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2013 (1) TMI 459 - AT - Income Tax


Issues Involved:
1. Deduction under section 80IB(11) on gross profit from trading of potatoes.
2. Alternate submission regarding interest and rent set off related to potato trading.
3. Deduction under section 80IB(11) on interest received from cultivators.
4. Advances to cultivators and their connection to the main business activity.
5. Alternate submission on net interest received and paid.
6. Addition of Rs.5,73,766/- under section 40a(ia) read with section 194C.
7. Applicability of TDS provisions on the payment of Rs.5,73,766/-.
8. Legal position regarding section 40a(ia) applicability only on amounts payable at the end of the previous year.

Detailed Analysis:

1. Deduction under section 80IB(11) on Gross Profit from Trading of Potatoes:
The appellant claimed a deduction under section 80IB(11) on the gross profit earned from trading potatoes. The Tribunal referenced a previous decision in the appellant's own case (ITA No.68/Agr/2011 for A.Y. 2007-08) where it was held that no deduction is permissible under section 80IB(11) for potato trading profits. The Tribunal confirmed that the facts of the current case were identical to the previous case and upheld the CIT(A)'s order denying the deduction.

2. Alternate Submission Regarding Interest and Rent Set Off:
The appellant argued that interest paid on a loan taken for their own stock of potatoes and rent should be set off from the gross profit from potato trading. The Tribunal again referred to the previous decision in ITA No.68/Agr/2011, noting that the issue requires reconsideration by the AO. The Tribunal directed the AO to re-examine the matter, considering the bank's certification that the cash credit limit was sanctioned for trading activities of potatoes.

3. Deduction under section 80IB(11) on Interest Received from Cultivators:
The appellant sought a deduction under section 80IB(11) on interest received from advances given to cultivators. The Tribunal, referencing the discussion on the first ground, confirmed that no deduction under section 80IB(11) could be allowed on interest income since the primary deduction on potato trading was not permissible. Thus, the Tribunal upheld the CIT(A)'s order on this issue.

4. Advances to Cultivators and Their Connection to Main Business Activity:
The appellant contended that advances given to cultivators were in the ordinary course of business to ensure that potatoes would be stored in their cold storage, making the interest received part of the main business activity. The Tribunal, consistent with its earlier findings, denied the deduction under section 80IB(11) for interest income derived from advances to cultivators.

5. Alternate Submission on Net Interest Received and Paid:
The appellant alternatively argued that the interest paid on a separate loan taken for advances to farmers should be considered, and only the net interest should be subject to deduction under section 80IB(11). The Tribunal found this issue identical to the second ground and directed the AO to reconsider it, following the directions given for the second ground.

6. Addition of Rs.5,73,766/- under Section 40a(ia) Read with Section 194C:
The AO disallowed Rs.5,73,766/- under section 40a(ia) as the appellant failed to deduct tax at source on payments made to contractors. The appellant argued that payments were made directly to individual laborers, not contractors, and the vouchers were prepared in the names of intermediaries. The Tribunal, not finding evidence to support the appellant's main contention, referred to a similar case (ITA No.434/Agr/2011) and directed the AO to verify the facts and reconsider the issue in light of the Special Bench's decision.

7. Applicability of TDS Provisions on the Payment of Rs.5,73,766/-:
The appellant argued that TDS provisions should not apply as payments were made to individual laborers. The Tribunal found no evidence supporting this claim and upheld the AO's and CIT(A)'s findings. However, it directed the AO to reconsider the matter following the procedure outlined in the similar case mentioned above.

8. Legal Position Regarding Section 40a(ia) Applicability Only on Amounts Payable at the End of the Previous Year:
The appellant contended that section 40a(ia) applies only to amounts payable at the end of the previous year and not to amounts already paid. The Tribunal, referencing the Special Bench decision and the similar case (ITA No.434/Agr/2011), directed the AO to verify the facts and decide the issue accordingly.

Conclusion:
The appeal was partly allowed for statistical purposes, with several issues being sent back to the AO for reconsideration and verification in light of previous Tribunal decisions and relevant legal provisions.

 

 

 

 

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