THE ITO (TDS), WARD - 3(3), Guntur V. THE Project Director, District Rural Development Agency, Guntur

ITA 492/VIZ/2012

• Counselvise Citation: 49225314 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 21-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D MANOJ KUMAR
• Keywords: Non-deduction of tax
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH , VISAKHAPATNAM BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER SL.NO. ITA NO. AY APPELLANT RESPONDENT 1 492/V/12 2009-10 INCOME-TAX OFFICER (TDS), WARD 3(3), GUNTUR PROJECT DIRECTOR, DRDA, GUNTUR PAN HYDO01880E 2 493/V/12 2010-11 -DO- -DO- AND SL.NO. C.O AY CROSS OBJECTOR RESPONDENT 3 21/V/13 (IN ITA NO. 492/V/12) 2009-10 PROJECT DIRECTOR, DRDA, GUNTUR PAN HYDO01880E INCOME-TAX OFFICER (TDS), WARD 3(3), GUNTUR 4 22/V/13 2010-11 -DO- -DO- REVENUE BY SHRI D. MANOJKUMAR ASSESSEE BY SHRI G.V.N. HARI DATE OF HEARING 07-07-2014 DATE OF PRONOUNCEMENT 07-07-2014 O R D E R PER BENCH.: THESE APPEALS ARE FILED BY THE REVENUE DIRECTED AG AINST SEPARATE ORDERS OF THE CIT(A), VIJAYAWADA DATED 31/08/12 FOR THE ASSESSMENT YEARS 2009-10 AND 2010-11. THE ASSESSEE ALSO FILED CROSS OBJECTIONS AGAINST THE VERY SAME ORDERS OF THE CIT(A). 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A GOVERNMENT ORGANIZATION BEING A DISTRICT RURAL DEVE LOPMENT AGENCY WORKING UNDER THE MINISTRY OF PANCHAYAT RAJ AND RUR AL DEVELOPMENT. 2 ITA NOS. 492 & 493/VIZ/12 & COS 21 & 22VIZ/14 PROJECT DIRECTOR, DRDA, GUNTUR THE OBJECTIVE OF SETTING UP THIS AGENCY IS FOR RURA L DEVELOPMENT BY HELPING THE PEOPLE BELOW THE POVERTY LINE BY PROVID ING THEM TRAINING FOR RUNNING THE BUSINESS AND ALSO EXTENDING NECESSA RY HELP TO ENABLE THEM CARRY OUT INCOME GENERATING ACTIVITIES. FOR TH IS PURPOSE, THE RESPONDENT WILL SELECT THE TRAINING INSTITUTES AS P ER THE GOVERNMENT GUIDELINES FOR GIVING TRAINING TO SELECTED CANDIDATES IN SPECIFIED FIELDS . THE ASSESSING OFFICER PROPOSED TO CONSIDER THE RESPONDENT AS ASSESSEE IN DEFAULT FOR FAILURE TO DEDUCT TAX AT SO URCE IN RESPECT OF PAYMENTS MADE IN CONNECTION WITH THE TRAINING PROGR AMMES. THE ASSESSEE CONTENDED THAT THE PROVISIONS OF TAX DEDUC TION AT SOURCE ARE NOT APPLICABLE FOR THE REASON THAT PAYMENTS WERE MADE AMONG OTHERS TO ZILLA MAHILA SAMAKHYAS. THESE MANILA SAMA KHYAS ARE ELECTED BODIES OF SELF HELP GROUP MEMBERS THAT WERE FORMED AS PER THE NORMS FRAMED BY THE GOVERNMENT IN VIEW OF THE CONCEPT TO STRENGTHEN THE RURAL WOMEN AND TO MAKE THEM SELF SUSTAINABLE. PAYMENTS W ERE MADE THROUGH THESE ZILLA MAHILA SAMAKHYAS TOWARDS COLLEGE FEE OF SOME SELECTED STUDENTS. FURTHER, PAYMENTS WERE ALSO MADE TOWARDS MONTHLY REMUNERATION @ RS.3,500 P.M. TO JRPS (JOB RESOURCE PERSONS} WHO FACILITATE ENROLLMENT AND SELECTION OF RURAL YOUTH FOR PROVIDING PRIVATE EMPLOYMENT. NO SERVICE CHARGES ARE PAID TO THESE ZILLA MAHILA SAMAKHYAS AS THESE ARE NON-PROFIT ORGANIZATIONS. THE AO REJECTED THE CONTENTIONS OF T HE ASSESSEE AND RAISED A DEMAND U/S 201 & 201(1A) OF THE ACT. 3. ON APPEAL, THE FIRST APPELLATE AUTHORITY REFERRE D TO THE BOARDS CIRCULAR NO. 502, DATED 27/01/1988 AND HELD THAT THE PAYMENT S MADE TO THE SAMAKHYAS ARE ESSENTIALLY PAYMENTS MADE TO THE BENE FICIARIES THEMSELVES AND NO MIDDLEMEN OR CONTRACTORS ARE INVOLVED. HENC E, TDS PROVISIONS U/S 194C DO NOT APPLY. THE CIT(A) HELD AS FOLLOWS: 6..THE AO IS ACCORDINGLY DIRECTED TO VERIFY THE NATURE OF THE ACTIVITIES OF THE SAMAKHYA. IF THE AFORESAID TW O ORGANIZATIONS I.E. SUJATHA MANDAL SAMAKHYA, BAPATLA AND ZILLA MAHILA S AMAKHYA, GUNTUR, ARE IN THE NATURE OF FEDERATION OF SHGS, THE PROVIS IONS OF SECTION 194C WOULD NOT APPLY IN VIEW OF THE BOARDS CIRCULAR AND THE AO IS DIRECTED TO REDUCE THE DEMAND RAISED U/S 201(1) AND 201(1A) OF THE ACT, IN RESPECT OF SUCH PAYMENTS. 3 ITA NOS. 492 & 493/VIZ/12 & COS 21 & 22VIZ/14 PROJECT DIRECTOR, DRDA, GUNTUR 7. WITH REGARD TO PAYMENTS MADE TO VARIOUS ORGANIS ATIONS OTHER THAN SHGS, SUCH AS SKYLARD INFO PVT. LTD., HYDERABAD GEM S SEZ LTD., ASWINI GENTS HOSTEL, TALLY (INDIA) PVT. LTD. ETC., THE PRO VISIONS OF DEDUCTION OF TAX AT SOURCE WOULD APPLY. HOWEVER, KEEPING IN VIEW THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGES (P) LTD., VS. CIT [2007] 293 ITR 226, THE AO IS DIRECTE D TO GIVE RELIEF, WHEREVER THE APPELLANT IS ABLE TO PROVE THAT THE AM OUNTS PAID HAVE ALREADY BEEN DECLARED BY THE RECIPIENTS IN THEIR RE TURNS OF INCOME. IN THIS REGARD, THE APPELLANT MAY OBTAIN AND PRODUCE THE RE LEVANT DETAILS BEFORE THE AO FOR NECESSARY VERIFICATION AND THEREAFTER TH E RELIEF MAY BE GIVEN ACCORDINGLY. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS BOT H IN FACTS AND IN LAW. 2. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THA T THE ZILLA SAMAKHYAS ARE NGOS AND ARE NOT COVERED BY ANY OF TH E EXCEPTIONS WHICH ARE NOT LIABLE TO TDS. 3. THE CIT(A) HAS FAILED TO APPRECIATE THAT THE ZI LLA SAMAKHYAS DID NOT OBTAIN A NON DEDUCTION CERTIFICATE ALLOWING NIL DED UCTION OF TAX FROM THE AO. 5. THE ASSESSEE FILED CROSS OBJECTIONS ON THE FOLLO WING GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), VIJAYAWADA IS CONTRARY TO THE FACTS AND ALSO THE LA W APPLICABLE TO THE FACTS OF THE CASE. 2. THE LEANED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN NOT DISPOSING SOME OF THE GROUNDS RAISED BY THE APPELLA NT. 3. THE LEARNED COMMISSIONER OF INCOME TAX OUGHT T O HAVE GRANTED RELIEF IN RESPECT OF THE FOLLOWING AMOUNTS BY HOLDING THAT THESE AMOUNTS WERE NOT IN THE NATURE OF TRAINING CH ARGES AND HENCE THE PROVISIONS OF S. 194C ARE ONLY APPLICABLE AND N OT THE PROVISIONS OF S. 194J AS APPLIED BY THE ASSESSING OFFICER: RS. I) DIRECTOR, KOLPING INDIA, GUNTUR 6,80,550 II) THE PRINCIPAL, TRTIC, GUDAVALLI 4,74,700 III)VIJAYA CHANDRA HOTEL, DASARIPALEM 58,050 IV)ASWINI GENTS HOSTEL, GUNTUR 5,77,940 V) PROFNG RANAGA KRISHIVIGYANAKENDRA, 4 ITA NOS. 492 & 493/VIZ/12 & COS 21 & 22VIZ/14 PROJECT DIRECTOR, DRDA, GUNTUR VINAYASARAM 99,300 VI)THE DIRECTOR,RURAL STUDIES AND ADMINISTRATION 24,000 VII)AREACOORDINATOR,MACHERLA 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) OUGHT TO HAVE GRANTED RELIEF IN RESPECT OF THE FOLLOWING AMO UNTS BY HOLDING THAT THE EXPENDITURE INCURRED WAS NOT IN THE NATURE OF TRAINING CHARGES AND WAS ONLY EXPENDITURE INCURRED DIRECTLY ON THE TRAINEES TOWARDS FOOD, ACCOMMODATION, TRANSPORTATION ETC., A ND HENCE NOT LIABLE FOR DEDUCTION OFTAX AS SOURCE: RS. I) PROJECT DIRECTOR, DRDA, GUNTUR 8,26,410 II) AREA COORDINATOR, TENALI 59,750 III)AREA COORDINATOR, SATTENAPALLY 22 .760 IV)M.VENKATA RAO 4,420 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) OUGHT TO HAVE HELD THAT THE APPELLANT IS NOT LIABLE TO DEDUC T TAX AT SOURCE ON PAYMENT OF RS.7,01,000 MADE TO CONSTRUCTION INDUSTR Y DEVELOPMENT, NEW DELHI ON THE GROUND THAT THEY HAVE SUBMITTED CERTIFICATE U/S 197(1) OF THE ACT. 6. AFTER HEARING RIVAL CONTENTIONS AND PERUSING THE MATERIAL ON RECORD AS WELL THE ORDERS OF THE REVENUE AUTHORITIES, WE H OLD AS FOLLOWS: 7. THE CIT(A) HAS DIRECTED THE AO TO VERIFY THE NAT URE OF ACTIVITIES OF SAMAKHYAS AND IF IT IS FOUND THAT THE SAMAKHYAS ARE IN THE NATURE OF FEDERATION OF SELF HELP GROUPS, THEN, THE PROVISIO NS OF SECTION 194C DO NOT APPLY. AS REGARDS THE PAYMENT MADE TO VARIOUS O RGANIZATIONS OTHER THAN SHGS, SUCH AS SKYLARD INFO PVT. LTD., HYDERABAD GEMS SEZ LTD., ASWINI GENTS HOSTEL, TALLY (INDIA) PVT. LTD. ETC., HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGES (P) LTD. VS. CIT [2007] 293 ITR 226 (SC), AND DIRECTED THE AO TO GIVE RELIEF, WHEREVER THE ASSESSEE IS ABLE TO PROVE THAT THESE E NTITIES HAVE ALREADY DECLARED THE INCOME IN QUESTION IN THEIR RETURNS O F INCOME. 5 ITA NOS. 492 & 493/VIZ/12 & COS 21 & 22VIZ/14 PROJECT DIRECTOR, DRDA, GUNTUR 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED T HE FINDINGS OF THE CIT(A). ON THE CROSS OBJECTIONS, THE LEARNED COUNSE L SUBMITTED THAT THE LEARNED CIT(A) HAS NOT ADJUDICATED ON THE ARGUMENTS RAISED REGARDING THE PAYMENTS MADE TO TRAINING INSTITUTIONS. THE CASE OF THE ASSESSEE IS THAT EXPENSES TOWARDS RENT, ELECTRICITY, BOARDING AND LO DGING TO THE STUDENTS ARE REIMBURSABLE EXPENDITURE AS PER THE AGREED TERMS AN D CONDITIONS AND, HENCE, TDS IS NOT ATTRACTED. 9. THE LEARNED DR OPPOSED THE SUBMISSION OF THE ASS ESSEE AND POINTED OUT THAT CIT(A) HAS NO POWER TO SET ASIDE THE MATTE R TO THE FILE OF THE AO IN VIEW OF THE AMENDMENT BY THE FINANCE ACT, 2001 WITH EFFECT FROM 2001 TO SECTION 251(1)(A) OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS A LIMITED REMAND, HENCE, IT IS PERMISS IBLE. IN OUR VIEW THE CIT(A) DOES NOT HAVE POWERS U/S 251(1)(A) TO REMAND THE MA TTER TO THE FILE OF THE AO. TO THIS EXTENT, WE UPHOLD THE SUBMISSIONS OF TH E LEARNED DR. THIS IS A TECHNICAL ERROR ON THE PART OF THE LEARNED CIT(A). AS FAR AS THE DIRECTIONS ARE CONCERNED, THEY ARE IN ACCORDANCE WITH LAW AND WE U PHOLD THE SAME. TO RECTIFY THE TECHNICAL DEFECT, WE REMAND THE ISSUE T O THE FILE OF THE AO TO DISPOSE OFF THE ISSUES ON THE LINES DIRECTED BY THE LEARNED CIT(A) ON THE CROSS OBJECTIONS, AS THE ARGUMENTS HAVE NOT BEEN AD JUDICATED, THE SAME IS TO BE REMITTED TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE SAME. 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED AND THE C.OS. FILED BY THE ASSESSEE ARE ALLOWED FOR STATIST ICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 07/07/2014. SD/- SD/- (SAKTIJIT DEY) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 7 TH JULY, 2014 KV 6 ITA NOS. 492 & 493/VIZ/12 & COS 21 & 22VIZ/14 PROJECT DIRECTOR, DRDA, GUNTUR COPY TO:- 1) ITO(TDS), WARD 3(3), C.R. BUILDINGS, KANNAVAR ITHOTA, GUNTUR 2) THE PROJECT DIRECTOR, DISTRICT RURAL DEVELOPMENT AGENCY, SWASAKTHI BUILDINGS, COLLECTORATE COMPOUND 3) CIT(A), VIJAYAWADA 4) CIT(TDS), HYDERABAD. 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., VIZAG.