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TMI Blog1991 (4) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the tax at source. 3. It must be made clear here that me appellant company was not an assessee but it was deemed to be an assessee as per the deeming provisions of s. 20(1) of the Act, 1961 and it was also deemed to be an assessee in default in respect of the tax not deducted at source However, a levy of penalty under s. 221 on such a deemed assessee in default is subject to the satisfaction of the AO if good and sufficient reasons are shown for failing to deduct and pay the tax at source. The penalty requires to be levied on the deemed assessee to be in default in respect of not deducting the tax at source or the tax the assessee deducted at source but failed to pay the same. The penalty is in the nature of simple interest that the deemed assessee in default is liable to pay @ 15 per cent per annum on the amount of the tax either not deducted at source or after deducting the same failed to deposit from the date on which such tax was deductible to the date on which such tax is actually paid. 4. The penalty contemplated under s. 221 of the Act would not exceed the amount of tax in arrears. A proviso to s. 221 of the said Act is made that if the deemed assessee in default p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BDT No. 93 dt. 26th Sept., 1972 which is at page 37 of the paper book. The heading under the note under sl. No. 575 is scope of provisions of the section requiring deduction of tax at source from payments to contractors and sub contractors explained. The main heading is Deduction of tax at source-payments. Under the heading IT Act Collection and recovery of tax a question No. 4 is as follows; Does the requirement apply in a case where payments are made under several contracts during a financial year and the total payments made exceeding Rs. 5,000 but the consideration for any individual contract does not exceed Rs. 5,000.? The answer given therein is No. Now the limit of making payment under any contract at a time is Rs. 10,000 A question No. 5 is as follows; Does the requirement apply to transport contract?" The answer is as follows; A transport contract cannot ordinarily be regarded as contract for carrying out any work and as such no deduction in respect of income tax is required to be made from payments made under such a contact In the case of a composite contract involving transport as well as loading and unloading the entire contract will be regarded as 'works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of green tea leaves, they are delivered within few hours from the time of plucking and such deliveries are made several times, and everyday several contracts are entered into for the purposes of processing and manufacturing of tea. These contracts were governed by the agreement dt. 12th April 1984 and it was clear that there were many contracts for processing of tea and the consideration of each such contract was less than Rs. 10,000 and the provision of s.194 C were not applicable. 9. The agreement dt. 12th April 1984 r/w letter dt. 25th April, 1984 entered into between the appellant-company and M/s General Fibre is only an agreement because it only specifies some terms and conditions which may be binding only if the contract for processing comes into existence when the appellant company delivers the green tea leaves to M/s General fibre for getting it processed. Thus it is a clear contract when a processing of green tea leaves comes into existence only and that depends on delivery of green tea leaves to M/s General Fibre for processing. Sri Kothari also tried his best to distinguish between the contract and an agreement. However we do not find much and considerable differenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rstly for making the payment below Rs. 10,000 under each contract as discussed above and secondly it held a Bona fide intention that it was not required to deduct the tax. 11. In processing and manufacturing the tea, the labour force utilised is quite minimum and negligible, The processing and manufacturing charges were required to be recovered from the supply of green tea leaves and those charges at a time as argued were not more than Rs. 10,000 and the said payment was not under challenge. What the AO. has done is that he has tried to take the cumulative figure of several contracts to arrive at a conclusion that the appellant. company made the payment under the contract more than Rs. 10,000 but still it did not deduct the tax at source. To take the cumulative effect of several contracts in view of the clear intention of the parties and the terms of the agreement would not be correct. There is no doubt that the contract is a memorandum of understanding which provides terms and conditions which are applicable to several contracts in view of the clear intention of the parties and the terms of the agreement would not be correct. There is no doubt that the contract is a memorandum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dt. 25th April, 1984 though made a part of the agreement does not in any way affect the agreement dt. 12th April, 1984. This is only clarification of the terms and conditions of the agreement. 14. The learned departmental representative Sri a. Ghosh also argued at length. He has pointed out that the view taken by the AO. and confirmed by the CIT(A) is quite correct According to him, the contract is only one contract and it cannot now be bifurcated into several contracts on the basis of supplying green tea leaves at several times for processing and manufacturing the tea. He has also contended that the letter dt. 25th April 1984 is an afterthought which is at page. 4 of the paper book The extracts of the register of supplying tea date-wise are filled by taking into consideration the quantity of green tea leaves supplied it cannot be said that the processing charges were more than Rs. 10,000 under each apply. The learned departmental representative relied on the order of the CIT(A). 15. In reply Sri Kothari has pointed out that the appellant-company did not deduct tax at source at anytime during the past so many years and the AO. did not take any action. It is first time that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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