2024 (5) TMI 88 - AT - Income Tax

TDS u/s 194H - non deduction of TDS commission paid to Primary Agriculture Co-operative Society (PACS) - HELD THAT - For carrying out all the activities PACS were given commission @ 2.05% of MSP for procurement by PACS in the kharif marketing seasons and 2% of MSP on procurement of wheat in the rabi marketing season - On subsequent dates i.e. 26.07.2013 the percentage of commission was replaced by the commission of Rs. 31.25/- per quintal for common grade and Rs. 32/- per quintal for grade A. Further notification dated 24.11.2015 provides for the provisional rates of custom milled rice procured under specification and retained for distribution under decentralized procurement operation. In the said notification apart from the commission paid to societies on per quintal basis PACS are also reimbursed for the mandi and labour charges transportation charges driage @ 1% of MSP custody and maintenance charges interest charges for two months milling charges administrative charges cost of new gunny bags. Before us as assessee has contended that the transactions between the assessee corporation and the PACS are on principal to principal basis because the risk is on the PACS for the procurement of food grains and they have to make payment in advance and get it reimbursed from the State Government. On the above identical factual matrix as decided in BIHAR STATE FOOD CIVIL SUPPLIES CORPORATION LIMITED VERSUS ITO WARD-2 (1) PATNA 2024 (4) TMI 884 - ITAT PATNA held that in order to compute the correct amount of commission paid and in order to ascertain the correct amount of tax to be deducted at source u/s 194H of the Act the matter is restored to the file of the assessing officer for carrying out necessary verification and calculation. The assessee is also directed to provide full co-operation to the assessing officer by placing all relevant material in order to get the needful information about correct amount of commission and correct amount of TDS u/s 194H of the Act. Appeals are also allowed for statistical purposes.

Summary

Issues involved:
The judgment involves issues related to time-barred appeals, condonation of delay, non-deduction of tax at source u/s 194H, interpretation of guidelines for procurement of food grains, and the nature of the relationship between the assessee corporation and Primary Agriculture Co-operative Societies (PACS).

Time-barred appeals:
The assessee filed appeals against orders of the Commissioner of Income Tax (Appeals) after significant delays, citing reasons for the delay related to internal miscommunication and procedural requirements. The Tribunal, considering the larger interest of justice, condoned the delay and admitted the appeals for adjudication.

Non-deduction of tax at source u/s 194H:
The revenue authorities found the assessee liable for non-deduction of tax at source on commission paid to PACS under section 194H of the Income Tax Act. The assessing officer raised a demand for non-deduction of TDS, leading to an appeal by the assessee. The Tribunal analyzed the nature of the transactions and the guidelines for procurement of food grains to determine the applicability of tax deduction. Ultimately, the Tribunal directed a re-calculation of the tax liability, considering the specific details of the transactions and the availability of PAN details for the PACS.

Interpretation of guidelines for procurement of food grains:
The Tribunal examined the guidelines issued by the State Government regarding the procurement of food grains and the role of PACS in the process. It was observed that the PACS acted as agents of the State Government in the procurement process, leading to a conclusion that the commission paid to PACS by the assessee corporation was liable for tax deduction at source u/s 194H. The Tribunal emphasized the need for proper verification and cooperation to determine the correct amount of commission and tax to be deducted.

Nature of relationship between assessee corporation and PACS:
The Tribunal analyzed the relationship between the assessee corporation and PACS, emphasizing that the transactions were on a principal to principal basis. However, based on the guidelines and notifications provided by the Central and State Governments, it was concluded that the PACS were working as agents of the State Government in the procurement of food grains. This determination influenced the decision regarding the tax liability on the commission paid by the assessee to PACS.

Decision:
The Tribunal allowed the appeals of the assessee for statistical purposes, directing a re-calculation of the tax liability based on the specific details of the transactions and the nature of the relationship between the assessee corporation and PACS. The decision was rendered in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 on 29.04.2024.