Income Tax Appellate Tribunal - Chandigarh
M/S The District Manager, Punjab State ... vs Acit (Tds), Chandigarh on 4 October, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE MS. DIVA SINGH, JUDICIAL MEMBER
AND SHRI B.R.R.KUMAR, ACCOUNTANT MEMBER
ITA Nos. 274/CHD/2017
Assessment Year : 2012-2013
The District Manager, Vs. The ACIT (TDS),
Punjab State Civil Supply Corp.Ltd., Chandigarh.
#127-128, Giani Zail Singh Nagar,
Ropar.
PAN No. PTLP11392D
(Appellant) (Respondent)
Appellant by : Shri Vibhor Garg,CA
Respondent by : Shri Ravi Sarangal, CIT-DR
Date of hearing : 06.07.2017
Date of Pronouncement : 04.10.2017
ORDER
PER MS. DIVA SINGH,JM The present appeal has been filed by the assessee assailing the correctness of the order dated 09.11.2016 of CIT (Appeals) Chandigarh pertaining to 2012-13 assessment year on various grounds including ground No. 2 and 3 as the other grounds are arguments in support of the said ground. The grounds read as under :
1. That the impugned order is bad both on facts and law.
2. That the Ld Appellate Authority wrongly and illegally held that the appellant was liable to deduct tax u/s 194c inspect of the value of by- products left with miller as deemed contractual payment of shelling of paddy against the material, evidence and pleadings on record.
3. That the Ld Appellate Authority wrongly and illegally confirmed the action of the AO in treating the Appellant as person in default u/s 201 of the Act.
4. That the Appellant Authority wrongly and illegally remanded the issue of Valuation of by-products to Ld AO ignoring that full facts and evidences were on record.
5. That the Ld Appellate Authority though correctly applied the Hon'ble Supreme Court judgment in the case of Hindustan Coca Cola however erred in holding that the period of default of short deduction of tax at source should be from date of payment made to the deductee to the date on which the deductee has filed its return.
2. In the facts of the present case, the assessee had challenged the order of the AO in holding the assessee in default in view of non deduction of TDS. The assessee before the CIT(A) had placed reliance upon the order of the ITAT in the case of ITO Vs Ahaar Consumer Products Pvt. Ltd. in ITA 2910/Del/2010 ITA 274/CHD/2017 A.Y. 2012-13 Page 2 of 5 dated 28.02.2011. For ready reference para 3.7 of the impugned order is reproduced hereunder :
3.7 The Ld. Counsel for the appellant has relied upon the judgement of Hon'ble ITAT in the case of M/s Ahaar Consumer Products Pvt. Ltd (ITA No. 2310/Del/2010 & Othrs dated 22.02.2010), it would be worthwhile to peruse the same as this judgment has been frequently quoted in various other judgements of other judicial authorities of this region. I have carefully gone through the judgement of Hon'ble ITAT, Delhi (supra) and respectfully, I differ from the interpretation of other judicial authorities on this issue.
In the said decision, the Hon'ble Delhi ITAT has given a clear finding on the basis of agreement between M/s Ahaar Consumer Products Pvt. Ltd. (hereinafter referred to as 'ACPL") with its supplier, viz. M/s Ahaar International Ltd (hereinafter referred to as 'AIL7) that it is not a contract covered u/s 194C, but given several reasons to justify its decision including the fact that no service charges/ contractual charges) were ever paid by the M/s ACPL. This needs to be examined in context with the Custom Milling Policy of the Government. As per the Milling Policy of the Punjab Government titled as "Custom Milling Policy Kharif Marketing Season 2015-16 which was similar to policy applicable in the year under consideration. As per para 2 of the policy, it is clearly mentioned "Paddy to be Custom Milled on contractual basis" In pursuance of the policy it is evident that the appellant has entered into a contract with the millers to assign paddy milling at a rate of Rs. 15/- per quintal. Since it is a contract for milling entered by the appellant with the millers, the issue is squarely covered u/s 194C of the Act. The appellant had deducted tax at source in respect of payments of Rs.15/- per quintal made to the miller. The facts of the case are entirely distinguishable and cannot be applied to the instant case. Therefore, the issue regarding the applicability of section 194C is not in dispute".
3. It is seen that more or less identical facts have been considered by the ITAT in order dated 07.09.2017 in ITA Nos. 214 & 215/CHD/2017 in the case of the District Manager, Punjab State Civil Supply Corp. Ltd., Ropar V ACIT (TDS) Chandigarh and in other identical appeals of different Branch Officers of the assessee itself wherein the view taken in order dated 04.08.2016 in the case of DM, Punjab State Civil Supplies Corporation Ltd. Hoshiarpur Vs ITO (TDS) Jalandhar as considered by Co-ordinate Bench in ITA 158&159/ASR/2016 for 2012-13 and 2013-14 has been consistently followed. The following extract of the said decision is reproduced for ready reference:
"5. Inviting our attention to the facts of the case, the learned AR submitted that assessees are Branches of State Government Agency which procures paddy from the market in every crop season and custom milling of this paddy is done by various millers with whom contracts are executed. As per the contracts, the millers are paid Rs. 15 per qntl, as milling charges and millers are also entitled to get by products generated in the process of milling of rice. Further as per the contract the millers are required to supply 67/68 kg of rice for every quintal of paddy supplied by the agency. The learned AR submitted that during assessment proceedings, the Assessing Officer observed that assessee had deducted TDS on the amount of milling charges paid to the millers whereas on the value of byproducts retained by millers no TDS was deducted. The Assessing Officer held that all the byproducts of paddy, as deemed payments and considered them as part of milling charges and therefore, held that the assessees were required to deduct TDS on the value of byproducts retained by them. The learned AR submitted that similar issues have already been decided by the Hon'ble Tribunal in the case of DM, State Civil Supplies Corporation Ltd;, Hoshiarpur in ITA No.214 to 216 (Asr)/2016 and in this respect filed a copy of the said order.
ITA 274/CHD/2017 A.Y. 2012-13 Page 3 of 5 The learned AR submitted that Hon'ble Tribunal in this case had followed the case law of M/s the Punjab State Corporation Supply and Federation Ltd., Nawanshar vs. ITO, TDS-1, Jalandhar in ITA Nos.54 to 56(Asr)/2016, for Asst. Years:2012-13 & 2014-
15.
6. The learned. DR, on the other hand submitted that learned CIT(A) has already allowed relief to the assessee by relying on the judgment of Hon'ble Supreme Court in the case of Hindustan Coca-cola Beverages (Pvt.) Ltd. Vs. CIT, arid learned CJIT(A) has only held that interest was to be charged from the assessee, therefore, there was no grievance left as learned CIT(A) has already allowed relief to the assessee."
4. On a perusal of the above, it is seen that the facts and circumstances of the present case are also identical to the facts of the said case. In the facts of the present case, the assessee relied upon the decision of the Coordinate Bench in the case of ITO Vs Ahaar Consumer Products Pvt. Ltd. It is seen that before the Coordinate Bench also, the said decision has been cited in various branch offices of this very particular assessee. The facts in the aforesaid ITAT decision have been referred to in para 7, considering which the appeal of the assessee was allowed by the ITAT. For ready reference same is extracted hereunder :
7. We have heard both the sides and carefully gone through the records. The assesses was asked to produce the copies of the agreement dated 2.2.2005 and also the copies of the delivery challan by which the wheat was supplied to AIL Ltd. It is also ascertained that Ahaar International (I) Ltd. is a sister concern of the assessee. The impugned transactions have taken place under the agreement dated 2.2.2005 between the parties which reads as under-ITA No.2310/Del/2010 & Others 10 "This agreement is executed and signed on this 2nd
day February, 2005 at New Delhi between M/s Ahaar Consumer Products (P) Ltd., a company incorporated & registered under the companies act, 1956, through its Director Mr. Gyan Prakash Gupta hereinafter called "The Company - Ahaar" of the First part. AND M/s Ahaar International (I) Ltd., 6-37, Lawrence Road, Delhi, a company hereinafter called "The Company - AQIL" of the Second part.
Whereas AIL has agreed to grind the wheat and produce Atta & Daliya "The products" of the Wheat provided by Ahaar and pack them in their packing on the terms and conditions hereinafter set forth. NOW THIS AGREEMENT WITNESSETH AS UDER:
l. PRODUCTS:
1.1 The products shall be manufactured in accordance with the specifications and descriptions mentioned in annexure A hereunder written as well as the standards of quality as per prevention of Food Adulteration Act, 1954 arid rule made thereunder (hereinafter the prescribed specifications).
1.2 In the event of the products supplied by AIL does not conform to the prescribed specifications, the company Ahaar reserves the right to reject such product.
1.3 In the event of AIL fails to deliver the products as per terms & conditions of this agreement or within the delivery time specified, Ahaar shall have the right to outsource the products at the cost & Risk of AIL. In that case AIL agrees to indemnify Ahaar the cost that may have incurred due to the reason of failure of the AIL to carry out his obligations under this agreement.ITA No.2310/Del/2010 & Othrs 111.4 Ahaar shall be entitled, at its discretion, to depute and
retain a quality control advisor to be located in plant (when manufacturing the product for Ahaaar) in order to monitor the product specification, however, Ahaaar shall not release the AIL of its obligation to manufacture the product in accordance with the specifications.
1.5 The AIL shall have fully equipped quality control lab & quality control officer to check the quality of raw material & Finished Material every hour.
1.6 Ahaar shall buy 30 MT of Atta/Daliya per working day initially and it could be increased up to 100 MT per day (Maximum capacity of plant) as per market demand. 1.7 The AIL shall maintain the plant including cleaning section and milling section at his own cost. The plant shall be maintained as per international standards including HACCP; FIFO, etc. 1.8 The plant shall be completely cleaned stating production. The workers shall wear clean uniform; cap, shoes, ITA 274/CHD/2017 A.Y. 2012-13 Page 4 of 5 tobbaco, cigarettes, gutkha etc. are not allowed in plant. 1.9 Ahaar shall provide Raw material (Wheat) and Packaging Material i.e. HDPE/PP Bags, LDPE packets, Liners and other consumable required in production and packing i.e. Coding ink, stamp, stitching thread etc.
2. PRICE:
2.1 AIL shall give 85% Daliya or 88% Atta of the wheat supplied by Ahaar. The remaining quantity of wheat/refraction shall be kept by AIL as its expenses. 2.2 AIL has to arrange from unloading of wheat till final packing, loading of Atta/Daliya. AIL has to arrange labour, electricity, power backup etc. and wheat shortage. 2.3 Wheat shall be supplied in Gross weight. Atta / Daliya shall be received in net weight. ITA No.2310/Del/2O10 & Othrs 12 2.4 The products may be packed in any packing from i kg to 90 kg as per market requirement. The products may be packed in any brand.
However, the packing material will be supplied by Ahaar.
3. TERMS;
This agreement shall come into force w.e.f. the date of the execution hereof and shall initially be valid up to 31.3.2008 and thereafter shall be automatically renewed for additional one year periods unless either party terminates this agreement by giving the other party written notice 3 months prior to the expiration of the initial term or any renewal term.
3.1 Notwithstanding anything to the contrary herein contained, either party hereto shall be entitled to terminate this agreement.
3.3 Any disputes or differences whatsoever arising between the parties out of or related to this agreement or breach thereof shall be settled by arbitration in accordance with the arbitration & conciliation act of 1996. Courts in New Delhi will have exclusive jurisdiction in the event of any legal / jurisdictional proceedings. In witness thereof these presents have been executed on behalf of the parties hereto as of the day and year first above written.
For Ahaar Consumer Products Pvt.Ltd. For Ahaar International (I) Ltd.
Sd/- Sd/-
Director Director
Annexure 'A' and 'B' which are part of the agreement are also reproduced below:-
ITA No.23l0/Del/2010 & Othrs 13 "Quality Standard Annexure A The specification of atta will depend on the market it is servicing. However, the broad specification are as under-
Moisture content 10% (Maximum)
Total Ash 1.5% to 1.75%
Acid insoluble ash 0.1%
Alcoholic Acidity 0.12%
Glutein 9% Minimum
Water Absorption More than 80%
Foreign Matter Nil
Grits/Stone Nil
Particle Size distribution Will be informed according to market
Cleaned wheat specification Should have Nil extraneous matter
Quality Standard Annexure B
Wheat may contain maximum of following:
Foreign Matter/Refraction
a)Mud Bulb/Stone 0.5%
b)Poisonous seed Nil
c)Chaff 1.0%
d)Other seeds of food grains 0.5%
e)Damaged grain 0.5%
Dunky (Vevilled) 0.5%
Broken & Shrevilled 4.0%
Kernal Burnt (Kanta) 0.5%
Potia 6.0%
Bulk Density 78 gm/ml (min)
8. There is no dispute that the parties, apart from entering into agreement have also acted upon the agreement and the transactions appear to be strictly falling within the agreement that is entered into by the parties. That is to say, this agreement, although between the two related concerns, is entered in the ITA No.23io/Del/2Oio & Othrs 14 course of business and is acted upon by both the sides. Therefore, one cannot ignore the terms of this agreement in determining the nature of the transaction that have taken place between the parties, as there is nothing in the impugned orders to doubt the genuineness of this agreement.
8.1 Now, it is for the revenue to understand this agreement and determine the nature of the assessee's tax liability arising from the transaction entered into through this agreement. In fact, it is stated that the assessee has given the wheat under a delivery challan-cum-invoice and the value is ITA 274/CHD/2017 A.Y. 2012-13 Page 5 of 5 provided only for settlement of claims. On the basis of the quantity of the wheat supplied by the assessee to AIL, the assessee has collected the end products namely Atta or Dalia and is not bothered about the other products and wastage arising therefrom. In other words, under the terms of agreement, by-products, waste and the residual of the wheat after manufacture belong to AIL and not to the assessee. Nowhere in the books of the assessee, the assessee has made any payment towards the services rendered by AIL in producing the Atta and Dalia for and on behalf of the assessee in the packets and containers provided by the assessee in terms of the agreement.
4. Accordingly, in the aforementioned peculiar facts and circumstances, drawing support from the aforesaid orders, we hold that the assessee was not required to make TDS u/s 194C of the Act on the value of the by-products. Respectfully following, the appeal of the assessee is accordingly allowed.
5. In the result, appeal of the assessee is allowed.
Order pronounced in the Open Court on 04.10. 2017.
Sd/- Sd/-
( B.R.R.KUMAR) (DIVA SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
'Poonam'
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CI T(A)
5. The DR
Asstt. Registrar
ITAT,Chandigarh.