TaxTMI 
TaxTMI 
2020 (6) TMI 152
X X X X Extracts X X X X
X X X X Extracts X X X X
....later. 3. The facts in brief are that the assessee company is engaged in the business of manufacture of sugar and generation of power. The assessee was initially known as M/s Parry Sugar Industries Ltd. It has since merged with M/s EID Parry India Limited. Before the Tribunal, the assessee has raised a ground, viz., the impugned orders of tax authorities are non-est in the eyes of law, since they have been passed in the name of non-existing entity, viz., M/s Parry Sugar Industries Ltd, which has since been merged with M/s EID Parry India Limited. However, the ld A.R could not clarify as to whether the factum of merger was brought to the notice of tax authorities during the course of either assessment proceedings or appellate proceedings. In the absence of availability of all facts relating to the legal ground, we decline to admit this legal ground of the assessee. 4. The facts relating to the addition made u/s 40(a)(ia) of the Act are discussed in brief. The AO noticed that the assessee has paid Harvesting Charges for harvesting of sugarcane without deduction of tax at source in both the years. Hence he proposed to invoke the provisions of sec. 40(a)(ia) of the Act for disall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uct tax at source from the payments so made. The farmers, being agriculturists, are also not liable to deduct tax at source from the harvesting charges. Accordingly he submitted that the tax authorities are not justified in invoking the provisions of sec.40(a)(ia) of the Act. The Ld A.R further submitted that the tax authorities are not justified in placing reliance on the decision rendered by the Hon'ble jurisdictional Karnataka High Court in the case of Ryatar Sahakari Sakkare Kharkhane Niyamit (supra), as the questions adjudicated by the Hon'ble Karnataka High Court in the above said case were different and hence the said decision cannot be considered as binding precedent. He submitted that the Hon'ble Karnataka High Court, in the above said case, was considering as to whether the TDS provisions would apply only to expenses remaining payable as at the yearend or they would apply to the entire expenses. Further whether the contract entered by the company with the harvesters without the knowledge of the farmers can still be considered as contracts, when the assessee has claimed harvesting charges as its own expenses?. Accordingly he submitted that the decision rendered by Hon'ble ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n behalf of the farmers and hence the payment of harvesting charges is also made on behalf of the farmers only, which shall be adjusted against the Sugarcane bill. Hence there is merit in the submission of the assessee that the harvesting charges do not constitute its own expenditure. 9. We notice that an identical issue was examined by the co-ordinate bench in the case of M/s NSL Sugars Ltd (ITA No.1228/Bang/2017 relating to assessment year 2012-13 in its order dated 8th November, 2019. For the same of convenience, we extract below the relevant portion of the order passed by the co-ordinate bench in the above cited case:- "18. This ground of appeal by the revenue for AY 2011-12 can be conveniently dealt with the grounds of appeal raised by the assessee in ITA No.1228/Bang/2017 for AY 2012-13 which reads as follows:- "1. The order of CIT (A) insofar as it is prejudicial to the interest of the appellant, is bad and unsustainable in the eye of law. 2. The CIT(A) grossly erred in confirming the disallowance of Harvesting charges disregarding the documentary evidences furnished before him including his own order for an earlier year. 3. The CIT(A) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of India and the said price also includes the harvesting and transportation charges. The assessee furnished copies of sugarcane purchase bills depicting the adjustment of harvesting and transportation charges from the cost of purchases. The assessee also placed reliance on the decision of ITAT Ahmedabad Bench in the case of Shree Mahuva Prasad Sahakari Khand Udyog Mandal Ltd. v. ITA No. 37/B/2016, 1228/B/17 & CO No.66/B/2016 ITO, ITA No.305/Ahd/2009 wherein the Tribunal took the view that provisions of section 194-C of the Act are not attracted for payment made to harvesting labourers and transporters because it was an obligation of cane growers to bring sugarcane to the assessee's factory and the aforesaid payments cannot be said to be payment covered by section 194C of the Act. Similar decision rendered by the ITAT Pune Bench in the case of DCIT v. Dwarkadheesh Sakhar Karkhana Ltd. [2015] 55 taxmann.com 415 (Pune Trib.) was also relied upon by the assessee. 21. The CIT(Appeals) accepted the arguments on behalf of the assessee and he found on perusal of the sugarcane purchase bills that farmers supplied sugarcane and harvested themselves and incurred transportation c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o MUKADAMS (harvesting labourers and transporters by Zone samiti) and also in the case of DCIT vs. Dwarakadeesh Sahakar Kharkhana Ltd. it was held by the special bench that sugar factory was not liable to make TDS u/s.194C from the payments made to Mukadams and Transporters by the samiti. It was for the cane grower to bring the sugarcane to the appellant's factory and on behalf of the cane growers the harvesting charges were paid to the labourers by the appellant along with transport charges which are included in the cost price of the sugar cane which is evident from the invoices furnished before me. Therefore, in the light of the factual and the legal matrix of the case, as discussed above I am of the opinion that the harvesting charges paid to the labourers by the appellant on behalf of the cane growers which is the part and parcel of the cost price of the sugar cane, the payment can not be stated to be covered within the expression "work contract "as defined u/s 194C of the Income Tax Act,1961. Therefore, I hereby delete the addition made by the Assessing Officer on account of TDS not made u/s.194C. The first ground of appeal is hereby allowed." 22. Aggriev....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... paper book filed by the assessee containing sample bills for purchase of sugarcane issued by the assessee. The sample bill shows the value of cane supplied by individual farmers and the transportation & harvesting charges are shown as deduction, which by implication means that the cane price is inclusive of transportation & harvesting charges. The plea of assessee that supply of cane by the farmers to the assessee is on ex gate of sugar factory basis appears to be correct. In our opinion, it would depend on the agreement between the assessee and cane farmers as to whether the cane price fixed between the parties is inclusive of harvesting & transportation charges. If the contract to supply sugarcane is ex field (cost of harvesting and transportation to be borne by the Sugar manufacturer), then it is the responsibility of the assessee to lift the sugarcane from the field to its factory i.e., the assessee has to bear the harvesting and transportation charges for the sugarcane. There is no such material brought on record to come to the conclusion that the harvesting & transportation charges paid by the assessee is on ex-field basis. In such circumstances, we are of the view that, on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....S) v/s. Khedut Sahakari Khand Udyog Mandli Ltd., 76 taxmann.com 117 = 2016-TIOL-2269-HC-AHM-IT has held that there is no liability to deduct the tax at source on payments made to Mukadam and Transport Contractor for supply of sugarcane to sugarcane factories. The SLP filed by the Revenue has also been dismissed by the Apex Court. Nothing has been shown to us to justify/warrant taking a view different from that taken by Gujarat High Court in Khedut Sahakari Khand Udyog Mandli Ltd., (supra). (f) Mr. Walve, learned Counsel for the Revenue places reliance upon the order dated 18th December, 2017 of this Court, admitting the Revenue's appeal in CIT v/s Manisha Construction (ITA No.412 of 2015) to submit that an identical question has been admitted. However, Mr. Walve is not able to point out the facts and circumstances in the case of Manisha Construction (supra) being identical to the facts in the present case. In the present case, there is a concurrent finding of fact recorded by the CIT(A) and the Tribunal that the payment made to the harvesting and transport contractor are on behalf of the sugarcane farmers, is a part of the price payable to them. Further no separat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....872? iii. Whether the Tribunal was right in not determining the issue relating to the existence of a CONTRACT between the Harvesters/Transporters and Appellant as per the Bond Agreement/s? iv. Whether the Tribunal was justified in directing the Appellant to furnish details to the Assessing Officer for verifying whether or not the recipients of Harvesting, Transportation and Legal Consultancy payments have been respectively offered for taxation so as to determining the levy of interest in the case of the Appellant?" 5. Revenue has raised following questions of law in its appeals:- '1. Whether on the facts and the circumstances of the case and in law the Tribunal is correct in interpreting the language of section 40(a)(ia) to mean that the consequence of disallowance is attracted only in respect of amounts which remain payable on the last day of the financial year? 2. Whether on the facts and circumstances of the case and in law, the Tribunal erred in not appreciating the fact that section 40(a)(ia) cannot be interpreted to mean that it applies only to amounts "payable" and not to those which have been "paid", as held by the Hon'bl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee has not deducted tax at source as required under Section 194C, 194I and 194J of the Act. However, non-compliance of the said provisions is sought to be justified on the ground that the agreement inter se between the assessee and the harvester is not a valid contract inasmuch as the farmer is not a party to the said agreement upon whose land the harvester works and whose produce is purchased by the assessee. It is also argued that the said agreement is not ratified by the farmer. In our considered view, the said argument advanced on behalf of the assessee is fallacious and is noted only to be rejected. We say so because, there is no dispute with regard to the fact that the assessee has entered into specific agreement/s for harvesting and transportation of sugarcane and the harvester has been admittedly paid harvesting and transportation charges by the assessee. This leads to an irresistible inference that the produce namely the sugarcane has been harvested and transported by the contractor. Harvesting and transportation can be effected only with consent of the owner of the sugarcane namely farmer." The assessee also took two other arguments, viz., (a) the ass....