TaxTMI 
TaxTMI 
2022 (4) TMI 1623
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....eing disposed of by a common order and the adjudication in lead case ITA/412/PAN/2018 laid in succeeding paragraphs, shall mutatis mutandis apply to the rest of five appeals. For the sake of convenience, the information of TDS assessments and first appellate orders are tabulated as under; Sr Appeal No Asstt Year TDS Assessment Order Details First Appellate Date of order Under Section Date of Order 1 ITA/412/PAN/2018 2011-2012 201(1) & 201(1A) 01/12/2017 20/08/2017 2 ITA/413/PAN/2018 2012-2013 201(1) & 201(1A) 01/12/2017 20/08/2017 3 ITA/414/PAN/2018 2013-2014 201(1) & 201(1A) 01/12/2017 20/08/2017 4 ITA/415/PAN/2018 2014-2015 201(1) & 201(1A) 01/12/2017 20/08/2017 5 ITA/416/PAN/2018 2015-2016 201(1) & 201(1A) 01/12/2017 20/08/2017 6 ITA/417/PAN/2018 2016-2017 201(1) & 201(1A) 01/12/2017 20/08/2017 4. Before advancing the matter on facts for adjudication, it is essential to reproduce grounds of grievance assailed by the appellant company as under; "1. The order of the Hon'ble Commissioner of Income Tax (Appeals) is contrary to law. Facts and circumstances of the case" 2. The Hon'ble Commissioner of Income Tax (Appeals) erred in isolati....
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.... Act for failure to deduct tax (TDS) from the payments made to contractors u/s 194C of the Act, and consequently passed the orders for the respective assessment years separately, determining the amount of default u/s 201(1), consequential interest liable to be paid u/s 201(1A) and the penalty u/s 206AA(1) of the Act. 5.2 The aforementioned orders passed by the Ld. AO holding the appellant as "assessee in default" for not deducting TDS u/s 194C of the Act, were unsuccessfully challenged before CIT (A)-Belagavi. And aggrieved by the orders of lower tax authorities, the appellant company filed these present six appeals before the Income Tax Appellate Tribunal [for short "Tribunal"] with the grounds assailed herein before at foregoing paragraph 4. 6. After hearing to the rival contentions of both the parties; perused material placed on records and duly considered the facts of the case in the light of settled legal position and the case laws relied upon by the appellant assessee as well the respondent revenue. 7. It is evidently noticeable form the records that; 7.1 The primary issue in the present controversy is, as to whether the payment to harvesting contractors is a payment towa....
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.... of the foresaid defence taken by the appellant, deduced that; a. Contract for harvesting cannot be claimed as contract for purchase of goods. b. Mere colouring of harvesting expenditure as purchase of raw material would not change the basic characteristic of the expenditure and liability to deduct. c. The non-taxability of payment in the hands of recipient contractors cannot absolve the deductor from the statutory liability cased under chapter XVII of the Act, and d. The 201(1) & 201(1A) proceedings are unconnected with disallowance of expenditure u/s 40(a)(ia) of the Act. 7.4 Nota bene, as regards to appellants claim that, the payments to harvesting contractors were made on behalf of the farmers was controverted by the Ld. AO with following categorical findings as laid at Para 3 of page 3 of the assessment order; "The claim of the deductor that payment to the harvesting contractor is made on behalf of the farmers was verified with the help of the contract which the deductor made with the harvesting contractors and it is found that the claim of the deductor is factually incorrect for the following reasons; i) The harvesting contractors are appointed by the deductor an....
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.... regards to engagement of contractor for harvesting of sugarcane for company and payments were made to those contractors without deduction of TDS u/s 194C of the Act in-spite the individual / single payments were exceeded the ceiling of Rs.30,000/- or the aggregate annual payment to the individual / single contractor exceeded the ceiling of Rs.75,000/-. From statement recorded, the Ld. AO observed that, the assessee company engaged these harvesting contractors and transport contractors on its own account and not at the bequest of supplying farmers, furthermore the appellant was engaging them without reference to any farm field but under an open contract, whose financial accounts were settled based upon the quantum of services rendered at the end of each crushing season, thus these payments were noting but in the nature of contractual payments for independent services availed within the meaning of section 194C of the Act and hence held as liable to make TDS from such payments made to its harvesting contractors, however the company failed to deduct tax at source u/s 194C of the Act. Resultantly by an orders u/s 201(1) and 201(1A) of the Act, Ld. AO held the appellant company as "dee....
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....bstance contended that, harvesting activity is a part and parcel of growing sugarcane which is done by the farmers, for which the company is facilitating the farmers in harvesting activity by paying gang leader who takes care of the said activity as the farmer is not found be expert in carrying these techniques. It is also contended before the Ld. CIT(A) that, total cost of sugarcane in fact include cost payable to farmer and harvester as raw material are delivered at the factory gate, and the claim of expenditure is eligible expenditure. To buttress the non-applicability of provisions of section 194C, it is also contended that, no tax is deductible on agricultural income as these payment falls into and in support of contention relied upon plethora of judicial pronouncements. In given facts & circumstances of the case and bone of contentions laid by the appellant, did not impress the Ld. CIT(A), resultantly echoed with the views of Ld. AO and relying upon the Hon'ble Jurisdictional High Court decision in "Ryatar Sahakari Sakkare Karkhane Niyamit Vs ACIT" reported in 383 ITR 261 (Kar), acceded with the assessment framed, in holding that, impugned payments are subject matter of TDS a....
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....redited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source- (i) . . . . . . . (ii) . . . . . . . (4) . . . . . . . . (5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed thirty thousand rupees: Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds seventy-five thousand rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section. (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum. (7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person au....
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....tituent of section 194C of the Act are fourfold viz; a specified person responsible for making payment to a resident for work in pursuance of a Contract with such specified person. Any transaction which is characterised with a forestated four key constituents, shall be mandatorily liable for compliance u/s 194C of the Act. 11.2 Insofar as the present case is concern, of the above four, three constituents remained undisputed that, the assessee is a company falling with the ambit of specified person in terms of clause (i)(d) of explanation to section 194C of the Act, the payee namely harvesting & transport contractor are resident in India and the company indeed has entered into contracts with various harvesting contractors (by whatever name called or referred). Surviving controversy spins around the fourth constituent i.e. "any work or work". The definition of "work" under the provision is not exhaustive but inclusive, and although circular issued by the Central Board of Direct Taxes [for short "CBDT"] vide circular No. 715 dt 08/08/1995, 716 dt 09/08/1995 has broadly clarified the applicability of section 194C of the Act to all type of contracts for carrying out any work, however a....
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....were taken for scrutiny and according due opportunity, the Ld. AO clearly brought on record that, the assessee company since engaged these resident contractors on its own account on principal-to- principal basis, for a services under a valid enforceable contracts and paid them sum of money in terms of such contracts / agreements for the services availed, consequently, held as liable to comply with the provisions of sections 194C. The Ld. CIT(A), reconsidering the factual position in the light of judicial precedents, concurred with the findings of the Ld. AO. In these facts and circumstance, we prima-facie are not able to persuade ourselves to accept the argument of Ld. AR for the reason laid in immediately preceding paragraphs. In our view, it is hardly any legal ground for consideration as the non-compliance of statutory obligations shall always have their own consequences to flow. 11.5 Before eventide the adjudication, we turn no deaf ear to the decision of co-ordinate bench in the case of "M/s Parry Sugar Industries Limited Vs DCIT" (Supra) referred by the Ld. AR, however the adjudication in the afore-referred case prima facie does not help the appellant company in as much as, ....
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....mbay Hight Court in "CIT Vs Dwarkadheesh Sakhar Karkhana Ltd" (2018-TIOL-118-HC-Mumb- IT) is concern, at the outset, it shall be indispensable to mention that, the Hon'ble High court dismissed the aforesaid appeal in the absence of substantial question of law arising out of the order of lower authorities. Nevertheless the facts therein in its entirety dissimilar with that of facts of the case before us, and few of such dissimilarities of case relied are noteworthy to make mention of; a. no separate deduction was even claimed for the aforesaid payment to harvesting and transport contractor, b. copy of contract pertaining to assessment under adjudication was before the authorities c. amount were paid to mukadams d. the payment to mukadams as Bakshish e. no separate deduction of amount paid as Bakshish to mukadams 11.7 Before reaching the estuary of adjudication, it is necessary to quote relevant portion of operating para number 26 of adjudication laid in the case of "DCIT & Another Vs NSL Sugar Limited" (ITA/76/Bang/2017) dt. 08/11/2019, which was also relied upon the Ld. AR, to showcase the distinguishable facts; 26. We have perused the paper-book filed by the assessee ....