ANDHRA PRADESH STATE CIVIL SUPPLIES CORPORATION LIMITED,VIJAYAWADA vs. INCOME TAX OFFICER (TDS), WARD-1,, ELURU

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ITA 164/VIZ/2026Status: DisposedITAT Visakhapatnam29 May 2026AY 2017-1811 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal decided to remit the matter back to the Assessing Officer. This was due to the submission of fresh evidence before the ITAT, which was not available to the lower authorities, particularly regarding the tax-exempt status of the recipients.

What were the facts?

The appellant, Andhra Pradesh State Civil Supplies Corporation Limited, failed to deduct TDS on payments made to commission agents and transporters. The TDS Officer initiated proceedings under sections 201 and 201(1A) for non-deduction of tax and levy of interest. The appellant contended that the recipients were cooperative societies and institutions meant for public welfare, exempt from tax.

What were the issues?

Whether TDS was required to be deducted on payments made to commission agents and transporters, considering the nature and tax status of the recipients. The admissibility of additional evidence filed before the ITAT was also a consideration.

Which sections of the Income-tax Act were involved?

Section 201,Section 201(1A),Section 194H,Section 194C,Section 80P,Section 10(22),Section 2(31),Section 12A,Section 10(26AAB)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH,

Before: SHRI VIJAY PAL RAO, HON’BLE & SHRI OMKARESHWAR CHIDARA, HON’BLE

आदेश / ORDER

PER OMKARESHWAR CHIDARA, AM: In the above captioned appeals filed by the State Government Undertaking the appellant-company is aggrieved by the orders passed by the Learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld. CIT(A)”] under section 250 of Income Tax Act, 1961 [hereinafter in short “the Act”] and the subject matter relates to non-deduction of TDS under section 201 of the Act and levy of interest under section 201(1A) of the Act thereon by the Income Tax Officer of TDS-Ward. Since the issue is same in all the six appeals filed by the appellant-company, all these appeals were clubbed and heard together. Accordingly, a common order is being passed for all the six impugned appeals.

2.

In all the above appeals, as per the assessment order, the appellant-company has credited amounts to the accounts of Commission Agents and Transporters without deducting TDS under section 194H and 194C of the Act. From the order of the TDS Officer under section 201(1) and 201(1A) of the Act, it is observed that the appellant- company should have deducted tax, at the time of crediting the commission / transport charges to the accounts of the concerned persons in view of section 194C and 194H of the Act. Since the assessee-company did not deduct the tax at the time of crediting/paying the amounts to the commission agents/transportation charges, the TDS Officer raised the demand under section 201(1) of the Act and also levied interest under section 201(1A) of the Act.

ITA No. 164/VIZ/2026 (A.Y. 2017-18)

3.

For Example, in the A.Y. 2017-18, the TDS Officer observed that the paddy commission charges of Rs.1.33 Crores was paid to the Paddy Procurement Centers [“PPCs’ in short”] and should have deducted TDS of Rs.6.83 Lakhs for the Rabi Season. Similarly, the appellant-company has paid commission to the Paddy Procurement Centers for the Kariff Season to the extent of Rs.1.08 Crores and did not deduct the TDS of Rs.5.03 Lakhs. During the same assessment year, the appellant- company has paid Car Hire Charges of Rs.5.76 Lakhs and did not deduct the TDS of Rs.5,760/-. Thus, an amount of Rs.2.48 Crores was paid towards commission charges and Car Hire Charges during this assessment year without deducting the applicable TDS of Rs.12.21 Lakhs. Hence the TDS Officer raised a demand of Rs.12.21 Lakhs under section 201(1) of the Act and also levied consequent interest under section 201(1A) of the Act to the extent of Rs.66.6 Lakhs. Thus, total demand payable for the A.Y. 2017-18 is Rs.78.82 Lakhs.

4.

Before the Learned Assessing Officer [hereinafter in short “Ld.AO”] the appellant-company has stated that section 194A/194C of the Act are not applicable to them because the recipients happened to be Cooperative Societies and Institutions meant for public welfare only and they are functioning under the Panchayatraj Department of State Government and hence they did not have any liability within the meaning under section 80P of the Act. The appellant has also relied on the letter of CBDT No. 12/113/68 dated 28.10.1968 wherein it was mentioned that the provisions of section 194A are not applicable to the educational institutions falling within the section 10(22) of the Act. Taking the same analogy, the PPCs are located in different villages which are exempted under section 80P of the Act. It was also contended that the PPCs are part and parcel of Panchayatraj Department of State Government and they do not fall under the definition of “PERSON” referred to in section 2(31) of the Act. Since they do not fall under the definition of person, TDS provisions are not applicable to them and consequently the appellant-company cannot be found fault for non-deduction of Tax under section 201(1) of the Act and interest payable under section 201(1A) of the Act. Reliance was placed by the appellant-company on the decisions of CIT(TDS) v. Canara Bank [386 ITR 229 (P&H)] and the Coordinate Bench decision of the Visakhapatnam Tribunal in the case of ACIT v. A Kasiviswanadham reported in 173 ITD 478. It was also contended before the Ld.AO that the recipients are having PAN which implies that they might have filed Returns of Income. As the recipients are admitting the income in their hands, TDS need not be deducted in the hands of appellant-company which is having registration under section 12A of the Act. The Ld.AO did not agree with the contentions of the assessee- company and held that TDS should have been deducted for the following reasons: -

a) The work entrusted to commission agents and transport contractors for procurement of paddy and its transportation is completed by 31st July, 2016 (for the Rabi season 2015-16) & 31 March, 2017 (Kharif season 2016-17) and no such work is pending for completion. b) Since the commission and transport charges are payable at rates fixed by the Government, the gross amount payable to each commission agent / transporter is clearly quantifiable as on the date of completion of the work entrusted. c) Since the assessee is following mercantile system of accounting and as these amounts are quantifiable and are clearly payable in the hands of the assessee-deductor and the liability is crystalised during the year i.e., by 31st July 2016 (Rabi 2015-16) & 31st March, 2017 (Kharif 2016-17) itself, the assessee cannot finalise its annual accounts for that year without recording this expenditure into its books. Hence, assessee's submission that the expenditure will be booked at the time of payment only, is not correct. d) The CBDT circular No.3/2010 dated 02/03/2010 referred to by the assessee earlier, is limited only to the provisions of Section 194A i.e, to the issue of interest on time deposits under section 194A by banks following core-branch banking solutions software and is not unanimously applicable to all the TDS provisions. e) The C.B.D.T letter No.12/113/68, dt: 28.10.1968 referred to by the assessee in the present proceedings is aiso limited only to the provisions of Section 194A in cases of (a) educational institutions whose income is exempt from tax under Sec.10(22); and (b) chartable Trust whose income is exempt u/s.11. Therefore the CBDT letter has no relevance to the issues under consideration in the present proceedings. f) The submission of the assessee-deductor that PPCs are not 'persons' as per the provisions of Sc.2(31) of the I.T. Act, 1961 is grossly incorrect for the reason that each and every PPC is admittedly having PAN. Hence, they are all, admittediy, 'persons' covered under the provisions of Sec.2(31) of the Act. g) The case-laws relied upon by the assessee-deductor viz. [(2016) 386 ITR 229 (P&H) CIT (TDS) Vs. Canara Bank and (2018), 173 ITD 478 (Visakhapatnam Trib.) ACT V.A Kasiviswanatham], etc. are quite distinguishable on facts. The income of the PPCs/ PACSs is taxable. Certain incomes/ receipts of the PPCs/PACSs may be eligible for deduction from out of the total incomes, as per the provisions of Chapter-VIA of the I.T. Act, 1961. When any payments are made which are taxable in the hands of the payee, payer's compliance to TDS provisions is mandatory. Further, on a careful reading of the case-law cited as 386 ITR 229, it is seen that the decision therein is covering the payments to those recipients (deductees) with exempt-income under the provisions of the I.T. Act, 1961 but not to those deductees who are allegedly eligible for deduction u/s.80P of the I.T. Act, 1961. h) The other objection of the assessee deductor that some of the the payees have no tax liability has no implication on the deduction of tax at source in the hands of the assessee-deductor unless the payees have produced a non- deduction certificate obtained from the Department to the assessee deductor. i) Further, in cases where the payees have filed their returns of income admitting the income received from the assessee deductor and paid the corresponding taxes, the assessee deductor's obligation (whether or not the assessee-deductor is granted registration u/s.12A of the I.T. Act) to deduct tax will not seize unless the payees have furnished certificate as stipulated under proviso to Section 201(1) of the Income-tax Act to the deductor.”

5.

Thus, the Ld.AO concluded the Assessment Order stating that TDS is deductible under the extant provisions and thus levied TDS under section 201 of the Act consequent interest under section 201(1A) of the Act was also levied and assessment was completed.

6.

Aggrieved by the order of the Ld.AO, the appeal was filed before the First Appellate Authority and the Ld. CIT(A) passed under section 250 of the Act confirming the additions made by the TDS Officer. The Ld. CIT(A), while confirming the order passed by the Ld.AO has held as follows: -

“6.4.1 The submissions of the appellant have been carefully considered in the light of the material available on record. As discussed in the preceding paragraphs while adjudicating Grounds of Appeal Nos. 2 and 4, it has been held that the liabilities towards paddy procurement commission and paddy transportation charges had accrued and become ascertainable as on 31.07.2016 (Rabi) and 31.03.2017 (Kharif) respectively, and that the appellant was statutorily required to deduct tax at source at the time of such accrual/credit in terms of sections 194H and 194C. The appellant, however, failed to deduct tax at the time when it was so deductible and, in several instances, deducted tax only at the time of actual payment or not at all. Once a default under section 201(1) is established, the levy of interest under section 201(1A) follows automatically and mandatorily, the said interest being compensatory in nature. Section 201(1A) envisages levy of interest in two distinct situations i.e., (i) for the period of failure to deduct tax, i.e., from the date on which tax was deductible to the date on which such tax was actually deducted and ii) for the period of delay in remittance, i.e., from the date of deduction to the date on which such tax was actually paid to the credit of the Central Government. Further, in cases where tax was not deducted at all on the credited amounts, interest is chargeable up to the date of passing of the order. Accordingly, the appellant's contention that interest u/s 201(1A) cannot be levied either in the absence of actual payment or on the ground that the credits were provisional is not tenable in law.”

7.

As the appellant-company did not get relief from the Ld. CIT(A), an appeal was filed before ITAT with the following grounds of appeal: -

“1. The Appellate authority failed to appreciate in proper perspective that the provisions of TDS not applicable towards paddy procurement centers which are wing/ part and parcel of the panchayat raj department and are unconditionally exempt from Income Tax and does not fall under definition of person u/s 2(31) of the Act and hence TDS provisions are not applicable to them and appellant cannot be assessee in default under sub-clause (c) of section 2(7) and interest U/s 201(1) cannot be levied thereon as held in the cases of [2016] 386 ITR 229 (P&H) CIT (TDS) vs Canara Bank and [2018] 173 ITD 478 (Visakhapatnam - Trib.) ACIT vs A Kasiviswanadham and order of Ld. AO is to be cancelled. 2. Subject to ground no 02 the Ld. Appellate Authority failed to appreciate the fact that the appellant has credited the amounts due to parties towards cost of paddy procurement and commission to their respective accounts where in fact no such amount was credited to the parties in the books of accounts. The final procurement price and commission is debited in books only after due verification of quality and quantity & after approval of higher authorities and then payment is made to the parties along with commission due thereon and as such the question of crediting the account of party does not arise and hence the appellant is liable to deduct TDS when the payment towards material procurement and commission thereon is made and hence determining TDS U/s 194H before credit in the books is erroneous and interest thereon levied U/s 201(1A) is not in accordance with law. 3. The appellate authority failed to appreciate the fact that paddy Transportation to the respective authorized mill points directly by PPC for the purpose of converting paddy into rice also the transport charges were passed on such persons on monthly basis upon uploading relevant document on Paddy Procurement Portal and no contractual obligation between appellant and transporters and therefore provisions of 194C are not at all applicable which is mandatory to invoke the provisions of 194C. Subject to above, even otherwise no credit is made to mill owners towards paddy transportation charges in the books of accounts and expenditure is recognized only on payment of the amount and hence the appellant is liable to deduct TDS only on payment and interest levied U/s 201(1A) on such payments shall be cancelled. 4. Further in the course of survey conducted; no incriminating documents were found by the department and simply invoked the provisions of 194H &194C and determined the TDS and applied the provisions of 201 & 201(1A) which is legally void.” For these and other grounds that may be urged at the time of hearing, the appellant prays the Honorable Tribunal to kindly set-aside the order passed by CIT(A)-11 and decide the case on merits to meet the ends of justice in accordance with law.”

8.

During the appeal proceedings before ITAT, Learned Authorized Representative (for short “Ld.AR”) of the appellant filed a petition for admission of additional evidences under Rule 29 of the ITAT Rules. While filing this petition, Ld.AR of the appellant-company has enclosed a copy of G.O.Ms.No. 18, Dated 08.11.2017 Consumer Affairs, Food & Civil supplies (CS-I) Department – De- Centralized Procurement of Paddy, certain documentary evidences evidencing the agreement between the Rural Development Organization Project Velugu & Village Unity Association of the District Federation and Andhra Pradesh Civil Supply District Managers, Copy of Paddy Transportation claim evidencing paddy purchases which was allotted to the Rice Mills etc. Admittedly, all these evidences were not filed before the Ld.AO nor before the Ld. CIT(A). During the course of hearing, Ld.AR of the appellant has submitted that the paddy procurement activity is held during Rabi and Karif seasons and it will be operated for about 15 to 30 days per season. As this is a very huge activity and the assessee alone with their own staff cannot carry out this huge task, they utilized the services of certain agencies like Primary Agriculture Societies (PACS), District Co-Operative marketing Society (DCMS), Farmers Producers Organization (FPO), Self-help Groups (SHG) and Velugu Groups. The detailed paddy procurement procedure issued by the Government of Andhra Pradesh vide G.O.Ms. No. 15 dated 15.11.2016 was also placed on record along with the paper book. It was stated that the paddy procurement centers belong to purely agriculturists whose incomes are exempt. It was also submitted that the assessee-company is eligible for exemption under section 10(26AAB) of the Act in view of the decision rendered by the Coordinate Bench of Bangalore in ITA No. 2805-2806/BANG/2025 vide order dated 07.04.2026 wherein it was held that the agricultural produce marketing companies are eligible for the above said exemption. The Ld.AR of the appellant has relied on the decision in the CIT(TDS) v. Canara Bank (386 ITR 229 P&H) wherein it was held that if an organization was exempted from payment of tax, then there was no need for deduction of tax at source. In view of all these fresh evidences (except cases-law), the Ld.AR of the appellant submitted that the State Government undertaking is not liable to deduct the tax at source and hence the TDS Order passed by the ITO maybe quashed.

9.

Ld. Departmental Representative (hereinafter in short “Ld. DR”) relied on the orders of the lower authorities and argued that the section 201 and 201(1A) of the Act are very clear and wherever certain amounts are paid by the company towards commission or transport charges, TDS has to be deducted under section 194H and 194C of the Act. As the assessee has not deducted the tax as per the above provisions of law, TDS was correctly levied under section 201 of the Act and consequent interest under section 201(1A) were correctly levied by Ld.AO which was subsequently confirmed by the First Appellate Authority. Hence it was argued by the Revenue that the additions made by the TDS Officer maybe confirmed and appeal of the assessee may be dismissed.

10.

After hearing both sides, the Bench decides to remit the matter relating to deduction of tax to the file of Ld.AO because the fresh evidences which were filed for the first time before ITAT were not available to the Lower Authorities. The most important claim which was made for the first time before the Bench is that the persons to whom the commission and Transportation charges were paid are exempt from taxation. Ld.AR of the appellant has stated that the commission paid to paddy procurement centers which are basically self-help groups containing weaker sections and women and they don’t have tax liability. These people were totally under the control of State Government Panchayatraj Department and the relevant Government Orders were filed before the Bench for the first time. Since these orders were not filed before the Lower Authorities the Bench decided to remit the issue back to the file of Assessing officer. The Ld.AO is directed to take into consideration the Government Orders and the composition of paddy procurement centers etc., and pass the order afresh after giving an effective opportunity to the appellant-company.

11.

In the result, appeal filed by the assessee is allowed for statistical purposes.

ITA Nos. 165, 166, 167, 168 & 169/VIZ/2026 12. Coming to appeals relating to ITA Nos. 165, 166, 167, 168 & 169/VIZ/2026, since facts in these cases are mutatis mutandis, and hence the decision taken in assessee’s case in ITA No. 164/VIZ/2026 is applicable to these appeals also. Accordingly, appeals filed by the assessee are allowed for statistical purposes.

13.

To sum-up, appeals filed by the Assessee are allowed for statistical purposes.

Order pronounced in the open court on 29th May,2026. Sd/- Sd/- VIJAY PAL RAO OMKARESHWAR CHIDARA VICE PRESIDENT ACCOUNTANT MEMBER Visakhapatnam Dated: 29th May, 2026 Giridhar, Sr.PS Copy to: ANDHRA PRADESH STATE CIVIL SUPPLIES CORPORATION LIMITED, 30, BHAGYALAKSHMI NAGAR COLONY, 1 GANDHI NAGAR HYDERABAD-500080, TELANGANA 1) INCOME TAX OFFICER (TDS), WARD-1, INCOME TAX OFFICE, 23-B-4-6/4, K K S TOWERS, R R PET, ELURU-534002, ANDHRA PRADESH 2 2) INCOME TAX OFFICER (TDS), WARD-1, AAYAKAR BHAWAN, VEERABHADRAPURAM RAJAHMUNDRY-533105 ANDHRA PRADESH 3 THE PCIT / CIT, 4 THE D.R., ITAT, VISAKHAPATNAM BENCH 5 GUARD FILE TRUE COPY V S S Digitally signed by V S S GIRIDHAR GIRIDHAR BABU MEKALA Date: 2026.06.01 15:45:02 BABU MEKALA +05'30' SR. PRIVATE SECRETARY I.T.A.T., VISAKHAPATNAM

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