M/s. Sahuwala Flour Mills, CHENNAI V. Additional CIT, CHENNAI

ITA 1837/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0976 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-03-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 29-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: SANJEEV SHAN
• Keywords: TDS; Set aside
• Section: 40(a)(ia); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER] I.T.A.NO.1837/MDS/2010 ASSESSMENT YEAR : 2007-08 M/S SAHUWALA FLOUR MILLS 56, NAMIAH MISTRY STREET TONDIARPET CHENNAI 600 081 VS THE ADDL. CIT BUSINESS RANGE VII CHENNAI [PAN - AABFS8827N ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANJEEV SHAN RESPONDENT BY : SHRI K.E.B RENGARAJAN, JR. STANDING COUNSEL O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE, FOR ASSES SMENT YEAR 2007-08, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) IX, CHENNAI, DATED 6.7.2010. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE-FIRM FILED ITS ORIGINAL RETURN OF INCOME ON 31.10.2009 D ECLARING TOTAL INCOME OF ` 50,53,691/-. THE ASSESSMENT WAS COMPLETED U/S 14 3(3) AT A TOTAL INCOME OF ` 1,12,22,240/-. AN ADDITION OF ` 61,68,540/- WAS MADE TO THE RETURNED INCOME ON ACCOUNT OF DISALLOWA NCE U/S 40(A)(IA) ITA 1837/10 :- 2 -: OF THE ACT FOR NON-DEDUCTION OF TDS U/S 194C OF THE ACT ON PAYMENTS MADE TO A PARTY NAMED, M/S CARGILL INDIA PVT. LTD. THE ASSESSING OFFICERS REASON FOR MAKING THIS ADDITION IS ON THE PREMISE THAT THIS PAYMENT WAS MADE TO A CONTRACTOR. THE CASE OF THE ASSESSEE IS THAT THIS PAYMENT WAS MADE ON ACCOUNT OF NON-SUPPLY OF GOODS AND IT WAS NOT ON ACCOUNT OF RENDERING ANY SERVICES, BUT WAS A SIMPLE TRADE TRANSACTION WHICH DOES NOT ATTRACT THE IMPUGNED PRO VISIONS OF LAW. AS PER THE ASSESSEE, THIS AMOUNT WAS THE DIFFERENCE IN THE PURCHASE PRICE AND SALE PRICE AND FOR ALL THE PAYMENTS MADE TO M/S CARGILL INDIA PVT. LTD WHICH WERE IN THE NATURE OF SERVICES, THE ASSESSEE HAS DEDUCTED TDS AS REQUIRED BY LAW. BUT THE ASSESSING OFFICER WAS NOT AGREEABLE AND HAS OPINED THAT THE AMOUNTS REPAID TO M/S CARGILL INDIA PVT. LTD WITHOUT DEDUCTING TDS ATTRACTS THE P ROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND HENCE, HE HAS DISALLOWED T HE SAME. BEFORE THE LD. CIT(A), THE ASSESSEE TOOK EXACTLY IDENTICAL CONTENTIONS, BUT THE IMPUGNED ADDITION HAS BEEN UPHELD BY HIM. NOW THE ASSESSEE IS IN FURTHER APPEAL. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE C AREFULLY PERUSED THE ENTIRE RECORDS INCLUDING THE PAPER BOOK FILED BY THE LD.AR. IT WAS FOUND THAT THE ASSESSEE-FIRM PURCHASES WHEAT AND MANUFACTURES MAIDA, SOOJI, ATTA AND BRAN AND SELLS THE ABOVE PRODUCTS ITA 1837/10 :- 3 -: IN THE WHOLESALE MARKET. THE FIRM ALSO SELLS WHEAT , INTER ALIA. THE ASSESSEE FILED THE COPIES OF BALANCE SHEET, PROFIT & LOSS ACCOUNT, AUDITORS REPORT AND STATEMENT OF INCOME. THE ASSES SEE HAS SHOWN A SUM OF ` 92,75,890.62 AS SUNDRY INCOME IN ITS TRADING AND P ROFIT & LOSS ACCOUNT . THE BREAK-UP OF THIS SUNDRY INCOME SHOWED A RECEIPT OF ` 1,84,44,430.62 TOWARDS SETTLEMENT FOR CANCELING OF WHEAT BARGAINED FROM VARIOUS PARTIES. OUT OF THE ABOVE A MOUNT, THE ASSESSEE HAS REPAID AN AMOUNT OF ` 61,68,540/- TO M/S CARGILL INDIA PVT. LTD. THIS PAYMENT HAS BEEN MADE AS PER THE TE RMS AND CONDITIONS OF AN AGREEMENT WHICH IS IN THE NATURE O F BUY-BACK AGREEMENT EXECUTED BETWEEN THE PARTIES ON 1.2.2006. OBVIOUSLY, THE ASSESSEE HAS NOT DEDUCTED TDS ON THIS AMOUNT ON THE FORCE OF THE ARGUMENTS THAT NO TDS IS DEDUCTIBLE IN THIS CASE BE CAUSE THE PAYMENT WAS ONLY FOR THE NON-SUPPLY OF GOODS RESULTING FROM A TRADE TRANSACTION AND WAS NOT PAID FOR RENDERING OF ANY S ERVICES. A COPY OF THE TRADE AGREEMENT IN QUESTION HAS BEEN FILED BEFO RE US. THE PERUSAL OF THIS AGREEMENT EVEN WITH REFERENCE TO CORRESPOND ENCE BETWEEN THE PARTIES PLACED AT PAGES 20,23,24,27 AND ALSO AT PAG E 31, WE ARE CONVINCED THAT THIS IS NOT A CASE WHERE THE PROVISI ONS OF SECTION 40(A) (IA)/194C ARE ATTRACTED. IN SECTION 194C, THE DEFI NITION OF EXPRESSION WORK WHICH IS AN INCLUSIVE DEFINITION HAS BEEN GI VEN BUT SPECIFICALLY EXCLUDES MANUFACTURE OR SUPPLY A PRODUCE ACCORDING TO THE ITA 1837/10 :- 4 -: REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON OTHER THAN THAT CUSTOMER. IT WAS FOU ND THAT THIS CONTRACT BETWEEN THE ASSESSEE AND M/S CARGILL INDIA PVT. LTD IS ONLY FOR THE SUPPLY OF GOODGRAINS ON AN ANNUAL CONTRACT BASI S AND NOT FOR RENDERING ANY SERVICES AS SPECIFIED IN THE DEFINITI ON OF EXPRESSION WORK U/S 194C OF THE ACT. IT WAS NOTICED THAT TH E ASSESSEE HAS RECEIVED A SUM OF ` 1,54,44,430.62 FROM M/S CARGILL INDIA PVT. LTD AND OTHER PARTIES TOWARDS DIFFERENCE IN PRICES AND NONE OF THEM HAVE DEDUCTED TAX ON SUCH TRANSACTIONS. IT WAS ALSO FOU ND FOR A FACT FROM THE RECORD THAT THE ASSESSEE HAS DEDUCTED TAX AT SO URCE FOR PAYMENTS MADE TO THE SAME PARTY FOR VARIOUS SERVICES RENDERE D, HENCE, IN OUR CONSIDERED OPINION, THE APPELLATE FINDINGS ARE NOT CORRECT AS PER LAW. WE, THEREFORE, SET ASIDE THE LD. CIT(A)S ORDER ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDIT ION. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS A LLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 18.3.2011. SD/- SD/- (ABRAHAM P GEORGE) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 18 TH MARCH, 2011 RD COPY TO: APPELLANT /RESPONDENT/CIT(A)/CIT//DR