT FACTS, RIGHTL Y DELETED ADDITIONS MADE BY THE A.O. U/S 201(1) OF THE ACT. WE DO NOT S EE ANY ERRORS OR INFIRMITY IN THE ORDER OF CIT(A). HENCE, WE INCLINE D TO UPHOLD CIT(A) ITA NOS.127, 128 & 129/VIZAG/2013 SUDALAGUNTA SUGARS LTD., CHITTOR DIST. 20 ORDER AND REJECT APPEAL FILED BY THE REVENUE FOR TH E A.Y. 2009-10 TO A.Y. 2011-12. 18. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ITA. NO. 127 TO 129/VIZAG/2013 ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 9 TH DEC16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 09.12.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CIRCLE-3(1)(TDS), VIJA YAWADA 2. / THE RESPONDENT M/S. SUDALAGUNTA SUGARS LTD., M AYUR NAGAR, KATUR POST, B.N. KANDRIGA MANDAL, CHITTOOR DIST., A.P. 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM