XEN Public Division No. 1, Kaithal V. Income Tax Officer, Karnal

ITA 4900/DEL/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6611 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 07-04-2011
• Assessment Year: 2009-2010
• Appeal Filed On: 09-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PERMIL GOYAL
• Keywords: Charitable institution; Non-deduction of tax
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I : NEW DELHI) (DELHI BENCH I : NEW DELHI) (DELHI BENCH I : NEW DELHI) (DELHI BENCH I : NEW DELHI) BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER SHRI K.D. RANJAN, ACCOUNTANT MEMBER SHRI K.D. RANJAN, ACCOUNTANT MEMBER SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NOS.4899 & 4900/DEL./2010 ITA NOS.4899 & 4900/DEL./2010 ITA NOS.4899 & 4900/DEL./2010 ITA NOS.4899 & 4900/DEL./2010 (ASSESSMENT YEARS : 2008 (ASSESSMENT YEARS : 2008 (ASSESSMENT YEARS : 2008 (ASSESSMENT YEARS : 2008- -- -09 & 09 09 & 09 09 & 09 09 & 09- -- -10) 10) 10) 10) XEN, PUBLIC HEALTH DIVISON NO.1 XEN, PUBLIC HEALTH DIVISON NO.1 XEN, PUBLIC HEALTH DIVISON NO.1 XEN, PUBLIC HEALTH DIVISON NO.1, ,, , VS. VS. VS. VS. ITO(TDS) WARD, ITO(TDS) WARD, ITO(TDS) WARD, ITO(TDS) WARD, KAITHAL (HARYANA), KAITHAL (HARYANA), KAITHAL (HARYANA), KAITHAL (HARYANA), KAITHAL. KAITHAL. KAITHAL. KAITHAL. (PAN/GIR NO. : RTKPO2583A) (PAN/GIR NO. : RTKPO2583A) (PAN/GIR NO. : RTKPO2583A) (PAN/GIR NO. : RTKPO2583A) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SHRI PERMIL GOYAL, ADV. ASSESSEE BY : SHRI PERMIL GOYAL, ADV. ASSESSEE BY : SHRI PERMIL GOYAL, ADV. ASSESSEE BY : SHRI PERMIL GOYAL, ADV. REVENUE BY : MS. BANITA DEVI NAOREM, SR.DR REVENUE BY : MS. BANITA DEVI NAOREM, SR.DR REVENUE BY : MS. BANITA DEVI NAOREM, SR.DR REVENUE BY : MS. BANITA DEVI NAOREM, SR.DR ORDER ORDER ORDER ORDER PER A.D. JAIN: JM PER A.D. JAIN: JM PER A.D. JAIN: JM PER A.D. JAIN: JM THESE ARE ASSESSEES APPEALS CONTENDING THAT THE AO/CIT(A) ERRED IN LAW AND FACT IN CREATING DEMAND ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE ON PAYMENT OF `7,00,00,000 MADE ON 14.11.08 FOR ASSESSMENT YEAR 2008-09 AND OF `4,25,00,000 FOR ASSESSMENT YEAR 2009-10 MADE ON 19.10.2000 TO NANDI FOUNDATION, A N ON PROFIT ORGANIZATION WITH NO COMMERCIAL ACTIVITY (A PUBLIC CHARITABLE TRUST). 2. THE ASSESSEE IS A STATE GOVT. PUBLIC HEALTH DEPARTMEN T OF HARYANA GOVT. A TDS INSPECTION IN THE CASE WAS CARRIE D OUT AT THE OFFICE PREMISES OF THE ASSESSEE ON 02.02.2010, 17.02.2010 AND 24.02.2010. WHILE PERUSING THE RECORDS, DISCREPANCIES WERE NOTICED WHICH WERE CONFRONTED TO THE ASSESSEE AS PER DETAILS BELO W: S.NO. FINANCIAL YEAR AMOUNT OF TDS AMOUNT OF TDS SH ORT/NON TO BE DEDUCTED DEDUCTED DEDUCTION 1. 2007-08 970740 89064 88976 2. 2008-09 1637304 - 1637304 3. 2009-10 1131673 2315 1129358 TOTAL - - 2855638 I.T.A NOS.4899 & 4900/DEL./2010 (A.Y. : 2008-09 & 09-10) 2 3. THE ASSESSEE ADMITTED ITS DEFAULT BEFORE THE AO. IT WAS STATED THAT THE SHORT TDS OCCURRED DUE TO LACK OF KNOWLEDGE ON THE PART OF THE CONCERNED STAFF. 4. THE AO LEVIED INTEREST U/S 201(1A) OF THE I.T. ACT , 1961, AS MANDATORY UNDER THE ACT CITED A NUMBER OF JUDGMENTS IN THIS REGARD. 5. THE CIT(A), BY VIRTUE OF THE IMPUGNED COMPOSITE O RDER DATED 30.8.10 CONFIRMED THE LEVY OF INTEREST U/S 201(1A) OF THE ACT. THIS BRING THE ASSESSEE IN APPEAL BEFORE US. 6 THE LD.COUNSEL FOR THE ASSESSEE CHALLENGING THE IMPUGN ED ORDER, HAS STATED THAT CIT(A) HAS ERRED IN UPHOLDING THE DEMA ND OF `1589000 + INTEREST OF `222460 ON ACCOUNT OF NON-DEDUCTION OF TDS ON PAYMENTS OF `1 CRORE MADE TO NANDI FOUNDATION, WHICH IS A NON-PROFIT ORGANIZATION HAVING COMMERCIAL ACTIVITY BEING, A PU BLIC CHARITABLE TRUST. IT HAS BEEN CONTENDED THAT THE PAYMENT MADE T O NANDI FOUNDATION WAS IN THE NATURE OF CONTRIBUTION TO THE COST OF RUNNING THE SAFE DRINKING WATER PROGRAMME; THAT THEREFORE, IT WA S NOT IN THE NATURE OF ANY CONSIDERATION FOR ANY WORK CONTRACT; THAT RAT HER IT WAS IN THE NATURE OF PAYMENT FOR PROCESSING AND SUPPLY OF PURIFIE R WATER; THAT NO ACTIVITY OR PART THEREOF, PERTAINING TO THE PROJECT IS TO BE CONSIDERED AS A COMMERCIAL ACTIVITY; THAT THERE WAS NO CONTRACT BE TWEEN NANDI FOUNDATION AND THE GOVT. OF HARYANA; THAT IN THE AB SENCE OF A CONTRACT, THE PROVISIONS OF SECTION 194C OF THE ACT ARE NOT ATTR ACTED. 7. THE LD.DR., ON THE OTHER HAND, STRONGLY RELIED ON THE IMPUGNED ORDER. 8. HAVING HEARD BOTH THE PARTIES AND HAVING PERUSED T HE MATERIAL ON RECORD, WE DO NOT FIND ANY FORCE IN THE GRIEVANC E SOUGHT TO BE RAISED BY THE ASSESSEE. IT HAS BEEN FOUND AS A FACT THAT CONCURRENTLY BY BOTH THE AUTHORITIES BELOW THAT THE WORK ALLOTTED TO NANDI FOUNDATION WAS PURELY OF WORK CONTRACT. THIS WAS CLEA R FROM THE VERY FIRST PAGE OF THE MEMORANDUM OF UNDERSTANDING DATED 2 3.7.08, WHICH I.T.A NOS.4899 & 4900/DEL./2010 (A.Y. : 2008-09 & 09-10) 3 WAS ENTERED INTO BETWEEN THE DEDUCTEE AND THE HARYAN A GOVT. FURTHER, AS PER THIS MOU, NANDI FOUNDATION WAS TO ENGA GE THE PROGRAMME TEAM TAKING CARE OF VARIOUS ACTIVITIES UNDE R THE PARTNERSHIP OF THE NANDI FOUNDATION WAS TO PROVIDE, I NSTALL AND COMMISSION SAFE DRINKING WATER PLANT BASED ON WHO GUIDE LINES WITH RO TECHNOLOGY, REPLETE WITH ALL ACCESSORIES AND STORAGE SYSTEM; AND THAT NANDI FOUNDATION WAS PUT RESPONSIBLE FOR THE OP ERATION, MAINTENANCE AND REPAIRS OF COMMUNITY WATER SYSTEM AT I TS OWN COST. FURTHER, THE GOVT. OF HARYANA WAS TO PAY `1125 LAKHS TO NANDI FOUNDATION FOR 100 VILLAGES AS THE COST SETTING UP OF A PROJECT IN TWO INSTALLMENTS. AS PER THE MOU, THIS AMOUNT WAS TO BE TRE ATED AS TOTAL WORK ADVANCE FOR SETTING UP COMMUNITY BASED WATER SYSTE M IN THE IDENTIFIED AREAS. 9. MOREOVER, AS PER CBDT CIRCULAR NO.681 DATED 8.3.9 4, SINCE CONTRACTS FOR CONSTRUCTION, REPAIRS, RENOVATION OF ALT ERATION OF BUILDINGS OR DAMS OR LAYING OF ROADS OR RAILWAY LINES OR ERECTIO N OR INSTALLATION OF PLANT AND MACHINERY ARE IN THE NATURE OF WORK AND L ABOUR, INCOME-TAX WILL HAVE TO BE DEDUCTED FROM PAYMENTS MADE IN RESPEC T OF SUCH PAYMENTS. AS FOUND BY THE AUTHORITIES BELOW, IN THE I NSTANT CASE ALSO, NANDI FOUNDATION SHOW PROFIT, INSTALL AND COMMISSION SA FE DRINKING WATER PLANT WITH ALL ACCESSORIES AND STORAGE SYSTEM. AS SU CH, THE SAID CIRCULAR OF THE CBDT IS APPLICABLE. 10. ACCORDING TO CBDT CIRCULAR NO.93 DATED 26.9.72, DEDUCTION IS ALSO TO BE MADE FROM ADVANCE PAYMENTS, IF THEY EXCEED THE LIMIT. IN VIEW THEREOF, IT HAS RIGHTLY BEEN HELD THAT TDS PROV ISIONS ARE APPLICABLE TO ADVANCE PAYMENTS. 11. THE CBDT CIRCULAR NO.502 DATED 27.1.88 HAS CORRE CTLY BEEN HELD NOT TO APPLY IN THE CASE OF THE ASSESSEE, THE SAID CIRCUL AR PERTAIN TO NREP/RLEGP WHICH IS NOT THE CASE HEREIN. I.T.A NOS.4899 & 4900/DEL./2010 (A.Y. : 2008-09 & 09-10) 4 12. FURTHER, THE CIT(A) HAS RIGHTLY OBSERVED THAT SINC E THE ENTIRE COST OF THE PROJECT IS TO BE MET BY GOVT. OF HARYANA, THE PLEA OF THE ASSESSEE THAT THE AMOUNT WAS PAID AS A CONTRIBUTION BY TH E GOVT. OF HARYANA, WAS INCORRECT. 13. IN VIEW OF THE ABOVE, WE HOLD THAT BOTH THE AUT HORITIES BELOW HAVE CORRECTLY OBSERVED THAT THE PROVISIONS OF SECTION 194C OF THE ACT ARE APPLICABLE TO THE PAYMENT OF `7 CRORES MADE BY T HE ASSESSEE TO NANDI FOUNDATION AND THAT THEREFORE, THE ASSESSEE WAS LI ABLE TO DEDUCT TDS FROM THE PAYMENT MADE TO NANDI FOUNDATION. 14. HENCE, FINDING NO ERROR THEREIN, THE ORDER OF T HE CIT(A) IS CONFIRMED. 15. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 07.04.2011. SD/- SD/- (K.D. RANJAN) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, APRIL 07, 2011 SKB COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), KARNAL 5.CIT(ITAT), NEW DELHI. AR/ITAT