TaxTMI 
TaxTMI 
TaxTMI 
2023 (11) TMI 538
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.... been filed. 2.1 On this issue the ld. AR of the assessee did not object to the reasons advanced and prayed that the bench may decide the issue in accordance with the law. 2.2 We have heard the contention of the parties and perused the materials available on record. The reasons advanced by the revenue for condonation of delay of 30 days has merit and are sufficient to condone the delay. Thus, the delay of 30 days in filing the present appeal by the assessee is condoned in view of the decision of Hon'ble Supreme Court in the case of Collector, land Acquisition vs. Mst. Katiji and Others, 167 ITR 471 (SC) as the revenue is prevented by sufficient cause and therefore, we admit this appeal and condone the delay. 3. Admitting the appeal of the revenue moving further on merits, the ld. DR submitted that the matter pertaining to Divisional Forest Officer, Ajmer in ITA no. 358/JP/2023 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical except the difference in the amount in other assessment year. The ld. AR did not raise any specific ....
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....g. During the course of verification it was found that the F.Y 2015-16 the total payment of Rs. 5,88,89,874/- was paid by the office of Deputy Conservator of Forest, Ajmer to various VFPMC/EDCs and no TDS on the same has been deducted. A show cause notice u/s 201(1) & 201(1A) of the Act was issued by the AO. In response to the said notice, the assessee stated that as per notification of Rajasthan State Government payments to EDC/VFPMCs do not fall under the category of contract payments, therefore, the provisions of section 194C is not applicable. The AO rejected the arguments stating that State Government GR cannot override provisions of Income Tax Act and therefore payments made to these AOPs were in nature of contract payment wherein the assessee was held liable to deduct TDS and accordingly the deductor treated as assessee in default u/s. 201(1)/201(1A) of the Act for non-deduction and deposition of tax at source by an order dated 20.03.2019. 6. Aggrieved from the order of the Assessing Officer assessee preferred an appeal before the ld. CIT(A) who has based on the written submission filed by the assessee allowed the appeal of the assessee. The relevant finding upon which the ....
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....he Act for non deduction of TDS u/s 194C on contract payment. 4.3.2 I have considered the rival arguments. It is evident from the above paragraphs, that there is no doubt regarding the institution of these EDCS/VFPMC groups or the nature of the work executed by them for the forest department. The only issue at hand is whether payments made for preservation of forest/reforestation by employing self help groups as per implementation of panchayti raj/NREP/RLEGP can be constituted as contract payment within the meaning of section 194C. 4.3.3 During the appellate proceedings, the appellant placed reliance on the CBDT circular no. 502 (F.No. 385/49/86-ITC dated 27.01.1988). As per this circular, programmes under NREF/RLEGP are executed with the participation of the people and the Panchayati Raj institutions under the active supervision of the State Governments in conformity with the guidelines framed by the Central Government. There is no contract between the village committee/voluntary agencies and the State Governments, which is sine qua non for attracting the provisions of section 194C. Moreover, these schemes specifically ban the employment of contractors/middlemen for the execut....
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.... per provision of section 11 and 12 or that as cooperative society so as to claim the provision of section 80P of the Act. Thus, there is no means by which the payee are exempted from tax. The ld. CIT(A) has granted the relief to the assessee based on the circular of state government and the decision of the apex court is not applicable to the present set of facts. The provision of the Central Act cannot be exempted by the state government notification. The CBDT circular no. 502 dated 27.01.1988 is not applicable as the scheme referred in that circular and the payment are for the different scheme. Thus, considering the provision of section 194C of the Act the appeal of the assessee has been allowed without considering the findings of the ld. AO recorded in his order and the arguments presented herein above. 8. Per contra, the ld. AR of the assessee supported the detailed finding of the ld. CIT(A). The ld. AR of the assessee filed a detailed written submission in support of the order passed by the ld. CIT(A) and contention raised there upon based on that aspect of the matter the appeal of the assessee is allowed by the ld. CIT(A). The written submission filed by the assessee is repr....
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....clarified that "MORE & MORE SUCH VAN SURAKSHA SAMITI" would be inspired under this "JANTA VAN YOJNA" for tree plantation & forestry. Such samitis shall not be in category of "THEKEDAR" (Contractor) rather this is work done under the Government Public Participation under the Government scheme of NREP(National Rural Employment programme) & RLEGP (Rural Landless Employment Guarantee Programme); since as per government notification such samiti & member would be local inhabitants of village / area only as per constitution & thus circular No. 502 dated 27/01/1988 squarely applies which states that "PROVISION OF SECTION 194C ARE NOT ATTRACTED IN THE CASE OF PAYMENTS MADE IN RESPECT OF SUCH WORKS". (Page 5 to 6, 7 and 11) Further it is again a "REIMBURSEMENT OF EXPENSES" since the objects of such "VAN SAMITIS" are "NO LOSS NO PROFIT" & thus again the provisions of circular no. 715 dated 08.08.1995 applies. From the bills raised to accounts submitted by such samities it is clear that there are no surplus / loss (except for cash accounting by such samiti's). (Page 8 to 10) (e) Thus the applicability of provisions of section 194(C) do not arise. The statements of staff recorded u/sec. 1....
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.... or any such intermediary agencies are engaged in the execution of work. (4) Thus, it is clear that the programmes under the NREP and RLEGP are executed with the participation of the people and the Panchayati Raj institutions under the active supervision of the State Governments in conformity with the guidelines framed by the Central Government. There is no contract between the village committee/voluntary agencies and the State Governments, which is sine qua non for attracting the provisions of section 194C. Moreover, these schemes specifically ban the employment of con tractors/middlemen for the execution of the work undertaken under these schemes. (5) In view of the foregoing, the provisions of section 194C are not attracted in the case of payments made in respect of works executed under these programmes. Accordingly in terms of circular no. 502 (F.No. 385/49/86-ITC dated 27.01.1988) of Government of India, Income Tax department it has been clarified / explained that provisions of section 194C are not applicable in case of afore captioned situation. Since Dy. Conservator Forest Department Bhilwara (Raj.) is a wing of Rajasthan State Government, Jaipur & works for forest d....
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....comes credited or paid or likely to be credited or paid during the previous year in which such income is to be included exceeds the maximum amount which is not chargeable to income tax. Thus when such societies are not having "TAXABLE INCOME" in terms of section 139 of Act; no return is to filed by them; nor are required to get pan. Section 197A(IB) also prohibits to them for apply "LOWER DEDUCTION" or to file any form. Thus asessee is "NOT IN DEFAULT" & no liability u/sec. 201(1) & 201(1A) can be determined. ALTERNATIVELY in view of provisions in section 201 / 201(1A) w.e.f. 01.07.2012 (Finance Act, 2012) it has been clearly stated as under:- Provided that in case any person, including the principal officer of a company fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident but is not deemed to be an assessee in default under the first proviso to sub-section (1), the interest under clause (i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident Thus the assessee cannot be cons....
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....be of a non - trading character. At what point does the relationship of mutuality ends and that of trading begins is a difficult and vexed question. A host of factors may have to be considered to arrive at a conclusion. Whether or not the persons dealing with each other constitute a mutual club or are carrying on a trading activity or an adventure in the nature of trade, is largely a question of facts - CIT v. Bankipur Club Ltd. (1997) 92 Taxman 278 (SC)." Similar view has further held in case of Chelmsford Club V/s CIT(2000) 243 ITR 89 (SC). "Principle of mutuality will extend to property income also - Where the assesse - club provides recreational facilities to its members and their guests and to no one else, and is run on no profit no loss basis, in that the members pay for all their expenses and are not entitled to any share in the profits and surplus, if any, is used for maintenance and development of the club, the notional income from house property in respect of the club building is not assessable to tax, on the principle of mutuality which will extend to such deemed income also on the facts of the case - Chelmsford Club V. CIT(2000) 243 ITR 89(SC)." "Activities should....
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....F SECTION 194C ARE NOT ATTRACTED IN THE CASE OF PAYMENTS MADE IN RESPECT OF SUCH WORKS". Further it is again a "REIMBURSEMENT OF EXPENSES" since the objects of such "VAN SAMITIS" are "NO LOSS NO PROFIT" & thus again the provisions of circular no. 715 dated 08.08.1995 applies. From the bills raised to accounts submitted by such samities it is clear that there are no surplus / loss (except for cash accounting by such samiti's. Even Hon'ble Supreme Court in case of Gujrat State & Others v/s Pratam Singh Parmar J.T. 2001(3) SC 326 in the bench of G.B. Patnaik & Shri V.N. Agarwal order dated 31.01.2001 has decided that State Government & Forest Department is not an "INDUSTRY" but there act are "UNIVERSAL". Further in this case all pan number of each VFPMC were submitted to A.O & has been admitted by A.O. in assessment order itself (Page 3 of Ao's order) & thus of same the provisions of section 206AA (Requirement to furnish pan or if Pan Not furnished TDS at 20% instead rate in force) cannot be applied. Thus even if provisions of section 201 / 201A are applied; TDS liability should be considered only to the extent of TDS rates in force u/sec. 194C e.g. 2% & not at 20% by invoking....
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....P and RLEGP schemes of government. (6) Copy of High Court order that "Forest Act" is not a "Trader"/"Industry" dated 16.08.2001" 11. The ld. AR in addition to the submission so made before ld. CIT(A) also relied upon the CBDT circular No. 502 dated 27.01.1988. The ld. AR of the assessee also submitted that the liability of TDS has been fixed upon the assessee @ 20% considering that EDC's are having any PAN. That information is already on record as the assessee started compliance to avoid unnecessary litigation. The ld. AR of the assessee submitted that in almost all cases there are available PAN. Therefore, even if on merit are not considered then the liability fasten in assessee cannot be @ 20%. Therefore, even if this plea is considered the demand will substantially reduce if these details are considered and mostly importantly even if these details are placed on record non of these EDCs case is re-opened or assessed considering the income paid by the assessee as chargeable to tax this itself proves that the revenue has accepted the fact that the income of the payee are not chargeable to tax and thus the TDS liability fastened on the assessee has rightly been del....
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....the provision of section 194C would automatically apply. The ld. AO held that instructions of state government have no bearing on the Income Tax Act as state government notification cannot overriding the central government Act and the assessee did not bring on record any circular or notification of central government notifying the exemption. Accordingly, the AO held that the assessee is default u/s 201 of the Act for non deduction of TDS u/s 194C on contract payment. The bench noted that it is not under disputed that the institution of these EDCS/VFPMC groups or the nature of the work executed by them for the forest department. The only issue at hand is whether payments made for preservation of forest/reforestation by employing self help groups as per implementation of panchayti raj/NREP/RLEGP can be constituted as contract payment within the meaning of section 194C of the Act or not. The ld. AR of the assessee heavily relied upon the CBDT circular no. 502 (F.No. 385/49/86-ITC dated 27.01.1988). As per this circular, programmes under NREF/RLEGP are executed with the participation of the people and the Panchayati Raj institutions under the active supervision of the State Governments....
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....tract with DTCP, a Government Department of Haryana, as per Agreement (supra) and the HUDA has merely received the payment for and on behalf of DTCP, the assessee was not required to deduct the TDS. 10. Ld. DR for the Revenue by relying upon the Office Memorandum F.No.370133/37/2017-TPL dated 23.12.2017 issued by the Central Board of Direct Taxes (CBDT) contended that there is no ambiguity that HUDA is a taxpayer entity under the Incometax Act and as such, TDS provisions would be applicable on EDC payable by developer to HUDA. 11. When we examine aforesaid contention raised by the ld.DR for the Revenue in the light of the facts and circumstances of the case in which EDC have been paid to HUDA for Financial Years 2013-14, 2014-15, 2015-16 & 2016-17 (upto December 2016) as mentioned by the ld. CIT (A) in para 2.1 of his order, it goes to prove that prior to 23.12.2017, the date of CBDT circular, there was no clarity whatsoever as to the deduction of tax on EDC. When there was no clarity with the assessee prior to 23.12.2017, if TDS was to be deducted by the assessee on payment of EDC, it provided a "reasonable cause" u/s 273B of the Act that TDS was not required to be deducted.....
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.... High Court and the decision of the ITAT, Delhi in the case of Television Eighteen India Ltd., we allow the assessee's appeal and cancel the penalty as levied u/s 271C." 3. Being aggrieved, the Revenue took up the matter before the High Court of Delhi against the order of the Income Tax Appellate Tribunal. The High Court rejected the appeal only on the ground that no substantial question of law arises in the matter. 4. On facts, we are convinced that there is no substantial question of law, the facts and law having properly and correctly been assessed and approached by the Commissioner of Income Tax (Appeals) as well as by the Income Tax Appellate Tribunal. Thus, we see no merits in the appeal and it is accordingly dismissed." 15. Furthermore, coordinate Bench of the Tribunal in case of DCIT (TDS), ACIT (TDS) and JCIT (TDS), Dehradun vs. The Joint Secretary Organizing Committee for Winter Games also decided the identical issue by relying upon the decision rendered by Hon'ble Supreme Court in case of CIT vs. Bank of Nova Scotia (supra) and deleted the penalty u/s 271C by returning following findings :- "31. We have carefully considered the rival contentions and perused....