Income Tax Appellate Tribunal - Indore
Commissioner, Lok Shikshan ... vs Department Of Income Tax on 22 December, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL,
INDORE BENCH, INDORE
BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARMA, A.M.
PAN NO. : BPLDO0429C
I.T.A.No.42 & 43/Ind/2011
Period : 1.4.2008 TO 26.2.2010
Additional CIT (TDS) Commissioner,
Bhopal vs Lok Shikshan
Sanchalanalaya,
Gautam Nagar,
Bhopal.
Appellant Respondent
Appellant by : Shri Keshav Saxena, CIT DR
Respondent by : Shri Anil Khabya, CA
Date of Hearing : 22.12.2011
Date of : 28.12.2011
pronouncement
ORDER
PER R. C. SHARMA, A.M.
These are the appeals filed by the Revenue against the order of CIT(A) dated 31st December, 2010, in the matter of order passed u/s 271C and u/s 201(1)/201(IA) of the Income- tax Act, 1961.
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2. The Revenue is aggrieved for CIT(A)'s action for cancelling the demand raised u/s 201(1)/201(IA) of the Income-tax Act, 1961, and also for deleting the penalty imposed with respect to such demand u/s 271C of the Income-tax Act, 1961.
3. Rival contentions have been heard and records perused. The AO observed that during the course of TDS survey proceedings in the case of the assessee, it was found that no tax at source has been deducted in respect of payments made for construction work. It was also noted that TDS u/s 194C was required to be made and deposited on contract given to M.P. Laghu Udyog Nigam for purchase of furniture and cycles etc. by the assessee as it consolidated works contract. The AO further observed that the assessee also failed to deduct tax at source u/s 194J of the Income-tax Act, 1961, on payment of supervision charges to M.P. Laghu Udyog Nigam. Accordingly, the assessee was treated as assessee in default u/s 201(1) for non deduction and deposit of TDS and also interest u/s 201(1A) of the Income-tax Act, 1961, on payments to government and public sector 2
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undertakings of M.P. State Government for the purpose of construction of school buildings and arranging the supply of furniture/cycles.
4. By the impugned order, the ld. CIT(A) deleted the demand so raised after having the following observations :-
"I have gone through the order passed by the Assessing Officer and the submission of the appellant. I find that on the facts and circumstances of the case, the AO was not justified in treating the appellant in default u/s 201(1) for its liability to deduct tax under the provision of Section 194C to 194J of the Income-tax Act, 1961. Further, the AO was not justified in charging interest u/s 201(1A) of the Income-tax Act, 1961, in the appellant's case. I agree with the ld. Authorized Representative's contention that the appellant had reasonable cause for non-deduction of TDS on fund transferred to various government Department undertakings for construction of school building and for arranging purchase of cycle, school furniture etc. as 3
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construction and purchase work was to be done through the government agencies only. It is also pertinent to note that the deductee government agencies had deducted tax at source from the bill of the contractors. That the AO was himself deleted the TDS liability on simple contract of sale and supply of goods like bicycle, furniture which was earlier treated as work contract and JTDS demand was made u/s 194C by passing rectification order on 29.11.2010. The reliance by the appellant on the decision of Hon'ble Supreme Court in CIT vs. Bharti Cellular Ltd. is applicable in the case of the appellant as there is no loss to the revenue. Though TDS was not deducted by the appellant on the fund transferred but TDS was properly made by these deductees (Government agencies) who made payments to contractors for the execution of work contract. These government agencies have duly accounted for the fund received from the appellant and discharged their tax liability by filing income tax 4
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returns. The decisions of the Hon'ble Supreme Court in the case of CIT vs. Eli Lilly and Co. (India) Pvt.Ltd., 312 ITR 225 and Hon'ble Karnataka High Court in Children Education Society vs. FDCIT (TDS)319 ITR 409 also support the appellant case.
In view of the above facts and as per law, there was no default on the part of the appellant within the meaning of Section 201(1) and 201(1A) of the Income- tax Act. Thus, the order passed u/s 201(1) by ACIT (TDS) Bhopal dated 23.3.2010 for the period 1.4.2008 to 26.2.2010 raising total demand of TDS and interest of Rs. 3,22,88,503/- is hereby cancelled and the grounds of appeal are allowed."
5. The Revenue is in further appeal before us.
6. We have carefully considered the rival contentions and found that the deductee government agencies had duly deducted tax at source from the bills of the contractors and we also find that the AO has deleted the TDS liability on simple contract of sale and supply of goods, which was earlier treated by him as works contract and TDS demand was raised u/s 5
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194C. Since the assessee has just transferred the fund and had not incurred any expenditure, it was not under statutory obligation to deduct any tax and the TDS was properly deducted by these Government Agencies to make payments to the contractors for execution of the works contract. We also found that these Government agencies have duly accounted for the funds received from the assessee and discharged their tax liability by filing income tax returns. The detailed findings recorded by the ld. CIT(A) at page 7 as reproduced hereinabove has not been controverted by the ld. Senior D.R., we, therefore, do not find any infirmity in the order of CIT(A) for deleting the demand raised u/s 201(1) and 201(1A) of the Income-tax Act, 1961.
7. As the demand itself has been deleted, there is no merit for levy of penalty for such default u/s 194C, accordingly, we do not find any infirmity in the order of CIT(A) for deleting such penalty after having the following observations :-
"I have gone through the penalty order as well as the written submissions of the appellant. I find that the 6
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AO was not justified on the facts and in the circumstances of the appellant's case to levy penalty u/s 271C of Rs. 2,45,54,563/-. I agree with the ld. Authorized Representative's contentions that the appellant had reasonable cause for non deduction of TDS on funds transferred a payments made to various Government Department Undertakings for construction of school buildings and purchase of cycles, furniture etc. as the construction and purchase work was to be done through these government agencies. That these deductees Government Agencies have also deducted tax at source from the bills of contractors. That earlier simple contract of sale and supply of goods like furniture for school and cycle for school children was treated as works contract but subsequently TDS demand u/s 194C was rectified vide order passed on 29.11.2010. I also hold that levy of penalty would not be justified by placing reliance on the decision of the Hon'ble Supreme Court in CIT vs. Bharti Cellular Limited (supra) as there is no loss to revenue. That TDS was no deducted by the appellant on funds transferred but TDS was made by the government agencies who made the payment to contractors. Further, these government agencies have accounted for the funds received from the appellant and 7
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discharged their tax liabilities and paying taxes and by filing income tax returns. The decisions of Hon'ble Supreme Court in CIT vs. Eli Lilly (India) and Hon'ble Karnataka High Court in Children Education society (Supra) support the appellant's case. Therefore, on the facts and as per law, the penalty u/s 271C of Rs.
2,45,54,563/- is deleted in full."
8. In the result, both the appeals of the Revenue' are dismissed.
This order has been pronounced in the open court on 28th December, 2011.
(JOGINDER SINGH) ( R.C.SHARMA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 28th December, 2011.
CPU*
2226
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