M/s LM Hati And Co, Jagatsinghpur V. ITO (TDS), Cuttack

ITA 352/CTK/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90793 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-05-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 12-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHOVAN KRISHNA SAHU
• Assessee Lawyers: SASWAT ACHARYA
• Keywords: Charitable institution; Non-deduction of tax; Reasonable cause
• Section: 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK B ENCH, CUTTACK , . . , BEFORE SHRI SUNIL KUMAR YADAV, JM & SHRI B.P.JAIN, AM ./ ITA NO.352 & 353 /CTK/2013 ( ! ! ! ! / ASSESSMENT YEARS: 2011-12 & 2012-13) L.M.HATI & CO., 59, MADHUBAN MARKET COMPLEX, PARADIP, JAGATSINGHPUR VS. ITO (TDS), CUTTACK ' ./ # ./ PAN/GIR NO. BBNLO 0072 ( '$ / APPELLANT ) .. ( %&'$ / RESPONDENT ) ( * * * * /ASSESSEE BY : SHRI SASWAT ACHARYA * * * * /REVENUE BY : SHRI SHOVAN KRISHNA SAHU + ( / DATE OF HEARING : 20 TH MAY, 2015 -.! ( / DATE OF PRONOUNCEMENT 22 ND MAY,2015 / / / / / O R D E R PER B.P.JAIN (AM) THESE TWO APPEALS OF THE ASSESSEE ARISE FROM THE O RDER OF THE LD CIT(A),CUTTACK DATED 31.1.2013 FOR THE FINANCIAL YEARS 2010-2011 & 2011-12, RELEVANT TO ASSESSMENT YEARS 2011-12 & 2012-13, RESPECTIVELY. 2. WE FIND THAT BOTH THE APPEALS FILED BY THE ASSES SEE ARE BARRED BY 59 DAYS. CONSIDERING THE CONDONATION APPLICATION AND AFTER H EARING BOTH THE SIDES, WE CONDONE THE DELAY IN FILING THE APPEALS AND PROCEED TO DECI DE THE APPEALS ON MERITS. 2.1 THE COMMON GROUNDS HAVE BEEN TAKEN IN BOTH THE APPEALS, WHICH ARE REPRODUCED HEREINBELOW: 2 . ITA NO.352 & 353 /CTK/2013 ASSESSMENT YEAR :2011-12 & 2012-13 1. FOR THAT THE ORDER PASSED BY THE FORUM BELOW IS EX FACIE ILLEGAL, ARBITRARY, EXCESSIVE AND IS BASED ON INCORRECT APPR ECIATION OF LAW AS WELL AS THE FACTS AND CIRCUMSTANCES OF THE CASE AND THUS DESERVES TO BE QUASHED IN LIMINE. 2. FOR THAT THE LD CIT(A) WAS NOT JUSTIFIED TO CONF IRM THE ASSESSMENT ORDER TREATING THE ASSESSEE IN DEFAULT. 3. FOR THAT WHEN TAX HAS BEEN DEFINED, AS INCOME TAX CHARGEABLE UNDER THE PROVISION OF THIS ACT WHEN INCOME IS NOT CHARG EABLE (AS ASSESSED TO TAX AT NIL) THERE CANNOT BE A DEFAULT IN COLLECTION OF TAX. 4. FOR THAT THE LD CIT(A) FAILED TO UNDERSTAND THE WORD TOTAL INCOME AND HAS WRONGLY JUSTIFIED THE DEMAND MADE BY THE LD AO. 3. FIRST OF ALL, WE TAKE UP ITA NO.352/CTK/2013 FOR THE ASSESSMENT YEAR 2011-12 AND OUR DECISION HEREINBELOW SHALL BE IDENTICALLY A PPLICABLE TO THE APPEAL OF THE ASSESSEE IN ITA NO.353/CTK/2013 BEING IDENTICAL ISS UE. ITA NO.352/CTK/2013: 4. THE BRIEF FACTS OF THE CASE AS PER THE ORDER OF THE ASSESSING OFFICER U/S.201 & 201(1A) OF THE ACT, THE AO OBSERVED THAT T HE ITO(TDS] CONDUCTED A SURVEY U/S.133A IN THE BUSINESS PREMISES OF THE TAX DEDUCTOR ON 31.10.2011. ON VERIFICATION OF THE DETA ILS GATHERED FROM BUSINESS PREMISES, HE NOTICED THAT TH E DEDUCTOR HAD NOT DEDUCTED TAX AT SOURCE AT THE APPROPRIATE RATE IN FORCE FROM THE PA YMENTS MADE TO MANAGEMENT COMMITTEE (CFH SCHEME] FOR SUPPLY OF LABOURS AS PER PROVISIONS OF SECTION 194C. THE ITO(TDS) DURING THE COURSE OF HIS PROCEEDING, ISSUE D A SHOW-CAUSE LETTER DATED 21.11.2011 TO THE ASSESSEE MENTIONING THEREIN THE M ATTER OF SHORT-DEDUCTION WITH DETAIL TAX CALCULATION ISSUED TO THE DEDUCTOR FIXING THE C ASE FOR HEARING ON 25.11.2011. HE HAS MENTIONED THAT THE A/R OF THE ASSESSEE SHRI S.K ACH ARYA APPEARED ON THE ABOVE DATE AND SUBMITTED BEFORE HIM THAT THE ASSESSEE-DEDUCTOR WAS WILLING TO PAY THE AMOUNT OF 3 . ITA NO.352 & 353 /CTK/2013 ASSESSMENT YEAR :2011-12 & 2012-13 TAX PERTAINING TO SHORT-DEDUCTION AS PER THE AFORE- MENTIONED SHOW-CAUSE DATED 21.11.2011. THE ITO(TDS) THUS CAME TO A FINDING THA T AS THE DEDUCTOR HAD FAILED TO DEDUCT TAX AT SOURCE AS PER PROVISION OF SECTION 19 4C AT THE APPROPRIATE RATE IN FORCE ON THE AMOUNT OF PAYMENT FOR THE FY 2010-11, THE ASSES SEE-DEDUCTOR IS DEEMED TO BE AN ASSESSEE-IN-DEFAULT IN RESPECT OF SUCH TAX U/S.201 AND CONSEQUENTLY LIABLE TO PAY SIMPLE INTEREST @1% PER MONTH AS PER THE PROVISION OF SECT ION 201(1A}. THUS HE CALCULATED THE PAYABLE AMOUNT AT RS.14,02,861/- (TAX RS.12,17,562/ - AND INTEREST RS.1,85,299/-}. 5. THE LD CIT(A) CONFIRMED THE ACTION OF THE ASSESS ING OFFICER. HOWEVER, IT IS PERTINENT TO REPRODUCE THE ORDER OF THE LD CIT(A) A T PAGES 4 TO 11, HEREINBELOW: LET ME BEGIN WITH THE DECISION CITED BY THE LEARNED A/R. IN DIT(EXEMPTION) V.COMMERCE TEACHERS ASSOCIATION THE ISSUE WAS IMPOSITION OF CONDITION BY DIRECTOR OF INCOME-TAX (EXEMPTION) WHILE GRANTING R EGISTRATION U/S.!2AA. IN SEVARAM ASHRAM PRATISTHAN V. CIT, THE ISSUE WAS RECOGNITION OF INSTITUTION U/S.80G(5). IN HIMACHAL PRADESH ENVIRONMENT PROTECTION & POLLUTION CONTROL BOARD V. CLT,SHIMLA T THE ISSUE WAS GRANTING REGISTRATION U/S.12AA. IN THE CASE OF THE APPELLANT, WE ARE CONCERNED WITH THE ORDER PASSED BY THE ITO(TDS) U/S.201 AND 201(1A) AS HE FOUND THAT THE A SSESSEE DEDUCTOR HAD FAILED TO DEDUCT TAX AT SOURCE U/S.194C. IN VIEW OF THE ABOVE, THE CASE OF THE APPELLANT IS DISTINGUISHABLE FROM THE ABOVE DECISIO NS RELIED ON BY THE LEARNED A/R. 6.1.1 THE LEARNED A/R OF THE APPELLANT RELIED ON TH E JUDGMENT OF THE HON'BLE ORISSA HIGH COURT IN MANAGEMENT COMMITTEE (CFH SCHEME) V. ITO(TDS), CUTTACK IN WP (C) NO.27531 OF 2011. THE ISSUE BEFORE THE HO N'BLE HIGH COURT WAS THE ORDER PASSED BY THE ITO(TDS) REJECTING THE APPLICATION OF MANAGEMENT COMMITTEE (CFH SCHEME) DATED 04.9.2009 MADE IN FORM NO.13 FOR ISSUANCE OF NON-DEDUCTION CERTIFICATE U/S.197 TO DIFFERENT PERS ONS FOR THE FINANCIAL YEAR 2009- 10. IN THE CASE OF THE APPELLANT WE ARE CONCERNED W ITH THE ASSESSEE DEDUCTOR NOT DEDUCTING TAX AT SOURCE U/S.!94C FROM PAYMENTS MADE TO MANAGEMENT COMMITTEE (CFH SCHEME) FOR THE FINANCIAL YEAR 2011- 12. WE ARE CONCERNED HERE WITH A DIFFERENT FINANCIAL YEAR. IN VIEW OF TH E ABOVE, THE CASE OF THE APPELLANT IS DISTINGUISHABLE FROM THE ABOVE CASE RELIED ON BY THE LEARNED A/R. 4 . ITA NO.352 & 353 /CTK/2013 ASSESSMENT YEAR :2011-12 & 2012-13 IT HAS BEEN HELD IN PADMASUNDRA RAO V. STATE O/ZW255 ITR 147 (SC); CITV. RAM ARAIN 227 ITR 401; GOVT. OF INDIA V.JAGADISH 221 ITR 338 AND CFVANAJA V. CIT 208 ITR 161 THAT RELIANCE SHOULD NOT BE PLACED ON A DECISION WI THOUT DISCUSSING HOW THE FACTUAL SITUATION FITS IN WITH T HE FACTUAL SITUATION OF THE DECISION ON WHICH RELIANCE IS PLACED. IT HAS ALSO BEEN HELD IN PADMASUNDRA RAO V. STATE OF TN THAT CIRCUMSTANTIAL FLEXIBILITY, E.G. ONE ADDITIONA L OR DIFFERENT FACT, MAY MAKE A WORLD OF DIFFERENCE BETWEEN CONCLUSIONS IN TWO CA SES. 6.1.2 THE ISSUE RELATES TO NON-DEDUCTION OF TAX AT SOURCE U/S.!94C AT APPROPRIATE RATE IN FORCE FROM THE PAYMENTS MADE TO MANAGEMENT COMMITTEE [CFH SCHEME) FOR THE SUPPLY OF LABOUR. THE MANAGEMENT COMMITTEE (CFH SCHEME] HAS BEEN CONSTITUTED UNDER THE ORDERS OF THE HON'BLE SUPREME COURT OF INDIA TO TAKE CARE OF THE PROBLEMS OF THE WORKERS AT PARADEEP PORT. TH E COMMITTEE OPERATES UNDER THE 'PARADEEP PORT CLEARING, FORWARDING & HANDLING WORKERS (REGULATION OF EMPLOYMENT) SCHEME, 1994'. THE COMMITTEE UNDERTAKES THE SUPPLY OF CLEARING, FORWARDING AND HANDLING WORKERS AT THE PRESCRIBED R ATES TO THE LISTED EMPLOYERS FOR CLEARING, FORWARDING AND HANDLING OPERATIONS, A S ARE DECIDED BY THE COMMITTEE IN THE PORT AREA. TWO OFFICERS OF THE PAR ADEEP PORT TRUST ARE ASSOCIATED WITH THE COMMITTEE TO OVERSEE THE ADMINI STRATION. ALL THE LABOUR CONTRACTORS AND HANDLING CONTRACTORS WHOSE SERVICES ARE UTILIZED BY THE COMIFTITTEE ARE ISSUED WITH LABOUR PERMITS / LICENS ES BY THE PARADEEP PORT TRUST. PARA 39 OF PARADEEP PORT CLEARING, FORWARDING & HAN DLING WORKERS (REGULATION OF EMPLOYMENT) SCHEME,1994 STATES THE FOLLOWING: 'RECOVERY OF CHARGES THE COST OF OPERATING THE SCHEME SHALL BE DEFRAYED OUT OF THE CHARGES (I.E. COST OF LABOUR, LEVY, OTHER CHARGES ETC.) LEVIED BY THE MANAGEMENT COMMITTEE FOR THE LABOUR SUPPLIED FOR CFH WORK TO THE CFH AGENTS AND HANDLING CONTRACTORS'. 6.1.3 I ISSUED A COPY OF CIRCULAR NO.44 /07/2002 -S T DATED 26.6.2002 OF UNDER SECRETARY TO GOVT. OF INDIA TO THE SECRETARY, MANAG EMENT COMMITTEE (CFH SCHEME) VIDE MY OFFICE LETTER NO.2268 DATED 18.01.2 013 FOR COMPLIANCE ON 30.01.2013. THE A/R OF THE ASSESSEE RECEIVED IT ON 18.01.2013. A COPY OF THE ABOVE CIRCULAR IS ANNEXED HEREWITH AS 'APPENDIX-1'. THE LEARNED A/R SUBMITTED THAT THE 'MANAGEMENT COMMITTEE' AND 'DOCK LABOUR BO ARD' ARE COMPLETELY DIFFERENT FROM EACH OTHER. HE STATED THAT THE 'MANA GEMENT COMMITTEE' HAS BEEN CONSTITUTED AS PER THE DIRECTION OF THE HON'BLE SUP REME COURT. IT HAS BEEN STATED IN THE ABOVE CIRCULAR THAT CONTRACTORS UTILIZED BY THE MANAGEMENT COMMITTEE FOR RENDERING THEIR SERVICES ARE ISSUED LICENSES OR PER MITS BY THE PARADEEP PORT TRUST TO OPERATE WITHIN THE PORT AREA. IT CANNOT TH EREFORE BE SAID THAT THE MANAGEMENT COMMITTEE IS NOT AUTHORIZED BY THE PORT TRUST FOR RENDERING SERVICES IN RELATION TO VESSELS AND GOODS WITHIN TH E PORT AREA. THUS THE MANAGEMENT COMMITTEE OF PARADEEP PORT FUNCTIONS LIK E A DOCK LABOUR BOARD. A SIMILAR ISSUE AROSE BEFORE THE HON'BLE ITAT, KOLK ATA BENCH IN DY.CIT V. KAMAL MUKHERJEE & CO. (SHIPPING) (P) LTD. 2012 TAX PUB(DT) 2170 (KOL-TRIB). THE 5 . ITA NO.352 & 353 /CTK/2013 ASSESSMENT YEAR :2011-12 & 2012-13 ASSESSEE WAS ENGAGED IN THE BUSINESS OF RENDERING S TEVEDORING SERVICES. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE AO NOTED T HAT THE ASSESSEE HAS MADE PAYMENTS ON ACCOUNT OF STEVEDORING EXPENSES TO CALC UTTA DOCK LABOUR BOARD (CDLB). BUT NEITHER THE ASSESSEE DEDUCTED ANY TAX A T SOURCE FROM THESE PAYMENTS NOR DID FURNISH ANY NON-DEDUCTION CERTIFIC ATE ISSUED BY THE I.T.DEPARTMENT IN FAVOUR OF CDLB. THE AO DID NOT TA KE NOTE OF THE ASSESSEE'S EXPLANATION THAT CDLB IS A GOVT BODY AND THEREFORE, NO TAX IS REQUIRED TO BE DEDUCTED FROM PAYMENTS TO CDLB. THE AO THEN PROCEED ED TO OBSERVE THAT THE MAIN FUNCTION OF CDLB IS TO PROVIDE LABOUR TO STEVE DORES. HENCE, IT IS REQUIRED TO DEDUCT TDS U/S.194C. IF ASSESSEE FAILED TO DEDUCT T DS, THEN SECTION 40(A)(IA) WILL BE APPLICABLE. IT WAS IN THIS BACKGROUND THAT THE AO DISALLOWED ENTIRE PAYMENT OF RS.2,22,58,795/- MADE TO CDLB AND CONVER TED RETURNED INCOME OF RS.1,49,775/- INTO ASSESSED INCOME OF RS.2,24,08,57 0/-. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A). THE CIT(A) HELD THAT THE PROVISION OF SECTION 194C DOES NOT APPLY TO THE APP ELLANT IN THIS CASE. THE HON'BLE ITAT QUOTED THE JUDGMENT OF THE HON'BLE KAR NATAKA HIGH COURT IN THE CASE OF SMT J.RAMA V. CIT (2010) 236 CTR (KAR) 105 WHEREIN IT HAS BEEN HELD THAT 'LAW DOES NOT STIPULATE THE EXISTENCE OF A WRI TTEN CONTRACT AS A CONDITION PRECEDENT FOR INVOKING THE PROVISIONS OF SECTION 19 4C WITH RESPECT TO PAYMENT OF TDS'. THE HON'BLE TRIBUNAL HELD THAT PROVISION OF S ECTION 194C ARE CLEARLY ATTRACTED AS PAYMENT TO CDLB IS MADE FOR SUPPLY OF LABOUR WHICH ARE SPECIFICALLY COVERED BY SECTION 194C(1). THE HON'BLE TRIBUNAL QU ASHED THE ORDER PASSED BY THE CIT(A). IN VIEW OF THE ORDER OF THE HON'BLE ITAT REFERRED H ERE-IN-ABOVE, THE ITO(TDS) HAS RIGHTLY COME TO A FINDING THAT PROVISION OF SEC TION 194C IS CLEARLY APPLICABLE IN THE CASE OF THE APPELLANT. 6.1.4 THERE HAS BEEN A DRASTIC AMENDMENT TO THE DEF INITION OF CHARITABLE PURPOSE W.E.F. 01.4.2009 BY SUBSTITUTION OF DEFINITION OF C HARITABLE PURPOSE U/S.2(15) WHEREBY ANY BUSINESS OR COMMERCIAL ACTIVITY IN RESP ECT OF AN ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY WILL BECOME TA XABLE. THE STATUTE SECTION 2 [15) READS AS UNDER: 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, E DUCATION, MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT [INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF A RTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CAR RYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIV ITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY. 6 . ITA NO.352 & 353 /CTK/2013 ASSESSMENT YEAR :2011-12 & 2012-13 THE CIRCULAR THE SCOPE AND EFFECT OF THE AMENDMENT WAS EXPLAINED BY THE BOARD IN CIRCULAR NO.1/2011 DATED 06.4.2011: (2011) 333 ITR ST. 7. IT READS AS UNDER: 'CHANGE IN THE DEFINITION OF 'CHARITABLE PURPOSE' - FOR THE PURPOSES OF THE INCOME-TAX ACT, 'CHARITABLE PURPOSE' HAS BEEN DEFIN ED IN SECTION 2(15) WHICH, AMONG OTHERS, INCLUDES 'THE ADVANCEMENT OF ANY OTHE R OBJECT OF GENERAL PUBLIC UTILITY'. HOWEVER, 'THE ADVANCEMENT OF ANY OTHER OBJECT OF GE NERAL PUBLIC UTILITY' IS NOT A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF REN DERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR F EE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, O R RETENTION, OF THE INCOME FROM SUCH ACTIVITY.' THESE AMENDMENTS HAVE BEEN MADE APPLICABLE W.E.F. 0 1.4.2009 AND WILL ACCORDINGLY APPLY FOR THE ASSESSMENT YEAR 2009-10 A ND SUBSEQUENT ASSESSMENT YEARS. IT HAS BEEN CLARIFIED SO IN BOARD CIRCULAR N O.1 DATED 27.3.2009: (2009) 310 ITR (ST.) 42. AMENDMENT BY THE FINANCE ACT, 2008 THE LEARNED AUTHOR IN SAMPATH LYENGAR'S LAW OF INCO ME TAX (VOL.1, 2011,11 TH EDITION) HAS MENTIONED AT PAGE-663 THE FOLLOWING: 'THIS EFFECTIVELY NULLIFIES THE SUPREME COURT DECIS ION IN CIT V. GUJARAT MARITIME BOARD (2007) 295 ITR 516 (SC) RENDERED ON 5 TH DECEMBER 2007, FOLLOWING THE DECISIONS IN CIT V. ANDHRA PRADESH STATE ROAD TRANSPORT CORPORAT ION (1986) 159 ITR 1 (SC) AND CIT V. ANDHRA CHAMBER OF COMMERCE (1965) 55 ITR 722 (SC). IN GUJARAT MARITIME BOARD'S CASE (SUPRA), WHERE THE ACTIVITY WAS FOR IMPROVEMENT OF MINOR PORTS BEING AN OBJECT OF GENER AL PUBLIC UTILITY, IT WAS HELD TO QUALIFY FOR EXEMPTION. THE DECISIONS STARTING FROM ANDHRA CHAMBER OF COMMERCE, WHICH HAD LAID DOWN THE LAW MORE THAN FOU R DECADES AGO WOULD NOW STAND NULLIFIED, SO THAT PUBLIC INSTITUTIONS LIKE G UJARAT MARITIME BOARD, A PUBLIC AUTHORITY STATUTORILY CONSTITUTED U/S.3(2) OF THE G UJARAT MARITIME BOARD ACT, 1981 WOULD LOSE EXEMPTION. BUT, SUCH ACTIVITIES BY TRUST S AND INSTITUTIONS IN RELATION TO RELIEF OF POOR, EDUCATION OR MEDICAL RELIEF WOULD C ONTINUE TO BE ELIGIBLE FOR EXEMPTION.' THE AUTHORITY IN ICAL V. DIRECTOR GENERAL OF IT (2012) 347 ITR 99, AT PAGE-108 (PARA 12), THE HON'BLE DELHI HIGH COURT HELD THE FOLLOWING: 'AS THE FIRST PROVISO WAS INTRODUCED WITH EFFECT FR OM 1 ST APRIL, 2009, THE SCOPE AND AMBIT OF THE SAID PROVISO TO SECTION 2(15 ) OF THE ACT HAS TO BE 7 . ITA NO.352 & 353 /CTK/2013 ASSESSMENT YEAR :2011-12 & 2012-13 EXAMINED AND CONSIDERED. EARLIER ORDERS UNDER SECTI ON 10(23C)(IV) ARE NOT RELEVANT AND ARE INCONSEQUENTIAL, AS THEY HAVE NOT EXAMINED THE SCOPE AND AMBIT OF THE FIRST PROVISO. THE PROVISO APPLIES ONLY IF AN INSTITUTION IS ENGAGED IN ADVANCEMENT OF ANY OTHER OBJECT OF GENER AL PUBLIC UTILITY AND POSTULATES THAT SUCH AN INSTITUTE IS NOT 'CHARITABL E' IF IT IS INVOLVED IN CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, CO MMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION T O ANY TRADE, COMMERCE OR BUSINESS. THE SECOND PART, 'ANY ACTIVITY OF RENDERI NG ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS' OBVIOUSLY INTEN DS TO EXPAND THE SCOPE OF THE PROVISO TO INCLUDE SERVICES, WHICH ARE RENDERED IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS. THE PROVISO FURTHE R STIPULATES THAT THE ACTIVITY MUST BE FOR A CESS OR FEE OR ANY OTHER CON SIDERATION. THE LAST PART STATES THAT THE PROVISO WILL APPLY EVEN IF THE CESS OR FEE OR ANY OTHER CONSIDERATION IS APPLIED FOR A CHARITABLE ACTIVITY/ PURPOSE. THE PROVISO HAS TO BE GIVEN FULL EFFECT TO. THUS, EVEN IF CESS, FEE OR CONSIDERATION IS USED OR UTILIZED FOR CHARITABLE PURPOSES, THE PROVISO AND T HE BAR WILL APPLY. AN INSTITUTION WILL NOT BE REGARDED AS ESTABLISHED FOR CHARITABLE PURPOSE/ACTIVITY UNDER THE LAST LIMB, IF CESS, FEE OR CONSIDERATION IS RECEIVED FOR CARRYING ON ANY ACTIVITY IN NATURE OF TRADE, COMMERCE OR BUSINESS OR FOR ANY ACTIVITY OF RENDERING OF ANY SE RVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, EVEN IF THE CONSIDERAT ION OR THE MONEY RECEIVED IS USED IN FURTHERANCE OF THE CHARITABLE P URPOSES/ACTIVITIES. IN VIEW OF THE FIRST PROVISO, THE DECISIONS THAT THE A PPLICATION OF MONEY/PROFIT IS RELEVANT FOR DETERMINING WHETHER OR NOT A PERSON IS CARRYING ON CHARITABLE ACTIVITY, ARE NO LONGER RELEVANT AND APP OSITE. EVEN IF THE PROFITS EARNED ARE USED FOR CHARITABLE PURPOSES, BUT FEE, C ESS OR CONSIDERATION IS CHARGED BY A PERSON FOR CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING O F ANY SERVICE IN ADDITION TO ANY TRADE, COMMERCE OR BUSINESS, IT WOU LD BE COVERED UNDER THE PROVISO AND THE BAR/PROHIBITION WILL APPLY.' THUS EVEN IF THE PROFITS EARNED ARE USED FOR CHARIT ABLE PURPOSES, BUT FEE, CESS OR CONSIDERATION IS CHARGED BY A PERSON FOR CARRYING O N ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF REND ERING OF ANY SERVICE IN ADDITION TO ANY TRADE, COMMERCE OR BUSINESS, IT WOU LD BE COVERED UNDER THE PROVISO AND THE BAR/PROHIBITION WILL APPLY. THE MANAGEMENT COMMITTEE (CFH SCHEME) HAS BEEN SHOW ING RECEIPT OF SERVICE TAX AND PAYMENT OF SERVICE TAX IN ITS 'RECE IPT & PAYMENT ACCOUNTS'. PAYMENT OF SERVICE TAX IS GUIDED BY SECTION 5 OF TH E STATUTORY PROVISION, 1994. IT STATES THAT 'EVERY PERSON PROVIDING TAXABLE SERVICE TO ANY PERSON SHALL PAY SERVICE TAX AT THE RATE SPECIFIED IN SECTION 66 IN SUCH MANNER AND WITHIN SUCH PERIOD AS MAY BE PRESCRIBED.' 6.1.5 PARADEEP PORT TRUST CLAIMED EXEMPTION U/S.1 1 TILL THE ASSESSMENT YEAR 2008-09. IT HAS BEEN GRANTED REGISTRATION AS A CHARITABLE TRUST U/S.12A BY THE 8 . ITA NO.352 & 353 /CTK/2013 ASSESSMENT YEAR :2011-12 & 2012-13 COMMISSIONER OF INCOME-TAX, CUTTACK W.E.F. 01.4.200 5. PARADEEP PORT TRUST HAS FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009 -10 WITHOUT CLAIMING EXEMPTION U/S.11. A COPY OF THE COMPUTATION OF TOTA L INCOME IS ENCLOSED HEREWITH AS 'APPENDIX-2.' IT IS RELEVANT TO MENTION HERE THAT THE APPELLANT C OMMITTEE UNDERTAKES THE SUPPLY OF CLEARING, FORWARDING AND H ANDLING WORKERS AT THE PRESCRIBED RATES TO THE LISTED EMPLOYERS FOR CLEARI NG, FORWARDING & HANDLING OPERATIONS AS ARE DECIDED BY THE COMMITTEE IN THE P ORT AREA. TWO OFFICERS OF THE PARADEEP PORT TRUST ARE ASSOCIATED WITH THE MANAGEM ENT COMMITTEE TO OVERSEE THE ADMINISTRATION OF THE COMMITTEE. FURTHER, THE C ONTRACTORS UTILIZED BY THE MANAGEMENT COMMITTEE FOR RENDERING THEIR SERVICES A RE ISSUED LICENSES OR PERMITS BY THE PARADEEP PORT TRUST TO OPERATE WITHI N THE PORT AREA. IN VIEW OF THE ABOVE, IT IS INCONGRUOUS THAT THE APPELLANT IS CLAI MING EXEMPTION U/S.LL FOR THE AY 2009-10 WHEREAS PARADEEP PORT TRUST WHICH HAS BEEN GRANTED REGISTRATION AS A CHARITABLE TRUST U/S.!2A BY THE COMMISSIONER OF INC OME TAX, CUTTACK W.E.F. 01.4.2005 HAS FILED RETURN OF INCOME FOR THE AY 200 9-10 WITHOUT CLAIMING EXEMPTION U/S.11. 6.1.6 INTEREST U/S.201(LA) IS MANDATORY AND THERE I S NO QUESTION OF CONSIDERING REASONABLE CAUSE FOR NON-PAYMENT. OF TAX DEDUCTED A T SOURCE IN TIME. IT HAS BEEN HELD SO IN CIT V. EXCEL INDUSTRIES LTD. (2006) 5 SOT 236 (MUM). IT HAS ALSO BEEN HELD IN WEST BENGAL STATE ELECTRICITY BOARD V. CIT (2005) 147 TAXMAN 234 (CAL) THAT INTEREST PAYABLE U/S.201(LA) IS MANDATORY AND CAN NEITHER BE WAIVED NOR THE RATE CAN BE REDUCED. FURTHER, IT HAS BEEN HELD IN KARNATAKA URBAN INFRASTRUCTURE DEVELOPMENT FINANCE CORPN. V. CIT (2009) 308 ITR 297 (KAR) THAT LEVY OF PENALTY U/S.201 AND LEVY OF INTEREST U /S.201-(!A) ARE ENTIRELY DIFFERENT AND EVEN IF, PENALTY PROCEEDINGS ARE DROP PED U/S.201, THE ASSESSEE CANNOT ESCAPE HIS LIABILITY TO PAY INTEREST U/S.201 (LA). 6.1.7 IN VIEW OF THE FOREGOING REASONS, TAX OF RS.1 0,41,341/- AND INTEREST OF RS.48,192/-IMPOSED BY THE ITO(TDSJ IS CONFIRMED. 6. THE LD COUNSEL FOR THE ASSESSEE ARGUED ON SIMILA R LINES AS MADE BEFORE THE LD CIT(A) (AVAILABLE AT PAGES 3-4 OF THE LD CIT(A)S O RDER) AND RELIED UPON THE DECISION OF THE MANAGEMENT COMMITTEE (CFH SCHEME) PARADIP PORT VS ACIT (ITA NO.98/CTK/2013 FOR THE ASSESSMENT YEAR 2009-2010 DA TED 11.3.2013. 7. ON THE OTHER HAND, THE LD D.R. RELIED ON THE ORD ERS OF THE AUTHORITIES BELOW. HE FURTHER INVITED OUR ATTENTION TO THE DECISION RELIE D UPON BY LD COUNSEL FOR THE ASSESSEE IN THE CASE OF MANAGEMENT COMMITTEE (CFH SCHEME) PARAD IP PORT(SUPRA) THAT FOR THE SAID ASSESSMENT YEAR, THE ASSESSEE WAS IN WRIT PETI TION BEFORE THE HONBLE ODISHA HIGH 9 . ITA NO.352 & 353 /CTK/2013 ASSESSMENT YEAR :2011-12 & 2012-13 COURT IN W.P(C) NO.27531 OF 2011. THE LD COUNSEL F OR THE ASSESSEE ARGUED THAT THE SAID WRIT PETITION WAS ON DIFFERENT SUBJECT AS HAS BEEN DISCUSSED BY THE LD CIT(A) IN PARA 6.11 OF THE IMPUGNED ORDER, WHICH, IN FACT WIT H REGARD TO THE ORDER BY THE ITO (TDS) REJECTING THE MANAGEMENT COMMITTEE (CFH SCHEM E) MADE IN THE FORM NO.13 FOR ISSUANCE OF NON-DEDUCTION CERTIFICATE U/S.197 TO DI FFERENT PERSONS FOR THE FINANCIAL YEAR 2009-2010 AND IN THE PRESENT CASE, THE ISSUE IS THE ASSESSEE DEDUCTOR IS NOT DEDUCTING THE TAX AT SOURCE U/S.194C OF THE ACT FROM THE PAYM ENTS MADE TO MANAGEMENT COMMITTEE (CFH SCHEME) FOR THE FINANCIAL YEAR 2010- 2011 AND IT IS A DIFFERENT FINANCIAL YEAR AND, ACCORDINGLY, THE SAID CASE IS DISTINGUISH ABLE AS RELIED UPON BY LD COUNSEL FOR THE ASSESSEE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IN THE PRESENT CASE, THE ISSUE RELATES TO NON-DEDUCTION OF TAX AT SOURCE U/S.194C AT APPROPRIATE RATE IN FORCE FROM THE PAYMENTS MADE TO MANAGEMENT COMMITTEE (CFH SCHEME) FOR THE SUPPLY OF LABOUR. THE LD CIT(A) HA S RELIED UPON THE DECISION OF THE ITAT KOLKATA BENCH IN THE CASE OF DCIT VS. KAMAL MU KHERJEE & CO. (SHIPPING)(P)LTD., 2012 TAX PUB (TD) 2170 (KOL-TRIB), DECISION OF HON BLE KARNATAKA HIGH COURT IN THE CASE OF SMT. J.RAMA VS CIT (2010) 236 CTR (KAR) 10 5 (SUPRA) AND DECISIONS OF VARIOUS COURTS OF LAW, REFERRED TO ABOVE. NOW THE QUESTION ARISES WHETHER THE ASSESSEE DEDUCTEE/RECIPIENT OF THE PAYMENT IS AT AL L TAXABLE IN THE IMPUGNED ORDER OR IS EXEMPT UNDER THE INCOME TAX ACT OR NOT. IN THIS RE GARD, THERE HAS TO BE CLEAR FINDING WHETHER THE DEDUCTEE/RECIPIENT IS TAXABLE UNDER THE ACT AND REQUIRED TO DEDUCT TAX AT SOURCE THEN THERE HAS TO BE A CLEAR FINDING AND A S PEAKING ORDER AND ALSO IN VIEW OF 10 . ITA NO.352 & 353 /CTK/2013 ASSESSMENT YEAR :2011-12 & 2012-13 SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT AND IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S. HINDUSTAN COCA CO LA BEVERAGE PVT LTD VS CIT (2007) 293 ITR 226(SC), WHERE THE RECIPIENT PAYEE I N THE PRESENT CASE HAS PAID THE TAX ON SUCH SUM ON THE DATE ON OR BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME. THEREFORE, IN THE CIRCUMSTANCES AND FACTS OF THE CA SE, THE MATTER IS SET ASIDE TO THE FILE OF THE AO WHO WILL PASS A SPEAKING ORDER IN VIEW OF OUR DIRECTION HEREINABOVE BUT BY AFFORDING ADEQUATE OPPORTUNITY OF HEARING TO THE AS SESSEE. THUS, THE GROUNDS OF APPEAL FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL P URPOSES. 9. WE NOW TAKE UP THE APPEAL IN ITA NO.353/CTK/2301 3. 10. THE ISSUE IN THE PRESENT APPEAL IS IDENTICAL TO THE APPEAL IN ITA NO.352/CTK/2013 AND, THEREFORE, OUR ORDER HEREINABO VE IN ITA NO.252/CTK/2013 IS IDENTICALLY APPLICABLE TO THE PRESENT APPEAL. THUS , THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 / 05/2015. SD/- SD/- ( ) (SUNIL KUMAR YADAV) ( . . ) (B.P.JAIN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK; DATED /05/2015 B.K.PARIDA, SR. PS. 11 . ITA NO.352 & 353 /CTK/2013 ASSESSMENT YEAR :2011-12 & 2012-13 / / / / %( %( %( %( 2!( 2!( 2!( 2!( / COPY OF THE ORDER FORWARDED TO : / / / / / BY ORDER, 3 33 3 / 4 4 4 4 (ASSTT. REGISTRAR) , / ITAT, CUTTACK 1. '$ / THE APPELLANT : L.M.HATI & CO., 59, MADHUBAN MARKET COMPLEX, PARADIP, JAGATSINGHPUR 2. %&'$ / THE RESPONDENT.: ITO (TDS), CUTTACK 3. 5 ( ) / THE CIT(A), CUTTACK 4. 5 / CIT , CUTTACK 5. 6 %( , , + / DR, ITAT, CUTTACK 6. 8 9+ / GUARD FILE. &( %( //TRUE COPY//