TMI Blog2017 (8) TMI 1485X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1) / 201 (1A) of the Income- tax Act would not be applicable to the facts and circumstances of the case. The Ld. CIT(A) therefore, has rightly deleted the addition imposed by the AO on account of non / short deduct ion of tax us 201(1) / 201(1A). - Decided in favour of assessee. - ITA No. 897/Chd/2017 - - - Dated:- 11-8-2017 - SHRI SANJAY GARG, JUDICIAL MEMBER MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER For the Appellant : None For the Respondent : Sh. Maninder Arora ORDER Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the Revenue against the order of Commissioner of Income Tax (Appeals)-2 [hereinafter referred to as CIT(A)], Chandigarh dated 14.03.2017. 2. The grounds raised by the Revenue in this appeal are as under:- i) Has the Ld. CIT (A) not erred in ignoring the legal position that the provisions of sect ion 194C are squarely applicable on the work carried out by the millers who are under contract with the procurement agency/assessee? (ii) Has the Ld. CIT(A) not erred in not upholding the Tax demand created on account of non / short deduction of tax u/s 201(1)/201(1A) of the Income- tax Act, 1961 ignoring the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order dated 11.8.2016 wherein the Tribunal while relying upon the decision of the Delhi Bench of the Tribunal in the case of Aahar Consumer Products Pvt Ltd in ITA No. 2910/Delhi /2010 dated 28.2.2011 has held that the provisions of sect ion 194C as well as sect ion 201(1) / 201(1A) of the Income-tax Act, 1961 are not applicable to the facts and circumstances of the case. The relevant part of the order of the Tribunal for the purpose of reference is reproduced here with :- 7. We have heard the rival submissions. The Ld. DR has fairly admitted that the issue is squarely covered by the decision of the Delhi Bench of the Tribunal dated 28.02.2011 passed in ITA No. 2910/Del/2010 another wherein the Tribunal after considering the rival submissions and discussing the issue in detail has observed that in case where the assessee was into the business of trading of wheat , atta and other food grains and the Assessing officer had found that they used to purchase wheat from open market and deliverit to M/s Aahar International Ltd (AIL) for making by-product such as atta, dalia etc., the assessee was required to provide the raw material (wheat ) and packaging material and in return M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplated in Sect ion 194C can also be made in kind and the assessee is under an obligation to deduct tax at source and such taxes have not been deducted. The so-called payment, constructively determined, at tract the disallowance under the provisions of Sect ion 40(a) (ia) of the Act. 10. The assessee relied upon the agreements and argued that the assessee has not paid any sum for carrying out any work including supply of labor in pursuance of a contract and the assessee is not obliged to make any payment nor the assessee has credited any amount in the account of the contractor as payable which requires the assessee to deduct tax and, therefore, the application of the provisions of sect ion 194C as well as the provisions of section 40(a) (ia) of the act is not justified. All the content ions that were taken before the two revenue authorities are reiterated before us including the case laws. 11. Ld. DR, on the other hand, strongly supported the findings of the AO and to the extent the addition is sustained by the CIT(A) to the findings contained therein. The provisions of Sect ion 194C which obliges the deduct ion of tax at source relevant to the AY 2006-07 are reproduced below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resident (hereafter in this sect ion refer red to as the sub-contractor ) in pursuance of a contract with the sub-contractor for carrying out, or for the supply of labour for carrying out , the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub-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 equal to one per cent of such sum as income-tax on income comprised therein: [Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the sub-contractor, shall be liable to deduct income-tax under this subsection.] [Explanation I.- For the purposes of sub-section (2), the expression contractor shall also include a contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed income-tax authority or the person authorized by it such particulars as may be prescribed in such form and within such time as may be prescribed; or] (ii) any sum credited or paid before the 1st day of June, 1972; [or] [ (iii) any sum credited or paid before the 1st day of June, 1973, in pursuance of a contract between the contractor and a co-operative society or in pursuance of a contract between such contractor and the subcontractor in relation to any work (including supply of labour for carrying out any work) undertaken by the contractor for the co-operative society.] [Explanation. - For the purposes of clause (i), goods carriage shall have the same meaning as in the Explanation to sub-sect ion (7) of sect ion 44AE.] (4) [***] (5) [***] ] 12. Now, we have to examine whether the assessee is obliged to deduct tax at source on the so-called constructive payment as construed by the AO in terms of the agreement. The assessee, in this case, supplies 100 kg of wheat and takes back 88 Kgs of Atta or 85 Kgs of Dalia after its processing done by the AIL and AIL is required to deliver the end product in this proport ion to the assessee who has supplied the raw mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that these cases by themselves may not be able to throw any light on the present contract entered into by the assessee. Hence, the assessee is supplying wheat and getting back Atta or Dalia as the case may be, in an agreed proportion. For such exchange, there is absolutely no payment of any consideration. Even if one were to treatit as a work contract and not a contract of sale, it is difficult to say that there is a payment as a consideration for the labour or the work that is rendered. The assessee is just exchanging the product; in the exchange he is not getting the same product but a different product and not to the same extent but to a different extent. In other words, it is difficult to say that the assessee has made any payment in undertaking this contract on the basis of the agreement that is acted upon by the parties. There is no payment of any sum by the assessee to AIL. Even if one were to say that there is a constructive payment, it is difficult to quantify the same and say that the assessee was under an obligation to deduct tax at source at such construed payments. The assessee has not even credited such const rued consideration for supply of labour in the books of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has got it routed through another concern on a sort of outsourcing basis, it does not result in an out f low. It is just an exchange and barter of one commodity against the other and the whole contract cannot be termed as works contract in the strict sense of the term which is generally understood under the provisions of Sect ion 194C. In our opinion, the AO went wrong in presuming that the diference in the wheat supply and the Atta or Dalia got in return represents sum paid for services rendered and payments for such services are claimed as deduct ion from the prof it and gains of business u/s 32 to sect ion 38. Only when the claim of the assessee for deduct ion is u/s 32 to sect ion 38, the provisions of Section 40(a) (ia) can be pressed into service to disallow such claims for deduct ion. At the cost of repetition, we may say that to invoke said provision of Section 40(a) (ia), first of all, the case should be made out by the department that the assessee is contemplating deduct ion u/s 32 to 38 on which tax is deductible and the assessee has not deducted tax at source. In our opinion, tax is not deductible and the assessee has not claimed any deduct ion u/s 32 to sect ion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal in Aahar Consumer Products Pvt. Ltd. (supra), provisions of section 194C of the Act as well as 201(1) / 201 (1A) of the Income- tax Act would not be applicable to the facts and circumstances of the case. The Ld. CIT(A) therefore, has rightly deleted the addition imposed by the AO on account of non / short deduct ion of tax us 201(1) / 201(1A) of the Act. We, therefore, confirm the order of Ld. CIT(A). 10. In the result, all the three appeals of the Revenue are hereby dismissed. 4. A perusal of the impugned order of the CIT(A) also reveals that the Ld. CIT(A) has also followed the decision of the ITAT Delhi Bench of the Tribunal in the case of Aahar Consumer Products Pvt Ltd (supra). There being no contrary decision brought to our knowledge, we do not find any justification to interfere in the well reasoned order of CIT(A). The issue being clearly covered by the decision of the Coordinate Bench of the Tribunal in favour of the assessee, we do not find any merit in the appeal of Revenue. Hence, the appeal preferred by the Revenue is hereby dismissed. 5. In the result, the appeal filed by the Revenue is hereby dismissed. Order pronounced in the Open Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
