2015 (4) TMI 1042 - AT - Income Tax

Tds u/s 194C - non deduction of TDS - CIT(A) deleting the demand raised by A.O. and interest payable u/s 201(1A) - Held that - It is found that there is no contractor-contractee relationship between the assessee and the RSAMB. The RSAMB is a parental body of Krishi Upaj Mandi Samiti. The Krishi Upaj Mandi Samiti is required to make a contribution out of its income to the marketing board and the marketing board is required to utilize these receipts on improvement of the agricultural market in the State, which is owned by the Krishi Upaj Mandi Samiti. The Marketing Board also gives aid and grant to Krishi Upaj Mandi Samiti to enable them to discharge their duties and functions satisfactorily. The CBDT Circular 741 dated 18.04.1996, Circular No. 745 dated 19.07.1996, Circular No. 22/68-ITB dated March 28/May 13, 1968 are also squarely applicable in the case of the assessee. The Samiti is required to contribute as per Section 18A of the Rajasthan Agricultural Marketing Act, 1961, which is a certain percentage of its income and is obligatory on the part of assessee. Therefore, no TDS is liable to be deducted U/s 194C and 194J of the Act. Accordingly, order of the Ld. CIT(A) is upheld. - Decided in favour of assessee.

Summary

Issues:
Appeal against deletion of demand due to non-deduction of tax at source under sections 201(1)/194C and 201(1)/194J of the IT Act, 1961.

Analysis:
1. The appeal was filed by the revenue against the CIT(A)'s order for A.Y. 2009-10, challenging the deletion of demand for non-deduction of tax at source under sections 201(1)/194C and 201(1)/194J of the IT Act, 1961. The Assessing Officer (AO) observed that the assessee made payments to RSAMB for construction and contributions, failing to deduct TDS. The AO held that the payments were covered under sections 194C and 194J, thus creating a demand of tax and interest. The CIT(A) allowed the appeal, stating that there was no contractor-contractee relationship between the parties. The contributions made were obligatory under the Rajasthan Agricultural Marketing Act, exempting them from TDS requirements under sections 194C and 194J. The CIT(A) relied on precedents and CBDT circulars to support the decision.

2. The revenue appealed the CIT(A)'s decision. The Departmental Representative (DR) supported the AO's order, while the assessee's representative argued that the payments were made to a government organization without any profit element, thus not warranting TDS deductions. The ITAT upheld the CIT(A)'s decision, emphasizing the lack of a contractor-contractee relationship between the parties. The contributions made by the assessee to RSAMB were mandatory under the Rajasthan Agricultural Marketing Act, exempting them from TDS obligations under sections 194C and 194J. The ITAT referred to relevant CBDT circulars and legal provisions to support the decision.

3. In conclusion, the ITAT dismissed the revenue's appeal, affirming the CIT(A)'s order. The ITAT found that the payments made by the assessee to RSAMB for construction and contributions did not attract TDS requirements under sections 194C and 194J due to the nature of the transactions and the mandatory nature of the contributions under the Rajasthan Agricultural Marketing Act. The decision was based on the absence of a contractor-contractee relationship and the legal provisions governing the contributions made by the assessee to RSAMB.

This detailed analysis provides a comprehensive overview of the judgment, addressing the issues raised in the appeal and the reasoning behind the decisions made by the authorities involved.