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TMI Blog2022 (4) TMI 1623X X X X Extracts X X X X X X X X Extracts X X X X ..... services and transport services availed by the company, is then added to the total cost of material in terms generally accepted accounting principle and norms of inventory valuation regularly employed by the appellant company. Case of the assessee for various years were taken for scrutiny and according due opportunity, the AO clearly brought on record that, the assessee company since engaged these resident contractors on its own account on principal-to- principal basis, for a services under a valid enforceable contracts and paid them sum of money in terms of such contracts / agreements for the services availed, consequently, held as liable to comply with the provisions of sections 194C. CIT(A), reconsidering the factual position in the light of judicial precedents, concurred with the findings of the AO. We prima-facie are not able to persuade ourselves to accept the argument of AR for the reason laid in immediately preceding paragraphs. It is hardly any legal ground for consideration as the non-compliance of statutory obligations shall always have their own consequences to flow. Interestingly, the appellant submitted a copy of purchase agreement entered on 18/08/2016 in the local ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. 3. Since the issue urged in these bunch of appeals are identical in nature, they are heard together for being disposed of by a common order and the adjudication in lead case ITA/412/PAN/2018 laid in succeeding paragraphs, shall mutatis mutandis apply to the rest of five appeals. For the sake of convenience, the information of TDS assessments and first appellate orders are tabulated as under; Sr Appeal No Asstt Year TDS Assessment Order Details First Appellate Date of order Under Section Date of Order 1 ITA/412/PAN/2018 2011-2012 201(1) 201(1A) 01/12/2017 20/08/2017 2 ITA/413/PAN/2018 2012-2013 201(1) 201(1A) 01/12/2017 20/08/2017 3 ITA/414/PAN/2018 2013-2014 201(1) 201(1A) 01/12/2017 20/08/2017 4 ITA/415/PAN/2018 2014-2015 201(1) 201(1A) 01/12/2017 20/08/2017 5 ITA/416/PAN/2018 2015-2016 201(1) 201(1A) 01/12/2017 20/08/2017 6 ITA/417/PAN/2018 2016-2017 201(1) 201(1A) 01/12/2017 20/08/2017 4. Before advancing the matter on facts for adjudication, it is essential to reproduce grounds of grievance assailed by the appellant company as under; 1. The order of the Hon ble Commissioner of Income Tax (Appeals) is contrary to law. Facts and circumstances of the case 2. The Hon ble Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee-in-default u/s 201(1) of the Act for failure to deduct tax (TDS) from the payments made to contractors u/s 194C of the Act, and consequently passed the orders for the respective assessment years separately, determining the amount of default u/s 201(1), consequential interest liable to be paid u/s 201(1A) and the penalty u/s 206AA(1) of the Act. 5.2 The aforementioned orders passed by the Ld. AO holding the appellant as assessee in default for not deducting TDS u/s 194C of the Act, were unsuccessfully challenged before CIT (A)-Belagavi. And aggrieved by the orders of lower tax authorities, the appellant company filed these present six appeals before the Income Tax Appellate Tribunal [for short Tribunal ] with the grounds assailed herein before at foregoing paragraph 4. 6. After hearing to the rival contentions of both the parties; perused material placed on records and duly considered the facts of the case in the light of settled legal position and the case laws relied upon by the appellant assessee as well the respondent revenue. 7. It is evidently noticeable form the records that; 7.1 The primary issue in the present controversy is, as to whether the payment to harvesting con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng each of the foresaid defence taken by the appellant, deduced that; a. Contract for harvesting cannot be claimed as contract for purchase of goods. b. Mere colouring of harvesting expenditure as purchase of raw material would not change the basic characteristic of the expenditure and liability to deduct. c. The non-taxability of payment in the hands of recipient contractors cannot absolve the deductor from the statutory liability cased under chapter XVII of the Act, and d. The 201(1) 201(1A) proceedings are unconnected with disallowance of expenditure u/s 40(a)(ia) of the Act. 7.4 Nota bene, as regards to appellants claim that, the payments to harvesting contractors were made on behalf of the farmers was controverted by the Ld. AO with following categorical findings as laid at Para 3 of page 3 of the assessment order; The claim of the deductor that payment to the harvesting contractor is made on behalf of the farmers was verified with the help of the contract which the deductor made with the harvesting contractors and it is found that the claim of the deductor is factually incorrect for the following reasons; i) The harvesting contractors are appointed by the deductor and an agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of contractor for harvesting of sugarcane for company and payments were made to those contractors without deduction of TDS u/s 194C of the Act in-spite the individual / single payments were exceeded the ceiling of ₹30,000/- or the aggregate annual payment to the individual / single contractor exceeded the ceiling of ₹75,000/-. From statement recorded, the Ld. AO observed that, the assessee company engaged these harvesting contractors and transport contractors on its own account and not at the bequest of supplying farmers, furthermore the appellant was engaging them without reference to any farm field but under an open contract, whose financial accounts were settled based upon the quantum of services rendered at the end of each crushing season, thus these payments were noting but in the nature of contractual payments for independent services availed within the meaning of section 194C of the Act and hence held as liable to make TDS from such payments made to its harvesting contractors, however the company failed to deduct tax at source u/s 194C of the Act. Resultantly by an orders u/s 201(1) and 201(1A) of the Act, Ld. AO held the appellant company as deemed to be an ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at the factory gate, and the claim of expenditure is eligible expenditure. To buttress the non-applicability of provisions of section 194C, it is also contended that, no tax is deductible on agricultural income as these payment falls into and in support of contention relied upon plethora of judicial pronouncements. In given facts circumstances of the case and bone of contentions laid by the appellant, did not impress the Ld. CIT(A), resultantly echoed with the views of Ld. AO and relying upon the Hon ble Jurisdictional High Court decision in Ryatar Sahakari Sakkare Karkhane Niyamit Vs ACIT reported in 383 ITR 261 (Kar), acceded with the assessment framed, in holding that, impugned payments are subject matter of TDS and the assessee company failed to comply with the requirement of section 194C and consequently upheld the assessments orders in toto. 9. Aggrieved, appellant company is before us alleging the action of both the tax authorities as factually incorrect bad in law and in supports of its claim Ld. AR during the course of hearing heavily relied upon the decision of co-ordinate bench in M/s Parry Sugar Industries Limited Vs DCIT ITA No 2814/Bang/2018 and 782/Bang/2019 (order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d during the financial year exceeds seventy-five thousand rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section. (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum. (7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person authorized by it, such particulars, in such form and within such time as may be prescribed. Explanation. For the purposes of this section, (i) specified person shall mean, (a) the Central Government or any State Government; or (b) any local authority; or (c) any corporation established by or under a Central, State or Provincial Act; or (d) any company; or (e) any co- operative society; or (f ) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 194C of the Act, the payee namely harvesting transport contractor are resident in India and the company indeed has entered into contracts with various harvesting contractors (by whatever name called or referred). Surviving controversy spins around the fourth constituent i.e. any work or work . The definition of work under the provision is not exhaustive but inclusive, and although circular issued by the Central Board of Direct Taxes [for short CBDT ] vide circular No. 715 dt 08/08/1995, 716 dt 09/08/1995 has broadly clarified the applicability of section 194C of the Act to all type of contracts for carrying out any work, however applicability in each case needs to be examined with reference to the terms of each contract. In substance this section applies to each and every contract where the predominant factor of contract is service, per contra when contract is for supply of goods or material, the provision of sub-section 3 per se carves out the application of 194C. 11.3 We are not unmindful to the incontrovertible facts of these present appeals such as, the appellant before us is a company and during the periods under consideration was engaged in the business of manufacturi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AO. In these facts and circumstance, we prima-facie are not able to persuade ourselves to accept the argument of Ld. AR for the reason laid in immediately preceding paragraphs. In our view, it is hardly any legal ground for consideration as the non-compliance of statutory obligations shall always have their own consequences to flow. 11.5 Before eventide the adjudication, we turn no deaf ear to the decision of co-ordinate bench in the case of M/s Parry Sugar Industries Limited Vs DCIT (Supra) referred by the Ld. AR, however the adjudication in the afore-referred case prima facie does not help the appellant company in as much as, while dealing with allowability of harvesting and transportation expenses with reference to section 40(a)(ia) r.w. CBDT circular, has categorically vide para 8 of its order, observed that, the farmer by a written agreement vide clause 8 requested the assessee to engage the service on his behalf and authorised to recover cost of such harvest and transport services from his cane bill and it is noteworthy to reproduce the relevant observation to smoke the reliance; 8. Harvesting and supplying of cane to the factory is my responsibility, however for any reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transport contractor, b. copy of contract pertaining to assessment under adjudication was before the authorities c. amount were paid to mukadams d. the payment to mukadams as Bakshish e. no separate deduction of amount paid as Bakshish to mukadams 11.7 Before reaching the estuary of adjudication, it is necessary to quote relevant portion of operating para number 26 of adjudication laid in the case of DCIT Another Vs NSL Sugar Limited (ITA/76/Bang/2017) dt. 08/11/2019, which was also relied upon the Ld. AR, to showcase the distinguishable facts; 26. We have perused the paper-book filed by the assessee containing sample bills for purchase of sugarcane issued by the assessee. The sample bill shows the value of cane supplied by individual farmers and the transportation harvesting charges are shown as deduction, which by implication means that the cane price is inclusive of transportation harvesting charges. ( Emphasis supplied) Au contraire, in the present case under adjudication, it is an well founded fact that, two separate bills viz; one for supply of cane in the name of the farmer and one for the harvesting services were raised and payments were undeniably made thereagainst separa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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