ITO, Kota V. THE SECRETARY, KUMS, BARAN

ITA 342/JPR/2013

• Counselvise Citation: 34223114 RSA 2013
• Duration Of Justice: 2 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 03-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DILIP SHARMA
• Assessee Lawyers: SIDDARTH RANKA DHK
• Keywords: Non-deduction of tax
• Section: 12A; 194C; 201(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA-@ ITA NO. 342, 343 & 344/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07, 09-10 & 10-11. INCOME TAX OFFICER, TDS, KOTA. CUKE VS. THE SECRETARY, KRISHI UPAJ MANDI SAMITI, CHHABRA, DISTT. BARAN. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AABTK 0633 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI DILIP SHARMA (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SIDDARTH RANKA (ADVOCATE) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 20.07.2015. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 20.07.2015 VKNS'K@ ORDER PER: R.P. TOLANI, J.M. THESE ARE THREE APPEALS FILED BY THE REVENUE AGAINS T THREE SEPARATE ORDERS DATED 17.01.2013 PASSED BY THE LEARNED CIT ( A), KOTA FOR A.Y. 2006-07, 2009-10 AND 2010-11. THE COMMON GROUNDS RAISED BY TH E REVENUE ARE AS UNDER :- 1. THE LD. CIT (A) HAS ERRED IN HOLDING THAT THE ASSESS EE DEDUCTOR WAS NOT LIABLE FOR MAKING TDS U/S 194C OF THE I.T. ACT ONLY BECAUSE THE DEDUCTEE (RSAMB) IS REGISTERED U/S 12A OF THE I.T. ACT AND ITS INCOME IS EXEMPT FROM TAX. 2 ITA NOS. 342 TO 344/JP/2013 A.Y. 2006-07,09-10 & 10 -11 ITO TDS VS. THE SECRETARY, KRISHI UPAJ MANDI SAMITI , CHHABRA, BARAN. 2. THE LD. CIT (A) HAS ERRED IN HOLDING THAT THE PROVISI ONS OF THE SECTION 194J OF THE I.T. ACT WERE NOT APPLICABLE IN R ESPECT OF THE PAYMENTS MADE BY THE ASSESSEE TO RSAMB, ON ACCOUNT OF STATUTORY CONTRIBUTION, AGAINST WHICH THE ASSESSEE R ECEIVED PROFESSIONAL AND TECHNICAL SERVICES FROM RSAMB. 2. THE FACTS IN ALL THE THREE APPEALS ARE SIMILAR AN D RELATES TO SAME ASSESSEE, THEREFORE, FOR THE SAKE OF CONVENIENCE WE DISPOSE OF F THESE APPEALS BY THIS CONSOLIDATED ORDER. BRIEF FACTS OF THE CASE ARE THA T THE ASSESSING OFFICER OBSERVED THAT THE RESPONSIBLE PERSON FOR DEDUCTION OF TAX, THE SECRETARY, KRISHI UPAJ MANDI SAMITI (KUMS), CHHABRA, DISTT. BARAN IS AN AGENCY AUTHORIZED BY THE GOVT. OF RAJASTHAN TO PROVIDE MARKET YARD FOR THE C ONDUCTING OF THE BUSINESS OF AGRICULTURISTS AND ADATIYAS. THE AO FURTHER OBSERV ED THAT KUMS WAS LIABLE TO DEDUCT TAX FROM PAYMENTS MADE TO VARIOUS PERSONS AN D AS PER INFORMATION AVAILABLE, THE RESPONSIBLE PERSON FAILED TO DEDUCT AND DEPOSIT TAX ON THE FOLLOWING PAYMENTS :- F.Y. 2005-06 PAYMENT TO RSAMB, BARAN RS. 29,34,344/- CONTRIBUTION (TO RSAMB) EXPENSES RS. 1,10,00,000 /- F.Y. 2008-09 PAYMENT TO RSAMB, BARAN RS. 45,92,912/- CONTRIBUTION (TO RSAMB) EXPENSES RS. 1,22,00,000 /- F.Y. 2009-10. PAYMENT TO RSAMB, BARAN RS. 55,80,387/- CONTRIBUTION (TO RSAMB) EXPENSES RS. 20,00,000 /- 3 ITA NOS. 342 TO 344/JP/2013 A.Y. 2006-07,09-10 & 10 -11 ITO TDS VS. THE SECRETARY, KRISHI UPAJ MANDI SAMITI , CHHABRA, BARAN. THE AO WAS OF THE VIEW THAT THE AFORESAID PAYMENTS WERE COVERED U/S 194C AND 194J OF THE I.T. ACT, 1961 AND THE TDS WAS REQUIRED T O BE DEDUCTED BUT THE RESPONSIBLE PERSON FAILED TO DO SO. THE AO ISSUED SHOW CAUSE NOTICES DATED 02.03.2010 AND 31.08.2010 IN THIS REGARD. IN RESPO NSE, THE LD. A/R OF THE ASSESSEE VIDE LETTER DATED 15.09.2010 FILED REPLY S TATING THEREIN THAT THEIR MARKETING BOARD I.E. RSAMB HAVE GIVEN A REPRESENTAT ION TO VARIOUS AUTHORITIES INCLUDING MINISTRY OF FINANCE, CBDT AND CIT (TDS) ETC. ON THE SAID SUBJECT AND THE APPLICATION IS PENDING DISPOSAL. THE AO CONSIDER ED THE REPLY ALONG WITH THE ENCLOSURES FILED, BUT NO WEIGHTAGE COULD BE FOUND. HE CONSIDERED THE RESPONSIBLE PERSON TO BE AN ASSESSEE IN DEFAULT WITH IN THE MEANING OF SEC. 201(1) OF THE ACT FOR NON-DEDUCTION OF TAX AND AS P ER PROVISIONS OF SEC. 201(1A) OF THE ACT, IF THE RESPONSIBLE PERSON IS FAILED TO DEDUCT THE WHOLE OR ANY PART OF TAX OR AFTER DEDUCTING FAILS TO PAY THE TAX IN ACCO RDANCE WITH THIS SECTION, THE RESPONSIBLE PERSON IS LIABLE TO PAY SIMPLE INTEREST @ 12% PER ANNUM. HE WORKED OUT THE DEMAND PAYABLE U/S 201(1)/194C AT RS. 2,96,370/-, U/S 201(1)/194J AT RS. 20,78,300/- AND U/S 201(1A)/194C & 194J AT RS. 7,75,490/- FOR THE F.Y. 2005-06 (A.Y. 2006-06), F.Y. 2008-09 ( A.Y. 2009-10) AND F.Y. 2009- 10 (A.Y. 2010-11) TOTALING RS.31,50,160/-. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT (A). THE ASSESSEE VIDE LETTER DATED 01.01.2013 MADE A DETAIL ED WRITTEN SUBMISSIONS, 4 ITA NOS. 342 TO 344/JP/2013 A.Y. 2006-07,09-10 & 10 -11 ITO TDS VS. THE SECRETARY, KRISHI UPAJ MANDI SAMITI , CHHABRA, BARAN. WHICH HAVE BEEN INCORPORATED AT PAGE 3 PARA 1 TO PAG E 13 AT PARA 5.9.4 OF THE IMPUGNED ORDER. THE LD. CIT (A) SUMMARIZED THE ASSESS EES SUBMISSIONS AS UNDER :- 1) THE AO FAILED TO APPLY EXPLANATION TO SECTION 191 . AS PER THIS SECTION, THE DEDUCTOR CANNOT BE TREATED AS AN ASSES SEE IN DEFAULT, IF TAXES WERE PAID DIRECTLY BY THE RECIPIENT/DEDUCTEE. 2) M/S. RSAMB HAS BEEN GRANTED REGISTRATION U/S 12A AND IS FILING ITS RETURN REGULARLY AND THERE WAS NIL TAX LIABILITY IN THE CASE OF RSAMB, THEREFORE, NO TAX CAN BE RECOVERED FROM THE ASSESSE E. 3) IN THE INSTANT CASE, THE ASSESSEE CLAIMED THAT T HERE WAS NO CONTRACTOR-CONTRACTEE (AWARDER) RELATIONSHIP BETWEEN THE ASSESSEE APPELLANT AND M/S. RAJASTHAN STATE AGRICULTURAL MAR KETING BOARD. THERE WAS NO WORK AWARDED BY THE ASSESSEE. NO POWERS OF SUPERVISING THE WORK WERE UNDER THE CONTROL OF THE AS SESSEE APPELLANT. 4. THE LD. CIT (A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DELETED THE DEMAND RAISED BY THE A.O. BY OBSERVING AT PAGE NOS. 15 TO 17 OF HIS ORDER AS UNDER :- THE ASSESSEE IS A STATUTORILY OBLIGED TO PAY RSAMB ITS SHARE OF MARKET FEE, LICENSE FEE ETC. COLLECTED BY THE ASSES SEE AS PER SECTION 18A OF RAPMA, 1961. THE CONTRIBUTION IS DISCHARGE OF STATUTORY OBLIGATION AND CANNOT BE TREATED AS A CONTRACTUAL/TECHNICAL/PROFESSIONAL PAYMENT. IT IS, THEREFORE, HELD THAT CONTRIBUTION TO RSAMB C ANNOT BE SUBJECT TO TDS BEING A STATUTORY PAYMENT. 5 ITA NOS. 342 TO 344/JP/2013 A.Y. 2006-07,09-10 & 10 -11 ITO TDS VS. THE SECRETARY, KRISHI UPAJ MANDI SAMITI , CHHABRA, BARAN. PAYMENT TO RSAMB FOR CONSTRUCTION & REPAIR OF ROADS AND BUILDINGS ETC. THE ASSESSEE REGULARLY MAKES PAYMENT TO EXECUTIVE EN GINEER, RSAMB FOR REPAIR, MAINTENANCE AND CONSTRUCTION OF R OADS & BUILDINGS. THE ASSESSEE CLAIMED THAT THERE WAS NO CON TRACTOR- CONTRACTEE RELATIONSHIP BETWEEN THE ASSESSEE AND RSA MB. HOWEVER, IN MY OPINION IT IS NOT NECESSARY THAT ANY CONTRACT HAS TO BE IN WRITING, THE CONTRACT CAN BE IN THE FORM OF ORAL UND ERSTANDING ALSO. IN THE INSTANT CASE, THERE WERE SUFFICIENT MATERIAL ON RECORD TO SUGGEST THAT THERE WAS BROAD UNDERSTANDING BETWEEN RS AMB AND VARIOUS KRISHI UPAJ MANDI SAMITIES TO CONSTRUCT & M AINTAIN ROADS ETC. AND TO SHARE THE EXPENSES. CLEARLY SUCH ARRANG EMENT HAS TO BE TREATED AS A CONTRACTUAL ARRANGEMENT AND THEREFORE, THESE PAYMENTS WERE CLEARLY COVERED BY SECTION 194C AS THESE PAYMEN TS WERE MADE FOR SPECIFIC PURPOSES (FOR CONSTRUCTION OF ROADS ET C.). HOWEVER, BEFORE TREATING THE ASSESSEE IN DEFAULT, TH E A.O. SHOULD HAVE GONE THROUGH EXPLANATION TO SECTION 191 OF THE I.T. ACT. FOR READY REFERENCE, THE SAME IS REPRODUCED BELOW :- IN THE CASE OF INCOME IN RESPECT OF WHICH PROVISIO N IS NOT MADE UNDER THIS CHAPTER FOR DEDUCTING INCOME-TAX AT THE TIME OF PAYMENT, AND IN ANY CASE WHERE INCOME-TAX HAS NOT BE EN DEDUCTED IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER, I NCOME-TAX SHALL BE PAYABLE BY THE ASSESSEE DIRECT. 6 ITA NOS. 342 TO 344/JP/2013 A.Y. 2006-07,09-10 & 10 -11 ITO TDS VS. THE SECRETARY, KRISHI UPAJ MANDI SAMITI , CHHABRA, BARAN. EXPLANATION: FOR THE REMOVAL OF DOUBTS, IT IS HEREB Y DECLARED THAT IF ANY PERSON INCLUDING THE PRINCIPAL OFFICER OF A COMPANY (A) WHO IS REQUIRED TO DEDUCT ANY SUM IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT ; OR (B) REFERRED TO IN SUB-SECTION (1A) OF SECTION 192, BEI NG AN EMPLOYER, DOES NOT DEDUCT, OR AFTER SO DEDUCTING FAILS TO PAY, OR DOES NOT PAY, THE WHOLE OR ANY PART OF THE TAX, AS REQUIRED BY OR UNDE R THIS ACT, AND WHERE THE ASSESSEE HAS ALSO FAILED TO PAY SUCH TAX D IRECTLY, THEN, SUCH PERSON SHALL WITHOUT PREJUDICE TO ANY OTHER CONSEQUE NCES WHICH HE MAY INCUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT WI THIN THE MEANING OF SUB-SECTION (1) OF SECTION 201, IN RESPECT OF SU CH TAX. ACCORDING TO THIS SECTION, A DEDUCTOR CANNOT BE TRE ATED AS ASSESSEE IN DEFAULT IF DUE TAXES WERE DIRECTLY PAID BY THE DEDUCTEE. IN THIS CASE, THE DEDUCTEE RSAMB HAS FILED ITS RETU RN OF INCOME DECLARING LOSS OF RS. 1,50,15,233/-, AND WAS NOT LI ABLE TO PAY TAX (AS ON THE RETURNED INCOME THERE WAS NIL TAX LIABILITY). M/ S. RSAMB WAS REGISTERED U/S 12A AND ITS INCOME WAS OTHERWISE ALSO EXEMPT U/S 12A. IN VIEW OF THE ABOVE, I AM OF THE OPINION THAT AS T HERE WAS NO TAX LIABILITY ON THE DEDUCTEE (RSAMB) ON ITS RETURN ED INCOME, THE DEDUCTOR (ASSESSEE) CANNOT BE TREATED AS AN ASSESSE E IN DEFAULT. MY VIEW IS SUPPORTED BY THE JUDGMENT OF HONBLE ALLAHAB AD HIGH COURT (21 TAXMANN.COM 489 ALL.) 7 ITA NOS. 342 TO 344/JP/2013 A.Y. 2006-07,09-10 & 10 -11 ITO TDS VS. THE SECRETARY, KRISHI UPAJ MANDI SAMITI , CHHABRA, BARAN. THE HONBLE ITAT KOLKATA BENCH IN RAMAKRISHNA VEDANTA MATH V. ITO (2012) IN ITA 477, 478 & 479/KOL/2012 H AS HELD AS UNDER :- AS FAR AS RECOVERY PROVISIONS ARE CONCERNED, THES E PROVISIONS ARE SET OUT IN SECTION 201(1) WHICH SEEKS TO MAKE G OOD ANY LOSS TO REVENUE ON ACCOUNT OF LAPSE BY THE ASSESSEE TAX DED UCTOR. HOWEVER, THE QUESTION OF MAKING GOOD THE LOSS OF REVENUE ARI SES ONLY WHEN THERE IS INDEED A LOSS OF REVENUE AND THE LOSS OF R EVENUE CAN BE THERE ONLY WHEN RECIPIENT OF INCOME HAS NOT PAID TAX . THEREFORE, RECOVERY PROVISIONS UNDER SECTION 201(1) CAN BE INV OKED ONLY WHEN LOSS TO REVENUE IS ESTABLISHED, AND THAT CAN ONLY B E ESTABLISHED WHEN IT IS DEMONSTRATED THAT THE RECIPIENT OF INCOME HAS NOT PAID DUE TAXES THEREON. IN THE ABSENCE OF THE STATUTORY POWERS TO REQUISITION ANY INFORMATION FROM THE RECIPIENT OF I NCOME, THE ASSESSEE IS INDEED NOT ALWAYS ABLE TO OBTAIN THE SAM E. THE PROVISIONS TO MAKE GOOD THE SHORT FALL IN COLLECTIO N OF TAXES MAY THUS END UP BEING INVOKED EVEN WHEN THERE IS NO SHORTFAL L IN FACT. ON THE OTHER HAND, ONCE ASSESSEE FURNISHES THE REQUISITE B ASIC INFORMATION, THE ASSESSING OFFICER CAN VERY WELL ASCERTAIN THE RE LATED FACTS ABOUT PAYMENT OF TAXES ON INCOME OF THE RECIPIENT DIRECTL Y FROM THE RECIPIENTS OF INCOME. IT IS NOT THE REVENUES CASE BEFORE US THAT, ON THE FACTS OF THIS CASE, SUCH AN EXERCISE BY THE ASS ESSING OFFICER IS NOT POSSIBLE. IT DOES PUT AN ADDITIONAL BURDEN ON T HE ASSESSING OFFICER BEFORE HE CAN INVOKE SECTION 201(1) BUT THA TS HOW HONBLE HIGH COURT HAS VISUALIZED THE SCHEME OF ACT AND THA TS HOW, THEREFORE, IT MEETS THE END OF JUSTICE. 8 ITA NOS. 342 TO 344/JP/2013 A.Y. 2006-07,09-10 & 10 -11 ITO TDS VS. THE SECRETARY, KRISHI UPAJ MANDI SAMITI , CHHABRA, BARAN. IN THE INSTANT CASE, THERE WAS NO LOSS TO THE REVENU E AS THE DEDUCTEE (RSAMB) WAS NOT LIABLE TO PAY TAX (THE INCO ME BEING LOSS AND RSAMB BEING REGISTERED U/S 12A). IN VIEW OF THE ABOVE, IT IS HELD THAT THE ASSESSEE C ANNOT BE TREATED AS AN ASSESSEE IN DEFAULT. THE A.O. IS DIRE CTED TO DELETE THE DEMAND RAISED U/S 201(1) & 201(1A). 5. NOW THE REVENUE IS IN APPEAL BEFORE US. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED THE MATERIAL ON RECORD. THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS INVOLVED IN THE CASE OF ITO VS. THE SE CRETARY, KRISHI UPAJ MANDI SAMITI, BARAN IN ITA NOS. 216 TO 220/JP/2013 FOR TH E A.YS. 2006-07 TO 2010-11 DATED 27.01.2014. SINCE THE PRESENT CASE IS COVERE D BY THE ABOVE DECISION OF THE ITAT, JAIPUR BENCH, JAIPUR, SO RESPECTFULLY FOLL OWING THE AFORESAID ORDER DATED 27.01.2014, WE DO NOT SEE ANY INFIRMITY IN THE ORDERS OF LD. CIT (A). ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE DEPARTM ENTAL APPEALS AND THE SAME ARE DISMISSED. 7. IN THE RESULT, THE REVENUES APPEALS ARE DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/07/2015. SD/- SD/- VH-VKJ-EHUK VKJ-IH-RKSYKUH (T.R. MEENA) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL; @ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 20/07/2015 DAS/ 9 ITA NOS. 342 TO 344/JP/2013 A.Y. 2006-07,09-10 & 10 -11 ITO TDS VS. THE SECRETARY, KRISHI UPAJ MANDI SAMITI , CHHABRA, BARAN. VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- ITO TDS KOTA. 2. IZR;FKHZ @ THE RESPONDENT- THE SECRETARY, KRISHI UPAJ MANDI SAM ITI, CHHABRA, DISTT. BARAN. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 342 TO 344/JP/2013) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR 10 ITA NOS. 342 TO 344/JP/2013 A.Y. 2006-07,09-10 & 10 -11 ITO TDS VS. THE SECRETARY, KRISHI UPAJ MANDI SAMITI , CHHABRA, BARAN.