2024 (4) TMI 884 - AT - Income Tax

TDS u/s 194H - Commission paid to Primary Agriculture Cooperative Society (PACS) - Non deduction of TDS - Higher rate of TDS @20% in absence of PAN - HELD THAT - Since assessee corporation is paying commission to PACS which are working as agents, we are inclined to hold that commission paid by assessee to PACS is liable for deduction of tax at source u/s 194H of the Act. We, however, notice that assessee did not get proper opportunity of hearing before the assessing officer and even before ld. CIT(A). We also note that the assessing officer has calculated the TDS at the maximum rate of 20% on account of non-availability of PAN even though all PACS are having bank accounts. We also note that commission has been calculated by applying the rate of Rs. 31.25/- on the transaction for F.Y. 2011-12 but the said rate of Rs. 31.25/- was finalised on 26.07.2013 which indicates that correct amount of commission has not been calculated by the ld. AO. It is also observed that deductee, PACS are having banking facility and certainly must be having PAN and had the details of the same been made available to the assessing officer, TDS may not have been calculated at the maximum rate of 20%. Therefore, considering all in order to compute the correct amount of commission paid and in order to ascertain the correct amount of tax to be deducted at source u/s 194H of the Act, the matter is restored to the file of the AO for carrying out necessary verification and calculation. Assessee is also directed to provide full co-operation to the assessing officer by placing all relevant material in order to get the needful information about correct amount of commission and correct amount of TDS u/s 194H of the Act. Accordingly, effective grounds of appeal raised are allowed for statistical purposes.

Summary

Issues Involved:
The issues involved in this judgment are the condonation of delay in filing the appeal, the liability for deduction of tax at source u/s 194H of the Income Tax Act, and the nature of the relationship between the assessee corporation and the Primary Agriculture Cooperative Societies (PACS).

Condonation of Delay in Filing Appeal:
The appellant filed appeals against orders of the Commissioner of Income Tax (Appeals) which were time-barred by 389 days. The delay was attributed to a mistake by the person handling income-tax affairs and the need for various approvals due to the appellant being a State-owned Corporation. Despite opposition from revenue authorities, the delay was condoned in the interest of justice based on the reasons presented during the hearing and a direction from the High Court to dispose of the appeals promptly.

Liability for Deduction of Tax at Source u/s 194H:
The case involved the non-deduction of tax at source u/s 194H by the appellant corporation on commission payments to Primary Agriculture Cooperative Societies (PACS). The assessing officer held the appellant in default for non-deduction of tax and raised a demand. The appellant argued that the transactions with PACS were on a principal-to-principal basis, but the Tribunal found that the PACS were acting as agents of the State Government based on established guidelines. The Tribunal directed the matter back to the assessing officer for proper verification and calculation of the tax liability.

Nature of Relationship with PACS:
The Tribunal analyzed the guidelines issued by the State Government regarding the role of PACS in procuring foodgrains and found that the PACS were acting as agents of the Government. Despite the appellant's argument that the transactions were on a principal-to-principal basis, the Tribunal concluded that the PACS were providing agency services and thus the commission paid was liable for tax deduction at the source u/s 194H. The Tribunal directed the assessing officer to reevaluate the tax liability based on proper verification and cooperation from the appellant.