ITO, Jaipur V. DISTRICT E-GOVERNANCE SOCIETY, Jaipur

ITA 933/JPR/2012

• Counselvise Citation: 93323114 RSA 2012
• Duration Of Justice: 2 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 19-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 133(6); 194C; 12AA; 12

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. 933/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 THE I.T.O. WARD 3(2), JAIPUR CUKE VS. M/S DISTRICT E-GOVERNANCE SOCIETY, COLLECTORATE BHAWAN, BANIPARK, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AAALD 0455 A VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAJESH OJHA (JCIT) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 31/12/2014 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 27/03/2015 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE DEPARTMENT AGAINST T HE ORDER DATED 01/10/2012 PASSED BY THE LEARNED CIT(A)-I, JAIPUR F OR A.Y. 2009-10. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED CIT(A) IS JUSTIFIED IN: 1. DELETING THE ADDITION OF RS. 10,74,207/- MADE BY THE A.O. ON ACCOUNT OF DIFFERENCE BETWEEN THE AMOUNT FOUND IN FORM NO. 16A AND FORM NO. 26AS. ITA 933/JP/2012_ ITO VS M/S DISTRICT E-GOVERNANCE SOCIETY 2 2. DELETING THE ADDITION OF RS. 37,86,609/- MADE BY THE A.O. U/S 40(A)(A) ON ACCOUNT OF NON DEDUCTION OF TA X AT SOURCE ON THE SERVICES CHARGES PAID. 2. THE FIRST GROUND OF APPEAL IS AGAINST DELETING TH E ADDITION OF RS. 10,74,207/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF DIFFERENCE BETWEEN THE AMOUNT FOUND IN FORM NO. 16A AND FORM NO . 26AS. THE ASSESSEE IS IN PROVIDING ALL GENERAL FACILITIES. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30/09/2009 DECLARING LOSS OF RS . 1,54,763/-. THIS CASE WAS SCRUTINIZED U/S 143(3) OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT) BY THE ASSESSING OFFICER. THE ASSESSEE SOC IETY IS REGISTERED WITH REGISTRAR OF SOCIETIES, JAIPUR AND ENGAGED IN P ROVIDING SERVICES OF DEPOSITING ELECTRICITY BILLS, TELEPHONE BILLS, PHED BILLS ETC. THROUGH LOCAL SERVICE PROVIDERS (LSPS). DURING THE YEAR UNDER CO NSIDERATION, THE ASSESSEE SOCIETY HAS RECEIVED SERVICE CHARGES OF RS . 1,60,67,894/- AND PAID SERVICE CHARGES OF RS. 1,39,42,771/- TO LOCAL SERVICE PROVIDER. THE ASSESSEE SOCIETY IS NOT REGISTERED U/S 12AA OF THE ACT. THE LEARNED ASSESSING OFFICER OBSERVED THAT IT IS FOUND THAT AS PER FORM NO. 26AS, AN AMOUNT OF RS. 2,27,47,472/- HAD BEEN CREDITED IN ASSESSEES ACCOUNT BUT THE ASSESSEE HAS SHOWN ONLY RS. 1,60,67,849/- I N THE P&L ACCOUNT. THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE, WHICH WAS REPLIED BY THE ASSESSEE VIDE LE TTER DATED ITA 933/JP/2012_ ITO VS M/S DISTRICT E-GOVERNANCE SOCIETY 3 28/11/2011. IT IS SUBMITTED THAT THE ASSESSEE HAS F OLLOWED SYSTEM OF ACCOUNTING AND ACCORDINGLY, IT DISCLOSED THE RECEIP T AS PER THE BANK STATEMENT. THEREFORE, CONSIDERING THE ACCOUNTING SY STEM FOLLOWED BY THE ASSESSEE, THE DIFFERENCE OF RS. 66,79,623/- SHO ULD NOT BE ADDED IN THE INCOME OF THE ASSESSEE. THE LEARNED ASSESSING O FFICER ALSO ISSUED NOTICE U/S 133(6) OF THE ACT TO M/S JAIPUR VIDYUT V ITRAN NIGAM LIMITED (JVVNL) TO EXPLAIN THE DIFFERENCE SHOWN IN THE 26AS AND FORM NO. 16A. IT WAS EXPLAINED BY M/S JVVNL THAT THIS DIFFERENCE WA S ON ACCOUNT OF TYPING ERROR AND PAYMENT SHOWN AT SERIAL NO. 33 AND 43 OF 26AS WERE ACTUAL RS. 6,79,597/- AND RS. 5,57,281/- RESPECTIVE LY IN PLACE OF RS. 34,50,000/- AND 55,72,821/- SHOWN IN THE FORM 26AS. M/S JVVNL HAD ADMITTED THAT TOTAL PAYMENT OF RS. 87,59,345/- HAD BEEN MADE TO THE ASSESSEE DURING THE F.Y. YEAR UNDER CONSIDERATION. SINCE THE ASSESSEE HAD SHOWN RECEIPT OF RS. 76,85,138/- AS AGAINST THE ACTUAL RECEIPT OF RS. 87,59,345/-. THE LEARNED ASSESSING OFFICER AGAIN GAVE REASONABLE OPPORTUNITY OF BEING HEARD TO RECONCILE THE DIFFERE NCES, WHICH WAS RESPONDED BY THE ASSESSEE VIDE LETTER DATED 23/12/2 011. AFTER CONSIDERING THE ASSESSEES REPLY, THE DIFFERENCE OF RS. 10,74,207/- WAS ADDED BACK IN THE INCOME OF THE ASSESSEE. ITA 933/JP/2012_ ITO VS M/S DISTRICT E-GOVERNANCE SOCIETY 4 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER:- 4.3 I HAVE CAREFULLY PERUSED THE ORDER OF THE A.O. AND THE SUBMISSIONS OF THE A.R.. ON PERUSAL OF THE EVIDENCE FILED IT IS SEEN THAT IT IS POSSIBLE TO VERIFY THE SUBMISSIO NS OF THE A.R. THAT THE PAYMENT OF RS. 5,16,925/- WAS MADE ON 01/04/2008 AND RS. 5,57,282/- MADE IN MAY, 2008 WAS REFLECTED BY JVVNL IN THE TDS CERTIFICATE FOR A.Y. 2008-09 AND WAS ACCOUNTED FOR BY THE ASSESSEE IN THAT A.Y.. THEREFORE, THE AMOUNT CANNOT AGAIN BE TAXED DURING T HIS A.Y.. THEREFORE, THE ADDITION OF RS. 10,47,207/- IS DELETED. 4. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LEARNE D D.R. VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFF ICER. 5. AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED AS UNDER:- 1. THE ASSESSEE HAS ACCOUNTED FOR THE RECEIPT FROM J VVNL TOWARDS THE SERVICE CHARGES ON THE BASIS OF THE TDS CERTIFICATE ISSUED BY IT. DURING THE YEAR JVVNL HAS ISSUED THE TDS CERTIFICATE SPECIFYING THAT IT HAS DEDUCTED TAX AT SOURCE ON THE AMOUNT OF RS. 76,85,138/- PAID BY IT TO THE ASSESSEE. ACCORDINGLY, ASSESSEE HAS ACCOUNTED FOR T HE INCOME OF RS. 76,85,138/- IN RESPECT OF RECEIPT OF SERVICE CHARGES FROM JVVNL. ITA 933/JP/2012_ ITO VS M/S DISTRICT E-GOVERNANCE SOCIETY 5 2. IN COURSE OF ASSESSMENT PROCEEDINGS WHEN THE A.O. SOUGHT THE DETAILS OF PAYMENT MADE BY JVVNL (JCC) T O THE ASSESSEE THEY FURNISHED THE MONTH WISE DETAIL OF PAY MENT MADE DURING THE YEAR AT RS. 87,59,345/-. ON RECONCI LIATION OF THE AMOUNT MENTIONED IN THIS LETTER VIS A VIS TH E AMOUNT MENTIONED IN TDS CERTIFICATE, IT MAY BE NOTED THAT A LL THE PAYMENT MENTIONED IN THE LETTER MATCHES WITH THE AMO UNT MENTIONED IN THE TDS CERTIFICATE EXCEPT FOR THE PAYM ENT OF RS. 5,16,925/- MADE IN APRIL 2008 AND RS. 5,57,282/ - MADE IN MAY, 2008 AGGREGATING TO RS. 10,74,207. IN FACT THESE TWO AMOUNTS WERE REFLECTED BY JVVNL IN THE TDS CERTIFICATE FOR ASSESSMENT YEAR 2008-09 AND ACCORDI NGLY ACCOUNTED FOR BY THE ASSESSEE IN THAT YEAR. 3. FROM THE ABOVE IT CAN BE NOTED THAT AMOUNT OF RS . 10,74,207/- IS ALREADY ASSESSED IN ASSESSMENT YEAR 2008- 09 AND THEREFORE THE SAME CANNOT BE AGAIN ASSESSED IN THE YEAR UNDER CONSIDERATION. THEREFORE, THE ADDITIO N OF RS. 10,74,207/- MADE BY THE A.O. IS UNJUSTIFIED AND UNCALLED FOR. 4. WITHOUT PREJUDICE TO THE ABOVE, ASSESSEE IS AUTH ORIZED TO RETAIN 10% AS ITS CHARGES FOR EACH CATEGORY OF SERV ICES FROM THE SERVICE CHARGES. THEREFORE, ONLY 10% OF RS. 10,74,207/- I.E. RS. 1,07,420/- IS ITS INCOME AND N OT THE ENTIRE AMOUNT OF RS. 10,74,207. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE REVENUE HAS NOT DISPUTED THAT THE ITA 933/JP/2012_ ITO VS M/S DISTRICT E-GOVERNANCE SOCIETY 6 PAYMENT OF RS. 5,16,925/- MADE IN APRIL, 2008 AND R S. 5,57,282/- MADE IN MAY, 2008 AGGREGATING TO RS. 10,74,207/- AND BOT H THE AMOUNTS WERE REFLECTED BY JVVNL IN THE TDS CERTIFICATE FOR A. Y. 2008-09 AND ACCORDINGLY, THE ASSESSEE HAS ACCOUNTED FOR THESE E NTRIES IN THAT YEAR I.E. A.Y. 2008-09. THEREFORE, WE UPHELD THE ORDER OF THE LEARNED CIT(A). 7. THE SECOND GROUND OF APPEAL IS AGAINST DELETING T HE ADDITION OF RS. 37,86,609/- MADE BY THE ASSESSING OFFICER U/S 4 0 (A)(IA) OF THE ACT ON ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE ON THE SERVICES CHARGES PAID. THE LEARNED ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE SOCIETY HAD PAID SERVICE CHARGES OF RS. 1,39,42,771/- TO LO CAL SERVICE PROVIDER FOR THE SERVICES RENDERED. IT IS FOUND THAT THE ASS ESSEE HAD NOT DEDUCTED TDS ON RS. 37,86,609/- MADE TO M/S EASY BIL LS LTD.. THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BE ING HEARD ON THIS ISSUE VIDE LETTER DATED 25/11/2011 AND 28/11/2011. IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE IS FOLLOWING CASH SYS TEM OF ACCOUNTING, WHICH MEANS ANY RECEIPT OR PAYMENT IS TO BE ACCOUNTE D FOR ONLY ON ACTUAL RECEIPT OR PAYMENT BASIS. THE ASSESSEE HAD D EBITED THE EXPENSES ON PAYMENT BASIS IN P&L ACCOUNT. THE LEARNED ASSESSI NG OFFICER HELD THAT THE ASSESSEE HAS NOT ADDED BACK THIS AMOUNT IN THE COMPUTATION ITA 933/JP/2012_ ITO VS M/S DISTRICT E-GOVERNANCE SOCIETY 7 OF INCOME AFTER DEVIATING THESE EXPENSES IN THE P&L ACCOUNT. FURTHER AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, THE WORD PAYABLE, WHICH MEANS DUE TO THE ASSESSEE, WHICH INCLUDES PAID AS WELL AS OUTSTANDING. WHEN CONTRACT AMOUNT DEBITED TO THE P& L ACCOUNT, THE PROVISIONS OF SECTION 194 IS SQUARELY APPLICABLE. I F NO TDS HAS BEEN MADE BY THE ASSESSEE, IT IS A DEFAULT U/S 194C READ WITH SECTION 40(A)(IA) OF THE ACT. THE LEARNED ASSESSING OFFICER MADE ADDITION OF RS. 37,86,609/- U/S 40(A)(IA) OF THE ACT. 8. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER:- I HAVE CAREFULLY PERUSED THE ORDER OF THE A.O. AND THE SUBMISSIONS OF THE A.R. AND I CONCUR WITH THE SUBMIS SIONS OF THE A.R. GIVEN THE FACTS OF THE CASE NAMELY:- 1. THE INCOME OF THE ASSESSEE SOCIETY IS ASSESSABLE UNDER THE HEAD OF INCOME FROM OTHER SOURCES AND SO PROVIS IONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE TO IT. 2. THE MATTER IN A.Y. 2007-08 CAME UP FOR ADJUDICATI ON BEFORE THE LEARNED CIT(A) AND SUBSEQUENTLY THE HON BLE ITAT JAIPUR, WHO VIDE ITS ORDER ITA NO. 609/JP/2010 D ATED 28/04/2011 HAS HELD THAT THE ASSESSEE SOCIETY IS NO T MAKING ANY PAYMENT BUT IS ONLY A CONDUIT TO MAKING PAYMENTS TO LSPS ON BEHALF OF THE GOVERNMENT ITA 933/JP/2012_ ITO VS M/S DISTRICT E-GOVERNANCE SOCIETY 8 DEPARTMENTS AND THEREFORE THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE TO IT. WITH THESE OBSERVATIONS, IT DELETED THE ENTIRE ADDITION OF RS. 78,74,242/- U/S 40(A)(IA ). THE FACTS OF THE CASE OF THE APPELLANT ARE COVERED BY THE FINDING OF THE HONBLE ITAT IN ITS CASE FOR A.Y. 200 7-08 VIDE ITS ORDER SUPRA IN ITS FAVOUR. SINCE THE ASSES SING OFFICER HAS NOT BROUGHT ON RECORD ANY ARGUMENT OR EVIDENCE TO CONTROVERT THE FINDING OF THE HONBLE I TAT ON THE SAME FACTS IN THE CASE OF THE ASSESSEE IN A.Y. 2007-08 THE MATTER IS COVERED BY THIS FINDING. THE AMOUNT OF RS. 37,86,609/- DISALLOWED U/S 40(A)(IA) FOR DEFAULT OF PROVISIONS U/S 194C IS THEREFORE DELETED. 9. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LEARNE D DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 10. AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSE E SUBMITTED AS UNDER:- 1. IT MAY BE NOTED THAT THE ASSESSEE SOCIETY WAS CON STITUTED TO PROVE ANY EXTEND FACILITIES OF INFORMATION TECHNO LOGY AND COMMUNICATION IN THE RURAL AND URBAN AREAS FOR PUBLIC AT LARGE WITHOUT ANY PROFIT MOTIVE. IT IS ACTING ONL Y AS A CONDUIT BETWEEN VARIOUS GOVERNMENT DEPARTMENTS AND T HE LOCAL SERVICE PROVIDERS FOR FACILITATING THE PAYMEN T OF THE BILLS BY PUBLIC AT LARGE. FROM THE AGREEMENT, IT CA N BE NOTED THAT LSP IS ACTUALLY ENGAGED IN COLLECTION OF BILLS AND ITA 933/JP/2012_ ITO VS M/S DISTRICT E-GOVERNANCE SOCIETY 9 REMITTANCE OF PAYMENT TO THE GOVERNMENT DEPARTMENT, ONLY THE PAYMENT OF SERVICE CHARGES BY GOVERNMENT DEPARTMENTS TO LSP IS CHANNELIZED THROUGH ASSESSEE SOCIETY. FROM THE AGREEMENT IT IS CLEAR THAT SERVIC E CHARGES PER TRANSACTION PAID BY THE DEPARTMENT TO ASSESSEE SOCIETY IS A SPECIFIC AMOUNT PER TRANSACTION AND THE SAME A MOUNT IS PAYABLE BY THE ASSESSEE SOCIETY TO LSP. THUS ASSE SSEE SOCIETY IS NOT DOING ANY BUSINESS ACTIVITY. THE BASI C INGREDIENT TO CONSTITUTE AN ACTIVITY AS A BUSINESS ACTIVITY IS THAT IT IS WITH AN OBJECT TO EARN PROFIT. RISK, UNCE RTAINTY, FORESIGHTNESS TO VISUALIZE THE IMPONDERABLES AND CA PACITY TO OVERCOME THE UNFORESEEN HURDLES ARE THE ESSENTIA L REQUISITE OF BUSINESS ACTIVITY. THESE FACTORS ARE NO T THERE IN THE PRESENT CASE. EVEN THE A.O. HAS NOT SPECIFIED T HE HEAD OF THE INCOME UNDER WHICH HE HAS ASSESSED THE INCOME . THE ASSESSEE ONLY RETAIN COMMISSION/SHARE/SERVICE CH ARGES OF 10% FROM THE BILLS OF LSP TO MEET ITS ADMINISTRA TIVE COST WHICH IT RECEIVES FROM THE DEPARTMENT. THE SURPLUS OF THE SOCIETY IS THEREFORE ASSESSABLE ONLY UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT UNDER THE HEAD INCOME FR OM BUSINESS. ONCE INCOME IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES, SECTION 40(A)(IA) IS NOT APPLICABLE AND CONSEQUENTLY, THE DISALLOWANCE MADE B Y THE A.O. IS AGAINST LAW. 2. IT IS ALSO TO BE NOTED THAT ON THE BASIS OF NUMB ER OF BILLS COLLECTED BY THE LSP, THEY RAISED BILL ON THE ASSES SEE AT THE SPECIFIC RATE PER TRANSACTION AS PER THE AGREEMENT. FROM ITA 933/JP/2012_ ITO VS M/S DISTRICT E-GOVERNANCE SOCIETY 10 THIS 10% IS DEDUCTED ON ACCOUNT OF COMMISSION/SHARE / SERVICE CHARGES AND THE BALANCE AMOUNT IS CLAIMED A ND PAID BY THE ASSESSEE TO LSP. ON THE BASIS OF THIS B ILL, THE ASSESSEE RAISES A BILL ON THE CONCERNED DEPARTMENT AT THE SAME RATE PER TRANSACTION. THUS IT CAN BE NOTED THAT THE ASSESSEE IS ONLY FACILITATING THE PAYMENT OF SERVIC E CHARGES AFTER VERIFICATION OF CLAIM OF LSP ON THE GOVERNMEN T DEPARTMENT FOR SERVICE CHARGES. FOR THIS IT RECEIVE S A MARGIN OF 10% TO MEET ITS ADMINISTRATIVE COST. THUS IT IS NOT A CASE WHERE THE ASSESSEE RECEIVES ANY SERVICE C HARGES INDEPENDENTLY OF HIS OWN AND MAKES PAYMENT TO THE LS P INDEPENDENTLY OF WHAT IT RECEIVES FROM THE GOVERNME NT DEPARTMENT. THE ENTIRE PROCESS ADOPTED FOR MAKING PAYMENT OF SERVICE CHARGES TO LSP THROUGH THE ASSES SEE SOCIETY IS ONLY TO HAVE A PROPER VERIFICATION AND C ONTROL OVER THE ACTIVITIES OF THE LSP. THUS NEITHER THE SER VICE CHARGES RECEIVED FROM THE DEPARTMENT IS INCOME OF T HE ASSESSEE NOR THE PAYMENT MADE TO LSP IS AN EXPENDIT URE OF THE ASSESSEE. THE INCOME OF THE ASSESSEE IS ONLY TO THE EXTENT OF 10% WHICH IS RETAINED BY IT OUT OF THE REIMBURSEMENT OF SERVICE CHARGES BILL OF LSP CLAIME D FROM THE DEPARTMENT. THUS ASSESSEE HAS NOT INCURRED ANY EXPENDITURE OF PAYMENT OF SERVICE CHARGES AND THERE FORE QUESTION OF DISALLOWANCE U/S 40(A)(IA) DO NOT ARISE. 3. SIMILAR ISSUE WAS CONSIDERED BY CIT(A) IN ASSESSM ENT YEAR 2007-08 WHERE THE DISALLOWANCE MADE U/S 40(A)(IA) WAS DELETED BY GIVING THE FOLLOWING FINDINGS. ITA 933/JP/2012_ ITO VS M/S DISTRICT E-GOVERNANCE SOCIETY 11 IT APPEARS THAT THE LSP COLLECTS BILLS OF VARIOUS DEPARTMENTS AND MAKE REMITTANCE TO THE GOVT. DEPARTMENTS. HOWEV ER, WHILE REIMBURSING THE SERVICE CHARGES THE GOVT. DEPARTMEN T USES THE SOCIETY AS A CONDUIT BETWEEN GOVT. DEPARTMENTS & LS PS. THE LSPS RAISE BILLS AT A FIX PRICE AND GOVT. DEPARTMEN TS MAKES THE PAYMENT ON THE VERY SAME RATE TO THE APPELLANT SOCI ETY SO THAT IT CAN REMIT THE AMOUNT TO THE LSPS AFTER DEDUCTING ITS 10% COMMISSION TO MEET ITS ADMINISTRATIVE EXPENDITURE. THE SOCIETY IS THUS A CONDUIT BETWEEN GOVT. DEPARTMENTS & LSPS AND IS NOT ENGAGED IN ANY PROFIT MAKING BUSINESS ACTIVITY. AFT ER RETAINING ITS COMMISSION OF L0% THE APPELLANT MAKES PAYMENT T O LSPS. THE SOCIETY IS NOT ENGAGED IN ANY BUSINESS ACTIVITY & THEREFORE INCOME WHICH IS IN THE FORM OF SURPLUS CANNOT BE TA XED UNDER THE HEAD 'BUSINESS INCOME'. AFTER MEETING ADMINISTR ATIVE EXPENDITURE THE BALANCE OF THE COMMISSION RECEIVED @ 10% IS SURPLUS FUND WHICH IS TAXABLE IN THE HANDS OF THE S OCIETY AS THE SOCIETY IS NOT REGISTERED U/S 12AA. AS THE ONLY INC OME EARNED BY THE APPELLANT IS TAXABLE UNDER THE HEAD INCOME F ROM OTHER SOURCES, PROVISIONS OF SECTION 40(A) (IA) WILL NOT BE APPLICABLE IN THE PRESENT CASE. FURTHER SECTION 40(A)(IA) CAN BE APPLICABLE ONLY IN CASE OF PAYMENT MADE U/S L94C FOR CARRYING OUT ANY WORK. THE APPELLANT SOCIETY ON ITS OWN IS NOT MAKIN G PAYMENT TO LSPS BUT WHAT IT RECEIVES FROM THE GOVT. DEPARTM ENT IS PASSED ON TO THE LSPS AFTER RETAINING A PART PAYMEN T AS ITS COMMISSION. THE APPELLANT IS ONLY A CONDUIT TO MAKE PAYMENT TO LSPS ON BEHALF OF GOVT. DEPARTMENTS & THEREFORE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE. THERE IS NO PAY MENT FOR SERVICES RENDERED TO THE APPELLANT SOCIETY & SOCIET Y DOES NOT MAKE PAYMENT ON ITS OWN, IT IS NOT A PAYMENT COVERE D BY ITA 933/JP/2012_ ITO VS M/S DISTRICT E-GOVERNANCE SOCIETY 12 PROVISIONS OF SECTION 194C. THE PROVISIONS OF SECTI ON 194C THEREFORE WILL NOT BE APPLICABLE. THE AO, IS THEREF ORE DIRECTED TO DELETE THE ENTIRE ADDITION OF RS. 78,74,242/- MADE U/S 40(A)(IA). THE SAID FINDING OF CIT(A) WAS UPHELD BY THE HON'BLE I TAT IN ITA NO. 609/JP/10 DATED 28/04/2011. 4. OF COURSE, THE ASSESSEE AS A MEASURE OF ABUNDANT PRECAUTION HAS DEDUCTED THE TAX AT SOURCE ON THE PA YMENT MADE BY IT TO LOCAL SERVICE PROVIDER, BUT SUCH PAYM ENT IS NOT FOR ANY SERVICES RENDERED BY THE LSP TO THE ASS ESSEE BUT ONLY ON BEHALF AND BEHEST OF THE GOVERNMENT DEPARTMENT ON WHICH PROVISION OF DEDUCTION OF TAX A T SOURCE IS NOT APPLICABLE. THEREFORE NON DEDUCTION O F TAX AT SOURCE ON THE BILLS OF M/S EASY BILLS LTD. DO NOT C ALL FOR ANY DISALLOWANCE U/S 40(A)(IA). 5. SO FAR AS THE CONTENTION OF AO THAT ASSESSEE HA S MAINTAINED THE ACCOUNTS ON CASH BASIS AND THEREFORE LIABILITY PROVIDED IN RESPECT OF BILLS OF M/S EASY BILLS LTD. IS NOT ALLOWABLE IS WITHOUT CONSIDERING THE FACT THAT AS SESSEE IS ENTITLED TO ONLY L0% OF SUCH BILL AS ITS SERVICE CHARGES. THIS HAS ALREADY BEEN CONSIDERED BY ASSESSEE WHEN THE GROSS RECEIPT IS INCLUDED IN INCOME. LF THE DEDUCTI ON IN RESPECT OF UNPAID BILLS IS NOT CONSIDERED (WHETHER T HE ACCOUNTS ARE MAINTAINED ON CASH BASIS OR ACCRUAL BA SIS) IT WILL AMOUNT TO TAXING THE RECEIPT AND NOT INCOME WHIC H IS AGAINST LAW AS IT WOULD VIOLATE THE MATCHING CONCEP T OF ACCOUNTING. THEREFORE, DISALLOWANCE OF RS. 37,86,609/ - IN ITA 933/JP/2012_ ITO VS M/S DISTRICT E-GOVERNANCE SOCIETY 13 RESPECT OF BILLS OF M/S EASY BILLS LTD. IS OTHERWISE NOT CALLED FOR. IN VIEW OF ABOVE, THE DISALLOWANCE IS UNCALLED FOR AN D THE SAME BE DELETED. 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE AS SESSEE SOCIETY HAS BEEN CONSTITUTED TO PROVIDE AND EXTEND FACILITIES O F INFORMATION TECHNOLOGY AND COMMUNICATION IN THE RURAL AND URBAN AREAS FOR PUBLIC AT LARGE WITHOUT ANY PROFIT MOTIVE. IT IS ACTING ONL Y AS A CONDUIT BETWEEN VARIOUS GOVERNMENT DEPARTMENTS AND THE LOCAL SERVIC E PROVIDERS FOR FACILITATING THE PAYMENT OF THE BILLS BY PUBLIC AT LARGE. IT IS FACT THAT THE LOCAL SERVICE PROVIDERS WAS PAID SERVICE CHARGES BY THE GOVERNMENT DEPARTMENT THROUGH THE ASSESSEE TO CHANNELIZE THE T RANSACTION AND VERIFY THE PAYMENT MADE TO LSP BY THE GOVERNMENT. TH E ASSESSEE SOCIETY IS NOT DOING ANY BUSINESS ACTIVITY AS BASIC INGREDIENT OF BUSINESS ACTIVITY ARE NOT FOUND IN THESE TRANSACTIONS. THE L SP RAISED THE BILLS ON THE ASSESSEE AT THE SPECIFIC RATE PER TRANSACTION A S PER AGREEMENT. THE ASSESSEE DEDUCTED 10% ON ACCOUNT OF COMMISSION/SHAR E/SERVICE CHARGES AND THE BALANCE AMOUNT IS CLAIMED AND PAID BY THE ASSESSEE TO LSP. THE ASSESSEE RAISED DEMAND BILL ON THE BASIS OF BILL RECEIVED FRO LSP. THE ASSESSEE ONLY RECEIVED 10% MARGIN OUT OF BI LL RAISED BY THE ITA 933/JP/2012_ ITO VS M/S DISTRICT E-GOVERNANCE SOCIETY 14 LSP FOR ADMINISTRATIVE COST. THE GOVERNMENT MADE PAY MENT TO LSP FOR SERVICES RENDERED THROUGH THE ASSESSEE TO VERIFY AN D CONTROL THE ACTIVITY OF LSP, THEREFORE, THESE PAYMENTS ARE PRINCIPAL TO PRINCIPAL AGAINST THE SERVICES RENDERED BY THE LSP TO GOVERNMENT. ANY PA YMENT MADE BY THE GOVERNMENT TO ANY PERSON IS NOT LIABLE TO BE DE DUCTED TDS. THE IDENTICAL ISSUE IN A.Y. 2007-08 HAS ALSO BEEN DECID ED BY THE LEARNED CIT IN FAVOUR OF THE ASSESSEE BY FOLLOWING THAT THE A PPELLANT IS ONLY A CONDUIT TO MAKE PAYMENT TO LSP ON BEHALF OF THE GOV ERNMENT AND THEREFORE PROVISIONS OF SECTION 194C OF THE ACT ARE NOT APPLICABLE. THEREFORE, WE UPHELD THE ORDER OF THE LEARNED CIT(A). 12. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 27/03/2015. 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 27 TH MARCH, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE I.T.O., WARD 3(2), JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S DISTRICT E-GOVERNANCE SOCIETY, JAIPUR. ITA 933/JP/2012_ ITO VS M/S DISTRICT E-GOVERNANCE SOCIETY 15 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDR @ 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. 933/JP/2012). VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR