Ryatar Sahakari Sakkarre Karkhane Niyamit, Ranna Nagar, Timmapur, Mudhol Taluk, Dist: Bagalkot V. Asst. Commissioner of Income Tax C-I and Joint Commissioner of Income Tax C-1 and Income Tax Officer W-1 and Income Tax Officer, TDS Ward

ITA/100111/2015

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The case involves Ryatar Sahakari Sakkarre Karkhane Niyamit, a cooperative society engaged in manufacturing sugar, which appealed against the order of the Income Tax Appellate Tribunal that remanded the matter to the assessing officer based on a precedent from the Allahabad High Court. The primary issue was the applicability of Section 40(a)(ia) of the Income Tax Act, 1961, concerning the deduction of tax at source on payments made under bond agreements with harvesters and transporters. The Tribunal's reliance on the precedent without detailed examination of the case's facts led to the High Court's decision to set aside the Tribunal's order and remand the case for a thorough re-evaluation.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 808635 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 25-11-2019
• Assessment Year: misc
• Other Referred Cases: Vector Shipping Services Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961, Indian Contract Act, 1972
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: Y V RAVIRAJ
• Assessee Lawyers: PRAKASH BADIGER; MANOJ PUKALE; H R KAMBIYAVAR
• Keywords: Appellate Tribunal; Contract payments; Income Tax; Non application of mind; Remand; TDS
• Section: 40(a)(ia); 194C; 194J; 260A

Judgement Text

" : 1 : IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 25TH DAY OF NOVEMBER 2019 PRESENT THE HON’BLE MR.JUSTICE ALOK ARADHE AND THE HON’BLE MR.JUSTICE N.S. SANJAY GOWDA I.T.A. Nos.100111-100120/2015 BETWEEN RYATAR SAHAKARI SAKKARRE KARKHANE NIYAMIT, RANNA NAGAR, TIMMAPUR, MUDHOL TALUK, DIST: BAGALKOT. R/BY MANAGING DIRECTOR, SRI ASHOK V MORAB. ..... APPELLANT (BY SRI PRAKASH BADIGER, SRI MANOJ D PUKALE, ADV. & SRI H.R. KAMBIYAVAR, ADV.) AND 1. ASST. COMMISSIONER OF INCOME TAX C-I, PRESENT ADDRESS DEVOOR BUILDING, BEHIND GODAVARI HOTEL, ATHANI ROAD, BIJAPUR. 2. JOINT COMMISSIONER OF INCOME TAX C-1 PRESENT ADDRESS: DEVOOR BUILDING, BEHIND GODAVARI HOTEL, ATHANI ROAD, BIJAPUR. 3. INCOME TAX OFFICER W-1, AAYAKAR BHAVAN, SECTOR NO 24, NAVANAGAR, BAGALKOT. : 2 : 4. INCOME TAX OFFICER, TDS WARD, FEROZ KHIMJIBHAI COMPLEX-I, OPP. CIVIL HOSPITAL, DR AMBEDKAR ROAD, BELAGAVI. ..... RESPONDENTS (BY SRI Y V RAVIRAJ, ADV.) THESE ITAs ARE FILED U/SEC.260A OF THE INCOME-TAX ACT, 1961 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED ABOVE AND ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, PANAJI BENCH-GOA DTD:04.08.2015 VIDE ITA NOS. 152 TO 161/PNJ/2015 TO THE EXTENT URGED IN THESE APPEALS. THESE APPEALS COMING ON FOR ADMISSION, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT Mr. Prakash Badiger, learned counsel for the assessee. Mr. Y.V.Raviraj, learned counsel for the revenue. Heard on the question of admission. 2. These appeals are admitted on the following substantial question of law: “Whether the order passed by the Income Tax Appellate Tribunal, Panaji Bench, Panaji suffers from the vice of non-application of mind inasmuch as no reasons had been assigned for making an order of remand?” : 3 : 3. With the consent of the parties, the matter is heard finally. 4. In these appeals, the assessee has assailed the validity of the order passed by the Income Tax Appellate Tribunal dated 04.08.2015 by which, the Tribunal while placing reliance on the decision of the High Court of Allahabad in the case of has remanded the matter to Adjudicating Officer. 5. Facts giving rise to filing of these appeals briefly stated are that the appellant which is the Co- operative Society of Sugarcane was carrying on the activity of manufacturing sugar and bye products. It was engaging services of harvesting, cutting and transporting sugarcane from the farmers with the help of harvesters and transporters by appointing them by executing bond agreements on behalf of the farmers. The appellant claim harvesting/transporting charges in computing income tax returns as per the CBDT circular. The assessing officer brought the relevant assessment years and disallowed the harvesting/ transporting expenses : 4 : under Section 40(a)(ia) of the Income Tax Act, 1961 and treated the same as contract payments. Being aggrieved, the appellant filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) by an order dated 16.05.2014, held that the bond agreement between the appellant and the harvesters/transporters did construe a contract as per the Indian Contract Act, 1972. Therefore, the provisions of tax deduction at source applied to the facts situation of the case. The Tribunal heard the appellants and placing reliance on the decision rendered by the Allahabad High Court in the case of Vector Shipping Services Pvt. Ltd., remanded the matter to the respondent assessing officer for re- adjudication. Being aggrieved by the aforesaid order, the assessee as well as the revenue are before us. 6. Learned counsel for the assessee submitted that the Income Tax Appellate Tribunal ought to have appreciated that the farmers were not parties to the contract in question and therefore, erred in upholding : 5 : disallowance of provisions under Section 40(a)(ia) of the Act. 7. On the other hand, learned counsel for the revenue has submitted that the Tribunal grossly erred in deciding the appeal merely by placing reliance on the decision rendered by the Allahabad High Court in the case of Vector Shipping Services Pvt. Ltd. without reference to the facts of the case on hand. It is further submitted that Section 40(a)(ia) is applicable to the whole contract amount and not to the amount payable at the end of the year. 8. We have considered the submissions made by the learned counsel for the parties and have perused the records. 9. The relevant extract of the order passed by the Tribunal reads as under: “6. We have considered the rival submissions. Admittedly, the decision of the Hon’ble Allahabad High Court in the case of Vector Shipping Services Pvt. Ltd. referred to supra was the subject matter of a SLP before : 6 : the Hon’ble Supreme Court and the same has also been dismissed. Though the Hon’ble Allahabad High Court decision is not a jurisdictional High Court decision, still the said decision of the Hon’ble Allahabad High Court, against which the SLP has been dismissed by the Hon’ble Supreme Court, has a binding precedence over this Tribunal insofar as it is the only decision which has been quoted before us and no contrary decision has been quoted. Further, as it is noticed that the facts, in its entirety, being whether the amounts have been paid before the year end has not been proved before us, in these circumstances we are of the view that the assessment orders are liable to be set aside and all the issues are restored to the file of the AO for re- adjudication in respect of the disallowance made by invoking the provisions of Sec. 40(a)(ia) of the Act. The Assessee shall prove before the AO that there is no amount left payable as on the year end and that all the amounts claimed, on which the provisions of TDS u/s 194C and 194J has been invoked, have been fully paid by the year end. If the Assessee is able to prove before the AO that there is no outstanding and all the amounts have been fully paid, then, in view of the : 7 : decision of the Hon’ble Allahabad High Court in the case of Vector Shipping referred to supra, against which the Hon’ble Supreme Court has dismissed the SLP vide order dt. 2.7.2014, the AO shall not invoke the provisions of Sec. 40(a)(ia) on such amounts. However, if any amount is found to be payable as on the year end, the disallowance made by the AO shall stand confirmed.” 10. Thus, from perusal of the relevant extract of the order passed by the Income Tax Appellate Tribunal, it is evident that the Tribunal has merely referred to the decision of the Vector Shipping Services Pvt. Ltd. and has not adverted to the facts of the case. The Tribunal has not recorded any finding on the issue whether the provisions of Section 40(a)(ia) of the Act applies to the fact situation of the case and whether the tax was required to be deducted at source under Chapter 17B of the Act with reference to the facts of the case. The order passed by the Tribunal is cryptic in nature and suffers from vice of non-application of mind. : 8 : 11. In view of the preceding analysis, we are inclined to answer the substantial question of law in the affirmative. In the result, the impugned order dated 04.08.2015 passed by the Income Tax Appellate Tribunal, Panaji Bench, Panaji is hereby quashed and set aside and the matter is remitted to the Tribunal for decision afresh to decide the issues on the applicability of Section 40(a)(ia) of the Act referred by us supra with reference to the facts of the case by a speaking order. 12. Let the aforesaid exercise be carried out by the Tribunal within a period of four months from today. Accordingly, appeals are disposed of. Sd/- JUDGE Sd/- JUDGE Naa "