TULASI SEEDS PVT. LTD.,,VISAKHAPATNAM vs. THE ACIT,, GUNTUR

आयकर अपीलीय अधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री िी. दुगाा राि,न्याधयक सदस्य एिं श्री धड.एस. सुन्दर धसंह, लेखा सदस्य के समक्ष BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER& SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A.No.167/Viz/2015 & I.T.A.No.55/Viz/2016 (निर्धारण वर्ा/Assessment Year : 2011-12 and 2012-13) Asst. Commissioner of Income Tax Vs. M/s Tulasi Seeds Private Ltd. Circle-2(1) D.No.6-4-6, Tulasi House Guntur 4/5, Arundelpet Guntur [PAN :AAACT8054C] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) आयकर अपील सं./ I.T.A.No.139/Viz/2015 & I.T.A.No.06/Viz/2016 (निर्धारण वर्ा/Assessment Year : 2011-12 and 2012-13) M/s Tulasi Seeds Private Ltd. Asst. Commissioner of D.No.6-4-6, Tulasi House Income Tax 4/5, Arundelpet Circle-2(1) Guntur Guntur [PAN :AAACT8054C] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) रधजस्व की ओर से /Revenue by : Shri D.K.Sonowal, CIT DR निर्धाऩरती की ओर से / Assessee by : Shri G.V.N.Hari, AR सुिवधई की तधरीख / Date of Hearing : 28.06.2019 घोर्णध की तधरीख/Date of Pronouncement : 19 .07.2019

2 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur आदेश /O R D E R Per D.S. Sunder Singh, Accountant Member : These appeals are filed by the revenue and the assessee against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], Guntur dated 12.03.2015 and 28.08.2015 for the Assessment Year (A.Y.) 2011-12 and 2012-13. Since the grounds raised in these appeals are common, these appeals are clubbed, heard together and a common order is being passed for the sake of convenience as under. I.T.A. No.167/Viz2015 and 55/Viz/2016, A.Y.2011-12 and 2012-13 2. We take up the Revenue’s appeal for the A.Y. 2011-12 and refer the facts from the ITA No.167/ViZ/2015 which are common for both the years. The assessee is a company with registered office at Guntur engaged in the business of processing of Hybrid BT cotton seeds/chilli/vegetable seeds. The company sells parent seeds to the organizers, who in turn supply the foundation seeds to farmers for cultivating the Hybrid seeds. The organizers collect the Hybrid seeds and sell the same to the company which is traded in the market. The company deals in production and marketing of hybrid sowing seeds like cotton seed, chilli seed and vegetable seeds. The company made technical collaboration with M/s Mahyco Monsanto Bio-

3 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur tech (India) Ltd., Mumbai for transfer of BT & BG II gene into Tulasi Cotton Hybrids in the year 2003. The company also made collaboration with M/s CIMMYT, Mexico for development of maize hybrids and with ICRISAT for development of Pearls Millets (Bajra) and Sorghum (Jowar). It has tied up with Monsanto for RRF technology. The said foundation seeds are supplied / sold to the organizers for a consideration. The organizers of specific area have to identify the growers and fields and also provide credit facilities to the growers. The organizer has to distribute parent seeds to the growers and also supervise the crop. The cotton crop will be taken for ginning mills by the organizers for ginning, delinting, cleaning etc. and send the same for quality test by the company. The seeds qualifying the quality test are purchased @280/- per packet of 750 gms including the commission of the organizer. These BT cotton seeds are sold by the assessee company to various farmers for raising the cotton crop. During the course of assessment proceedings, the Assessing Officer (AO) noticed that the assessee company had given advances to the organizers and asked the assessee to explain the nature of advance and to file the copies of accounts. In response to the notice, the assessee company filed a letter dated 30.08.2013, it was explained that the company had advanced a sum of

4 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur

Rs.18.21 crores to the organizers and these advances were intended for the purpose of business, to facilitate them to purchase seeds from farmers or to make advances to the farmers in crop growing season for various crop growing needs.

2.1. There were 64 seed organizers operating and the company has entered into agreements with 36 organizers who are engaged in BT cotton and no agreements were entered with other organizers who are associated with refugee cotton seeds. As all the agreements are in the same format without any change and the AO examined one of the agreements with the organizer for procurement of seeds. The terms and conditions and the salient features of agreement as noted by the AO are as under :

The assessee-company paid the amount for procurement of seeds to the organizers not to the farmers. As per the terms of agreement entered with organizers, there are so many obligations entrusted to the organizers. They are— the organizer should take up the production of hybrid cotton seed of (1) the proprietary hybrids of the company through potential local seed growers in their fields for supplying back to the company the organizer shall take the parental (foundation) seeds from the (2) company; (3) the organizer shall distribute foundation seed to the seed growers and a list of such seed growers must be submitted within 7 days from the date of receipt of foundation seed by the organizer to the company;

5 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur

the organizer shall pay the cost of foundation seed, inspection fee, GOT (4) charges; the above charges must be paid by the organizers as advance, failure (5) of which these amounts will be adjusted against the final payment to be made for the seeds produced and supplied by the organizer; the organizer is duty bound to inform the company about the excess (6) area planted by using the supplied foundation/parent seeds; the organizer should collect the seeds which were left over with the (7) seed growers after completion of sowing and must be returned to the company; (8) in case the organizer is unable to account for any foundation seed given to him, damages of Rs.4,000/- per acre will be collected from him; the organizer shall protect the parent lines as well as hybrid seed of (9) the company from going into the hands of competitors as the seed is proprietary hybrid of the company; (10) the organizer agrees that multiplication of parent lines shall not be done by him or his growers; the organizer should take steps for stopping any unauthorized (11) multiplications by growers; the organizer undertakes the entire seed produced will be supplied to (12) the company and no grower shall be allowed to retain any quantity; (13) the organizer is duty bound to lodge a complaint with Police or any other law enforcing agency against the seed growers who retains hybrid seeds for their use or sells part of it to some other people; (14) the organizer has to cooperate in all respects in getting back the seeds from such growers and to hand over the same to the company; the organizer undertakes to ensure that the foundation seed supplied (15) by the company will be exclusively used for seed production in terms of the agreement and will not be used for crossing with foundation seeds obtained from any other source to develop some other hybrid; as per the agreement the company can take legal action against the (16) organizer and his growers or any other person if the foundation seed is misutilized;

6 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur

the organizer should maintain secrecy of the confidential nature of the (17) seed production programme and he should not make any publicity the organizer should enter into an agreement with growers before or at (18) the time of distribution of foundation seed, which should contain the information like procurement price, terms of production, quality parameters etc,. (19) the agreement with the growers should also include a clause wherein the grower should assured that they will not mix or replace the seeds and entire seed produced will be supplied to the company through organizers; the company agrees to pay a procurement price of Rs.280/- (including (20) organizers commission) per packet of 750 gms of delinted (at or below IO% moisture level), graded hybrid cotton seeds after completion of quality test. both the parties agreed that the payment will be made to those lots (21) which confirm to the minimum quality standards after deducting the packing losses the organizer agrees for the rejection of the seeds which are below (22) minimum standards and these seeds will be returned to the growers through the organizers only at the time of cotton sowing season the organizer shall employ the required number of supervisors (23) throughout the cotton seed production period at his own cost and they will in cooperation with the company and its employees conduct inspection of each plot; the organizer agrees to arrange to bring the seed cotton to the ginning (24) mill designated by the company; the organizer is duty bound for ginning, delinting and grading of the (25) seed at the units designated by the company and under the supervision of the company even though the organizer has its own facility for the same; As per the agreement yield estimate has to be done by the organizer (26) and also by the staff of the company at two times. If any significant deviation is found, a field visit will be conducted by the company jointly with the organizer; the actual supply of the seed should tally with the yield estimates made (27) by the company's staff, failing which penalty as per the directions of the company shall be levied on the organizer beside initiating any other legal action at the instance of the company;

7 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur

(28) the organizer will collect all raw materials from the seed growers at his own cost and bring the same to the designated ginning and delinting plant; (29) the organizer will get a commission only on fulfilling his responsibility properly as listed in the agreement, in case \ the organizer found lacking in performing his duties, the company at its discretion can reduce or totally deny the payment of any commission and the company's decision in this regard is final; (30) the organizer agrees as per the terms that he is solely responsible to the seed growers and he agrees to take all steps to pass on the instructions given to the growers regularly for rouging etc., for getting quality in seed production; (31) as per the agreement the payment shall be made by the company to the organizer and he shall be fully responsible for distribution of the payments to the growers; (32) the company shall not entertain any growers with regard to payment; (33) the organizer undertake he shall alone pay advances to the seed growers by ensuring that the seed growers does not obtain advances for the same seed lot from other sources / organizers for the lint etc,. which may lead to complication as the seed lot in such cases is likely to be diverted to other places for ginning, delinting and processing which causes loss to the company by way of delay in supply of seed and pilferage of seed material; the company shall recover such loss from organizer only; (34) (35) for non-supply of seeds due to internal disputes between organizer and grower the company will recover losses from the organizer; (36) the company is neither responsible nor liable for compliance of any legal or statutory or grower or payment of any compensation, sets or revenue dues to the government or authorities;

2.2. The AO has gone through the agreement entered by the assessee with Mahyco Monsanto and sub license agreement dated 14.05.2007 and observed that the assessee is involved in research, development, production and sale of proprietary hybrid cotton seed and has entered into sub license agreement with Mahyco Monsanto Biotech (I) Ltd. on

8 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur

03.06.2003 which was amended on 02.03.2007 and further amendment was made on 14.05.2007 and as per the terms and conditions of the agreement, the sub-licensor granted sub-license to the assessee company to use Monsanto technology provided to sub licensee to test, produce and sell genetically modified hybrid cotton planting seed in the territory, including a sub license and applicable Monsanto patent rights. The sub- license with the assessee company shall not have right to grant further sub- license other than provided in the Article 2 without permission of the sub- licensor. The other important and relevant part of the agreement as observed by the AO is as under : “The said agreement defines 'HYBRID COTTON SEED BUSINESS' at page 3 which is reproduced as under: "Hybrid Cotton Seed Business" shall mean the activities which may be carried out by sub-licensee, including without limitation, hybrid testing, breeding, product selection, production oversight, production including contract production through farmers, storing, delinting, conditioning, quality control, warehousing and marketing of Hybrid Cotton Planting Seed."

The article 2 of the sub-license allows the assessee-company (sub-licensee) use of third party services and the relevant portion is reproduced hereunder: "USE OF THIRD PARTY SERVICES: The sub-license granted to sub-licensee shall include the right to utilize the services of third parties to act on behalf of sub- licensee in conducting those activities associated With the Hybrid Cotton Planting Seed Business which are directed towards the production of Genetically Modified Hybrid Cotton Planting Seed for subsequent sale by Sub- licensee to farmers in the territory. By way of example, sub-licensee may engage a third party to act on its behalf to multiply Genetically Modified Hybrid Cotton

9 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur Planting Seed (for subsequent sale by sub-licensee to third parties in the territory) and to carry out all other activities reasonably necessary for the production, ginning, delinting, processing and sale of Genetically Modified Hybrid Cotton Planting Seed by sub-licensee in the territory. Third parties will be required to meet basic performance standards that will be defined jointly by sub-licensor and sub-licensee. Sub-licensee shall have written contracts with such third parties which shall provide that such third parties may only use Monsanto Technology to carry out services on behalf of sub-licensee, subject to limitations and restrictions at least as restrictive as those applicable to sub- licensee under this agreement. Sub-licensee will also use its best efforts to prevent theft or other loss of the Monsanto Technology"

2.3. The AO observed from the agreement dated 03.06.2003 that the sub- licensee i.e. the assessee company has accepted certain terms and conditions as under : (1) The sub-licensee shall only cross or back cross the BT gene into most suitable lines of cotton proprietary germplasm and it shall not cross or back cross the BT gene into any third party germplasm. (2) The sub-licensee shall not cross or back cross the BT gene into cotton public germplasm or sell cotton public germplasm which has been crossed or back crossed with BT gene without the prior permission of the sub-licensor; (3) The assessee-company shall not market or otherwise commercialize any genetically modified hybrid cotton seed without approval of the sub- licensor; (4) The sub-licensee shall be solely responsible for any and all marketing costs inducing in connection with sale and marketing of genetically modified hybrid cotton seed; (5) The sub-licensee is responsible to the extent of the claim determined as a result of seed quality problem;

2.4. The supplementary agreement dated 02.03.2007 furnished the rate at which the trait fee to be paid by the assessee company to the sub-

10 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur licensor. On going through the terms of the agreement entered into between the assessee company and Mahyco Monsanto Biotech and also the copy of the agreements entered into between the assessee company and the organizers, the AO observed that except research and development, all other activities of production of hybrid proprietary cotton seed from the parent seed was assigned to the organizers. As per the sub-license agreement, the assessee was allowed to utilize the third party services for production of genetically modified hybrid cotton planting seed. The third party services include all activities reasonably necessary for production, ginning, delinting of genetically modified hybrid cotton. Therefore, the AO observed that the activity given by the assessee company to the organizers was in the nature of work contract / job which is covered u/s 194C of the Act, attracting disallowance u/s 40(a)(ia) of the Act. Therefore, the AO called for an explanation from the assessee as to why the above job work should not be treated as works contract and the disallowance should not be made u/s 40(a)(ia) of the Act for failure to deduct the tax at source.

2.5. In response to the notice issued by the AO, the assessee filed explanation stating that the assessee has not given any job work to the

11 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur organizers and it was only the activity of purchase and sale transaction from the farmers and the organizers are only facilitators. The assessee contended that the assessee has supplied the seeds to the farmers through organizers who in turn have grown the seeds which were procured by the assessee company from the farmers. The organizers are only facilitators to identify the farmers for growing the seeds. The advances were given for encouraging the farmers and to make them to be loyal to the assessee company for growing seeds. The assessee argued that since the entire activity is agricultural activity and there is no job work or works contract involved in the activity of the assessee, there is no case of contract, hence, requested not to make the disallowance. For the sake of clarity and convenience, we extract relevant part of the explanation given by the assessee company to the AO which reads as under :

"It is to bring to your kind consideration that our understanding with the seed organizers is not at all job work or works contract. Normally in case of job work or works contract there is no production of any article or thing. Normally in case of job works, all kinds of raw material is supplied and in turn contractor will give the same goods duly assembled but no other new product is given. In case of hire work also normally some material is given and the same material is further processed and the ultimate product is given by making additional process. Whereas in this case we are selling foundation seed or parent seed and we are purchasing hybrid cotton seed from the farmers. This foundation seed is sown by grower in their agricultural lands and after 4 to 6 months they get cotton crop of Kapas where in this hybrid seed is available. This purchasing and selling is organized through so called organizers as company cannot deal with thousands of farmers.

12 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur

When the organizers purchased the foundation seed from our company, his account is debited by raising the sale invoice in his name. This sale of parent seed is actually to the growers / farmers but as explained to avoid dealing with thousands of farmers, the organizer is given responsibility to sell the parent seed to the farmers. These farmers have to carry on agricultural operations in their respective fields like sowing of these parent seeds in their agricultural fields. After agricultural operations finally the farmer / grower will not get same parent seed from the fields he gets cotton kapas as the yield from the agricultural fields on sowing of the parent seeds. Therefore the seeds sown and yield received are totally different. In the final product i.e, cotton kapas which contain cotton seed covered by cotton lint. These seeds will have the qualities of germination and we will have to make further process to sell them as our selling product in the market. Therefore this entire process is nothing but production / cultivation to get a new product but it is not all a modification or further process of our parent seed to be called job work/hire work. The parent seeds we give will have lot of technically advanced, scientific qualities and these seeds are extraordinary and to be taken abundant precaution. Since this parent seeds are ultimately distributed by the organizers to hundreds of farmers. It is not possible to control these hundreds of farmers against misuse of the valuable parent seeds. Therefore we have selected these organizers and these are none other than heads of a group of farmers.

13 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur respective organizers whose items are recorded in the organizer A/c. Therefore the organizer A/c in our books of accounts finally shows the sale of particular seeds by us and purchase of seeds grown by the farmers, amount received either in advances or on final payments for the supply of cotton seed through the farmers. Therefore the payment made by us to the organizer is for the purchase of cotton seed from the farmers. It is not at all a job work or hire work or any contract work. Sale of material will not amount to contract under any circumstances. The sale of cotton seed by the farmer is not a simple process. As explained above our seeds are highly technical and propriety. Therefore the farmer also should cultivate, maintain and grow cotton seeds under scientific conditions under our continuous monitoring and supervision so that good quality and saleable cotton seeds are produced by them. These cotton seeds will be further processed to sell for the commercial sale. To implement this final stipulation we have to advance the money for different stages of cultivation to get the final result. If we do not give advance the farmers may come and say several reasons and may avoid giving the product to us. Therefore we give advances at different stages through organizers so that the commitments and bondage of the farmer and the organizer will become stronger and supply goods only to us. The agreement with the organizer is also to indicate the seriousness of our foundation seed, quality and its importance and our final business of selling lakhs of seed packets depends on getting the qualitative seeds being produced by this group of farmers. Therefore, sometimes we often liberal with these people in the business expediency. Even though it appears that the seed organizer is acting like our agent in supplying seeds to the farmers, in distributing of the amount to the farmers in collection of produce from the farmers etc., In the real sense this organizer is nothing but head of the group of the farmers. As explained to avoid dealing with hundreds of farmers which community is pampered one with lot of sensitive issues. Most of the farmers are very good people but they are under influence of local group heads and politicians. Even for the smallest mistakes group of farmers become violent and may cause lot of disturbances. Under these circumstances, to protect our company and avoid all kinds of confrontations, agitations etc., we prefer to deal with handful of heads of groups of farmers rather than thousands of people. Even though the organizer is given this task, we will not leave total work to organizer. Our employees are always be monitoring the process of cultivation from sowing of seeds to the realization of final product. In this entire activity, we are not cultivating and farmer is growing. In case farmer fails to produce, we will not give him anything and farmers have to return our money with interest. In fact, for the amount given as advance also, we charge interest and it is appearing in the account of organizer. This particular cotton seed ie., BT cotton seed with the technology of Monsanto from USA was having lot of demand. Therefore we need not give any amount to the organizers and for this entire activity they get profit from

14 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur

the farmers. This group heads have agreed for the same because of the demand for the product. In case there is no demand we would have given cost to these organizers also. In fact in the subsequent years when the demand for the product is coming down by virtue of other several manufacturers now we are giving commission to the organizers. The agreement with the organizers is also discussed as follows: On page-2 preamble, it clearly says this is an agreement between organizer and company to organize hybrid cotton seed production so that is for the seed production and selling. Point No. I of agreement clearly says that the organizer shall purchase parent seed for supply back the production from the fields. Page-2A clearly says that this foundation seed will be distributed to the farmers in his group that means organizer is not cultivating himself also. Paint No. 2B:The organizer has to make the payment to the company for the cost of parent seed, fees for the inspection by our staff and government authorities for acre. This also shows that organizer is purchasing and selling. Point No.3: Organizer agrees that the entire seed produced by his group of growers will be sold to the company. Here seed production activity is important and it is not any works contract. Point No.5 indicates that the parent seed is sold to the organizer only after identification of the growers by the organizer that means it is a controlled sale. Point No.6 Clearly indicates that the company agrees to pay the procurement price/ purchase price per packet at Rs.280/- The quantity is totally uncertain, contingent and dependent on several factors including climatic conditions to get the yield to the grower to supply the final product to our company. Point No.8 deals with the company is purchasing only cotton seed and lint used to be returned to the farmer. To separate the cotton seed from the kapas, ginning and delinting has to be made. we are asking the grower and the organizer to do it under our supervision to avoid the misuse. Since we are paying Rs.280/- per 750 Grms of daunted seed the other expenditure of ginning and delinting has to be borne by them only. Point No.11 deals with several tests to be undertaken by company before purchase of the goods from the organizers and growers. Point No.15 clearly says the ultimate responsibility for the growers payment will be with the organizers only and shall be fully responsible for distribution of payment to the growers. The company shall not entertain any grower. This agreement clearly shows to avoid the possible litigation from the farmers

15 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur and to avoid negotiating with farmers for different situations and to avoid hundreds of farmers with hundreds of accounts in each account this group head is finally taken. Finally it is nothing but selling of foundation seed and purchase of cotton seed from the farmers through the organizer. Finally the amount that is given by us to the organizer is not the expenditure to us i.e., an advance given to them for purchase of seeds from the farmers and on purchase of said seeds by way of purchase invoice from farmers those purchases will go to the Trading Account. During the relevant Assessment year the company has made a turnover of Rs.196 crores. This entire sales turnover requires cost of raw material. Without that cost of raw material the sales will never came. That cost of raw material is nothing but the purchase of seeds from the farmers. This purchase of seeds can never be compared with any works contract under any circumstances. Moreover, these purchases of our raw material is also from the agricultural farmers. Under these circumstances and explanations given above, this is not a works contract liable for deduction of tax at source'.

2.6. The AO examined the explanation offered by the assessee and did not accept the contention of the assessee that it was not job work and the purchase. The AO was of the view that the organizers are the contractors. The AO also noted the differences in explanation offered by the assessee in interpreting / changing the word used in agreement vis-à-vis explanation. In the agreement for the word of supply the assessee stated to have substituted the word with purchase and sale. Since the assessee is not in the purchase and sale of hybrid cotton seeds and the assessee is in the business of research and production of hybrid cotton seeds, the AO held that the activity involved with the organizers by the assessee is in the nature of job contract which attracts the provisions of TDS u/s 194C of the Act. The AO relied on Explanation (iv)(e) to Section 194C of the Act. The

16 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur AO relied on the decision of Madras High Court in the case of CIT Vs. Kumudam Publications P.Ltd. reported in 88 ITR 84 (1991) and the decision of the coordinate bench of ITAT Pune in the case of BDA Ltd. Vs.ITO84 ITD 442 (2003). Further ITO Vs. Narmada Cement Co. Ltd. reported in 81 TTJ 955 (2003), taken various examples and held that the assessee made the composite payments for the contractors identifying the farmers, the land and raising the cotton seeds inclusive of commission and accordingly held that the assessee company has entered into contract and held that even in composite payments TDS need to be deducted on the entire amount. The AO relied on the decision of Hon’ble Supreme Court in the case of GE (India) Technology Centre (P) Ltd. Vs. CIT & Anr reported in 193 Taxman 234. From the agreement, the AO found that the organizer acting on behalf of the assessee company for production of modified hybrid cotton seed. The procurement price as per the agreement is meant for the services rendered in organizing the farmers, fields, facilitating, ginning, delinting and growing of seeds and it is not an activity of purchase by the company and sale by the organizer. The AO further observed that it is the organizer who has to arrange for ginning, delinting and grading of seeds but not the farmer and from the agreement, there is no purchase and sale

17 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur transaction and it is only supply. Therefore, the AO has given a finding that the organizers are rendering the services and in turn the company is making payment and the company is no way connected with the growers. The consideration paid by the assessee company to the organizers include commission for the services rendered, therefore, held that the entire activity carried on by the organizer is in the nature of job contract, hence, attracted the provisions of TDS and the assessee has to deduct the TDS at source. Non deduction of TDS attracts the disallowance u/s 40(a)(ia) of the Act. For the A.Y.2011-12, the assessee company made the payment of Rs.51,21,67,527/- on which the TDS was not made u/s 194C of the Act. Hence, disallowed the sum of Rs.51,21,67,527/- for the A.Y. 2011-12 and a sum of Rs.74,19,91,425/- for the A.Y.2012-13 u/s 40(a)(ia) of the Act and accordingly brought to tax.

18 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur allowed the appeal partly. The Ld.CIT(A) followed the decision of special bench in the case of Merilyn Shipping & Transports Vs. Addl.CIT and accordingly directed the AO to delete the addition relating to the payment already made and confirmed the addition representing the amount outstanding.

3.1. The Ld.CIT(A) also observed that the assessee is engaged in the production of BT Cotton seed, BG-II cotton seed, refugee and not BT cotton seed account and foundation seed account. However, the Ld.CIT(A) observed that the purchase of 18.36 metric tons of foundation seed which was debited to Profit & Loss account to the extent of Rs.51,40,800/-. Since the assessee is not engaged in the foundation cotton seed from the farmers, the Ld.CIT(A) held that the expenditure debited to P&L account to the extent of Rs.51,40,800/- relating to purchase of foundation seed is not genuine and accordingly enhanced the addition of Rs.51,40,800/-.

19 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur ITD 23/20 taxmann.com 244 (Vishakhapatnam) dated 09.04.2012 and the assessee filed cross appeal for the additions confirmed by the Ld.CIT(A). Hon’ble Supreme Court in the case of Palam Gas Services vide Civil Appeal no. 5512 of 2017 has reversed the decision of Merilyn Shipping & Transports (supra) and held that TDS required to be deducted on the amounts paid also. Therefore, during the appeal hearing, the Ld.DR argued that the decision of Special Bench in the case of Merilyn Shipping & Transports is no more valid in view of the Hon’ble Supreme Court judgement in the case of Palam Gas Services and argued that even if the entire amount is paid without deducting TDS and not remitted to Government account, the provision of section 40(a)(ia) attracts. Therefore, argued that the CIT(A) wrongly deleted the addition made by the AO on the payments already made which were not outstanding. The Ld.DR further submitted that since, the Ld.CIT(A) has held that nature of payment is contract payment he requested to confirm the entire addition. The Ld.DR relied on the orders of the AO as well as the Ld.CIT(A) and argued that the payment made by the assessee to the organiser is contract payment for works contract, hence section 194C is applicable and the assessee is bound to deduct the tax at source. In brief, the Ld.DR submitted that the facts

20 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur clearly show that the assessee has engaged the organizers for production and supply of seeds, hence argued that the assessee is required to deduct tax at source. Accordingly, requested to uphold the order of the AO and dismiss the appeals of the assessee.

21 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur market by the company for raising the cotton crop by the cotton growers. The Ld.AR submitted that as per the terms of agreement, the consideration paid to organizers is for purchase of hybrid seeds. For the sake of meeting statutory requirements, the company maintains, farmer wise details of hybrid seeds produced. The assessee company does not deal with the farmers and the amount is paid to the organizer who will in turn makes payments to the farmers. Thus, it is simple transaction for supply of seeds and there is no element of contract involved. The supply of hybrid seeds involve activities like planting of seeds, cultivation of land, production of cotton crop and separation of seed and kapas, all these activities are carried out in a confidential manner as per the license terms and further in compliance with the statutory requirements. The assessee with the help of organizers and it’s own supervisors monitors the entire activity. At the end, the assessee procures hybrid seeds and the other activities are only incidental to main activity for purchase of hybrid seeds. The farmer produces cotton crop in the field by planting the female seed and by cultivating the land. The kapas part and damaged seed are left to the farmers and only the hybrid seed passing the quality test are supplied to the assessee through the organizers. Thus, it is not a contract production

22 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur as the assessee is not interested in the entire business. It is only a contract for procurement of hybrid seed which is by itself the tradable commodity. The assessee maintains books of accounts of the organizers and its accounts are debited for the cost of female seeds supplied to the organizer and advances given to organizers against the supply of hybrid seeds. This account is credited for value of hybrid seeds procured from the organizers. There is no separate consideration whatsoever for the incidental activities monitored by the organizer. In the event of any failure of the cotton crop, the expenses incurred by the farmers have to be borne by them and the assessee is not obliged to compensate the loss either to the organizer or to the farmer. The Ld.AR argued that it is not a job work. In the job work, the contractor would be paid consideration in the form of job work charges. In the case of the assessee, consideration paid is towards value of hybrid seeds procured from the organizers and not at all contractual. The AO relied on the decision of BDA Limited (84 ITD 442). The decision was subsequently reversed by the Hon’ble Bombay High Court (281 ITR 99). Therefore, the Ld.AR argued that there is no job contract or supply contract. It is a pure activity of purchase of hybrid seeds from the organizers. Since it is a purchase transaction, there is no contract involved

23 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur and the provisions of TDS do not apply. Hence, argued that the addition made by the AO u/s 40(a)(ia) of the Act required to be deleted and the appeal be allowed.

6.1. The assessee entered into agreement with Mahyco Monsanto Bio- tech (India) Ltd., whereby, the assessee was granted license to Monsanto technology to produce genetically modified hybrid cotton plant seed in the

24 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur allocated time period. The agreement authorizes the assessee to utilize the services of the third party to act on behalf of the assessee in conducting the activities associated with hybrid cotton planting seed for subsequent sale to farmers in the territory. Mahyco Monsanto gives five foundation seeds to the assessee, who in turn multiply these five seeds into hundreds of seeds in the laboratory of Tulasi seeds which includes environment controlled shaded areas. These are called parent seeds and with the aid of very few farmers, the assessee separates the seeds into male and female seeds. The female seeds are given to seed organizers who in turn got them cultivated in the vast area of land in different areas. After yielding the cotton crop, the kapas is separated and the hybrid seeds are supplied to the assessee. After quality testing, these hybrid seeds are made into 750 grams per each packet and sold to farmers in the open market under the brand name. These hybrid seeds are useful for further multiplication and useful only for cotton production. The planting of female seeds, cultivation and production of cotton crop, separation of hybrid seed and kapas, all these activities have to be carried out in accordance with the statutory norms and regulations of the State Government and further utmost secrecy is to be maintained. Since, it is practically difficult for the assessee to deal with

25 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur large number of farmers involved in the process, the assessee entered into an agreement with some persons who are called the organizers. The organizers in turn enter into agreement with the farmers for cultivation and production of hybrid seeds directly in accordance with the norms stipulated by the assessee company. The organizers have to purchase female seeds from the assessee company for onward supply to the farmers. When hybrid seeds are produced, the organizers buy the same from the farmers for onward supply to the assessee. The organizers have to pay for the female seeds purchased from the assessee company and they will have to be paid for the hybrid seeds sold to the assessee company. The assessee company does not deal with the farmers directly. The amount paid to the organizers for purchase of hybrid seeds is treated by the AO as contract work and disallowed the entire payment u/s 40(a)(ia) of the Act.

6.2. The assessee is engaged in the business of production and marketing of hybrid seeds. It is undisputed fact that the assessee has sold the parent seeds to the organizers. There is an agreement with the assessee company and the organizers for identifying the farmers and production of hybrid seeds as per the stipulated norms. Though agreement provides for

26 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur payment of commission, there is no evidence having paid the commission to the organizers. Commission is included in purchase price of Hybrid seeds. The parent seeds are supplied to the organizers as a sale transaction and in turn the organizers supply the parent seeds to the various farmers to cultivate the hybrid seeds in the specific conditions under the control and monitoring of the assessee company. In case, there is loss or failure of crop, the assessee company is not responsible to compensate the farmer / organizer. The company maintains the accounts of the organizers and farmers. The organizer has to furnish the list of farmers to whom the parent seeds are supplied. Neither the farmers nor the organizers are permitted to sell the hybrid seeds to third parties. As and when the organizer purchase the foundation seed from the company, its account is debited with by raising the sale bills in his name. As and when the organizers supply the hybrid seeds, the company is purchasing the hybrid seeds at fixed rate and their account is credited. The advances given to the organizers were also charged with interest. From the entire activity, we understand that the assessee is growing the hybrid seeds with the help of farmers and the organizers in a controlled atmosphere to keep confidentiality and secrecy of the B.T.Cotton seeds with the technology of

27 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur Monsanto which is having lot of demand. From the agreement though the purchase price is inclusive of commission, no separate payment is paid to the organizer. The organizer is not making any regular supply of hybrid seeds to the assessee company to hold it is a supply contract. The organizer also is not undertaking any job contract and he is purchasing the seeds and selling the hybrid seed to the assessee company and. To encourage the production to prevent the farmers to go to the other suppliers of seed growers, the assessee company is advancing the amounts to farmers to make them loyal to the assessee company. Though the activities of the organizers appears like an agent, the AO has not given any finding for payment of any commission for the services. He is acting like an agent of the company or facilitator of the company, for identifying the farmer, distributing the parent seeds and growing the hybrid seeds and arranging the delinting of cotton kapas from the crop grown by the farmers and supplying the entire separated cotton seeds to the assessee company. The assessee company is ultimately making the payment only for the hybrid cotton seed, purchasing the same at Rs.280/- per packet of 750 gms. No other payment is made to the organizers. Therefore, it appears to us

28 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur that it is a simple purchase transaction, but not works contract or supply contract as held by the AO. There is no dispute that the organizer is rendering services to the farmers as well as the assessee, however, from the bills raised by the assessee or from purchases made from the company, there was no separate payment made by the company to the organizers. It appears that the organizers have made the profit out of the seeds procured from the farmers for the services rendered which required to be brought to tax. Similarly, the company has not purchased the entire produce. It has purchased only the hybrid cotton seeds which are tradable in the open market. Remaining cotton and kapas are left to the farmers only. The AO relied on the decision in the case of State of Gujarat Vs. Variety Body Builders 38 STC 176 of Hon’ble Apex Court. The issue in the case relied upon by the AO is related to the construction of railway coaches as per the designs provided under the frames supplied by the railways. The AO also relied on the decision of Bombay High Court in the case of CIT Vs.Glenmark Pharmaceuticals Ltd. reported in 324 ITR 0199 (2010), the issue involved in the cited case is related to carrying on work of involving labour and service and the use of materials is incidental to the execution of the work.

29 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur The decision of ITAT Pune in the case of BDA Ltd. Vs. ITO, 84 ITD 442 (2003) is related to the printing of labels on the bottles., None of the decisions are related to the supply of foundation seeds and purchase of hybrid seeds from the farmers after due process of cultivation. Therefore, the case law relied upon by the AO are distinguishable on facts and not applicable in the assessee’s case. The department neither made out a case of contract for deducting TDS nor made out case for commission payment. The company is engaged in research and development of BT cotton seed and it has to safeguard it’s interest and keep confidentiality to avoid the competitors misusing the technology from theft or hacking. Hence, it has included lot of conditions in the agreement with the organizers. From the facts of the case, it is clear that it is a simple purchase transaction and sale transaction, hence the provisions of TDS has no application and it clearly shows that the organizer has made the profit from the purchases made from the farmers.

6.3. The dispute between the assessee and the department is with regard to nature of transaction of the company whether it is contract or the purchase. If the nature of transaction is contract, as a natural corollary the

30 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur department has to take action for non deduction of tax at source against the company. Therefore the bench has asked clarifications from the department with regard to action taken by the department for non deduction of tax at source against the assessee u/s 201/201(1A) of the Act. The department did not place any material to show that the action was initiated against the assessee for non deduction of tax at source as per the provisions of section 201/201(1A) of the Act. The Ld.AR informed the bench that the department has not taken any action u/s 201/201(1A) to treat the assessee as assessee in default. In case, the department feels that the transaction in question is contract and the assessee failed to deduct tax at source, the department also required to take action against the assessee for its failure to deduct tax at source u/s 194C and treat the assessee as assessee in default for non deduction of tax at source and raise the demand u/s 201/201(1A) of the Act. Having not treated the assessee as assessee in default and not raising the demand u/s 201(1A), we are of the considered view that the contention of the assessee that it was purchase transaction got strengthened and there is no justification to make addition u/s 40(a)(ia) of the Act.

31 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur 6.4. Similarly, the assessee also contended that the activity of the organizer is agricultural activity and the income of the organizer is exempt. From the agreement though there was a provision for payment of commission, in the impugned assessment year, no commission was paid to the organizers. The Ld. AR stated that the entire payment towards the purchase of Hybrid seeds was passed on to the farmers and the department did not show any evidence to controvert the submission of the assessee. The profit of the organizer is included in the purchase price of hybrid seed. If at all tax is to be deducted the same should be related to the commission payment to the organizers. As per the submission made by the Ld.A.R the company has neither paid any commission separately nor claimed the expenditure in the books of accounts. To ascertain the income of the organizer, the Bench also asked the clarification from the department whether the department has taken any action against the organizers to assess their income from the purchases made by the company? The Ld.DR replied that that the department did not take any action against the organizers also to assess the relevant income relating to the payments made by the assessee company to the organizers even after lapse of more than 6 years. Inaction against the organizers also support the assessee’s

32 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur contention that no separate payment was made to the organizers for their services which attract the TDS. It is established that the company has not made any payment to the organizers for the services rendered and the company has also charged the interest for the advances and made only payment for the seed purchased from the organizers. It appears that the organizers have made the profit out of the seeds procured from the farmers for the services rendered which required to be brought to tax. From the facts of the case, it is clear that it is purchase and sale transaction, hence the provisions of TDS has no application on purchases made by the assessee company. If at all TDS has to be deducted, the same should be deducted on component of commission but not on the entire payment made to the organizer / farmer. From the foregoing discussion, it is established that the department neither quantified the commission nor proved that the company has paid the commission. The department has neither taken any action u/s 201/201(1A) against the assessee nor for assessment of income in the hands of the organization. Therefore, we hold that there is no case for deduction of tax at source u/s 194C and the disallowance u/s 40(a)(ia) of the Act, accordingly, we set aside the orders of the lower authorities and delete the addition made by the AO.

33 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur 7. The appeals of the revenue on this ground are dismissed and the appeal of the assessee is allowed. I.T.A. No.139/Viz/2015, A.Y.2011-12 8. Ground No.1 is related to the addition of Rs.29,30,860/- relating to purchase of seeds from the growers made u/s 40(A)(3)of the Act. During the assessment proceedings, the AO found that the assessee has made the payments of Rs.29,30,860/- to organizers exceeding Rs.20,000/- on each occasion in cash as per the details given below : Sl.No. Name of the organizer Dt. of Payment Amt. (Rs.) 12,317 1. K.Penchalaiah, Gadwai 31.03.2011 19,000 2. K.Ramudu, Ieeja 31.03.2011 19,000 9,488 3. G.Narasimha Reddy, Ieeja 31.03.2011 19,000 18,840 4. N.Chakrapani Reddy 31.03.2011 4,100 19,000 5. Lavu Nagavara Prasad 01.10.2010 50,532 1,00,000 6. Polanati Rama Krishna 01.10.2010 50,366 1,00,000 1,00,000 01.10.2010 7. Sai Baba Bobbili 4,805 31.03.2011 91,560 8. M.Surya Chandra Rao 01.10.2010 99,756 31.03.2011 49,800 9. S.Prasada Rao 31.03.2011 64,733 40,215 1,00,000

34 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur 1,00,000 1,00,000 1,00,000 1,00,000 01.10.2010 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 10. Kapa Srinivasa Rao 1,00,000 38,792 70,000 70,000 75,000 75,000 31.03.2011 80,000 1,00,000 1,00,000 1,00,000 1,00,000 TOTAL 29,30,860 8.1. The assessee explained that the payments were made in cash to the farmers or organizers in exceptional circumstances. Since the payments were made for purchase of agricultural produce, the assessee contended that the payment is covered under exception under Rule 6DD, hence, no disallowance u/s 40A(3) is required. However, the AO has not accepted the contention of the assessee. The AO observed that the assessee company is in the business of production of hybrid seeds and engaged few organizers for the work to be done. It cannot be said that it is purchasing seed from

35 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur the organizers. The payments were made for the purpose of blower, platform, hand grading, hamali, ginning etc. but not for purchase of the seeds. Therefore, held that the payment attracts clearly the provisions of section 40A(3) and accordingly disallowed the expenditure and made the addition.

36 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur the obligation of the farmer/organizer to separate cotton and kappas and sell the hybrid seed to the company. Therefore there is no reason to make such payments by the assessee and the assessee did not make out a case that the payment is exempt from the provisions of section 40A(3) of the Act. Hence, we do not see any reason to interfere with the order of the Ld.CIT(A) and the same is upheld.

37 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur appeal hearing, the Ld.AR submitted that no notice of enhancement was issued by the Ld.CIT(A). The department did not place any evidence to show that the Ld.CIT(A) has issued notice for enhancement. Therefore, the enhancement made by the Ld.CIT(A) is unsustainable, accordingly, the enhancement made by the Ld.CIT(A) is deleted.

I.T.A.No.06/Viz/2016, A.Y.2012-13 14. The first issue in both the revenue and assessee’s appeal is related to the addition made by the AO u/s 40(a)(ia) of the Act representing purchases made by the AO for purchase of hybrid seeds. As per the discussion in detail in appeal No.167/Viz/2015 for the A.Y. 2011-12, we hold that the addition made by the AO is unsustainable, accordingly deleted. The appeal of the revenue is dismissed and the appeal of the assessee becomes infructuous, hence dismissed on this issue.

38 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur suspicion that the foundations seeds were purchased from the organizers relying on the order of the Ld.CIT(A) in the earlier years.

15.1. During the appeal hearing also, the Ld.AR argued that the AO made the addition without verifying the facts and requested to remit the matter back to the file of the AO.

15.2. We have carefully considered the submissions of the Ld.A.R as well as the DR. though the assessee did not purchase the foundation seed from the organizers, the do purchase the Hybrid seed from the organizers. Hence this issue require verification at the end of the AO. Therefore, we remit the matter back to the file of the AO the examine the issue in detail and decide the same on merits after giving opportunity to the assessee. The appeal of the assessee on this ground is allowed for statistical purposes.

39 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur 17. On appeal, the Ld.CIT(A) confirmed the addition since the assessee failed to furnish the details and dismissed the appeal of the assessee.

40 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur that there is no distinction between employees' and employer contribution to PF, and if the total contribution is deposited on or before the due date of furnishing return of income u/s 139(1) of the Act, then not disallowance can be made towards employees' contribution to provident fund. The CIT(A) after considering the relevant details rightly deleted the additions made by the A.O. We do not see any reasons to interfere with the order of the CIT(A). Hence, we inclined to uphold the CIT(A) order and dismiss the appeal filed by the revenue.”

4.1. Respectfully following the decision of this Tribunal on the assessee’s own case for the earlier year, we uphold the order of the Ld.CIT and allow the appeal of the assessee.”

The ITAT held that the payment made before the due date of filing the return required to be allowed as deduction. Respectfully following the view taken by this Tribunal, the appeal of the assessee is allowed.

Order pronounced in the open court on 19th July 2019.

Sd/- Sd/- (िी.दुगाा राि) (धड.एस. सुन्दर धसंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBERलेखा सदस्य/ACCOUNTANT MEMBER नवशधखधपटणम /Visakhapatnam नििधंक /Dated : 19.07.2019 L.Rama, SPS

41 I.T.A. No.167/Viz/2015, 55/Viz/2016, 139/Viz/2015 and 06/Viz/2016, A.Y.2011-12 & 2012-13 M/s Tulasi Seeds Pvt.Ltd., Guntur आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. निर्धाऩरती/ The Assessee- M/s Tulasi Seeds Private Ltd., D.No.6-4-6, Tulasi House, 4/5, Arundelpet, Guntur 2. रधजस्व/The Revenue – Asst. Commissioner of Income Tax, Circle-2(1), Guntur 3. The Pr.Commissioner of Income Tax, Guntur 4. The Commissioner of Income Tax (Appeals)-1, Guntur 5. तिभागीय प्रतितिति, आयकर अिीिीय अतिकरण, तिशाखािटणम/DR, ITAT, Visakhapatnam 6.गार्डफ़ाईि / Guard file आदेशािुसार / BY ORDER // True Copy //

Sr. Private Secretary ITAT, Visakhapatnam