M/s. Council for Citrus and Agri Juicing in Punjab, Chandigarh V. The Income-tax Officer, Jalandhar

ITA 30/ASR/2014

• Counselvise Citation: 3020914 RSA 2014
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 15-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 143(3); 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.30(ASR)/2014 ASSESSMENT YEAR:2008-09 PAN :AAATC7942H M/S. COUNCIL FOR CITRUS AND AGRI. JUICING VS. INCOM E TAX OFFICER, IN PUNJAB, SCO 358-359, SECTOR 34A, (TDS)-1, JALA NDHAR. CHANDIGARH. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.PRIKSHIT AGGARWAL, CA RESPONDENT BY:SH.TARSEM LAL, DR DATE OF HEARING:02/03/2015 DATE OF PRONOUNCEMENT: 17 /03/2015 ORDER PER B.P.JAIN,AM: THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), JALANDHAR, DATED 08.11.2013 FOR THE ASSESSMENT YEA R 2008-09. 2. ORIGINALLY, THE ASSESSEE HAS FILED THE GROUNDS O F APPEAL AND THEREAFTER ADDITIONAL GROUND OF APPEAL WAS ALSO FILED AND FI NALLY HAS FILED THE MODIFIED GROUNDS IN LIEU OF ORIGINAL GROUNDS AND ADDITIONAL GROUND WHICH ARE LISTED HEREIN BELOW: ITA NO.30(ASR)/2014 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE WORTHY CIT(A) IN APPEAL NO.167/2012-13/CIT(A)/JAL. VIDE ORDER DATED 08.11.2013 HAS ERRED IN PASSING THAT OR DER IN CONTRAVENTION OF THE PROVISIONS OF SECTION 250(6) O F THE INCOME TAX ACT, 1961. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WO RTHY CIT(A) VIDE PARA 6.2 OF HIS ORDER, HAS ERRED IN CONFIRMING THE ACTION OF AO WHEREIN THE AO HAD ERRONEOUSLY HELD THAT THE APP ELLANT WAS LIABLE TO DEDUCT TAX AT SOURCE U/S 194A ON PROVISI ON INTEREST OF RS.48,00,000/- TO PUNJAB AGRI EXPORT CORPORATION L IMITED AND HAS THEREBY ERRED IN PASSING THE ORDER U/S 201(1) T O THAT EXTENT AND CREATING A DEMAND OF RS.5,43,840/- ON ACCOUNT O F SHORT DEDUCTION OF TAX AT SOURCE AND CONSEQUENTIAL DEMAND ON ACCOUNT OF INTEREST THEREON U/S 201(IA) OF THE ACT. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WO RTHY CIT(A) VIDE PARA 6.2 OF HIS ORDER, HAS ERRED IN CONFIRMING THE ACTION OF AO WHEREIN THE AO HAD ERRONEOUSLY HELD THAT THE APP ELLANT WAS LIABLE TO DEDUCT TAX AT SOURCE U/S 194A ON PROVISI ON INTEREST OF RS.48,00,000/- TO PUNJAB AGRO @ 11.33% EVEN WHEN TH E CORRECT RATE OF TDS APPLICABLE WAS 10.30%. THIS GRO UND IS WITHOUT PREJUDICE TO CLAIM OF THE APPELLANT ON MERI TS. 4. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE BEFORE DISPOSING OF THE APPEAL, THE WORTHY CI(A) HA S ERRED IN NOT CONSIDERING THE INTRODUCTION OF IST PROVISO TO S.201(1) BY FINANCE ACT, 2012 EVEN WHEN THE SAID AMENDMENT IS C URATIVE IN NATURE AND IS APPLICABLE RETROSPECTIVELY AND THE IN SERTION OF THE SAID PROVISO WAS ON STATUTE BOOK WHEN THE ORDER WAS PASSED BY WORTHY CIT(A). 5. THAT THE APPELLANT CRAVES LEAVE FOR ANY ADDITION, D ELETION OR AMENDMENT IN THE GROUNDS OF APPEAL ON OR BEFORE THE DISPOSAL OF THE SAME. ITA NO.30(ASR)/2014 3 3. AS REGARDS GROUNDS NO. 2 & 3, THE BRIEF FACTS OF THE CASE ARE THAT AN INFORMATION IN THIS CASE WAS RECEIVED FROM ITO, WAR D 4(3), CHANDIGARH BY ITO (TDS)-II, CHANDIGARH THAT ASSESSEE M/S. CITRUS AND AGRI JUICING IN PUNJAB SCO NO.338 339, SECTOR 34A, CHANDIGARH HAS NOT EITHER DEDUCTED OR SHORT DEDUCTED TAX AT SOURCE U/S 194A, 194-1 AND 194J OF THE I.T.ACT, 1961 TO THE TUNE OF RS.9,21,626/- FOR THE F.Y. 2007 -08 RELEVANT TO AY 2008- 09. LATER ON, IT WAS FOUND BY ITO (TDS)-II, CHANDIG ARH THAT THE JURISDICTION OVER TAN OF THE ASSESSEE WAS WITH ITO(TDS)-I, JALA NDHAR. THE INFORMATION IN RESPECT OF NON/SHORT DEDUCTION OF TDS WAS, THER EFORE, PASSED ON TO THE ITO (TDS)-1, JALANDHAR BY ITO (TDS)-II CHANDIGARH V IDE HER OFFICE LETTER NO. ITO (TDS II) CHD/2011-12/18673 DATED 01.03.201 2 FOR TAKING NECESSARY ACTION IN THE CASE OF THE ASSESSEE. ACCOR DINGLY, THE ITO (TDS)-1, JALANDHAR VIDE HER OFFICE LETTER NO. ITO/TDS-1/JAL/ 2011-12/964 DATED 21.03.2012 ISSUED A SHOW CAUSE NOTICE TO THE ASSESS EE TO VERIFY THE COMPLIANCE OF TDS/TCS PROVISIONS. AFTER NECESSARY V ERIFICATION, THE AO I.E. ITO (TDS)-1, JALANDHAR HAS PASSED AN ORDER U/S 201( 1)/201(1A) OF THE ACT DATED 27.03.2012 VIDE WHICH A DEMAND OF RS.13,64,00 6/- WAS CREATED AGAINST THE ASSESSEE (INCLUDING INTEREST) FOR NON-S HORT DEDUCTION OF TAX AT SOURCE (TDS) UNDER THE PROVISIONS OF SECTION 194A, 194I & 194J OF THE ACT ITA NO.30(ASR)/2014 4 WHICH INCLUDE DEMAND U/S 201(1) OF THE ACT AT RS.9, 21,626/- AND U/S 201(1A) OF THE ACT AT RS.4,42,380/-. 4. THE ASSESSEE FILED THE APPEAL BEFORE THE LD. CIT (A) AGAINST THE ORDER OF THE AO FOR CREATION OF DEMAND OF RS.5,43,840/- A LONGWITH OTHER DEMANDS RAISED U/S 201(1) & 201(1A) AND U/S 194, 194A, 194 C, 194I & 194J OF THE ACT. THE LD. CIT(A) VIDE PAGE 18 OF HIS ORDER IN PA RA 6.2. CONFIRMED THE ACTION OF THE A.O. 5. THE LD. COUNSEL FOR THE ASSESSEE WITH REGARD TO GROUND NO.2 INVITED OUR ATTENTION TO THE PROVISIONS OF SECTION 196 OF T HE ACT AND ARGUED THAT THE ASSESSEE IS COVERED U/S 196(I) OF THE ACT SINCE THE AMOUNT WAS PAYABLE TO THE GOVERNMENT AND THEREFORE, NO TAX AT SOURCE WAS DEDUCTIBLE AT ALL. THE LD. COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO P AGE 9 OF CIT(A)S ORDER WHERE THE SUBMISSIONS WERE MADE BEFORE THE LD. CIT( A), WHICH FOR THE SAKE OF CONVENIENCE ARE REPRODUCED HEREINBELOW: 1. THE APPELLANT WAS GRANTED FUNDS AMOUNTING TO RS. 6 CRORE BY PUNJAB AGRO FOOD GAINS CORPN. LTD. (PAIC). NO INTER EST WAS EVER PAID ON THIS LOAN BY THE APPELLANT. 2. IN THE BALANCE SHEET ATTACHED ALONGWITH ORIGINAL RETURN OF INCOME FILED ON 28.09.2008, THE APPELLANT DID NOT P ROVIDE FOR ANY INTEREST ON ABOVE LOAN. 3. HOWEVER, THE ABOVE BALANCE SHEET WAS NOT APPROVE D BY THE BOARD OF MANAGEMENT OF THE APPELLANT AND RE-WORKING AND RE- AUDIT WAS ORDERED. 4. IN RE-WORKING AND RE-AUDIT THE AUDITOR FORCES TH E APPELLANT TO PROVIDE FOR INTEREST ON ABOVE LOAN AT MINIMUM 8% P. A. HENCE, ITA NO.30(ASR)/2014 5 INTEREST OF RS.48 LACS WAS PROVIDED IN BOOKS. THIS BALANCE SHEET WAS SIGNED ON 13.10.2009. THE YEAR IN QUESTION HAD ALREADY CLOSED MUCH EARLIER AND THE APPELLANT HAD NO CHANCE TO PROVIDE FOR TDS ON THIS ACCRUAL TRANSACTION IN THE BOOKS. 5. SINCE, THE INTEREST ITSELF WAS NEITHER PAID NOR ACCRUED IN ORIGINAL BALANCE SHEET FINALIZED DURING THE YEAR, T HE APPELLANT WAS NOT REQUIRED TO PROVIDE FOR TDS U/S 194J OF THE ACT. FURTHER, WHEN THE REVISED BALANCE SHEET WAS FINALIZ ED MUCH AFTER THE CLOSE OF THE YEAR IN QUESTION, THE APPELL ANT HAD NO OPPORTUNITY TO PROVIDE FOR TDS THEREON. 6. IT IS FURTHER SUBMITTED THAT THE ASSESSMENT U/S 143(3) WAS FRAMED ON THE BASIS OF ORIGINAL BALANCE SHEET AND R EVISED BALANCE SHEET FIGURES WERE CONSIDERED AS NON-EST. T HE CLAIM OF INTEREST OF RS. 48 LACS IN THE REVISED BALANCE SHEE T WAS ITSELF CONSIDERED AS NON-EST BY AO IN PROCEEDINGS CONCLUDE D U/S143(3). THEREFORE, WHEN THE CLAIM OF INTEREST ON ACCRUAL BASIS IN THE REVISED BALANCE SHEET HAS BEEN CONSIDE RED BY AO TO BE NOT PART OF ACCOUNTS OF THE APPELLANT, THE AO W AS UNJUSTIFIED IN HOLDING THAT THE APPELLANT HAS FAILED TO DEDUCT TDS ON INTEREST PROVISION CREATED IN REVISED BALANCE SHEET . 7. IT IS FURTHER SUBMITTED THAT PAIC IS A COMPANY REGISTERED UNDER COMPANIES AC, 1956. EVEN IF IT IS HELD THAT THE AP PELLANT WAS REQUIRED TO DEDUCT TDS ON ACCRUAL OF INTEREST TO PA IC, THE RATE SHOULD HAVE BEEN 10.3% AS AGAINST APPLIED BY AO AT 11.33% . THIS IS SO BECAUSE THE PAYMENT/CREDIT OF INTEREST T O PAIC ( A COMPANY) DID NOT EXCEED THE THRESHOLD LIMIT OF RS. 1 CRORE DURING THE YEAR. HENCE, EVEN IF THE APPELLANT IS HE LD TO BE LIABLE TO DEDUCT TDS, ON ACCRUAL OF INTEREST OF RS. 48 LAC S THE NON DEDUCTION SHOULD HAVE BEEN COMPUTED AT RS.4,94,000/ - AS AGAINST COMPUTED BY AO AT RS.5,43,840/- . APPROPRIA TE RELIEF IS PRAYED. 6. THE LD. COUNSEL FOR THE ASSESSEE FURTHER INVITED OUR ATTENTION TO PB-29, THE SUBMISSION AND IN FACT, THE STATEMENT BY M/S. PUNJAB AGRI EXPORT CORPN. LTD., WHICH IS REPRODUCED HEREINBELOW FOR TH E SAKE OF CONVENIENCE: 1.WE ARE A GOVERNMENT COMPANY AND HAVE BEEN PROMOTE D BY THE STATE GOVERNMENT OF PUNJAB. THE ORIGINAL PROMOTERS EQUITY IN OUR ITA NO.30(ASR)/2014 6 ORGANIZATION WAS CONTRIBUTED ON 50-50 BASIS BY THE PUNJAB AGRO INDUSTRIES CORPORATION LTD. (PAIC) AND PUNJAB MANDI BOARD. 2. A SEPARATE FUND OF RS. 5 CRORES (RS.2.5 CRORES E ACH WAS CONTRIBUTED BY PUNJAB MANDI BOARD AND PUNJAB AGRO I NDUSTRIES CORPORATION LTD.) WAS CREATED. PAIC CONTRIBUTED ITS SHARE OUT OF THE AMOUNT/LOAN PROVIDED BY PUNJAB RURAL DEVELOPMENT BO ARD. THE FUND WAS TO BE KEPT IN A SEPARATE ACCOUNT TO BE CALLED PUNJAB AGRI PROMOTION AND DEVELOPMENT ACCOUNT. IT HAD FOLLOWIN G FURTHER CONDITIONS. I) THIS ACCOUNT WILL BE OPERATED BY A NOMINEE EACH OF THE PUNJAB AGRO INDUSTRIES CORPORATION LIMITED AND PAGR EXCO FOR THE IMPLEMENTATION OF SPECIFIC SCHEMES FOR THE PROMOTIO N OF AGRI EXPORT FROM THE STATE INCLUDING FINANCIAL ASSISTANCE TO EX PORTERS/GROWERS FOR INFRASTRUCTURE, TRANSPORT ETC FROM THE INTEREST INC OME AND WHERE NECESSARY FROM THE PRINCIPAL AMOUNT. THE INTEREST I NCOME OF THE FUND WILL ALSO BE CREDITED TO THE FUND ITSELF. II) A COMMITTEE CONSISTING OF THE FOLLOWING IS CON STITUTED TO APPROVE THE SCHEMES FOR WHICH THE SEPARATE FUND CRE ATED ABOVE WILL BE UTILIZED. THE UTILIZATION OF FUND SUBJECT TO SPE CIFIC APPROVALS GIVEN BY THE COMMITTEE FOR THE SCHEMES AND THE AMOUNTS TO BE CREDITED THEREFORE. 1. FINANCIAL COMMISSIONER, DEVELOPMENT PUNJAB. 2. MANAGING DIRECTOR, PUNJAB AGRO INDUSTRIES CORPN. LTD. 3. SECRETARY, PUNJAB MANDI BOARD. 4. SECRETARY, PUNJAB RURAL DEVELOPMENT BOARD. 5. ADDL. MANAGING DIRECTOR, PAGREXCO AN ORDER DATED 20.01.1998 PASSED BY THE GOVERNMENT OF PUNJAB IN REGARD TO ABOVE IS ATTACHED. 3. THEREAFTER, MORE FUNDS WERE PLOUGHED IN THIS COR PUS FUND BY STATE GOVERNMENT, THE ABOVE REFERRED ORGANIZATIONS AND OTHER BODIES. 4. THAT IN A MEETING OF CORPUS FUND COMMITTEE HELD ON 02.01.2007 UNDER THE CHAIRMANSHIP OF FINANCIAL COMMISSIONER (D EVELOPMENT) PUNJAB. THE COMMITTEE APPROVED THE GRANT OF SOFT LO AN OF RS. 6 CRORE @ 8% P.A. SIMPLE INTEREST TO M/S. COUNCIL FOR CITRU S AND AGRI JUICING IN PUNJAB FOR WORKING CAPITAL . A COPY OF THE MINUT ES OF THIS MEETING IS ATTACHED. ITA NO.30(ASR)/2014 7 5. THE FUNDS AVAILABLE IN THIS CORPUS FUND BELONG T O THE STATE GOVERNMENT OF PUNJAB AND ANY INCOME ARISING OUT OF IT BELONGS TO THE GOVERNMENT OF PUNJAB. 7. ON THE OTHER HAND, THE LD. DR ARGUED THAT NOTHIN G HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE OR THE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT PAYABLE IS TO THE GOVERNMENT AND NO DOCUMENTARY EVI DENCE IN THIS REGARD HAS BEEN PLACED ON RECORD AND THEREFORE, THE ASSESS EE IS NOT COVERED U/S 196(I) OF THE ACT, AS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE. IN THE REJOINDER, THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT FUNDS ARE PROVIDED BY THE GOVERNMENT BEING NODAL AGENCY TO THE PAYEE AND THEREFORE, INTEREST IS PAYABLE TO THE GOVT. ONLY AND THEREFORE, NO TAX A T SOURCE IS REQUIRED TO BE DEDUCTED AND THE ASSESSEE IS COVERED U/S 196(I) OF THE ACT. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DOCUMENTARY EVIDENCE PLACED ON RECORD B Y THE LD. COUNSEL FOR THE ASSESSEE THAT THE LOAN HAS BEEN RAISED FROM THE GOVERNMENT AND INTEREST IS PAYABLE TO THE GOVERNMENT AND THEREFORE, THE SUB MISSION MADE BEFORE THE LD. CIT(A) AND BEFORE US CANNOT HELP THE ASSESSEE TO COVER THE ISSUE U/S 196(I) OF THE ACT. IT HAS ALSO BEEN CONCEDED BEFORE THE LD. CIT(A) THAT PUNJAB AGRO FOOD GRAINS CORPN. LTD., HAS ALSO NOT DECLARED THE SAID INTEREST INCOME IN THEIR BOOKS OF ACCOUNT AND THEREFORE, JUD ICIAL PRONOUNCEMENT IN THE CASE OF HINDUSTAN COCA-COLA WILL NOT BE AVAILA BLE TO THE ASSESSEE AS ITA NO.30(ASR)/2014 8 HELD BY THE LD. CIT(A). THE RELEVANT FINDINGS OF LD . CIT(A) AT PAGE 18 ARE REPRODUCED FOR THE SAKE OF CONVENIENCE AS UNDER: IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT THE PUN JAB AGRO FOOD GAINS CORPORATION LIMITED HAS PROVIDED LOAN/FU NDS OF RS. 6 CRORES TO THE ASSESSEE ON WHICH NO INTEREST WAS EVE R PAID BY THE ASSESSEE. IT HAS ALSO BEEN SUBMITTED THAT THE ASSES SEE HAS ALSO NOT PROVIDED ANY INTEREST ON THE LOAN OF RS.6 CRORE IN THE BOOKS OF ACCOUNT/BALANCE SHEET. WHEN ASKED THE ASSESSEE TO S UBSTANTIATE ITS CLAIM, IT HAS BEEN FAIRLY CONCEDED BY THE LD.ARS OF THE ASSESSEE THAT THE ASSESSEE HAS PROVIDED FOR THE INTEREST OF RS.48 LAKHS IN THE BOOKS AND NO TDS WAS DEDUCTED AS THE FINANCIAL YEAR WAS A LREADY OVER. IT HAS ALSO BEEN CONCEDED DURING THE APPELLATE PROCEED INGS THAT PAIC HAS ALSO NOT SHOWN THE INTEREST INCOME N THEIR BOOK S OF ACCOUNT AS THEIR INCOME MEANING THEREBY THAT THE BENEFIT OF TH E JUDICIAL PRONOUNCEMENT IN THE CASE OF HINDUSTAN COCA-COLA WI LL ALSO NOT BE AVAILABLE TO THE ASSESSEE. IN THESE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION HAT THE AO IS JUSTIFI ED IN CREATING DEMAND OF RS.5,43,840/- ALONGWITH INTEREST IN THE C ASE OF THE ASSESSEE FOR NOT DEDUCTING TDS AS PER PROVISIONS OF SECTION 194 OF THE ACT. IN THE RESULT, GROUND OF APPEAL NO.2 TAKEN BY THE ASSE SSEE IS DISMISSED. 9. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE F IND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY HELD THE A SSESSEE IN DEFAULT U/S 201(1) & 201(1A) OF THE ACT. WE FIND NO INFIRMITY I N THE ORDER OF THE LD. CIT(A) SUBJECT TO THE RATE OF INTEREST WHICH THE A SSESSEE IN GROUND NO.3 HAS AGITATED SHOULD HAVE BEEN 10.30% INSTEAD OF 11.33% . THE AO IS DIRECTED TO VERIFY THE RATE OF INTEREST AS PER LAW WHETHER IT I S 10.30% OR 11.33%. ACCORDINGLY, THE MATTER IS SET-ASIDE TO THE FILE OF THE AO ONLY TO THE EXTENT OF DETERMINATION OF RATE OF TDS APPLICABLE IE. @ 10 .30% OR 11.33%. HENCE, ITA NO.30(ASR)/2014 9 GROUND NO.2 OF THE ASSESSEE IS DISMISSED AND GROUND NO.3 IS SET ASIDE TO THE FILE OF THE AO TO DETERMINE THE RATE OF INTEREST AP PLICABLE IN THE LIGHT OF OUR DIRECTION HEREINABOVE. GROUND NO.4 IS ALSO DISMISS ED IN VIEW OF OUR FINDING AND FINDING OF THE LD. CIT(A). 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.30(ASR)/2014 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17TH MARCH, 2015. SD/- SD/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17TH MARCH, 2015 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:COUNCIL FOR CITRUS AND AGRI JUICING I N PUNJAB , CHANDIGARH. 2. THE ITO (TDS)-1, JALANDHAR. 3. THE CIT(A),JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.