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2019 (7) TMI 1086 - AT - Income TaxTDS u/s 194C - purchase and sale transaction - AO observed that the activity given by the assessee company to the organizers was in the nature of work contract / job - organizers purchase seeds from farmers on behalf of company - HELD THAT:- It is established that the company has not made any payment to the organizers for the services rendered and the company has also charged the interest for the advances and made only payment for the seed purchased from the organizers. It appears that the organizers have made the profit out of the seeds procured from the farmers for the services rendered which required to be brought to tax. From the facts of the case, it is clear that it is purchase and sale transaction, hence the provisions of TDS has no application on purchases made by the assessee company. If at all TDS has to be deducted, the same should be deducted on component of commission but not on the entire payment made to the organizer / farmer. From the foregoing discussion, it is established that the department neither quantified the commission nor proved that the company has paid the commission. The department has neither taken any action u/s 201/201(1A) against the assessee nor for assessment of income in the hands of the organization. Therefore, we hold that there is no case for deduction of tax at source u/s 194C and the disallowance u/s 40(a)(ia), accordingly, we set aside the orders of the lower authorities and delete the addition made by the AO. - Decided in favour of assessee Addition relating to purchase of seeds from the growers made u/s 40(A)(3) - HELD THAT:- As per the information available on record, the assessee made payments in excess of ₹ 20,000 to the organizers, but not to the farmers. The assessee did not explain any reason for making the payment in cash. The payment stated to be made for the purpose of delinting, processing, platform, hand-grading and hamali, blower, ginning etc. In the preceding paragraphs we, have held that the transaction between the assessee and the company is purchase transaction. Having held the it was purchase transaction there is no case for making payment separately for delinting, processing, platform, hand-grading and hamali, blower, ginning etc.. by the company. As argued by the Ld.AR for non deduction of TDS that it was the obligation of the farmer/organizer to separate cotton and kappas and sell the hybrid seed to the company. Therefore there is no reason to make such payments by the assessee and the assessee did not make out a case that the payment is exempt from the provisions of section 40A(3). Hence, we do not see any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. Enhancement of income by CIT(A) u/s 251(2) - no notice of enhancement - HELD THAT:- During the appeal hearing, the Ld.AR submitted that the Ld.CIT(A) enhanced the addition without giving notice and opportunity to the assessee. As per the Income Tax Act, if the CIT(A) intends to enhance the addition, he is bound to issue notice as per section 251(2) of the Act. CIT(A) is not permitted to enhance the addition without issue of notice and giving opportunity to the assessee. During the appeal hearing, the AR submitted that no notice of enhancement was issued by the CIT(A). The department did not place any evidence to show that the CIT(A) has issued notice for enhancement. Therefore, the enhancement made by the Ld.CIT(A) is unsustainable, accordingly, the enhancement made by the Ld.CIT(A) is deleted. Addition for purchase of foundation seeds - HELD THAT:- DR though the assessee did not purchase the foundation seed from the organizers, the do purchase the Hybrid seed from the organizers. Hence this issue require verification at the end of the AO. Therefore, we remit the matter back to the file of the AO the examine the issue in detail and decide the same on merits after giving opportunity to the assessee. The appeal of the assessee on this ground is allowed for statistical purposes. Addition relating to EPF contribution beyond due date as required under Provident Fund Act - AO disallowed the sum u/s/36(va) - HELD THAT:- The issue is related to the payment of PF belatedly. The assessee submitted that the payment was made before the due date for filing the return and the department did not controvert the submissions made by the assessee. The expenditure is allowable u/s 36(1)(va) of the Act r.w.s.43B of the Act. This Tribunal has taken the decision on identical facts in favour of the assessee in the case of M/s Eastern Power Distribution Company of AP Ltd [2017 (9) TMI 1803 - ITAT VISAKHAPATNAM] ITAT held that the payment made before the due date of filing the return required to be allowed as deduction. Respectfully following the view taken by this Tribunal, the appeal of the assessee is allowed.
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