Income Tax Appellate Tribunal - Mumbai
The Maharashtra State Co Op Marketing ... vs Addl Cit Rg 13(3), Mumbai on 19 January, 2023
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "D" MUMBAI
BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER)
AND
SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER)
ITA No. 2760/MUM/2017
Assessment Year: 2010-11
The Maharashtra State Co-op. Addl. CIT Range-13(3),
Marketing Federation Limited 4th floor, Aayakar Bhavan,
Kanmoor House, Narsi Natha Vs. Mumbai-400020.
Street, Masjid,
Mumbai-400 009
PAN No. AAAAT 6218 L
Appellant Respondent
ITA No. 2761/MUM/2017
Assessment Year: 2011-12
The Maharashtra State Co-op. Jt. CIT Range-13(3),
Marketing Federation Limited 4th floor, Aayakar Bhavan,
Kanmoor House, Narsi Natha Vs. Mumbai-400020.
Street, Masjid,
Mumbai-400 009
PAN No. AAAAT 6218 L
Appellant Respondent
ITA No. 3368/MUM/2017
Assessment Year: 2012-13
The Maharashtra State Co-op. Asst. CIT-17(3),
Marketing Federation Limited Aayakar Bhavan, M.K. Road,
Kanmoor House, Narsi Natha Vs. Mumbai-400020.
Street, Masjid,
Mumbai-400 009
PAN No. AAAAT 6218 L
Appellant Respondent
The Maharashtra State Co-op.
Co Marketing 2
Federation Ltd
ITAs 2760, 2761 & 3368/Mum/2017
3368
Assessee by : Mr. Jitendra Singh, AR
Revenue by : Smt. Mahita Nair, CIT-DR
CIT
Date of Hearing
He aring : 12/01/2023
Date of pronouncement
pronounce ment : 19/01/2023
ORDER
PER OM PRAKASH KANT, AM
These three appeals by the assessee are directed against three separate orders, i.e. two orders dated 02/12/2016 for Assessment Years 2010-11 2011 12 and third order dated 03/02/2017 for 11 & 2011-12 A.Y. 2012-13, passed by the Ld.CIT(A) Ld.CIT(A)-28, 28, Mumbai [in short, the Ld.CIT(A)]. As identical issues are involved in these three appeals, therefore, fore, same were heard together and disposed off of by way of this consolidated order for convenience.
convenience
2. As the issue being identical in all the three appeals, the appeal 11 is taken as lead case and adjudicated accordingly. for A.Y. 2010-11 Grounds raised by tthe he assessee in the appeal are reproduced as under:-
"1. ADDITION OF SUB AGENT COMMISSION UNDER SECTION 4Q(a)(ia):
On the facts and in the circumstance of the case, the Learned Commissioner of the Income Tax (Appeals) erred in facts and in law in 1,20,83,1977 in respect of payments confirming the addition of Rs. 1,20,83,1977- made towards subagent commission.
Learned Commissioner of the Income Tax (Appeals) has simply followed the order of the first appellate authority in appellants own case for the earlier year and has ignored the appellants submissions that the payments made to subagents are payments for and behalf of The Maharashtra State Co-op.
Co Marketing 3
Federation Ltd
ITAs 2760, 2761 & 3368/Mum/2017
3368
Government of Maharashtra for its procurement activity. Appellant relies on the decision in case of Arvind Murjani Brands Private Limited Vs. Income Tax Officer [21 Taxmann 131 (2012) Mumbai Tribunal], in support of its argument.
2. ADDITION OF MARKET CESS AND SUPERVISION FEES UNDER SECTION 40(a)(ia):
On the facts and in the circumstance of the case, the Learned Commissioner of the Income Tax (Appeals) erred in facts and in law in confirming the addition of Rs. 1,21,77,1907- 1,21,77,1907 in respect of payments paymen made towards market cess and supervision fees under section 40(a)(ia). .
Learned Commissioner of the Income Tax (Appeals) has simply followed the order of the first appellate authority in appellants own appellants submissions case for the earlier year and has ignored the appellants that the payments made towards market cess and supervision fees are not only for and behalf of Government of Maharashtra for its procurement activity, but are also in the nature of cess / duty and not a payment for services rendered. Le arned Commissioner of the Income Learned Tax (Appeals) failed to understand that payment is in the nature of duty / cess paid to APMC's, a regulatory body and payment is not for availing any services. Further the Learned Commissioner of the Income Tax (Appeals) has s also erred in holding that these payments are covered by provision of section 194H when payment is not made towards commission or brokerage.
3. PRIOR PERIOD EXPENSES:
On the facts and in the circumstance of the case, the Learned Commissioner of the Income Tax (Appeals) erred in facts and in law in Rs.21,42,072/ in respect of prior period confirming the addition of Rs.21,42,072/- expenses. The Learned Commissioner of the Income Tax (Appeals) also erred in facts and in law in not considering prior period of income of o Rs.3,07,117/-.
Appellant relies on the judgement delivered by Delhi High Court in case of Shri Ram Pistons following the judgement in the case of CIT vs. Nagri Mills Ltd. 330 ITR 681 and also in the case of CIT vs. Vishnu Industrial Gases that where the Department has not disputed that the expenditure was deductible but was only disputing the year in which the deduction could be allowed then if the tax rates were the same in The Maharashtra State Co-op.
Co Marketing 4
Federation Ltd
ITAs 2760, 2761 & 3368/Mum/2017
3368
the both the years, the Department should not waste its energies in raising questions ions as to the year of deductibility."
3. Briefly stated, facts of the case are that the assessee is a State level Apex Co-operative operative Society (Federation) registered under the operative Societies' Act, 1960.
Maharashtra Co-operative During the year on, the assessee was engaged in the business of under consideration, marketing of the agricultural commodities procured through its Member Co-operative operative Societies throughout throughout the state of Maharashtra. The commodities include agricultural produce, fertilizers, machinery, etc. F or the year under consideration, the For assessee filed return of income on 30/09/2010 declaring total income of Rs.2,39,83,749/-.
Rs.2,39,83,749/ . The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income-tax short 'the Act') were issued and complied tax Act, 1961 (in sh with. The assessment under section 143(3) of the Act was completed on 26/03/2013, wherein the Assessing Officer made (i) disallowance under section 40(a)(ia) of the Act for not deducting tax cess and supervision fee and sub-agent at sources on market cess commission paid to Member Co operative Co-operative Societies, (ii) disallowance for prior period expenses, etc. On further appeal, the Ld. CIT(A) allowed part relief to the assessee. Aggrieved with the disallowance / addition sustained by the Ld.CIT(A), the assessee is in appeal before the Tribunal by way of raising grounds as reproduced above.
The Maharashtra State Co-op.
Co Marketing 5
Federation Ltd
ITAs 2760, 2761 & 3368/Mum/2017
3368
4. Before us, the Ld. Counsel of the assessee has filed a paper book containing pages 1 to 152.
5. In grounds 1 & 2 of the appeal, the assessee has raised issue of disallowance of commission amounting to Rs.1,20,83,197/ Rs.1,20,83,197/- and disallowance of market cess and supervision fees amounting to Rs.1,21,77,190/- under section 40(a)(ia) of the Act for non deduction of tax at source.
6. We have heard rival submissions of the parties and perused the relevant materials on record. On perusal of the paper book page 59, we find that the tax auditor in clause 17(f) of the form No.3CD pointed out that following amounts were not admissible under section 40(a)(ia) )(ia) of the Act. The relevant note of the tax auditor is reproduced as under:-
under:
Clause 17(f): Details amounts inadmissible under section (40)(a) Nature of Expenses Amt on which TDS Not Remark Deducted Prof. Fees 2,05,000/- TDS Not Deducted Contract 1,20,110/- TDS Not Deducted Market Cess & 1,20,83,197/- TDS Not Deducted Supervision Fees (Refer note below) Sub-agent 1,21,77,190 No TDS Deducted Commission (Refer Note Below) Note: During the year federation has made provision for payment .of Market Cess & Supervision fees payable to variou. District Level Co-
Co op society's for use of market yards, weights & other marketing facilities for procurement of food grains on behalf of M Maharashtra The Maharashtra State Co-op.
Co Marketing 6
Federation Ltd
ITAs 2760, 2761 & 3368/Mum/2017
3368
Govt. & NAFED. For this as per Govt of Maharashtra Resolution (GR) market Cess & Supervision fees @ 1.05% & sub gent commission Co op societies.
@1% payable to various district level APMC & Co-op However assessee has submitted that, these procurements are for & on behalf of Govt; of Maharashtra & NAFED, and market cess & supervision fees & Sub Agent commissions. are reimbursed by the respective Governments and paid to various APMC & district level op society's for procurement of food grains for & behalf co-op be of Government, Also, as per Section 10(26AAB of Income Tax Act, said income is exempt in the hands of various APMC & district Co-opCo Society. In view of these, provisions of section 40(a) are not attracted. The sum of Rs.1,20,83,197/-
Rs.1,20,83,197/ includes, some District Di Level op society's to whom payment .will not exceeds Rs.50,000/-
Co-op Rs.50,000/ for the whole previous year 2009-10.2009
6.1 The Assessing Officer noted that the assessee added back the amount of professional fee and contract expenses on which tax was market cess' not deducted. However, the amount in respect of 'market cess and 'supervision fees' and 'sub agent commission' on which tax was not deducted at source, were not added back to the computation of th se payments on income on the ground that assessee has made those he Government of Maharashtra for assisting various behalf of the operative societies in procuring food-grains marketing co-operative food from various parties. The Ld. AO, however, rejected the contention of the assessee and observed that it is the assessee, who was responsible for making operative Societies aking such payments to the Member Co-operative Account. In respect of sub and claiming the expenses in its P&L Account agent commission, it was held by the Ld. AO that being in the nature of commission the assessee was required to deduct tax at source under section 194H of the Act. In respect of market cess The Maharashtra State Co-op.
Co Marketing 7
Federation Ltd
ITAs 2760, 2761 & 3368/Mum/2017
3368
and supervision fees, according to the Assessing Officer, same were work done by the payee and, in the nature of payment made for the work therefore, tax was to be deducted at source. The Ld. CIT(A), following the finding of his predecessor , sustained the disallowance in respect of sub agent commission and market cess and supervision fee paid.
7. Before us, the Ld. Counsel of the assessee has taken one of Co operative Societies has the alternative arguments that Member Co-operative already offered those amounts of sub agent commission and market cess and supervsion fees as income in the return of income filed by re, same are covered under Second Proviso to them and, therefore, section 40(a)(ia) which has been inserted with effect from 04/2013. However, held to be retrospective by the Tribunal in 01/04/2013.
the case of Santosh Kumar Kedia vs. vs ITO in ITA No. 1905/Kol/2014 and G Shankar vs. ACIT ACI in ITA No.1832/2013/Bangalore Accordingly, the Ld. Counsel of the No.1832/2013/Bangalore.
assessee submitted that matter may be restored back to the file of the Ld. AO for verification and compli nce of the said Proviso.
compliance
8. On the other hand, the Ld.DR relied on the order of the lower authority.
9. For ready reference, the said Proviso to section 40(a)(ia) is reproduced as under:
under:-
The Maharashtra State Co-op.
Co Marketing 8
Federation Ltd
ITAs 2760, 2761 & 3368/Mum/2017
3368
"Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during paid after the due date specified in sub-
the previous year but paid sub section (1) of section 139, thirty per cent of such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid :
Provided further that where an assessee fails to deduct d the whole or any part of the tax in accordance with the provisions of XVII B on any such sum but is not deemed to be an Chapter XVII-B assessee in default under the first proviso to sub-section sub (1) sub-clause, it shall of section 201, then, for the purpose of this sub- be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the 38[resident] payee referred to in the said proviso."
proviso.
9.1 The said Proviso further refers to Proviso below section 201(1) which h is also reproduced below for read reference:-
reference:
"201. (1) Where any person, including the principal officer of a company,--
(a)& (b) xxxxxxxxxxxxxxxxxxxxx Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such payee payee--
The Maharashtra State Co-op.
Co Marketing 9
Federation Ltd
ITAs 2760, 2761 & 3368/Mum/2017
3368
(i) has furnished his return of income under section 139;
139(ii) has taken into account such sum for computing income in such return of income; and
(iii) has paid the tax due on the in income come declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed"
10. In view of the Second Proviso to section 40(a)(ia) read with Proviso to section 201(1) of the Act, no disallowance of expenses under section 40(a)(ia) can be made unless the assessee has been treated as an assessee in default under section 201(1) of the Ac Act for its failure to deduct tax at source from the payment made on account of any interest, commission, brokerage, rent, royalty, fee for professional services, etc. In other words, if the amount paid by the payer has been included by the payee in his ret return of income for relevant assessment year, filed under section 139 of the Act and also paid the tax thereon in such return, to the extent the payee return, has included the sum sum, which has been paid by the assessee, assessee in his disallowance could be made return of income and filed the same, no disallowance under section 40(a)(ia) of the Act. The Second Proviso below section 40(a)(ia) has been inserted by the Finance Act from 01/04/2012. However, in the case of G Shankar vs ACIT (supra), the Tribunal has held that this Proviso should should be treated as retrospectively The Maharashtra State Co-op.
Co Marketing 10
Federation Ltd
ITAs 2760, 2761 & 3368/Mum/2017
3368
applicable from 01/04/2005 and no disallowance for want of TDS can be made if the payee has paid tax thereon, and opportunity to and file form 26A be given.
given Similarly, in the case of Santosh Kumar Kedia vs ITO (supra), the Tribunal Tribunal has held that Second Proviso to section 40(a)(ia) is curative and retrospective and legitimate business expenses cannot be disallowed if the payee has paid taxes thereon.
11. Before us, the Ld. Counsel of the assessee has claimed that the payee co-operative rative marketing societies have paid taxes therein. In view of the same, we feel it appropriate to restore the matter to the file of the Assessing Officer for verification of conditions stipulated in Proviso to section 201(1). If the assessee satisfies the t conditions, furnishes certificate as required under the said Proviso, no disallowance may be made in accordance with the provisions of the Act. Grounds 1 & 2 of the appeals of the assessee are accordingly allowed for statistical purpose.
12. As far as ground 3 is concerned, the Assessing Officer observed, amount of Rs.21,42,072/-
Rs.21,42,072/ to the P&L Account though th he Assessing Officer disallowed the pertained to earlier years. The claim of the assessee in view of the mercantile system of accounting iew of the tax auditor's report. The Ld.CIT(A) followed and in view upheld the finding of the Ld.AO.
The Maharashtra State Co-op.
Co Marketing 11
Federation Ltd
ITAs 2760, 2761 & 3368/Mum/2017
3368
13. We have heard rival submissions of the parties on the issue on dispute and perused the materials on record. On perusal of the paper book pages 70 & 71 71, we find that the tax ax auditor has reproduced the details of prior period expenses in respect of the various units as under:
under:-
Particulars Rupees
Debits during the year 21,42,071.84
Less : Credits during the year 3,07,116.63
Net Credit 18,34,955.21
PARTICULARS DEBIT CREDIT NET BAL
RUPEES RUPEES RUPEES
VCFF FACTORIES 40963 202369.10 161406.10
RICE MILL D'PHATA 271470 0 271470
WASHI 24466.61 0 24466.61
GODOWN 1118767 0 1118767
RDS 232499.64 0 232499.64
FOODGRAIN 163490.59 183.52 163307.07
JOWAR / PADDY 0 14237.05 14237.87
FERTILISER 16457 89607.87 73150.87
BHAGIRATH 0 6 6
MACHINERY 0 713 -713
HEAD OFFICE 273958 0 273958
TOTAL 2142071,84 307116.63 1834955.21
13.1 We find that authorities below have not examined the exact nature of the expenses and, crystallization of those expenses in the year under consideration. If those expenses though pertained to earlier years; however, have crystallized in the year under consideration, then same are liable to be allowed in the year under his issue has not been examined by the lower consideration. Since tthis authorities, we deem it appropriate to restore this issue back to the Ld. CIT(A) for deciding afresh.
The Maharashtra State Co-op.
Co Marketing 12
Federation Ltd
ITAs 2760, 2761 & 3368/Mum/2017
3368
14. The grounds raised in appeals for A.Ys 2011-12 2012 12 & 2012-13 are identical to the grounds which we have adjud icated in A.Y. 2010-11 adjudicated 2010 and therefore, our decision shall apply mutatis mutandis on the grounds raised in A.Ys 2011-12 2011 & 2012-13.
15. In the result, all the three appeals of the assessee are allowed, for statistical purpose.
under Rule 34(4) of Order pronounced in the open Court/under the ITAT Rules, 1963 on 19/01/2023.
Sd/- Sd/
Sd/-
(SANDEEP
SANDEEP SINGH KARHAIL)
KARHAIL OM PRAKASH KANT)
(OM KANT
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
Dated: 19/01/2023
Pavanan, Sr. P.S (on contract)
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER,
//True Copy//
(Sr. Private Secretary)
ITAT, Mumbai