The Principal Chief Conservator of Forests (Kendu Leaves), Bhubaneswar V. ACIT-1 (TDS), Bhubaneswar, Bhubaneswar

ITA 283/CTK/2014

• Counselvise Citation: 28322114 RSA 2014
• Duration Of Justice: 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 27-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B K MAHAPATRA
• Section: 10

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK BEFORE SHRI P. K. BABNSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 280 TO 283 / CTK /2014 (ASST. YEAR S : 200 9 - 1 0 TO 201 2 - 1 3 ) THE PRINCIPAL CHIEF CONSERVATOR OF FORESTS (KENDU LEAVES), ODISHA ARANYA BHAWA, PLOT NO. GD - 2/12, CHANDRASEKHARPUR, BHUBANESWAR . VS. ACIT - 1 (TDS) , BHUBANESWAR. PAN NO. BBNAO 0254 C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI B.K. MAHAPA TR A DEPARTMENT BY : SHRI ANIL SHARMA - D.R. DATE OF HEARING : 06 / 0 2 /2015 . DATE OF PRONOUNCEMENT : 1 1 / 0 3 /201 5 . O R D E R PER D.T. GARASIA , J .M TH ESE FOUR APPEAL S BY THE ONE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDER S OF LD. CIT (A) - 1 , BHUBANESWAR , EACH DATED 19 /0 3 /201 4 FOR THE A.Y S . 2009 - 10 TO 2012 - 13 . SINCE THE COMMON ISSUE INVOLVED AND THE APPEALS ARE HEARD TOGETHER, SO THESE ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2 2. FOR THE SAKE OF CONVENIENCE , FACTS ARE TAKEN FROM I.T.A.NO. 280/CTK/2014. THE FOLLOWING GROUNDS ARE RAISED IN THIS APPEAL : - 1. THAT THE ORDER DATED 19.03.2014 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(APPEALS)] SO FAR AS PARTLY ALLOWING THE APPEAL IS CONTRARY TO FACTS, ARBITRARY AND ERRONEOUS AND BAD IN LAW. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CASE, THE ORDER OF THE LEARNED CIT (APPEALS) IN UPHOLDING THE AO'S ORDER IN TREATING THE APPELLANT AS AN 'ASSESSEE - IN - DEFAULT' FOR NON - DEDUCTION OF TAX AT SOURCE U/S.!94H THE ACT IS CONTRARY TO FACTS, ARBITRAR Y, ERRONEOUS, BAD IN LAW AND LEGALLY UNTENABLE. 3. THAT WITHOUT PREJUDICE TO THE GROUNDS 1 TO 2 ABOVE, THE LEARNED CIT (APPEALS) HAS FAILED TO APPRECIATE THAT AS THE ENTIRE ADMINISTRATION OF SELLING AND REALIZATION OF OPERATION OF THE SALE PROCEEDS OF K ENDU LEAVES ARE CARRIED OUT BY ORISSA FOREST DEVELOPMENT CORPORATION LIMITED( FOR SHORT 'OFDC'), IF AT ALL, ANY TAX IS REQUIRED TO BE DEPOSITED FOR EFFECTING TDS, THE SAME OUGHT TO HAVE BEEN MADE BY 'OFDC AND THE LEARNED CIT (APPEALS) HOLDING THAT THE SAME IS IRRATIONAL AND NOT IN ACCORDANCE WITH LAW IS ARBITRARY, ERRONEOUS AND BAD IN LAW. 4. THAT THE PROVISIONS OF THE ACT WITH REGARD TO TDS, HAVING BEEN DULY COMPLIED WITH BY THE APPELLANT, T HE LEVY OF INTEREST OF U/S.201(1 A) OF THE ACT IS INCORRECT, ERRONEOUS AND LEGALLY UNTENABLE AND THE LEARNED CIT (APPEALS) HAS ERRED IN HOLDING THAT INTEREST U/S.201(1 A) IS PAYABLE TILL THE DATE OF FILING THE RETURN BY OFDC. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) OUGHT TO HAVE ALLO W ED THE APPEAL OF THE APPELLANT IN FULL. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, SUPPLEMENT, MODIFY THE GROUNDS HEREINABOVE BEFORE OR AT THE HEARING OF THE APPEAL. 3. SHORT FACTS OF THE CASE ARE THAT THE TDS VERIFICATION WAS CONDUCTED IN THE CASE OF ASSESSEE ON 24/08/2012 . IT WAS FOUND FROM THE SURVEY THAT THE ASSESSEE IS ENTRUSTED WITH THE TASK OF PRODUCTION 3 AND PROCESSING OF KENDU LEAVES WHICH IS MARKETED BY ORISSA FOREST DEVELOPMENT CORPORATION (FOR SH ORT, OFDC) . THE OFDC RECEIVES COMMISSION ON THE SALE OF KENDU LEAVES, HOWEVER, IT WAS FOUND THAT NO TAX HAS BEEN DEDUCTED AT SOURCE ON THE COMMISSION PAID BY THE ASSESSEE AS REQUIRED U/S. 194H OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT', FOR SHORT) . A SHOW - CAUSE NOTICE WAS ISSUED TO THE ASSESSEE. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS ENTRUSTED ONLY TO PROCURE KENDU LEAVES IN 19 KENDU LEAVES DIVISIONS AND DELIVER THEM TO OFDC LTD. THE OFDC AS THE SOLE SELLING AGENT, SELLS THAT KENDU LEAVES AND PARKS THE PROCEEDS IN THE JOINT ACCOUNT OPERATED BY THE ASSESSEE AND OFDC. THE OFDC IS ENTITLED TO COMMISSION AND THE SAME IS WITHDRAWN FROM THE JOINT ACCOUNT BY THE OFDC. THE OFDC IS SUPPOSE D TO PAY TDS FROM THE COMMISSION, IT TAKES FROM THE JOINT ACCOUNT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ONUS OF MAKING TDS LIES WITH THE ASSESSEE AND CANNOT BE PASSED TO OFDC. THEREFORE, ASSESSEE WAS IN DEFAULT TO DEDUCT TAX ON THE COMMISSION P AID AND HE ACCORDINGLY LEVIED THE PENALTY. THE ASSESSING OFFICER HAS ALSO CHARGED INTEREST U/S. 201(1A) OF THE ACT FOR AN AMOUNT OF RS. 67,08,020/ - . 4 . THE MATTER WAS CARRIED TO THE LD. CIT(A) AND LD. CIT(A) HAS HELD THAT THE ASSESSEE IS NOT A DEFAULTER IN TDS SINCE THE SAME HAS BEEN 4 SHOWN AS INCOME BY THE DEDUCTEE IN HIS RETURN . HOWEVER , INTEREST U/S. 201(1A) OF THE ACT IS PAYABLE TILL THE DATE OF FILING THE RETURN BY OFDC. 5. LEARNED AR SUBMITTED THAT THE ASSESSEE IS NOT IN DEFAULT IN TDS AS THE SALE PROCEEDS OF KENDU LEAVES WERE CARRYOUT BY OFDC AND THEY ARE REQUIRED TO DEDUCT TAX AT SOURCE AND THEY HAVE ALREADY SHOWN THIS COMMISSION INCOME IN ITS RETURN OF INCOME. LEARNED AR SUBMITTED THAT THE FOREST DEPARTMENT , GOVERNMENT OF ODISHA HAS APPOIN TED OFDC LTD., A WHOLLY OWNED BY GOVERNMENT OF ODISHA COMPANY AS ITS THE SOLE SELLING AGENT OF KENDU LEAVES . THE FOREST DEPARTMENT PROCURES AND COLLECTS KENDU LEAVES AND DELIVERS THE SAME IN ITS GODOWNS TO OFDC WHICH SELLS THE KENDU LEAVES TO THE PURCHASERS. IT IS PERTINENT TO MENTION THAT THE SALE PROCEEDS OF KENDU LEAVES ARE RE C EIVED BY OFDC AND IS KEPT IN DESIGNATED BANK ACCOUNT AND THE ENTIRE ADMINISTRATION OF SELLING AND REALISATION OF OPERATION OF THE SAL E PROCEEDS OF KENDU LEAVES ARE DON E BY OFDC. OFDC IS ENTITLED TO COMMISSION ON KENDU LEAVES AS PER THE RATES BASED ON THE TURNOVER ACHIEVED IN RESPECT OF KENDU LEAVES CROP YEAR. OFDC MAINTAINS ITS ACCOUNT ON MERCANTILE BASIS . THE ASSESSEE DID NOT MAKE PAY MENT OF COMMISSION TO OFDC, HENCE, ASSESSEE IS NOT LIABLE TO DEDUCT ANY TDS. THE OFDC FILED ITS RETURN FOR ALL THE ASSESSMENT YEARS AND THEY HAVE 5 ACCOUNTED THIS COMMISSION ON ACCRUAL BASIS. IF THE TDS LIABILITY IS THERE, IT IS THE LIABILITY OF OFDC AN D NOT OF THE ASSESSEE, THEREFORE ASSESSEE IS NOT LI A BLE FOR ANY INTEREST. THE LD. CIT(A) HAS DIRECTED TO CHARGE THE INTEREST , IS CONTRARY TO THE DECISION OF SUPREME COURT IN THE CASE OF M/S. HINDUSTAN COCA COLA B EVERAGE PVT. LTD. VS. CIT REPORTED IN 293 ITR 226 . 6. ON THE OTHER HAND, LEARNED DR RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE LD. CIT(A) HAS VERIFIED ALL THE ASS ESSMENT YEARS AND THE PAPER BOOK AT PAGE 5 WHEREIN THE OFDC HAS ACCOUNTED THE INCOME OF COMMISSION ON KENDU LEAVES IN ITS RETURN OF INCOME FOR A.Y S . 2008 - 09 TO 2011 - 12 , THEREFORE, THE ASSESSEE IS NOT LIABLE FOR TDS. WE FIND THAT THE INTEREST U/S. 201(1A) OF THE ACT IS TO BE COLLECTED UPTO THE DATE O N WHICH OFDC FILE THE RETURN . WE FIND THAT THE DECISION OF SUPREME COURT IN THE CASE OF CIT VS. M/S. ELI LILLY & COMPANY (INDIA) (P) LTD. REPORTED IN (2009) 178 TAXMAN 505 CLEARLY HELD THAT LEVY OF INTEREST IS MANDATORY AND THE ABSENCE OF LIABILITY FOR TAX WILL NOT DILUTE THE DEFAULT . THEREFORE, THE LD. CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO VERIFY THE CLAIM OF 6 FILING OF RETURN BY OFDC AND IF IS FOUND CORRECT, THEN RELIEF MAY BE GRANTED . THEREFORE , IN THE INTEREST OF JUSTICE AND FAIR PLAY , WE MODIFY THE ORDER OF LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE AS PER THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P) LTD. VS. CIT REPORTED IN 293 ITR 226 AND THE INTEREST LIABILITY AS PER THE DECISION IN CIT VS. M/S. ELI LILLY COMPANY (INDIA) (P) LTD. (SUPRA) REPORTED IN (2009) 178 TAXMAN 505 AND DECIDE THE MATTER AS PER LAW AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. 8. IN THE RESULT, APPEAL S OF THE ASSESSEE ARE ALLOWED AS INDICATED ABOVE. ( ORDER PRONOUNCED IN PURSUANCE OF RULE 34(4) OF ITAT RULES, 1963 BY PUTTING ON NOTICE BOARD OF THE BENCH AT CUTTACK ON 1 1 T H MARCH , 201 5 ). S D / - S D / - (P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 1 T H MARCH , 201 5 . VR/ - COPY TO: 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE LD. CIT 4 . THE CIT(A) 5 . THE D.R 6 . GUARD FILE. BY ORDER 7 ASSISTANT REGISTRAR I.T.A.T., CUTTACK.