ACIT, SRIGANGANAGAR V. M/s. Krishi Upaj Mandi Samiti (Grain), SRIGANGANAGAR

ITA 167/JODH/2013

• Counselvise Citation: 16723314 RSA 2013
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 15-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Charitable institution; Non-deduction of tax
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. I.T.A. NO.167/JODH/2013 ASSESSMENT YEARS:2006-07 THE A.C.I.T VS M/S KRISHI UPAJ MANDI SAMITI SRIGANGANAGAR [GRAIN], NEW DHAN MAN DI SRIGANGANAGAR PAN NO.AABTK0300Q [APPELLANT] [RESPONDENT] ASSESSEE BY : SHRI RAKESH GUPTA DEPARTMENT BY : SHRI G.R. KOKANI DATE OF HEARING : 01/08/2013. DATE OF PRONOUNCEMENT : 05/08/2013 O R D E R PER N.K. SAINI, A.M. : THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 10/12/2012 OF LD. CIT(A), BIKANER. THE FOLLOWING GR OUNDS HAVE BEEN RAISED IN THIS APPEAL. 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 194C OF THE INCOME TAX ACT, 1 961 WERE NOT APPLICABLE IN RESPECT OF THE PAYMENTS MADE BY THE ASSESSEE TO RAJSASTHAN STATE AGRICULTURE MARKET ING BOARD FOR CONSTRUCTION/REPAIRS/MAINTENANCE OF THE M ARKET YARDS AND MISSING LINK ROADS. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THERE IS NO REQUIREMENT OF DEDUCTION OF TAX AT SOURCE U/S 19 4J ON PAYMENT MADE TO LOCAL FUND AUDIT DEPARTMENT OF STAT E 2 GOVERNMENT WHEREAS THE PAYMENT WERE MADE TO ADVOCATE/CHARTERED ACCOUNTANTS FOR PROFESSIONAL SER VICES. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT INTEREST U/S 201(1A) WILL BECOME LEVIABLE ONLY IF THE TOTAL TAX DEDUCTED BY THE END OF THE YEAR IS LESS THAN THE TA X DEDUCTIBLE ON THE TAXABLE SALARY PAID DURING THE YE AR. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THERE IS NO REQUIREMENT OF CHARGING INTEREST U/S 201(1A) WHE RE THE PAYEE HAS DEPOSITED THE DUE TAX WHEREAS IN THE PER CIRCULAR NO. 275/202/95-IT(B) AND DECISION OF HON'B LE SUPREME COURT IN THE CASE OF HINDUSTAN COCACOLA BEVERAGES (P) LTD. THERE IS A MENTION OF CHARGING O F INTEREST U/S 201(1A) AND PENALTY U/S 271C. 2. FACTS OF THE CASE IN BRIEF, ARE THAT AN INVESTIG ATION WAS CONDUCTED ON 17.11.2009 AND BOOKS OF ACCOUNT ALONGWITH OTHER DOC UMENTS MAINTAINED BY THE ASSESSEE WERE CHECKED AND INSPECTED. THE A.O. NOTED CERTAIN DISCREPANCIES FOR NON-DEDUCTION OF TAX OR IRREGULAR DEDUCTION OF TAX AT SOURCE. IT WAS OBSERVED THAT PAYMENTS WERE MADE TO RAJASTHA N STATE AGRICULTURAL MARKETING BOARD (RSAMB IN SHORT) IN VARIOUS YEARS F OR CONSTRUCTION OF SHEDS IN VARIOUS MANDIS, DEVELOPMENT OF ROADS AND OTHER A LLIED DEVELOPMENT ACTIVITIES IN MANDIS AND THERE WAS NO DEDUCTION OF TAX ON THOSE PAYMENTS. THE A.O. ALSO OBSERVED THAT LEGAL/PROFESSIONAL FEES WAS PAID TO VARIOUS LAWYERS AND ACCOUNTANTS VIOLATING THE PROVISIONS OF SECTION 194J OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'T HE ACT', IN SHORT] AND PAYMENTS WERE MADE TO VARIOUS PERSONS FOR HIRING OF VEHICLES AS WELL AS 3 PRINTING OF OFFICIAL STATIONERY AND TAX WAS NOT DED UCTED ON THE SAME, THEREFORE, THE PROVISIONS OF SECTION 194C WERE CLEARLY VIOLATE D. THE A.O. ISSUED SHOW CAUSE NOTICE INTIMATING THAT IT WAS PROPOSED TO TRE AT PAYMENTS TO RSAMB, MADE TOWARDS THE WORKS LISTED, AS CONTRACTUAL PAYME NT ATTRACTING PROVISIONS OF SECTION 194C. THE A.O. DID NOT FIND MERIT IN TH E SUBMISSIONS OF THE ASSESSEE AND DEMAND U/S 201(1) & 201(1A) OF THE ACT FOR ASSESSMENT YEARS 2006-07 TO 2010-11 AMOUNTING TO RS. 48,57,072/- WAS CREATED. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT UNDER THE RAJASTHAN AGRICULTURAL PRO DUCE ACT, 1961, TWO ENTITIES WERE CREATED VIZ. THE KRISHI UPAJ MANDI SA MITI[THE ASSESSEE] AND RAJASTHAN STATE AGRICULTURAL MARKETING BOARD. IT W AS FURTHER SUBMITTED THAT THE ASSESSEE LOOKED AFTER THE DAY TO DAY ADMINISTRA TIVE WORK, I.E. COLLECTION OF MARKET FEE AND SUPERVISION OF AUCTION OF FOOD GRAIN S WHEREAS THE BOARD LOOKED AFTER THE PLANNING AND DEVELOPMENT OF INFRAS TRUCTURE I.E. CONSTRUCTION AND MAINTENANCE OF ROADS IN THE PREMISES OF THE MAN DI SAMITI, CONSTRUCTION AND MAINTENANCE OF SHOPS, BOUNDARY WALLS, GATES, ET C. BOTH THE ENTITIES WERE GOVERNED BY THE RULES AND REGULATIONS FRAMED BY THE STATE GOVERNMENT. IT WAS EXPLAINED THAT THE ASSESSEE TOOK THE DECISION F OR CONSTRUCTION AND REPAIR WORK AND ACCORDINGLY, FUNDS WERE PROVIDED TO THE RS AMB FOR EXECUTION AND COMPLETION OF THE WORKS DECIDED BY THE ASSESSEE. I T WAS STATED THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND RSAMB WAS NOT OF CONTRACTOR- 4 CONTRACTEE BUT WAS MERELY A CASE OF FUND TRANSFER F ROM ONE BRANCH TO ANOTHER BRANCH OR ONE DEPARTMENT TO ANOTHER AND THERE WAS N O IMPLIED/DEEMED OR WRITTEN/ORAL CONTRACT BETWEEN THE TWO. IT WAS FURT HER STATED THAT THE ASSESSEE BEING A REGISTERED PUBLIC CHARITABLE TRUST, THE AMO UNTS GIVEN TO RSAMB BY THE ASSESSEE WERE ONLY APPLICATION OF INCOME. IT WAS S TATED THAT THE RSAMB DID NOT HAVE ITS OWN INFRASTRUCTURE FOR CARRYING OUT TH E WORK AS PRIVATE CONTRACTORS WERE ENGAGED TO DO THE SAME AND THAT THE FUNDS RECE IVED BY RSAMB WERE FURTHER DISBURSED TO SUCH CONTRACTORS WHEREBY THE S AME WERE IN THE NATURE OF DEPOSIT AND THAT THE RSAMB DEDUCTED TAX AT SOURCE @ 2% FROM THE CONTRACTORS WHO EXECUTED THE WORK. IT WAS STATED T HAT HAD THE CONTRACTORS BEEN SUB-CONTRACTORS THE RSAMB WOULD HAVE DEDUCED T AX AT SOURCE @ 1% ONLY. IT WAS FURTHER STATED THAT RSAMB BY SUPERVIS ING THE WORK AND NOT CARRYING OUT THE WORK ITSELF FUNCTIONED AS A CONSUL TANT ONLY. RELIANCE WAS PLACED ON THE DECISION OF THE ITAT LUCKNOW BENCH IN THE CASE OF U.P. STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. VS ITO REPO RTED AT 81 ITD 173. IT WAS ARGUED THAT ON THE ONE HAND THE A.O. TRIED TO E STABLISH THAT THE RELATION BETWEEN THE ASSESSEE AND RSAMB WAS THAT OF PRINCIPA L AND AGENT AND ON THE OTHER HAND THAT OF A CONTRACTOR AND A SUB-CONTR ACTOR, WHICH WAS A CONTRADICTORY STAND. IT WAS FURTHER ARGUED THAT TH ERE BEING NO CONTRACT BETWEEN THE ASSESSEE AND THE RSAMB, THE PAYMENTS MA DE BY THE ASSESSEE TO RSAMB WERE NOT LIABLE FOR DEDUCTION OF TAX AT SO URCE. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVE D THAT IN ORDER TO ATTRACT 5 THE PROVISIONS OF SECTION 194C OF THE ACT, THE FOLL OWING CONDITIONS NEED TO BE SATISFIED WHICH WERE NOT SATISFIED IN THE ASSESSEE S CASE: I. THERE MUST BE CONTRACT BETWEEN THE PAYER AND THE CONTRACTOR. II. THE CONTRACT MUST BE FOR CARRYING OUT ANY WORK. III. THE WORK MUST BE CARRIED OUT THROUGH A CONTRAC TOR. IV. THE CONSIDERATION FOR THE CONTRACT SHOULD EXCEE D RS. 50,000/- FOR THE YEAR. V. THE AMOUNT IS PAID OR CREDITED TO THE ACCOUNT OF THE CONTRACTOR FOR THE WORK CARRIED OUT BY HIM. 4. THE LD. CIT(A) DELETED THE ADDITION MADE BY THE A.O. AND HELD THAT THERE WAS NO REQUIREMENT OF MAKING DEDUCTION AT SOU RCE U/S 194C OF THE ACT. THE RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. KRISHI UPAJ MANDI SAMITI, GAJSI NGHPUR REPORTED AT 227 CTR 79 [RAJ] AND DECISION OF THE ITAT JODHPUR IN TH E CASE OF KRISHI UPAJ MANDI SAMITI, JETSAR VS. ITO, SURATGARH IN ITA NO. 434/JU/2011. 5. AS REGARDS THE OTHER ISSUE REGARDING VIOLATION O F PROVISIONS OF SECTION 194J OF THE ACT FOR MAKING PAYMENTS TO ADVOCATES/CH ARTERED ACCOUNTANTS FOR PROFESSIONAL SERVICES, THE ASSESSEE SUBMITTED TO TH E LD. CIT(A) THAT THE PAYMENTS FOR PROFESSIONAL SERVICES BY CHEQUE WERE MADE TO THE ADVOCATES/CHARTERED ACCOUNTANTS WHO HAD PAID DUE TA X ON THIS PROFESSIONAL RECEIPTS AND THIS FACT WAS ALSO INTIMATED TO THE A. O. AT THE TIME OF ASSESSMENT PROCEEDINGS. IT WAS FURTHER STATED THAT CIRCULAR N O. 275/202/95-IT(B) DATED 29.1.1997 ISSUED BY THE CBDT DECLARES AS UNDER :- 6 NO DEMAND VISUALIZED U/S 201(1) SHOULD BE ENFORCED AFTER THE TAX DEDUCTOR HAS SATISFIED THE OFFICER IN CHARGE OF TDS THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE, HOWEVER, THIS WILL NOT ALTER THE LIABILITY TO CHARG E INTEREST U/S 201(1A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCTEE OR THE LIABILITY FOR PENALTY U/S 271C OF THE ACT. IT WAS CONTENDED THAT FROM THE CIRCULAR IT WAS CLEA R THAT WHEN THE PAYEE HAD DEPOSITED THE DUE TAX, THE PAYER HAS NO FURTHER LIA BILITY FOR DEDUCTION OF TAX AT SOURCE. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: A. ITO VS. ALFRED ADVERTISING [8 SOT 312] [DELHI TR IB.] B. SINGAPORE AIRLINES LTD. VS. ITO [7 SOT 84 [CHENN AI TRIB.] C. M.S. CHAHAL VS. ITO [3 SOT 561] [ASR TRIB.] D. CIT VS. ADIDAS INDIA MARKETING (P) LTD [157 TAXM AN 519] E. CIT VS. MAJESTIC HOTELS LTD. [155 TAXMAN 447] 6. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE OBSERVED THAT THE HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES [P] TD VS. CIT HELD THAT WHEN THE PAYEE HAS PAID DUE TAX ON THESE PAYMENTS, THERE IS NO FURTHER LIABILITY OF TH E PAYER TO DEDUCT TAX AT SOURCE. HE ACCORDINGLY DELETED THE DEMAND RAISED B Y THE ASSESSING OFFICER. NOW THE DEPARTMENT IS IN APPEAL. 7. DURING THE COURSE OF HEARING, THE LEARNED COUNS EL FOR THE ASSESSEE, AT THE VERY OUTSET, SUBMITTED THAT THIS ISSUE NOW STAN DS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE VIDE ORDER DATED 1 2/07/2013 OF THIS BENCH OF THE TRIBUNAL IN I.T.A. NO.06/JODH/2013 IN THE CASE OF ITO(TDS), UDAIPUR VS. KRISHI UPAJ MANDI SAMITI, PRATAPGARH, C HITTORGARH. 7 8. IN HIS RIVAL SUBMISSIONS THE LEARNED D.R. ALTHO UGH SUPPORTED THE ORDER OF THE ASSESSING OFFICER BUT COULD NOT CONTROVERT T HE AFORESAID CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. 9. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES AND PERUSING THE MATERIAL ON RECORD, IT IS NOTICED THAT A SIMILAR IS SUE HAVING IDENTICAL FACTS HAS ALREADY BEEN ADJUDICATED BY THIS BENCH OF THE TRIBU NAL IN THE CASE OF ITO(TDS), UDAIPUR VS. KRISHI UPAJ MANDI SAMITI, PRA TAPGARH, CHITTORGARH IN I.T.A. NO.06/JODH/2013 (SUPRA) WHEREIN THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 7 AS UNDER: 7. WE HAVE CONSIDERED THE SUBMISSIONS OF LEARNED D .R. AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE L EARNED CIT(A) HAS DELETED THE IMPUGNED ADDITION BY FOLLOWING THE DECISION DATED 05/08/2011 OF ITAT JAIPUR BENCH B IN THE CA SE OF KUMS, SIKAR VS. INCOME TAX OFFICER IN I.T.A. NO.55/JAIPUR /2011 WHEREIN THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS. KUMS, GAJSINGHPUR & ORS. 227 CTR (RAJ) 79 H AS BEEN FOLLOWED. SINCE THE ISSUE UNDER CONSIDERATION IS C OVERED BY THE AFORESAID REFERRED TO JUDGMENT OF HON'BLE JURISDIC TIONAL HIGH COURT, WE, THEREFORE, DISMISS THE APPEAL OF THE DEP ARTMENT. 10. SINCE THE FACTS OF THE PRESENT CASE ARE IDENTIC AL TO THE FACTS INVOLVED IN THE AFORESAID REFERRED TO CASE OF ITO(TDS), UDAIPUR VS. KRISHI UPAJ MANDI SAMITI, PRATAPGARH, CHITTORGARH IN I.T.A. NO.06/JOD H/2013, SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 12/ 07/2013, WE DO NOT SEE ANY MERIT IN THE APPEAL OF THE DEPARTMENT. 8 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 05/08/2013. ) SD/- SD/- (HARI OM MARATHA) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTA NT MEMBER DATED: 05/08/2013 *RANJAN COPY TO : 1. THE APPELLANT- THE A.C.I.T, SRIGANGANAGAR. 2. THE RESPONDENT- M/S KRISHI UPAJ MANDI SAMITI, SR IGANGANAGAR. 3. THE CIT 4. THE CIT(A) 5. THE DR 6. THE GUARD FILE I.T.A. NO.167/JODH/2013 ASSISTANT REGISTRAR