TaxTMI 
TaxTMI 
2020 (12) TMI 547
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....) Cane Incentive Expenses- Rs. 1,17,25,513/- Payment to H&T Contractors- Rs. 8,20,70,865/- 3. The learned CIT(A)-12 and learned AO ought to have appreciated that the payment made to H&T Contractor amounting to Rs. 8,20,70,865/- is part of purchase price of sugarcane, hence not liable for deduction of tax u/s. 194C of the ITA, 1961. 4. The learned CIT(A)-12 and learned AO erred in law and on facts in holding that the provisions of section 194C(4) of the ITA, 1961 are not applicable for payments made to H&T Contractor amounting to Rs. 8,20,70,865/-. Learned IT-Authorities ought to have appreciated that appellant merely acted as a facilitator between H&T Contractor and farmers and hence provisions of section 194C(4) of the ITA, 1961 squarely applies to the facts of the case. 5. The learned CIT(A)-12 and learned AO erred in law and on facts in holding that the provisions of section 194C(6) of the ITA, 1961 are applicable only to persons engaged in the business of plying, hiring or leasing goods carriages. 6. Alternatively and without prejudice to the above grounds, learned CIT(A)-12, Pune and learned AO erred in law and on facts in disallowi....
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....the Act, respectively. For failure to deduct the tax at source, the learned Assessing Officer asked to show cause as to why the stated sum should not be disallowed under Sec. 40(a)(ia) of the Act. In its reply dated 08.01.2014, the assessee stated that it got lower deduction certificates u/s. 197 of the Act in respect of its 120 cane transport and harvesting contractors and therefore in view of the certificates, no TDS was required to be deducted. The learned Assessing Officer found that TDS certificate u/s. 197 of the Act were only with respect to contractual payments i.e., 194C payment and not in respect of the payments to be made under Sec. 194J of the Act. Moreover, as per certificates u/s. 197 of the Act, the assessee was directed to deduct TDS @ 0.01% on the payments made to the said contractors between 28.03.2011 to 31.03.2011, whereas the assessee had not deducted even a single rupee on account of TDS. 6. The assessee filed written submissions before the learned Assessing Officer which were reproduced at Para 3.6 of learned Assessing Officer's order. The contentions of the assessee are that: (1) TDS was not deductible on the above three payments since it was....
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....ssions which are on record. The learned Commissioner of Income-Tax (Appeals) after considering the facts of the case, submissions of the assessee and the assessment order gave a categorical finding on the disallowance under Sec. 40(a)(ia) of the Act. It was submitted before the learned Commissioner of Income-Tax (Appeals) that the assessee purchased sugarcane from the farmers on ex-gate basis. In other words, the responsibility and liability of bringing the sugarcane till the factory gate of the assessee was that of the farmers supplying the cane. Many farmers preferred to supply the cane directly at the factory and in such cases, these farmers incurred the cost of transportation on their own. However, some farmers were unable to deliver the cane to the factory gate of the assessee and in such case on behalf of these farmers, the assessee appointed the transporters for ensuring the transport of sugarcane to the factory gate. It was further observed that there was an agreement between cane growers i.e., farmers/suppliers and the company. It was submitted before the learned Commissioner of Income Tax (Appeals) that the assessee was not incurring harvesting and transport expenses on h....
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....the assessee. As per clause (3), any material supplied by the assessee was to be compensated to the assessee directly. As per clause (4) any damage in the process of cutting and transporting were made to be good to the assessee by the contractors. As per clause (8) rates for the entire activity of harvesting and transport were decided by the assessee directly with these contractors. As per clause (13), time-table of the assessee had to be adhered to by the contractors. As per clause (20), if any advance paid by the assessee remained pending, the same was to be refunded to the assessee by these contractors and as per clause (34), the assessee had a right of legal proceedings in case of failure of the contractors as regards their performance. Agreement shows that sugarcane growers were not a party to the contract made with the transporters/contractors and the contention that payments were made on behalf of the farmers was without any basis. Therefore, there is a categorical finding by the learned Commissioner of Income-Tax (Appeals) that there were contracts entered into by the assessee one with the farmers i.e., sugarcane growers and another with that of with the transporters. There....
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....tractors were engaged by the assessee in its own right and in all these cases, where harvesting and transport charges were paid, the same were the liability of the assessee. Farmers were only concerned with the receipts of the net sugarcane price before the start of the season and therefore it is clear that the relationship between the assessee and the contractor/transporter that of contractor and the contractee and the assessee was under the obligation to deduct tax at source u/s. 194C of the Act. In fact, the filing of application under Sec. 197 of the Act and securing lower deduction certificate also suggests that the assessee was aware of its responsibility as tax deductor and therefore, the learned Commissioner of Income-Tax (Appeals) upheld the action of the assessee in disallowing the expenses of Rs. 8,20,70,865/- under Sec. 40(a)(ia) of the Act for failure of the assessee to deduct TDS under Sec. 40(a)(ia) of the Act on payments made to harvesting and transport contractors. 11. At the time of hearing before us, the learned Authorised Representative of the assessee took us through the orders of the learned Assessing Officer as well as the learned Commissioner of Income-Ta....
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....parate contracts entered into by the assessee one with the farmers and another with the transporters and therefore, the farmers were not reaching the sugarcane to the gate of the assessee factory. 13. We are of the considered view that when the assessee is entering in his own right and capacity in contract and the payment to harvesters/transporters were the liability of the assessee and directly done by the assessee to them, when the farmers were only concerned with the receipt of net sugarcane price fixed before the start of the season and when the facts are crystal clear that the payments made by the assessee were not made on behalf of the farmers, in such scenario, there is a strict relationship between the assessee and the contractor/transporter as that of the contractor and the contractee and in such circumstances, the assessee was under the legal obligation to deduct TDS under Sec. 194C of the Act and since this legal obligation was not fulfilled by the assessee, therefore, disallowance of Rs. 8,20,70,865/- u/s. 40(a)(ia) of the Act as confirmed by the learned Commissioner of Income-Tax (Appeals) is hereby sustained. Accordingly, grounds 1 to 4 of the assessee's appeal....
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....educted if single payment made to H&T Contractors does not exceed Rs. 30,000/- and aggregate amount in a year does not exceed Rs. 75,000/-. The assessee contends that in the present case, there are some instances wherein the payments to the H&T contractors does not exceed both the limits prescribed under Sec. 194C(5) of the Act and as such "within the limits" payments to H&T contractors, assessee is not required to deduct tax. The assessee admits that this ground could be remitted back to the learned Assessing Officer to reach a suitable finding. 18. That on perusal of the order of learned Commissioner of Income-Tax (Appeals), we find that whether there were some cases where payment made to some contractor does not exceed the limits prescribed under Sec. 194C(5) of the Act or not has not been brought out at all and it requires factual verification. Therefore, this limited issue with regard to Sec. 194C(5) of the Act is restored to the file of learned Assessing Officer for factual verification and adjudicating of the issue while complying with the principles of natural justice. Ground No. 6 is allowed for statistical purposes. 19. With regard to the Additional Ground No. 9, th....