2016 (6) TMI 1206 - AT - Income Tax

Tribunal upholds decision on TDS exemption for sugarcane supply at factory gates

ITO, TDS-3, Surat Versus Madhi Vibhag Khand Udyog Mandli Ltd., Surat

The Tribunal dismissed the Revenue's appeal against the deletion of a demand and interest under sections 201(1) and 201(1A) of the Income Tax Act. The ... Non-deduction of TDS - payment of transporting expenses for the sugarcane - The ld.First Appellate Authority was of the view that farmers were required to bring sugarcane upto the factory gate. Therefore, the assessee has not incurred any transportation expenses - Held that: - the issue in dispute is squarely covered in favour of the assessee by the orders of the ITAT as well as Hon’ble Gujarat High Court passed in assessee’s own case in Tax Appeal No.440 of 2006 - it was held in the case that the supply of sugarcanes at the gates of factories of the respective assesses was a part of sale transaction and thus, the assesses are not liable to deduct TDS - the order of the ld.CIT(A) upheld - appeal dismissed - decided against Revenue. Issues: Appeal against deletion of demand under section 201(1) and interest under section 201(1A) of the Income Tax Act.Analysis:1. The appeal was made by the Revenue against the order of the ld.CIT(A)-I, Surat dated 15.11.2011 concerning the Asstt.Year 2004-05. The Revenue contested the deletion of a demand of Rs. 46,66,999 and interest of Rs. 44,80,320 raised by the AO under sections 201(1) and 201(1A) of the Income Tax Act.2. The AO's basis for the demand was that the assessee, engaged in sugar manufacturing and trading, failed to deduct TDS on transportation expenses for sugarcane lifting. The ld.CIT(A) deleted these additions, stating the assessee was not obligated to deduct TDS as farmers were responsible for delivering sugarcane to the factory gate, not the assessee.3. During the hearing, the assessee did not appear, but written submissions referenced previous favorable judgments by the ITAT and Hon’ble Gujarat High Court in the assessee's case. The ld.DR could not counter these submissions.4. The Hon’ble Gujarat High Court previously ruled that the supply of sugarcane at factory gates was part of a sale transaction, not a separate work contract. Citing a similar case involving natural gas transportation, the Court held that TDS deduction was not required in such scenarios. Consequently, the ld.CIT(A) decision was upheld based on this precedent.5. Considering the binding judgment of the Hon’ble Gujarat High Court, the Tribunal found no reason to interfere with the ld.CIT(A)'s order. Therefore, the Revenue's appeal was dismissed, affirming the deletion of the demand and interest under sections 201(1) and 201(1A) of the Income Tax Act.This detailed analysis outlines the key legal issues, the arguments presented, and the precedents relied upon to arrive at the final decision in the judgment.