BIHAR STATE FOOD & CIVIL SUPPLIES CORPORATION LIMITED,PATNA vs. ITO, WARD-2 (1), PATNA

The registry has informed that the instant appeals are time barred by 389 days. During the course of hearing, it has been contended that the concerned person who was looking after the affairs of income-tax, committed a mistake by not approaching the authorised representative for filing the appeals. He also submitted that the assessee being State of Bihar owned Corporation, various approvals were needed. Admittedly, the delay has occurred but the assessee could not have benefitted by filing the appeal beyond the prescribed time limit. He further prayed that it was not a bona fide to 71/Pat/2024 Bihar State Food & Civil Supplies Corporation Ltd. A.Y. 2012-13 to 2014-15 mistake and in the larger interest of justice, the delay may be condoned. Though the revenue authorities have opposed to the said request, we on going through the reasons mentioned during the course of hearing and in the larger interest of justice condone the delay and admit the appeal for adjudication.

Before us, the order of Hon’ble Jurisdictional High Court dated 09.11.2023 has been placed and from perusal of the same, we observe that the Hon’ble Court adjudicating the Civil Writ Jurisdiction Case No. 3531 of 2023 and 4212 of 2023 directed this Tribunal to dispose of the appeal expeditiously or consider the interim orders sought for by the assessee, if the appeal cannot be disposed of within a time frame. Thus, considering the direction of Hon’ble Jurisdictional High Court we are disposing of the present appeals.

Since the facts and issues involved are identical, these appeal have been taken for disposal by this common order. For the sake of convenience ITA No.8/Pat/2024 is taken as lead case and our decision shall apply mutantis mutandis to all the remaining appeals captioned above. The assessee in this appeal has taken the following grounds of appeal: “1. Whether the ld. CIT, NFAC, Delhi was justified on the facts and in circumstances of the case and in law to confirm the addition u/s 201(1)(1A) of the Income-tax, Act, 1961 made by the assessing officer on account of non deduction of TDS u/s 194H.

Brief facts of the case are that assessee is fully owned by State Government of Bihar and is engaged in dealing in agricultural produce, functioning under the direct control and supervisions of the Ministry of Agriculture in the Central Government. The primary Agricultural Co-operative Societies at the district and villages level are members of the assessee corporation. The Government of India through the Ministry of Agriculture in order to protect the interest of farmers before the beginning of each agriculture season announces, the Minimum Support Prices (MSP) for the crops like wheat/paddy. The PACS purchases the agricultural produce from the farmers on behalf of BSFC. In order to procure the foodgrain from farmers, PACS raise bills on BSFC and in the invoices raised, “commission” or “service charge” is charged. The revenue to 71/Pat/2024 Bihar State Food & Civil Supplies Corporation Ltd. A.Y. 2012-13 to 2014-15 authorities examined the transaction carried out by the assessee during F.Y. 2011-12 and on going through the record observed that for the purpose of procurement of foodgrains, the assessee corporation paid commission to PACS and the same is liable for deduction of tax u/s 194H of the Act. Since, no such tax was deducted by the assessee (deductor) on the payment of commission to deductees i.e. PACS, the ld. AO came to a conclusion that the assessee is in default for non-deduction of tax at source on commission u/s 194H of the Act. Further, the ld. AO noticed that no details were filed about the Permanent Accountant Number of the PACS which left him with no option except to hold the assessee liable to non-deduction of tax at source @ 20% of the commission payment. The amount of commission was calculated @ Rs. 31.25/- per quintal of paddy. A consolidated order u/s 201/201(1A) r.w.s. 194H of the Act prepared on 19.02.2018 for F.Y. 2011-12. Similar assessment order for F.Y. 2013-14 and 2014-15 were also prepared for non-deduction of TDS on commission. During the course of assessment proceedings, no submissions were filed by the assessee. Subsequently, the assessee preferred an appeal before the ld. CIT(A) but again failed to succeed as it could not appear on various dates of hearing which mainly fall during the Covid-19 restriction period.

Aggrieved assessee is now in appeal before this Tribunal. Ld. Counsel for the assessee vehemently argued referring to detailed paper book, judicial pronouncements which includes decision of co- ordinate bench, Bangalore in ITA No. 721 to 723/Bangalore/Others in the case of NAFED vs DCIT dated 08.03.2013, and stated that the transaction between the assessee and PACS is on principal to principal basis and not in the nature of principle agent relationship 4 to 71/Pat/2024 Bihar State Food & Civil Supplies Corporation Ltd. A.Y. 2012-13 to 2014-15 and the commission paid to PACS is in the nature of profit mark up. 7. Per contra, ld. departmental representative vehemently argued supporting the orders of both the lower authorities. 8. We have heard the rival contentions of the parties and perused the record placed before us. The question before us is whether ld. CIT(A) is justified in confirming the action of ld. AO raising demand for non-deduction of tax at source u/s 194H of the Act on the alleged commission paid to Primary Agriculture Co- operative Society (PACS). 9. We note that the State Government in order to make purchase from the farmers at the minimum support price issued certain guidelines and the same are mentioned in the letter dated 07.12.2011 issued by letter no. 9624 by the Development Commission of Bihar. The copies of the same are placed at page 8 to 15 of the paper book. In para 12 of the said guidelines there is discussion about the role of Primary Agriculture Co-operative Society. 10. Under these guidelines, it is stated that the State Government through its nodal agencies and the state owned corporation shall first select the PACS working at various district and village levels. Various Officers in charge of the PACS should be fastened with the duties and responsibilities, to ensure proper running of the PACS and to get the details of purchase and sale of wheat/paddy of the foodgrains on day to day basis, to provide financial assistance to PACS through co-operative banks, to provide credit limits to the to 71/Pat/2024 Bihar State Food & Civil Supplies Corporation Ltd. A.Y. 2012-13 to 2014-15 PACS to appoint various officers at district levels to examine the working of PACS, to organise training programme for President/Managers of PACS regarding procurement of foodgrains and carrying out of business activities etc. and also to provide facility for warehousing of the foodgrains. As per the above referred guidenlies dated 07.12.2011 we observe that specific mechanism has been provided for the working of PACS. In the very same guidelines MRP’s have been fixed for wheat/paddy of foodgrains per quintal. Further, for carrying out all these activities, the PACS were given to commission @ 2.05% of MSP for procurement by PACS in the kharif markeing seasons and 2% of MSP on procurement of wheat in the rabi marketing season. However, on subsequent dates i.e. 26.07.2013 the percentage of commission was replaced by the commission of Rs. 31.25/- per quintal for common grade and Rs. 32/- per quintal for grade A. Further in the paper book at page 4 notification dated 24.11.2015 has been filed which provides for the provisional rates of custom milled rice procured under specification, retained for distribution under decentralized procurement operation. In the said notification apart from the commission paid to societies on per quintal basis, the PACS are also reimbursed for the mandi and labour charges, transportation charges, driage @ 1% of MSP, custody and maintenance charges, interest charges for 2 months, milling charges, administrative charges, cost of new gunny bags. 11. Before us, ld. counsel for the assessee has contended that the transactions between the assessee corporation and the PACS are on principal to principal basis because the risk is on the PACS for the to 71/Pat/2024 Bihar State Food & Civil Supplies Corporation Ltd. A.Y. 2012-13 to 2014-15 procurement of foodgrains and they have to make payment in advance and get it reimbursed from the State Government. 12. We however fail to find any merit in the contention of the ld. counsel for the assessee and also find that the decisions referred are not applicable on the facts of the instant case. A perusal of the guidelines referred (supra) and other notifications, it remains an admitted fact that the complete procedure for procurement of foodgrains and to provide minimum support price to the farmers is prepared by the Central Government with full assistance of State Government. Further, the State Government appoints Nodal Agency and provides guidelines for working of PACS. Every activity of the PACS relating to procurement of foodgrains, payment of MSP to the farmers loading and unloading of foodgrains, warehousing, VAT charges if any, cost of gunny bags and even the interest to be spent by PACS on the banking credit facility awarded on the direction of State Government are given by Central and State Government with their Nodal Agencies which includes assessee also. All these guidelines of the State Government clearly indicates that the PACS are only working as an agent of the State Government and each of their activity connected to procurement of foodgrains from farmers, payment of MSP to farmers and bringing of the foodgrains to the godowns owned by the State Government are part of the agency services. In the past, commission was received as a percentage of MSP and thereafter commission is paid on per quintal basis. 13. Since assessee corporation is paying commission to PACS which are working as agents, we are inclined to hold that commission paid by assessee to PACS is liable for deduction of tax I.T.A. Nos.8 to 71/Pat/2024 Bihar State Food & Civil Supplies Corporation Ltd. A.Y. 2012-13 to 2014-15 at source u/s 194H of the Act. We, however, notice that assessee did not get proper opportunity of hearing before the assessing officer and even before ld. CIT(A). We also note that the assessing officer has calculated the TDS at the maximum rate of 20% on account of non-availability of PAN even though all PACS are having bank accounts. We also note that commission has been calculated by applying the rate of Rs. 31.25/- on the transaction for F.Y. 2011-12 but the said rate of Rs. 31.25/- was finalised on 26.07.2013 which indicates that correct amount of commission has not been calculated by the ld. AO. It is also observed that deductee, PACS are having banking facility and certainly must be having PAN and had the details of the same been made available to the assessing officer, TDS may not have been calculated at the maximum rate of 20%. Therefore, considering all the above referred facts and circumstances and in the interest of justice and being fair to both the parties and in order to compute the correct amount of commission paid and in order to ascertain the correct amount of tax to be deducted at source u/s 194H of the Act, the matter is restored to the file of the assessing officer for carrying out necessary verification and calculation. The assessee is also directed to provide full co-operation to the assessing officer by placing all relevant material in order to get the needful information about correct amount of commission and correct amount of TDS u/s 194H of the Act. Accordingly, effective grounds of appeal