TDS under Section 194H applies to commission paid to Primary Agriculture Co-operative Society for procurement activities

ITAT Patna held that TDS u/s 194H was applicable on commission paid to Primary Agriculture Co-operative Society (PACS) for procurement activities. The assessee corporation argued transactions were on principal-to-principal basis as PACS bore procurement risks and made advance payments. However, following precedent in a similar case, ITAT restored the matter to assessing officer for verification and calculation of correct commission amount and TDS liability. The assessee was directed to provide full cooperation by furnishing relevant materials. Appeals were allowed for statistical purposes.

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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.

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