The Secretary, Kums, Kota vs Department Of Income Tax

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. 342, 343 & 344/JP/2013 fu/kZkj.k o"kZ@Assessment Year : 2006-07, 09-10 & 10-11.

Income Tax Officer, cuke The Secretary, TDS, Vs. Krishi Upaj Mandi Samiti, Kota. Chhabra, Distt. Baran. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AABTK 0633 L vihykFkhZ@Appellant izR;FkhZ@Respondent

jktLo dh vksj ls@ Revenue by : Shri Dilip Sharma (JCIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri Siddarth Ranka (Advocate)

lquokbZ dh rkjh[k@ Date of Hearing : 20.07.2015. ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 20.07.2015

vkns'k@ ORDER

PER: R.P. TOLANI, J.M.

These are three appeals filed by the Revenue against three separate

orders dated 17.01.2013 passed by the learned CIT (A), Kota for A.Y. 2006-07,

2009-10 and 2010-11. The common grounds raised by the revenue are as under

:-

1. The ld. CIT (A) has erred in holding that the assessee deductor was not liable for making TDS u/s 194C of the I.T. Act only because the deductee (RSAMB) is registered u/s 12A of the I.T. Act and its income is exempt from tax.

2 ITA Nos. 342 to 344/jp/2013 A.Y. 2006-07,09-10 & 10-11 ITO TDS vs. The Secretary, Krishi Upaj Mandi Samiti, Chhabra, Baran.

2. The ld. CIT (A) has erred in holding that the provisions of the section 194J of the I.T. Act were not applicable in respect of the payments made by the assessee to RSAMB, on account of statutory contribution, against which the assessee received professional and technical services from RSAMB."

2. The facts in all the three appeals are similar and relates to same assessee,

therefore, for the sake of convenience we dispose off these appeals by this

consolidated order. Brief facts of the case are that the Assessing Officer

observed that the responsible person for deduction of tax, the Secretary, Krishi

Upaj Mandi Samiti (KUMS), Chhabra, Distt. Baran is an agency authorized by the

Govt. of Rajasthan to provide market yard for the conducting of the business of

agriculturists and adatiyas. The AO further observed that KUMS was liable to

deduct tax from payments made to various persons and as per information

available, the responsible person failed to deduct and deposit tax on the

following payments :-

F.Y. 2005-06 Payment to RSAMB, Baran Rs. 29,34,344/-

Contribution (to RSAMB) expenses Rs. 1,10,00,000/-

F.Y. 2008-09 Payment to RSAMB, Baran Rs. 45,92,912/- Contribution (to RSAMB) expenses Rs. 1,22,00,000/-

F.Y. 2009-10. Payment to RSAMB, Baran Rs. 55,80,387/- Contribution (to RSAMB) expenses Rs. 20,00,000/- 3

ITA Nos. 342 to 344/jp/2013 A.Y. 2006-07,09-10 & 10-11 ITO TDS vs. The Secretary, Krishi Upaj Mandi Samiti, Chhabra, Baran.

The AO was of the view that the aforesaid payments were covered u/s 194C and

194J of the I.T. Act, 1961 and the TDS was required to be deducted but the

responsible person failed to do so. The AO issued show cause notices dated

02.03.2010 and 31.08.2010 in this regard. In response, the ld. A/R of the

assessee vide letter dated 15.09.2010 filed reply stating therein that their

Marketing Board i.e. RSAMB have given a representation to various authorities

including Ministry of Finance, CBDT and CIT (TDS) etc. on the said subject and

the application is pending disposal. The AO considered the reply along with the

enclosures filed, but no weightage could be found. He considered the

responsible person to be an assessee in default within the meaning of sec.

201(1) of the Act for non-deduction of tax and as per provisions of Sec. 201(1A)

of the Act, if the Responsible person is failed to deduct the whole or any part of

tax or after deducting fails to pay the tax in accordance with this section, the

Responsible person is liable to pay simple interest @ 12% per annum. He

worked out the demand payable u/s 201(1)/194C at Rs. 2,96,370/-, u/s

201(1)/194J at Rs. 20,78,300/- and u/s 201(1A)/194C & 194J at Rs. 7,75,490/-

for the F.Y. 2005-06 (A.Y. 2006-06), F.Y. 2008-09 (A.Y. 2009-10) and F.Y. 2009-

10 (A.Y. 2010-11) totaling Rs.31,50,160/-.

3. Being aggrieved, the assessee carried the matter to the ld. CIT (A). The

assessee vide letter dated 01.01.2013 made a detailed written submissions, 4 ITA Nos. 342 to 344/jp/2013 A.Y. 2006-07,09-10 & 10-11 ITO TDS vs. The Secretary, Krishi Upaj Mandi Samiti, Chhabra, Baran.

which have been incorporated at page 3 para 1 to page 13 at para 5.9.4 of the

impugned order. The ld. CIT (A) summarized the assessee's submissions as

under :-

1) The AO failed to apply explanation to section 191. As per this section, the deductor cannot be treated as an assessee in default, if taxes were paid directly by the recipient/deductee.

2) M/s. RSAMB has been granted registration u/s 12A and is filing its return regularly and there was nil tax liability in the case of RSAMB, therefore, no tax can be recovered from the assessee.

3) In the instant case, the assessee claimed that there was no contractor-contractee (awarder) relationship between the assessee appellant and M/s. Rajasthan State Agricultural Marketing Board.

There was no work awarded by the assessee. No powers of supervising the work were under the control of the assessee appellant.

4. The ld. CIT (A) after considering the submissions of the assessee, deleted

the demand raised by the A.O. by observing at page nos. 15 to 17 of his order as

under :-

" The assessee is a statutorily obliged to pay RSAMB its share of market fee, license fee etc. collected by the assessee as per section 18A of RAPMA, 1961. The contribution is discharge of statutory obligation and cannot be treated as a contractual/technical/professional payment.

It is, therefore, held that contribution to RSAMB cannot be subject to TDS being a statutory payment.

5 ITA Nos. 342 to 344/jp/2013 A.Y. 2006-07,09-10 & 10-11 ITO TDS vs. The Secretary, Krishi Upaj Mandi Samiti, Chhabra, Baran.

Payment to RSAMB for Construction & Repair of Roads and Buildings etc.

The assessee regularly makes payment to Executive Engineer, RSAMB for repair, maintenance and construction of roads & buildings. The assessee claimed that there was no contractor- contractee relationship between the assessee and RSAMB. However, in my opinion it is not necessary that any contract has to be in writing, the contract can be in the form of oral understanding also. In the instant case, there were sufficient material on record to suggest that there was broad understanding between RSAMB and various Krishi Upaj Mandi Samities to construct & maintain roads etc. and 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 these payments were made for specific purposes (for construction of roads etc.).

However, before treating the assessee in default, the A.O. should have gone through explanation to section 191 of the I.T. Act. For ready reference, the 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 has not been deducted in accordance with the provisions of this Chapter, income-tax shall be payable by the assessee direct.

6 ITA Nos. 342 to 344/jp/2013 A.Y. 2006-07,09-10 & 10-11 ITO TDS vs. The Secretary, Krishi Upaj Mandi Samiti, Chhabra, Baran.

Explanation: For the removal of doubts, it is hereby 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 fails to pay, or does not pay, the whole or any part of the tax, as required by or under this Act, and where the assessee has also failed to pay such tax directly, then, such person shall without prejudice to any other consequences which he may incur, be deemed to be an assessee in default within the meaning of sub-section (1) of section 201, in respect of such tax."

According to this section, a deductor cannot be treated as assessee in default if due taxes were directly paid by the deductee.

In this case, the deductee RSAMB has filed its return of income declaring loss of Rs. 1,50,15,233/-, and was not 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 there was no tax liability on the deductee (RSAMB) on its returned income, the deductor (assessee) cannot be treated as an assessee in default. My view is supported by the judgment of Hon'ble Allahabad High Court (21 Taxmann.com 489 All.) 7 ITA Nos. 342 to 344/jp/2013 A.Y. 2006-07,09-10 & 10-11 ITO TDS vs. The Secretary, Krishi Upaj Mandi Samiti, Chhabra, Baran.

The Hon'ble ITAT Kolkata Bench in Ramakrishna Vedanta Math v. ITO (2012) in ITA 477, 478 & 479/Kol/2012 has held as under

:-

" As far as recovery provisions are concerned, these provisions are set out in section 201(1) which seeks to make good any loss to revenue on account of lapse by the assessee tax deductor. However, the question of making good the loss of revenue arises only when there is indeed a loss of revenue and the loss of revenue can be there only when recipient of income has not paid tax. Therefore, recovery provisions under section 201(1) can be invoked only when loss to revenue is established, and that can only be established when it is demonstrated that the recipient of income has not paid due taxes thereon. In the absence of the statutory powers to requisition any information from the recipient of income, the assessee is indeed not always able to obtain the same. The provisions to make good the short fall in collection 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 basic information, the Assessing Officer can very well ascertain the related facts about payment of taxes on income of the recipient directly from the recipients of income. It is not the revenue's case before us that, on the facts of this case, such an exercise by the Assessing Officer is not possible. It does put an additional burden on the Assessing Officer before he can invoke section 201(1) but that's how Hon'ble High Court has visualized the scheme of Act and that's how, therefore, it meets the end of justice."

8 ITA Nos. 342 to 344/jp/2013 A.Y. 2006-07,09-10 & 10-11 ITO TDS vs. The Secretary, Krishi Upaj Mandi Samiti, Chhabra, Baran.

In the instant case, there was no loss to the revenue as the deductee (RSAMB) was not liable to pay tax (the income being loss and RSAMB being registered u/s 12A).

In view of the above, it is held that the assessee cannot be treated as an assessee in default. The A.O. is directed to delete the demand raised u/s 201(1) & 201(1A)."

5. Now the Revenue is in appeal before us. We have heard both the parties

and considered the material on record. The facts of the present case are similar

to the facts involved in the case of ITO vs. The Secretary, Krishi Upaj Mandi

Samiti, Baran in ITA Nos. 216 to 220/JP/2013 for the A.Ys. 2006-07 to 2010-11

dated 27.01.2014. Since the present case is covered by the above decision of

the ITAT, Jaipur Bench, Jaipur, so respectfully following the aforesaid order

dated 27.01.2014, we do not see any infirmity in the orders of ld. CIT (A).

Accordingly, we do not find any merit in the departmental appeals and the same

are dismissed.

7. In the result, the revenue's appeals are dismissed.

Order pronounced in the open court on 20/07/2015.

Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 20/07/2015 Das/ 9

ITA Nos. 342 to 344/jp/2013 A.Y. 2006-07,09-10 & 10-11 ITO TDS vs. The Secretary, Krishi Upaj Mandi Samiti, Chhabra, Baran.

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

1. vihykFkhZ@The Appellant- ITO TDS Kota.

2. izR;FkhZ@ The Respondent- The Secretary, Krishi Upaj Mandi Samiti, Chhabra, Distt. Baran.

3. vk;dj vk;qDr@ CIT

4. 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. 342 to 344/JP/2013)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar 10 ITA Nos. 342 to 344/jp/2013 A.Y. 2006-07,09-10 & 10-11 ITO TDS vs. The Secretary, Krishi Upaj Mandi Samiti, Chhabra, Baran.