TaxTMI 
TaxTMI 
2026 (9) TMI 41
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....tionally challenged the addition of Rs.26,89,627 made under section 41(1) in respect of outstanding sundry creditors. For the sake of convenience, the facts of A.Y. 2008-09 are being referred to wherever necessary. 2. The assessee, Maharashtra State Co-operative Marketing Federation Limited, is an apex co-operative marketing society which, inter alia, functions as an implementing/procurement agency of the Government of Maharashtra under various schemes relating to procurement and distribution of agricultural produce. Approximately 95% of its share capital is stated to be held by the Government of Maharashtra and its Managing Director is appointed by the State Government. Under the Minimum Support Price procurement scheme, the assessee acts as the implementing agency for procurement of foodgrains through rural/member co-operative societies. The actual procurement at the field level is undertaken through such societies, whereas the assessee essentially supervises and administers the scheme, verifies the claims submitted by the procuring societies with reference to the rates prescribed by the Government, forwards the same for sanction and, upon receipt of sanctioned funds, releases....
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....07, 17.10.2008 and 22.10.2009 and the accompanying schedules prescribing the admissible expenditure under the MSP procurement scheme. He submitted that these documents demonstrate that the assessee does not independently determine either the nature or quantum of the impugned payments. The Government sanctions the admissible procurement expenditure at predetermined rates, the assessee verifies the claims of the procuring societies and, after receipt of the sanctioned amount, releases the same to the concerned societies/APMCs. Our attention was also drawn to the ledger/control accounts, sample receipts and debit vouchers and details of payments placed in the paper book. Insofar as Market Cess/Market Fee and Supervision Charges are concerned, learned counsel further referred to section 31 of the Maharashtra Agricultural Produce Marketing (Development and Regulation) Act, 1963 and submitted that the Market Fee is a statutory levy which the Market Committee is empowered to levy and collect and, therefore, payment thereof cannot be regarded as consideration for any contractual or agency service rendered to the assessee. 6. We have heard the parties and perused the material placed befo....
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....ks contract merely because the assessee, while acting as the Government procurement agency, discharges or facilitates payment of that liability. There is neither any work contracted by the assessee to the Market Committee nor any consideration paid to it for execution of such work. The basic statutory ingredient which could attract section 194C is therefore absent. 8. The Government sanction documents reinforce the same conclusion from another angle. The schedules placed before us specifically prescribe Market Fee and Supervision/Development Charges at 1.05% of the Minimum Support Price and state that these amounts are reimbursable at the rates approved by the Government of India. Neither the incidence of the liability nor its quantum is determined by the assessee. The assessee does not negotiate the rate with the APMC, does not retain any portion thereof as its income, and does not make the payment in consideration of any service contracted by it. It merely operates within a statutory and Government-controlled procurement framework. Thus, two features converge: first, the payment owes its origin to the statutory levy; and second, under the MSP scheme it constitutes an identifie....
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....an intermediary merely because the recipient performs certain functions at the ground level. The statutory obligation has to be tested against the real juridical relationship giving rise to the payment. Here, the assessee is implementing and supervising a Government procurement programme; the underlying procurement expenditure is sanctioned according to predetermined Government norms; and the assessee receives and disburses the corresponding amounts under that scheme. The contemporaneous Government records and the accounting mechanism therefore support the assessee's contention that, except for its separately identifiable entitlement, the impugned amounts are Government-sanctioned pass-through disbursements. The mere routing of these amounts through the assessee's accounts cannot, without something more, convert them into expenditure independently incurred by the assessee under a contractor/subcontractor relationship so as to attract section 194C and consequently section 40(a)(ia). 11. We may also observe that the Assessing Officer, despite the matter having been restored in the earlier round for examination of the underlying character of these payments, has substantially reject....
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.... way of remission or cessation. Therefore, what must be established is an event of remission or cessation occurring during the relevant previous year. Mere continuance of an unpaid liability for a length of time, or failure to furnish creditor-wise particulars in the particular format desired by the Assessing Officer, does not by itself establish such cessation. Before us, the assessee has placed the list of creditors as well as extracts of the running ledger accounts showing continued recognition of the liabilities, continuing transactions and subsequent payments. No creditor has been shown to have waived or relinquished its claim; no liability has been shown to have been written back by the assessee; nor has the Revenue identified any event during the relevant previous year by which any specific liability stood extinguished in law or in fact. 14. The factual context in which these balances arise is also relevant. The assessee is substantially engaged in implementation of Government procurement and distribution schemes where settlement of liabilities may depend upon verification, sanction and release of funds by the Government. Delay in payment in such circumstances cannot, wit....