M.P. State Civil Supplies Corp. Ltd., V. Income Tax Officer(TDS)-1,

ITA 22/JAB/2016

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 7075 (ITAT-JABALPUR)
• Duration Of Justice: 6 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 16-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ABHIJEET SRIVASTAVA
• Keywords: TDS
• Section: 201(1); 13; 22

Judgement Text

1 | P a g e IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE SHRI SANJAY ARORA, HON‟BLE ACCOUNTANT MEMBER & SHRI MANOMOHAN DAS, HON'BLE JUDICIAL MEMBER I.T.A. Nos. 22 to 24/JAB/2016 (Asst. Years: 2010-11 to 2012-13) Appellant by : Shri Abhijeet Srivastava, Advocate Respondent by : Shri Ravi Mehrotra, Sr.DR Date of hearing : 08/06/2022 Date of pronouncement : 15/06/2022 O R D E R Per Bench This is a set of three Appeals by the Assessee agitating the dismissal of it‟s appeals contesting the order dated 21/3/2013 under sections 201(1) & 201(1A) of the Income Tax Act, 1961 („the Act‟, hereinafter) in it‟s case for three consecutive years, being assessment years (AYs). 2010-11 to 2012-13, by the Commissioner of Income Tax (Appeals)-1, Jabalpur („CIT(A)‟ for short) vide again a consolidated order dated 16/11/2015. The appeals raising the same issues, per identically worded grounds, the same were heard together, and are being disposed of per a common, consolidated order. M.P. State Civil Supplies Corp. Ltd., Collectorate Campus, Old DRDA Building, Jabalpur. [TAN: JBPMO 3635 C] vs. Income Tax Officer, TDS-1, Jabalpur. (Appellant) (Respondent) ITA Nos. 22-24/JAB/2016 (AYs. 2010-11 to 2012-13) M.P. State Civil Supplies Corp. Ltd. v. ITO 2 | P a g e 2. The short issue/s in these appeals is the maintainability of the order/s u/s. 201 & 201(1A) for failure to deduct tax at source and interest thereon (for the delayed deposit with the Central Government) respectively for the relevant years, since upheld by the first appellate authority. 3. The assessee is a Department of the State Government engaged in supply of food grains through Public Distribution System (PDS) in the area of district Jabalpur, MP, for which it gets grants primarily from the Central Government. For the purpose, as explained by Shri Srivastava, the ld. counsel for the assessee, with a view to remove the middle men and agents, it procures food grains directly from the farmers, who are, for the purpose, organised in societies, consisting of 10 to 12 famers each, belonging to a particular village/area. The assessee deals with about 125-150 farmer cooperatives. Apart from purchase of food grains, which is at a fixed price, it pays commission, labour/hamali charges, storage charges, milling charges, transportation, etc. to these societies in respect of different services rendered by them in relation to procurement, storage and supply of food grains. The tax deduction at source on these sums, which form the income of the societies, is the bone of contention in the instant case, i.e., apart from also in stray cases, as Auditor‟s remuneration. The ld. CIT(A) has reviewed the several claims raised by the assessee in this regard before him, holding as under, so that, aggrieved, the assessee is in second appeal before us: “Thereafter, TDS liability has been determined from page 13 to page 14. In the appeal before the undersigned the additional ground of appeal has been taken by the appellant which in any case stands decided by the AO in paras 9 & 10. It is an admitted fact that assessee is following hybrid system of accounting at the relevant point of time. There is further aspect of clear admission of TDS liability before the AO and the subsequent clarifications are based on unsubstantiated argument which cannot be accepted. The aspect of there being no loss to revenue because deductee societies are exempted from tax is a plea which can be examined only in course of regular assessment and not in TDS proceedings. The liability to deduct TDS within my understanding cannot be diluted or removed even if the income of recipient is exempt. In any case, there is a specific procedure which is already prescribed u/s 197 of the IT Act which could have been resorted to by the deductee. However, this provision has not been utilised. The reasoning of the AO ITA Nos. 22-24/JAB/2016 (AYs. 2010-11 to 2012-13) M.P. State Civil Supplies Corp. Ltd. v. ITO 3 | P a g e is crystal clear and the aspect of non-deduction of TDS on the various heads clearly stands admitted. It is also not the case of the assessee that these payments did not attract TDS in the argument filed before the under signed. The assessee has constantly harped on the technical nature of the default. The confused and non acceptable system of accounting has also been clearly admitted on page 1 of the written submission. It is clearly mentioned that the appellant followed hybrid system of accounting at the relevant point of time for recognising income. For Government grants cash system of accounting is followed. For contract agreements the assessee follows mercantile system of accounting. All these facts make it crystal clear that such a hybrid system of accounting leads to a confused states of affairs. The reliance of the assessee on the judgment of Hindustan Coca Cola 293 ITR 226 (SC) is completely misplaced because that judgment is about payment of taxes by the deductees and consequentially no amount being recoverable from the deductor. In the instant case there is claim of exemption on behalf of the deductees which is completely unsustainable in law and facts. There is this further aspect of not following the procedure laid down u/s 197. In view of the above facts, it is clear that the AO has correctly fastened the TDS liabilities in all the three years and the demand raised is hereby confirmed.” (emphasis, ours) 4. We have heard the parties, and perused the material on record. 4.1 Though the appeals raise several grounds, Shri Srivastava would, at the outset, submit that he shall be pressing only Ground 9, which reads as under:- “The ld. CIT(A) failed to examine whether income of recipient is exempt from tax or whether tax has been paid by the recipient in view of judgment of Hon'ble Apex Court in Hindustan Cola.” The ld. CIT(A) having dealt with the said aspect, Shri Srivastava, upon being enquired by the Bench in the matter, would admit that none of the societies had claimed exemption u/s. 80P, on the underlying strength of which, as also evident from the impugned order, the plea as to the applicability of the decision in Hindustan Coca Cola Beverage P. Ltd. v. CIT [2007] 293 ITR 226 (SC) was raised before the first appellate authority. It is clear that neither before him nor before us there is anything on record to exhibit the income of the payee-societies, much less the whole of it, as exempt u/s. 80P, or even if they have claimed it per their returns of income for the relevant years. Rather, as observed by the ld. CIT(A), the proper course, even in such a case, is for the payees to obtain a certificate of deduction of tax at source u/s. 197 at nil or a lower rate, only which would enable the assessee to either not deduct tax at source or do so at a lower rate. Further, as we see it, it is ITA Nos. 22-24/JAB/2016 (AYs. 2010-11 to 2012-13) M.P. State Civil Supplies Corp. Ltd. v. ITO 4 | P a g e only where the fact of exemption from tax of the payee‟s income, which is subject to TDS, is admitted and unqualified, as where it is not hinged by or subject to any conditionality, that perhaps one could argue of non-liability to TDS (inasmuch as the tax deduction provisions would extend only to income chargeable to tax), else not (see G.E. India Technology Centre (P.) Ltd. v. CIT [2010] 327 ITR 456 (SC)). The Apex Court in Hindustan Coca Cola Beverage P. Ltd. (supra) held that a payer may not deduct tax at source where the same stands already deposited by the payee (with the Central Govt.), adducing proof to that effect, though shall be liable to interest for the delayed payment of tax as well as penalty, being the position of law as clarified by the Board itself per it‟s Circular dated 29/1/1997. The assessee‟s reliance on the said decision is wholly unevidenced and without merit. 4.2 The assessee‟s liability to deduct tax at source in respect of the sums under reference being patent and, in fact, admitted, we have no hesitation in, upholding the impugned order, dismissing the assessee‟s appeals as not pressed/without merit. We decide accordingly. 5. In the result, the assessee‟s appeals are dismissed. Order pronounced in open Court on June 15, 2022 sd/- sd/- (Manomohan Das) (Sanjay Arora) Judicial Member Accountant Member Dated: 15/06/2022 vr/- C o p y t o : 1. T h e A p p e l l a n t: M.P. State Civil Supplies Corp. Ltd., Collectorate Campus, Old DRDA Building, Jabalpur (MP) 2. T h e R e s p o n d e n t: Income Tax Officer, TDS-1, Jabalpur. 3. T h e C IT-T D S , B h o p a l . 4. T h e C IT ( A )-1, J a b a l p u r ( M P ) 5. T h e S r . D . R., IT A T , J a b a l p u r. 6. G u a r d Fi l e . By order Sr. Private Secretary, ITAT, Jabalpur.