2014 (2) TMI 899 - HC - Income Tax

Remission made by Tribunal - Liability to deduct TDS u/s 194C of the Act Liability to pay interest u/s 201(1) of the Act Held that - There is no finding as such rendered by the Tribunal and the purpose of the remit to the Assessing Officer is only with a view to enable him to make a proper determination of the facts -The assessee had not appeared before the Assessing Officer in the first instance - The Tribunal observed that the AO should obtain information whether the NGO s to whom payments were made are duly registered under Section 12(A) of the Income Tax Act, 1961 and whether they are liable to pay tax under the provisions of the Act - the Tribunal has clarified that if the payees were not Charitable Institutions whose income is exempted, the Assessing Officer would be at liberty to pass an appropriate order in accordance with law - the Tribunal has not issued a specific direction in regard to the provisions of Section 194C the appeal does not gave rise to any substantial question of law Decided against Revenue.

Summary

Issues:
- Applicability of Section 194-C of the Income Tax Act, 1961 on payments made by Basic Shiksha Adhikari to NGOs for Mid-day-Meals.
- Interpretation of Board's circular dated 27 January 1988 (Circular 502) exempting payments under certain schemes from Section 194-C.
- Consideration of whether Mid-day-Meal Schemes fall under NREP and RLEGP.
- Assessment of whether the Basic Shiksha Adhikari is part of Panchayati Raj Institutions.
- Examination of whether payees are charitable institutions exempt from tax under Section 12A of the Income Tax Act, 1961.

Analysis:
The case involved four appeals filed by the Basic Shiksha Adhikari against the order of the Commissioner of Income Tax (Appeals) regarding the applicability of Section 194-C of the Income Tax Act, 1961 on payments made to NGOs for Mid-day-Meals. The Assessing Officer held the Basic Shiksha Adhikari liable for not deducting tax at source and imposed tax and interest under Section 201(1). The CIT (A) rejected the appeal based on the grounds that the payments were made to organizations providing Mid-day Meals, thus falling under the purview of contractors under Section 194-C. The CIT (A) also questioned the applicability of the Board's circular exempting certain schemes from Section 194-C, as the nature of the payments made was not clarified.

The Tribunal restored the proceedings to the Assessing Officer, emphasizing the importance of determining whether the payees were charitable institutions exempt from tax under Section 12A. The Tribunal highlighted the need for the Assessing Officer to verify if the NGOs were registered under Section 12A and exempt from income tax. If the payees were charitable institutions, the demand for tax should be deleted to avoid unnecessary TDS deposits and subsequent refunds. The Tribunal kept all issues open for the Assessing Officer's decision, including the interpretation of Section 194-C and the impact of the circulars.

The High Court dismissed the appeals, noting that the Tribunal's remit to the Assessing Officer was solely for factual determination. The High Court clarified that the Assessing Officer should assess whether the payees were charitable institutions and liable to pay tax under the Act. The High Court upheld the Tribunal's decision to keep all issues open for the Assessing Officer's consideration, including the applicability of Section 194-C and the interpretation of circulars. The High Court concluded that no substantial question of law arose from the appeal, leading to the dismissal of the appeals.