Shree Khedut Sahakari Khand Udhyog ... vs Department Of Income Tax

आयकर अपील सं./ ITA No.2341/Ahd/2011 नधा रण वष /Assessment Year: 2004-2005 ITO, TDS-3 Shri Khedut Sahakari Khand Udyog Surat. Vs Mandali Ltd. At & PO - Baben Tal: Bardoli, Dist. Surat 394 602.

PAN : AAAAS 4554 N

अपीलाथ!/ (Appellant) "#यथ!/ (Respondent)

Revenue by : Smt.Sonia Kumar, Sr.DR Assessee by : None

सन ु वाई क तार ख/ Dateof Hearing : 17/06/2015 घोषणा क तार ख / Date of Pronouncement: 24/07/2015

आदे श/O R D E R

PER RAJPAL YADAV, JUDICIAL MEMBER:

The Revenue is in appeal before us against the order of learned CIT(A)-I, Surat dated 28.6.2011 passed for the Asstt.Year 2004-05.

2. Though the Revenue has taken four grounds of appeal, which are not in consonance with the Rule 8 of Income Tax (Appellate Tribunal) Rules, but its grievance revolves around a single issue, whereby, it is to be ascertained whether the assessee got transported the sugar cane from the fields of farmers to its premises with the help of transporters, and if yes, then on account of its failure to deduct TDS under section 194C of the Income Tax Act, it is to be held as an assessee-in-default liable to tax under section 201 as well as interest under section 201(1A) of the Income Tax Act.

ITA No.2341/Ahd/2011 2 3. In response to the notice of hearing, no one has come present on behalf of the assessee. With the assistance of the learned DR, we have gone through the record carefully and proceed to dispose of the appeal ex parte qua the assessee.

4. Brief facts of the case are that the assessee is a co-operative society registered with the Registrar of Cooperative Societies, Gujarat. It is engaged in the manufacture of sugar and trading. Survey under section 133A of the Income Tax, 1961 was conducted at the office premises of the assessee on 5.2.2004 and 7.12.2010. According to the AO, during the course of survey, it was noticed that the sugar cane is being grown in the fields of the farmers which was spread in large area The sugar cane was being transported by the sugar factories. Thus, sugar factory ought to have deducted tax on contractual payment of getting and transporting the sugar cane from fields to the factory area under section 194C. In the opinion of the AO, the assessee failed to deducted TDS on such payment, therefore, order under sections 201(1) and 201(1A) ought to be passed.

5. In response to the notice of hearing, it was contended by the assessee that as per the arrangement with the farmers, the sugar cane is being supplied either by the farmers or registered societies at the factory area. The assessee has not been incurring any expenditure on the alleged transportation of sugar cane. The assessee has narrated various resolutions as well as referred to bye-laws of the society. The relevant part reproduced by the AO from the submissions of the assessee is worth to note here, which reads as under:

"(2) In addition to the submissions made earlier as stated above, my client is also submitting herewith the following relevant documents/statements/materials:

ITA No.2341/Ahd/2011 3 (i) Bye Laws of the assessee sugar co-operative Society duly registered, sanctioned and approved by the Registrar of Co-

operative Society, the highest authority of the governing Act. i.e. The Gujarat Co-Operative Societies Act, 1961. The relevant Bye Laws No. 7(A) categorically provides that the cane grower members are exclusively responsible to cut, harvest and transport their sugarcane from their field to the factory gate for which they had been paid ex-factory gate cane price by virtue of the Sugar Cane Price Control Order, 1966 of the Central Government.

(ii) Copy of water stop instructions letter/card given to the cane grower members containing therein categorically the condition that the cane grower member should cut and supply his sugarcane grown on his field after the instructions to the factory gate of the sugar mill.

(iii) The copy of plantation agreement for the plantation of sugarcane for the seasons 2003-04 containing therein rules and regulations particularly condition No. 1 i.e. the cane grower member is responsible to harvest and cut his sugarcane and deliver the same to the factory gate of the assessee sugar mill.

(iv) Copy of member account for the season 2003-04 showing therein the ex-factory price paid for the sugarcane supplied by the cane grower, member. This clearly proves that the assessee, sugar, mill has paid the, ex-factory price of Rs. 1,326/- per MT in various installments as approved by the Board of Directors (for which the copies of resolutions were already furnished. The copies of ledger accounts of the following members are furnished herewith.

(a) Ambubhai Bhikhabhai

(b) Bhagubhai Rachhodbhai Patel

(c) Bharatbhai Nathubhai Patel

(d) HasmukhbhaiMaganbhai Patel.

(v) Detailed ledger of cane purchase account and payments of ex-factory cane price made to, cane grower members.

From the above submissions, it is crystal clear that my client has not incurred at all any expenditure towards harvesting and transportation of sugarcane nor claimed such expenditure in the audited books of accounts which were produced and verified during the survey proceedings conducted on 05.02.2004 and 07.12.2010 by the income tax authorities. Hence, when my client has not made any payment towards transportation and harvesting of the sugarcane to any agency or third person, there is no valid ITA No.2341/Ahd/2011 4

and legal ground in support of the allegation of default u/s. 201(1) and 201(1A) of the Act.

3. Your kind attention is invited to the very fact that the Divisional Bench of ITAT, Ahmedabad has already allowed the appeal in favour of the assessee for the Asstt.Year: 2003-04 against the order passed by u/s 201(1) and 201(1 A) of the Act treating the assessee mill as assessee in default for the alleged payment of transportation and harvesting of sugarcane. Thus, as a matter of fact, the issue being identical and the same as in the present year, has already been resolved by the Hon'ble ITAT, Ahmedabad in the assessee's own case."

6. The learned AO did not apply his mind on this explanation of the assessee. He simply considered that the assessee is responsible for transporting the sugar from the fields of the farmers. It is pertinent to take note observation of the ld.AO from para-11, 12 and 13 of the assessment order. It reads as under:

"11. The most important fact where assessee differs from all the cases mentioned by the assessee is that in all these cases, the deductee were assessed to tax 85 have paid tax on the income which they received from the deductor. Whereas, in the present case, the assessee has not been able to even furnish the names of these deductee forget apart the details of payments made to them & their assessment details. This has resulted in loss of revenue by the Department. Therefore, these decisions differ from the case of the assessee on facts also.

12. For the year under consideration, the assessee has not furnished any details for harvesting of sugarcane and transport contractors. It is therefore, decided to work out such payments on the basis of quantity of sugarcane purchased and advance per metric ton of sugarcane given to farmers which actually was utilized for payment to harvesting & transport contractors.

13. In the case of the assessee as per P & L A/c., it had purchased 17,71,699 MT of sugarcane. Further, in absence of details regarding amount per metric ton paid to farmers as advance, this rate is adopted at Rs. 185/-per metric ton, the rate at which assessee paid for the immediate preceding year. On the basis, the amount of expenditure on harvesting & transport contractors is worked out as under :-

Rs.185 per MT x 17,71,699 MT ITA No.2341/Ahd/2011 5

Of sugar cane purchased = Rs.32,77,64,315/-"

7. In this way, the ld.AO has held the assessee liable for transporting the sugar cane from the fields of the famers, and according to the AO, the assessee has failed to TDS on payments of transportation. Therefore, it is an assessee-in-default. He has passed an order under section 201(1) and 201(1A) working out the amount of TDS deductible at Rs.67,19,168/- and interest for not depositing this amount in Government Treasury at Rs.64,50,400/-. The learned AO has raised demand of Rs.1,31,69,568/-.

8. On appeal, the ld.CIT(A) has deleted the additions by assigning following ten reasons:

"[1] The appellant pays ex- factory / gate delivery cane price to Cane growers.

[2] The farmer member is responsible to cut his sugarcane and supply the same at the factory gate of the appellant.

[3] Payments made to cane growing farmer members of the Co - op Society is in the nature of purchase price, on which section 194C cases not apply.

[4] The appellant pays ex- factory / gate delivery price to farmers as per maximum price fixed by the Central Government from time to time.

[5] The appellant pays advance purchase price to cane growing members to meet expenses like, harvesting, cutting and transportation.

[6] First installment of Rs 185/- M.T is given as advance purchase price to farmer to enable them to meet the expenditure of harvesting, cutting, and transporting. Thereafter, purchase price is again given to farmers in installments. This account is finally settled when the final ex-factory cane price is determined by the appellant.

[7] Copy of Member account in appellant's s books indicate that first installment of Rs 185/ P.M.T given to farmers is actually advance purchase price of sugar cane.

ITA No.2341/Ahd/2011 6 [8] The case of the appellant for A Y 2003-04 having identical facts, has been decided in appellants's favour and as such, it is binding on lower authorities.

[9] The A.O. has worked out the total payment covered U/s 194C on the basis of pure estimate based on last years payment to farmer members.

[10] The arguments of the appellant are quite convincing. The A.O. has hardly been able to support his case with cogent reasons / credible evidence. The crux of the argument of appellant is that they are making advance payment of sugar cane purchase price to their farmer members. The farmers are agriculturists. Their income is not taxable. It is clear that Section 194C of the IT Act is not applicable in appellant's case.

Having regard to the facts and circumstances of the case as well as arguments of the appellant and the Judgment of Hon'ble ITAT , it is held that the assessing officer is not justified in invoking the provisions of Sec. 194C against the appellant . The Assessing Officer's action of treating the appellant as 'assessee in default and working out liability u/s.201 & 201(1A) is not sustainable."

9. The ld. DR relied upon the order of the AO and submitted that the AO has rightly treated the assessee-in-default.

10. We have duly considered the contentions of the learned DR and gone through the record carefully. Section 194C provides that if any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash, or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equivalent to ......... the rates provided in clause no.(i) (ii) and other sub-sections of section 194C. As far as the quantification of TDS amount is concerned, that is not in dispute. The dispute is whether the assessee is liable to deduct TDS or not. The assessee has contended that it has not got the sugar cane transported with the help of contractor rather, it was obligation of the farmers to supply sugar cane at the factory gate. Before the AO also this was the contention of ITA No.2341/Ahd/2011 7

the assessee, but the ld.AO nowhere recorded any findings that it is the responsibility of the assessee to get the sugar cane transported from the fields of the farmers to the factory premises. The AO is totally silent in his order. On the other hand, the assessee has made reference to the resolutions, bye-laws and standing orders in this respect. The ld.First Appellate Authority has also considered the submission of the assessee in details, and thereafter recorded a finding that the assessee was not at all responsible for transportation of the sugar cane. Thus, section 194C is not applicable in the present situations. The ld.CIT(A) has rightly deleted the demand raised by the AO. We do not find any merit in this appeal. It is dismissed.

11. In the result, the appeal of the Revenue is dismissed.

Order pronounced in the Court on 24th July, 2015 at Ahmedabad.

Sd/- Sd/- (G.D. AGRAWAL) (RAJPAL YADAV) VICE-PRESIDENT JUDICIAL MEMBER

Ahmedabad; Dated 24/07/2015