Krishi Upaj Mandi Samiti, Alwar vs Department Of Income Tax

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. 18/JP/2013 fu/kZkj.k o"kZ@Assessment Year : 2009-10

Income Tax Officer cuke M/s Krishi Upaj Mandi Samiti, (TDS), Alwar. Vs. Dausa.

LFkk;h ys[kk la-@thvkbZvkj la-@TAN No.: JPRK 02496 E vihykFkhZ@Appellant izR;FkhZ@Respondent

jktLo dh vksj ls@ Revenue by : Shri Rajesh Ojha (JCIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri R.S. Poonia (C.A.)

lquokbZ dh rkjh[k@ Date of Hearing : 16/01/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 10/04/2015

vkns'k@ ORDER

PER: T.R. MEENA, A.M.

This is an appeal filed by the revenue against the order dated

10/10/2012 passed by the learned CIT(A), Alwar for A.Y. 2009-10. The

effective grounds of appeal are as under:-

"(1) Ld. CIT(A) has erred in law and facts by deleting the demand raised by A.O. on account of non-deduction of tax at source u/s 201(1)/194C and interest payable u/s 201(1A) of the IT Act, 1961.

(2) Ld. CIT(A) has erred in law and facts by deleting the demand raised by A.O. on account of non-deduction

2 ITA 18/JP/2013_ ITO Vs. KUMS, Dausa

of tax at source u/s 201(1)/194J and interest payable u/s 201(1A) of the I.T. Act, 1961."

2. Both the grounds of the appeal are directed against the order of

the Ld CIT(A) against deleting of demand created on account of non

deduction of tax U/s 201(1) and interest payable U/s 201(1A) of the

Act. The ITO (TDS) observed that the assessee made payment to

Executive Engineer, Rajasthan State Agriculture Marketing Board (in

short the RSAMB), Dausa for construction at Rs. 74,80,179/-. Besides

this, the assessee deductor had made contribution of Rs. 11,83,3309/-

@ 10% to RSAMB, Jaipur. The contribution paid to RSAMB and the

funds for which contribution made were to be utilized in very specific

and for the project done by RSAMB for specific purposes. Thus, the

payment made to Executive Engineer, Dausa for construction of

establishment of market yard and missing link road and contribution to

RSAMB is covered U/s 194C and 194J of the Income Tax Act, 1961 (in

short the Act) respectively. The assessee failed to deduct TDS,

therefore, the ITO (TDS) gave reasonable opportunity of being heard to

the assessee, which was replied by the assessee. After considering the

assessee's reply, it has been held that RSAMB is an autonomous body

and assessed to tax separately. The RSAMB is charging supervision and

work charges on Samiti for the construction activity done by it. All these 3 ITA 18/JP/2013_ ITO Vs. KUMS, Dausa

facts showed that the construction work done by RSAMB is covered U/s

194C and liable to deduct TDS on payment made to the Executive

Engineer, Dausa. Further, Section 194J is also applicable on contribution

made to RSAMB, therefore, he calculated TDS amount at Rs. 1,69,500/-

U/s 201(1) of the Act and interest thereon at Rs. 22,993/- U/s 201(1A)

of the Act for the F.Y. 2008-09 on amount paid Rs. 74,80,179/- and

1,34,00,69/- U/s 201(1) and interest thereon U/s 201(1A) of the Act on

contribution for the F.Y. 2008-09 and total demand U/s 201(1) was

created with Rs. 3,03,569/- and interest U/s 201(1A) of the Act at Rs.

43,096/-.

3. Being aggrieved by the order of the Assessing Officer, the

assessee carried the matter before the learned CIT(A), who had allowed

the appeal by observing as under:-

"4.3 I have considered the case and submission filed by the AR.

I am included to agree with the submission of the AR that so far as the payment to RSAMB for construction related work is concerned there is no contractor-contractee relationship. I rely on the finding of my ld. Predecessor in the case of KUMS, Bharatpur for A.Y. 2009-10 in appeal No. 369/09-10 where the appeal has been allowed after making the following observations-" I have carefully perused the case and written submission submitted by AR and found that there 4 ITA 18/JP/2013_ ITO Vs. KUMS, Dausa

is no contractor-contractee relationship as the Agricultural Marketing Board is parental body of the Krishi Upaj Mandi Samiti. The Krishi Upaj mandi Samiti is required to make a contribution out of its income to the Marketing Board and the Marketing Board is required to utilize its income on improvement of the agricultural markets in the state which are owned by the Krishi Upaj Mandi Samiti. The Marketing Board is also required to give aid and grant to Krishi Upaj mandi Samiti to enable them to discharge their duties and functions satisfactorily.

I also considered 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 advise non-deduction of tax on interest which is wholly exempt from tax in the hands of the recipient. Where there is no liability of tax in the hands of the recipient of income or the recipient of income has paid tax due on its income, liability of tax u/s 201(1) cannot be imposed on the payer of income. It has been so held by the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages P. Ltd. Vs. CIT 293 ITR 226. RSAMB is not liable to pay tax, its income being exempt from tax."

Similarly, I am of the considered opinion that the contribution made by KUMS to RSAMB is not a payment which will attract provisions of section 194J since the contribution made is as per section 18A of the Rajasthan Agricultural Marketing Act 1961 whereby the certain percentage of its income is to be given as contribution to the Board. This amount is in turn spent by the RSAMB for the improvements of Agricultural Markets in the State and it cannot be said to be a fees for professional or technical services within the meaning of section 194J of the Act.

5 ITA 18/JP/2013_ ITO Vs. KUMS, Dausa

I rely on the findings of my ld. Predecessor in the case of KUMS, Bharatpur for A.Y. 2009-10 in appeal No. 369/09-10 where the appeal has been allowed after making following observations. "I have carefully perused the facts and submissions of the AR and found that the contention of the AR has force as the RSAMB is not a professional but a Rajasthan State Organization and as the Agriculture Marketing Board is parental body of Krishi Upaj Mandi Samiti and the payment made to RSAMB is only contribution made for the improvements of agriculture markets in the state and not in the nature of professional or Technical services. The legal position has been discussed in preceding paras and also the RSAMB is exempted on the paying tax. So the Mandi Samiti is under no obligation to deduct tax at source and the provisions of section 194J cannot be attracted to the case of Mandi Samiti." In view of above discussion it is held that there was no liability to deduct tax by KUMS on the above said payments to RSAMB for construction work and for the contributions made as per section 18A of the Rajasthan Agricultural Marketing Act, 1961. Accordingly, it is held that the A.O. was not correct in holding that the appellant was liable to pay tax u/s 201(1) of Rs. 303569/- and interest under section 201(1A) of Rs. 43096/- for not deducting the TDS on the above said payments. The A.O. is directed to delete the demand of Rs. 3,46,665/- raised u/s 201(1)/201(1A) of the Act. Both the grounds of appeal are allowed."

6 ITA 18/JP/2013_ ITO Vs. KUMS, Dausa

4. Now the Revenue is in appeal before us. The learned D.R.

vehemently supported the order of the ITO (TDS) and prayed to

confirm the same.

5. At the outset, the learned A.R. for the assessee has supported

the order of the ld CIT(A) and argued that the assessee samiti paid this

amount to mother Board i.e. RSAMB for construction of establishment

of market yard and missing linking road as samiti has not technical

expertise/personal capacity to develop the infrastructure for farmers.

The payment is made to a government organization. These transactions

were made without any profit element involved either both sides,

therefore, it is not liable to deduct TDS under both the Sections.

6. We have heard the rival contentions of both the parties and

perused the material on record. It is found that 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 Samiti is required to make a contribution out of its income to the

marketing board and the marketing board is required to utilize these

receipts on improvement of the agricultural market in the State, which

is owned by the Krishi Upaj Mandi Samiti. The Marketing Board also

gives aid and grant to Krishi Upaj Mandi Samiti to enable them to 7 ITA 18/JP/2013_ ITO Vs. KUMS, Dausa

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 contribute as per

Section 18A of the Rajasthan Agricultural Marketing Act, 1961, which is

a certain percentage of its income and is obligatory on the part of

assessee. Therefore, no TDS is liable to be deducted U/s 194C and 194J

of the Act. Accordingly, order of the Ld. CIT(A) is upheld.

7. In the result, the revenue's appeal is dismissed.

Order pronounced in the open court on 10/04/2015.

Sd/- Sd/- ¼vkj-ih-rksykuh½ ¼Vh-vkj-ehuk½ (R.P.Tolani) (T.R. Meena) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur fnukad@Dated 10th April, 2015

*Ranjan

vkns'k dh izfrfyfi vxzsf'kr@Copy of the Order forwarded to:

1. vihykFkhZ@The Appellant- The I.T.O. (TDS), Alwar.

2. izR;FkhZ@ The Respondent- M/s KUMS, Dausa.

3. vk;dj vk;qDr@ CIT

8 ITA 18/JP/2013_ ITO Vs. KUMS, Dausa

4. vk;dj vk;qDr@ vk;dj vk;qDr¼vihy½@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. 18/JP/2013).

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar