ITO, Kota V. THE SECRETARY, KUMS, BUNDI

ITA 499/JPR/2013

• Counselvise Citation: 49923114 RSA 2013
• Duration Of Justice: 2 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Assessee Lawyers: TANUJ AGARWAL
• Keywords: Retrospective amendment
• Section: 12A; 194C; 201(1); 10

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. 499 TO 503/JP/2013 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2006-07 TO 2010-11 THE INCOME TAX OFFICER, (TDS), BUNDI. CUKE VS. THE SECRETARY, KRISHI UPAJ MANDI SAMITI, BUNDI. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: JDHK 01821 B VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAJ MEHRA (JCIT) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI TANUJ AGARWAL (CA) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 09/11/2015 MN?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 10/11/2015 VKNS'K @ ORDER PER: BENCH THESE THE APPEALS FILED BY THE REVENUE ARISE AGAINS T THE ORDER DATED 19/02/2013 PASSED BY THE LD CIT(A), KOTA FOR A.Y. 2006-07 TO 2010-11. THE SOLE COMMON GROUND OF ALL THE APPEALS IS AS UNDER:- THE LD CIT(A) HAS ERRED IN HOLDING THAT THE PROVI SIONS OF SECTION 194J OF THE I.T. ACT WERE NOT APPLICABLE I N RESPECT OF THE PAYMENTS MADE BY THE ASSESSEE TO RSAMB ON ACCOUNT OF STATUTORY CONTRIBUTION, AGAINST ITA 499 TO 503/JP/2013_ ITO VS. KUMS, BUNDI 2 WHICH THE ASSESSEE RECEIVED PROFESSIONAL AND TECHNICAL SERVICES FROM RSAMB. 2. IN ALL THE APPEALS, THE ONLY GROUND OF THE REVEN UE IS AGAINST NOT HOLDING THE PROVISIONS OF SECTION 194J OF THE INCOM E TAX ACT, 1961 (IN SHORT THE ACT) IS APPLICABLE ON PAYMENTS MADE TO RA JASTHAN STATE AGRICULTURAL MARKETING BOARD (IN SHORT RSAMB). THE I TO(TDS) OBSERVED THAT THE ASSESSEE HAD MADE PAYMENTS TO RSAMB BUT NO TDS HAS BEEN DEDUCTED, WHICH IS COVERED U/S 194C OF THE ACT. NON- DEDUCTION OF TAX AT SOURCE ON THE ABOVE PAYMENTS U/S 201(1) IS WORKED OU T AS UNDER:- F.Y. AMOUNT PAID AMOUNT OF NON DEDUCTION OF TAX AT SOURCE U/S 201(1) INTEREST LEVIABLE U/S 201(1A) 2005 - 06 U/S 194C RS. 83,76,200/ - 1,87,962/ - 1,03,379/ - 2006 - 07 U/S 194C RS. 1,35,03,244/ - 3,03,013/ - 1,39,385/ - 2007 - 08 U/S 194C RS. 72,00,000/ - 1,63,152/ - 53,840/ - 2008 - 09 U/S 194C RS. 6,30,00,0 00/ - 14,27,580/ - 2,85,516/ - 2009 - 10 U/S 194C RS. 1,45,00,000/ - 2,90,000/ - 20,300/ - TOTAL 23,71,707/ - 6,02,420/ - F.Y. AMOUNT PAID AMOUNT OF NON DEDUCTION OF TAX AT SOURCE U/S 201(1) INTEREST LEVIABLE U/S 201(1A) 2005 - 06 U/S 194J RS. 1,45,36,168/ - 8,15 ,479/ - 4,56,668/ - 2006 - 07 U/S 194J RS. 1,42,08,099/ - 7,97,074/ - 3,58,683/ - 2007 - 08 U/S 194J RS. 2,13,09,168/ - 24,14,329/ - 7,96,728/ - 2008 - 09 U/S 194J RS. 2,07,62,284/ - 23,52,367/ - 4,93,997/ - 2009 - 10 U/S 194J RS. 1,36,22,044/ - 15,43,378/ - 1,54,337/ - T OTAL 79,22,627/ - 22,60,413/ - ITA 499 TO 503/JP/2013_ ITO VS. KUMS, BUNDI 3 THE ITO (TDS) GAVE REASONABLE OPPORTUNITY OF BEING HE ARD TO THE ASSESSEE. AFTER CONSIDERING THE ASSESSEES REPLY IN ALL THE YEARS, IT HAS BEEN HELD THAT A RESPONSIBLE PERSONS WAS MANDATORY OBLIGED TO MAKE DEDUCTION OF TAX AT THE TIME OF MAKING THE PAYMENTS . UNDER THE CIRCUMSTANCES THE RESPONSIBLE PERSONS IS DEEMED TO BE ASSESSEE IN DEFAULT WITHIN THE MEANING OF SECTION 201(1) OF THE ACT FOR NON- DEDUCTION OF TAX AND AS PER THE PROVISIONS OF SECTI ON 201(1A) IF THE RESPONSIBLE PERSON IS FAILED TO DEDUCT THE WHOLE OR ANY PART OF TAX OR AFTER DEDUCTING FAILED TO PAY THE TAX IN ACCORDANCE WITH THIS SECTION, THE RESPONSIBLE PERSON IS LIABLE TO PAY SIMPLE INTEREST @ 12% PER ANNUM. THEREFORE, HE CALCULATED TDS AMOUNT AND INTEREST U/S 201(1)/194J OF THE ACT FOR A.Y. 2006-07 AT RS.8,15,479/-, FOR A.Y. 2007-08 AT RS. 7,97,074/-, FOR A.Y. 2008-09 AT RS. 24,14,329/-, FO R A.Y. 2009-10 AT RS. 23,52,367/- AND FOR A.Y. 2010-11 AT RS. 15,43,378/- AND CALCULATED INTEREST U/S 201(1A) FOR A.Y. 2006-07 AT RS.6,02,06 4/-, FOR A.Y. 2007-08 AT RS. 5,28,041/-, FOR A.Y. 2008-09 AT RS. 9,27,893 /-, FOR A.Y. 2009-10 AT RS. 9,07,187/- AND FOR A.Y. 2010-11 AT RS. 2,20,005 /- AND CREATED A DEMAND ACCORDINGLY. ITA 499 TO 503/JP/2013_ ITO VS. KUMS, BUNDI 4 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD DELETED THE ADDITION BY OBSERVING AS UNDER:- I HAVE GONE THROUGH THE AO'S FINDINGS AND ASSESSEE 'S SUBMISSION. CONTRIBUTION TO RSAMB THE ASSESSEE IS 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 DISC HARGE OF STATUTORY OBLIGATION AND CANNOT BE TREATED AS A CON TRACTUAL / TECHNICAL / PROFESSIONAL PAYMENT. IT IS THEREFORE H ELD THAT CONTRIBUTION TO RSAMB CANNOT BE SUBJECT TO TDS [BEIN G A STATUTORY PAYMENT]. PAYMENT TO RSAMB FOR CONSTRUCTION & REPAIR OF ROADS AND BUILDINGS ETC. THE ASSESSEE REGULARLY MAKES PAYMENT TO EXECUTIVE ENGINEER, RSAMB FOR REPAIR, MAINTENANCE AND CONSTRU CTION OF ROADS & BUILDINGS. THE ASSESSEE CLAIMED THAT THERE WAS NO CONTRACTOR-CONTRACTEE RELATIONSHIP BETWEEN THE ASSES SEE AND RSAMB. HOWEVER, IN MY OPINION IT IS NOT NECESSARY TH AT ANY CONTRACT HAS TO BE IN WRITING, THE CONTRACT CAN BE I N THE FORM OF ORAL UNDERSTANDING ALSO. IN THE INSTANT CASE, TH ERE WERE SUFFICIENT MATERIAL ON RECORD TO SUGGEST THAT THERE WAS BROAD UNDERSTANDING BETWEEN RSAMB AND VARIOUS KRISHI UPAJ ITA 499 TO 503/JP/2013_ ITO VS. KUMS, BUNDI 5 MANDI SAMITIES TO CONSTRUCT & MAINTAIN ROADS ETC. A ND TO SHARE THE EXPENSES. CLEARLY SUCH ARRANGEMENT HAS TO BE TREATED AS A CONTRACTUAL ARRANGEMENT AND THEREFORE, THESE PAYMENTS WERE CLEARLY COVERED BY SECTION 194C AS THE SE PAYMENTS WERE MADE FOR SPECIFIC PURPOSES (FOR CONSTR UCTION OF ROADS ETC.). HOWEVER BEFORE TREATING THE ASSESSEE IN DEFAULT, THE A.O. SHOULD HAVE GONE THROUGH EXPLANAT ION TO SECTION 191 OF THE I.T. ACT. FOR READY REFERENCE, TH E SAME IS REPRODUCED BELOW:- IN THE CASE OF INCOME IN RESPECT OF WHICH PROVISION IS NOT MADE UNDER THIS CHAPTER FOR DEDUCTING INCOME-TAX AT THE TIME OF PAYMENT, AND IN ANY CASE WHERE INCOME-TAX H AS NOT BEEN DEDUCTED IN ACCORDANCE WITH THE PROVISIONS OF T HIS CHAPTER, INCOME-TAX SHALL BE PAYABLE BY THE ASSESSE E DIRECT. EXPLANATION : FOR THE REMOVAL OF DOUBTS, IT IS HERE BY 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, BEING AN EMPLOYER, DOES NOT DEDUCT, OR AFTER SO DEDUCTING FA ILS TO PAY, OR DOES NOT PAY, THE WHOSE OR ANY PART OF THE TAX, AS REQUIRED BY OR UNDER THIS ACT, AND WHERE THE ASSESSE E HAS ALSO FAILED TO PAY SUCH TAX DIRECTLY, THEN SUCH PER SONS SHALL, WITHOUT PREJUDICE TO ANY OTHER CONSEQUENCES WHICH HE MAY ITA 499 TO 503/JP/2013_ ITO VS. KUMS, BUNDI 6 INCUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT WITHIN THE MEANING OF SUB-SECTION (1) OF SECTION 201, IN RESPE CT OF SUCH 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 RNS OF INCOME DECLARING EITHER LOSS OR NIL INCOME AND WAS N OT LIABLE 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 TH ERE WAS NO TAX LIABILITY ON THE DEDUCTEE (RSAMB) ON ITS RET URNED INCOME, THE DEDUCTOR (ASSESSEE) CANNOT BE TREATED A S AN ASSESSEE IN DEFAULT. MY VIEW IS SUPPORTED BY THE JUD GMENT OF HON'BLE ALLAHABAD HIGH COURT (21 TAXMANN.COM 489 ALL .). THE HONBLE ITAT, KOLKATA BENCH IN RAMAKRISHNA VEDANT A MATH V. ITO (2012) IN ITA 477, 478 & 479/KOL/2012 H AS HELD AS UNDER: AS FAR AS RECOVERY PROVISIONS ARE CONCERNED, THESE PROVISIONS ARE SET OUT IN SECTION 201(1) WHICH SEEKS TO MAKE G OODS ANY LOSS TO REVENUE ON ACCOUNT OF LAPSE BY THE ASSESSEE TAX DEDUCTOR. HOWEVER, THE QUESTION OF MAKING GOODS THE LOSS OF REVENUE ARISES ONLY WHEN THERE IS INDEED A LOSS OF REVENUE AND THE LOSS OF REVENUE CAN BE THERE ONLY WHEN RECI PIENT OF INCOME HAS NOT PAID TAX. THEREFORE, RECOVERY PROVIS IONS UNDER SECTION 201(1) CAN BE INVOKED ONLY WHEN LOSS OF REV ENUE IS ITA 499 TO 503/JP/2013_ ITO VS. KUMS, BUNDI 7 ESTABLISHED, AND THAT CAN ONLY BE ESTABLISHED WHEN IT IS DEMONSTRATED THAT THE RECIPIENT OF INCOME HAS NOT P AID DUE TAXES THEREON. IN THE ABSENCE OF THE STATUTORY POWE RS OF REQUISITION ANY INFORMATION FROM THE RECIPIENT OF I NCOME, THE ASSESSEE IS INDEED NOT ALWAYS ABLE TO OBTAIN THE SA ME. THE PROVISIONS TO MAKE GOODS THE SHORTFALL IN COLLECTIO N OF TAXES MAY THUS END UP BEING INVOKED EVEN WHEN THERE IS NO SHORTFALL IN FACT. ON THE OTHER HAND, ONCE ASSESSEE FURNISHES THE REQUISITE BASIS INFORMATION, THE ASSESSING OFFI CER CAN VERY WELL ASCERTAIN THE RELATED FACTS ABOUT PAYMENT OF T AXES ON INCOMES OF THE RECIPIENT DIRECTLY FROM THE RECIPIEN TS OF INCOME. IT IS NOT THE REVENUES CASE BEFORE US THAT , ON THE FACTS OF THIS CASE, SUCH AN EXERCISE BY THE ASSESSI NG OFFICER IS NOT POSSIBLE. IT DOES PUT ON ADDITIONAL BURDEN ON T HE ASSESSING OFFICER BEFORE HE CAN INVOKE SECTION 201( 1) BUT THATS HOW HON'BLE HIGH COURT HAS VISUALIZED THE SC HEME OF ACT AND THATS HOW, THEREFORE, IT MEETS THE END OF JUSTICE. 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 NIL 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 DIREC TED TO DELETE THE DEMAND RAISED U/S 201(1) & 201(1A). THIS GROUND OF APPEAL IS THEREFORE ALLOWED. 4. NOW THE REVENUE IS IN APPEALS BEFORE US. THE LEAR NED D.R. VEHEMENTLY SUPPORTED THE ORDER OF THE ITO(TDS). AT TH E OUTSET, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THIS ISSUE IS COVERED IN THE CASE OF KRISHI UPAJ MANDI SAMITI, DAUSA IN ITA NO. 18/JP /2013 DECIDED ON ITA 499 TO 503/JP/2013_ ITO VS. KUMS, BUNDI 8 10/4/2015. THE LD AR REFERRED PARAGRAPH NO. 6 AT PA GE NO. 6 OF THIS ORDER, WHICH IS REPRODUCED AS UNDER:- 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS FOUND THA T THERE IS NO CONTRACTOR-CONTRACTEE RELATIONSHIP BETWEEN THE ASSESSEE AND THE RSAMB. THE RSAMB IS A PARENTAL BODY OF KRISHI UPAJ MANDI SAMITI. THE KRISHI UPAJ MANDI S AMITI IS REQUIRED TO MAKE A CONTRIBUTION OUT OF ITS INCOM E TO THE MARKETING BOARD AND THE MARKETING BOARD IS REQUIRED TO UTILIZE THESE RECEIPTS ON IMPROVEMENT OF THE AGRICU LTURAL MARKET IN THE STATE, WHICH IS OWNED BY THE KRISHI UP AJ MANDI SAMITI. THE MARKETING BOARD ALSO GIVES AID AND GRANT TO KRISHI UPAJ MANDI SAMITI TO ENABLE THEM TO DISCHARGE THEIR DUTIES AND FUNCTIONS SATISFACTORILY . THE CBDT CIRCULAR 741 DATED 18.04.1996, CIRCULAR NO. 745 DATED 19.07.1996, CIRCULAR NO. 22/68-ITB DATED MARCH 28/MAY 13, 1968 ARE ALSO SQUARELY APPLICABLE IN THE CASE OF THE ASSESSEE. THE SAMITI IS REQUIRED TO CONTRIBU TE AS PER SECTION 18A OF THE RAJASTHAN AGRICULTURAL MARKETING ACT, 1961, WHICH IS A CERTAIN PERCENTAGE OF ITS INCOME AN D IS OBLIGATORY ON THE PART OF ASSESSEE. THEREFORE, NO TD S IS LIABLE TO BE DEDUCTED U/S 194C AND 194J OF THE ACT. ACCORDINGLY, ORDER OF THE LD. CIT(A) IS UPHELD. HE FURTHER ARGUED THAT THERE IS NO RELATION AS A CO NTRACTOR AND CONTRACTEE BETWEEN THE PARENT ORGANIZATION AND ASSES SEE. RSAMB IS A PARENT ORGANIZATION CREATED BY RAJASTHAN AGRICULTUR AL PRODUCE MARKETING ACT, 1961 (IN SHORT RAPM ACT). THE PAYMENTS WERE MAD E FOR FULFILLMENT OF OBJECT ENSHRINED BY THE RAPM ACT. THE CONTRIBUTIO N TO RSAMB, ITA 499 TO 503/JP/2013_ ITO VS. KUMS, BUNDI 9 STATUTORY OBLIGATION ON THE PART OF THE ASSESSEE AN D IS NOT LIABLE FOR DEDUCTION OF TDS. HE HAS FURTHER DRAWN OUR ATTENTION ON CBDT CIRCULAR NO. 4 OF 2002 DATED 16/7/2003 WHEREIN CBDT HAS DIREC TED THE REVENUE AUTHORITIES THAT BOARDS OR BODIES WHOSE INCOME IS UN CONDITIONALLY EXEMPT U/S 10 OF THE ACT AND WHO ARE STATUTORILY NO T REQUIRED TO FILE RETURN OF INCOME AS PER SECTION 139, THERE WOULD BE NO REQUIREMENT FOR TAX DEDUCTION AT SOURCE SINCE THEIR INCOME IS ANYWAY EXEMPT UNDER THE INCOME TAX ACT. HE HAS FURTHER DRAWN OUR ATTENTION O N AMENDMENT MADE IN FINANCE ACT, 2012 TO SECTION 201 AND 40(A)( IA) HELD CURATIVE TO HAVE RETROSPECTIVE EFFECT. THE HONBLE ITAT, JAIPUR B ENCH, JAIPUR IN THE CASE OF ACIT VS. GIRDHARI LAL BARGOTI IN ITA NO. 757 /JP/2012 HAS DECIDED THIS ISSUE. THE HON'BLE DELHI HIGH COURT HAS ALSO DE CIDED THIS ISSUE IN THE CASE OF CIT VS ANSAL LAND MARK TOWNSHIP PVT. LTD. IN ITA NO. 160 & 161/2012 DECIDED ON 26/08/2015 AS THIS AMENDMENT AR E CURATIVE IN NATURE. THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF THE LD CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THIS BENCH HAVE ALREADY EXPRESSED OUT VIEW IN THE CASE OF ITO VS. KRISHI UP AJ MANDI SAMITI, DAUSA IN ITA NO. 18/JP/2013 DECIDED ON 10/4/2015. TH E RELEVANT PARA OF THIS ORDER HAS ALREADY BEEN REPRODUCED IN THE SU BMISSION OF THE ITA 499 TO 503/JP/2013_ ITO VS. KUMS, BUNDI 10 ASSESSEE. FURTHER VARIOUS OTHER CASE LAWS REFERRED BY THE ASSESSEE ARE SQUARELY APPLICABLE. BY RESPECTFULLY FOLLOWING OUR O WN BENCH DECISION AND OTHER HON'BLE HIGH COURTS, WE UPHOLD THE ORDER O F THE LD CIT(A). 7. IN THE RESULT, ALL THE FIVE REVENUES APPEALS AR E DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 10/11/2015. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 10 TH NOVEMBER, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ITO, (TDS), BUNDI. 2. IZR;FKHZ @ THE RESPONDENT- THE SECRETARY, KUMS, BUNDI. 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. 499 TO 503/JP/2013) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR