RAJARAMBAPU SHETKARI AND SHETMAJUR SAHHAYA SAMITI,,SANGLI vs. INCOME TAX OFFICER,, SANGLI

Rajarambhau Shetkari and Shetmajur Sahhaya Samiti Considering the above condonation averments and due to no objection from the Revenue side, we find it as a fit case to condone the impugned delay of 103 days and admit the appeal for adjudication.

“1. The ld.CIT(A) erred in confirming addition of Rs.65,69,674/- of disallowance u/s 40(a)(ia) of the Income Tax Act, 1961.

2. The CIT(A) on facts and circumstances of was erred in confirming the addition of Rs.65,69,674/- without appreciating the documents and information produced by the assessee AOP that it is not carrying on any business activity.

3. The learned.CIT(A) on facts and circumstances of case erred in confirming the addition of Rs.65,69,674/- as even after non deduction of TDS there is no loss of revenue.

4. The learned.CIT(A) on facts and circumstances of case erred in confirming the addition of Rs.65,69,674/- as even though no tax is payable by deductees.”

7.1 AOP has entered into agreements with the contractors for carrying the contract works like harvesting and transportation of sugarcane. While executing the agreements it has exercised due diligence. It has incorporated such terms & conditions which a prudent businessman does while entering into the contracts. It has also anticipated the need for non-TDS certificates. It has also obtained „authority letter‟ from the contractors to the effect that AOP will have all the rights to appoint the tax experts of its choice for obtaining the non TDS certificates for its contractors.

7.2 Appellant AOP is well aware of its responsibilities relating to TDS provisions. Moreover, it is constituted at the behest of Sugar Factory with the object to relieve the Sugar Factory from following the procedures of TDS and management of the harvesting work and transportation of sugar cane to the factory site. This fact could be seen from the observations of Ld. CIT while responding to assessee‟s application for grant of 12A registration. The assessee applied for registration u/s 12A & 80G of the Act, 1961 in the year 1998 before the CIT, Kolhapur. The Ld.CIT, Kolhapur vide his order dated 14-05-1999 rejected assessee‟s application. It has observed by the then CIT, Kolhapur that “instead of managing the work of harvesting and transportation of sugarcane by sugar factory itself, the sugar factory is getting it done through the Trust under the direct supervision and control of chairman/President/Directors of the said sugar factory and other co- operative bodies.”

7.3 The income of the appellant AOP is computed as per the provisions applicable for computing „Business Income‟. The appellant itself has prepared its profit & loss account in respect of its business income. Sugar Factory has paid contract receipts to appellant after deducting TDS

Rajarambhau Shetkari and Shetmajur Sahhaya Samiti as per the provisions of TDS. After arriving at the net profits, it has filed its return of income claiming income tax refund. The appellant has simply raised hue & cry that it is non-profit making appellant like a Trust. Once its profits are assessable as „business income‟ the provisions of section 40(a)(ia) become applicable. Moreover, even a charitable trust is required to comply with the TDS provisions. In view of the above, the argument of the appellant to the effect that provisions of section 40(a)(ia) are not applicable in its case is incorrect.

7.4 Tax is one of the major sources of revenue for the government. One of the modes of collecting tax is TDS, by which a certain percentage of amounts is deducted by a person at the time of making/crediting certain nature of payment to the other person and deducted amount is remitted to the Government‟s account. The concept of TDS envisages the principle of “pay as you earn”. It facilitates the sharing of responsibility of tax collection between the deductor and the tax administration. It ensures early and timely generation of revenue to the government and also acts as a powerful instrument to prevent tax evasion. Almost 37% of Tax collection comes through TDS. Moreover TDS is mechanism and source of the information to the government through which it can accelerate its revenue. Section 40(a)(i) has been incorporated to augment compliance of TDS provisions in the case of residents and to curb bogus or non-genuine payments. Non-deduction or non-payment or even untimely deduction of tax results into disallowance or deferment of allowance of expenditure. The appellant AOP instead of looking positively at the provisions and subscribing to the views of government, it has put in its energy in making available the non-deduction TDS certificates to its contractors by engaging Tax experts. Thus, the attitude of AOP is negative compliance.

7.5 Appellant AOP had enough opportunity to regularize its default of not deducting tax. Its accounts are subjected to tax audit, presumably its Auditors must have pointed out the non-deduction of tax at source and also must have informed the likely disallowance of expenditure

Rajarambhau Shetkari and Shetmajur Sahhaya Samiti Rs.65,69,674/-. It is aware that it has obtained certificates of no TDS for all its contractors which are effective from 01.05.2011. It should have taken care to deduct TDS on the payments which have escaped TDS even at the time of filing its Return of income. Thus, appellant has instead of curing the procedural lapses it has unnecessarily and knowingly defaulted the compliance of TDS.

7.6 In view of my discussion as above and considering the circumstances of default, purpose of its constitution at the behest of Sugar Factory, its involvement in arranging non-deduction of TDS certificates, I am inclined to uphold the disallowance made by AO.”

Rajarambhau Shetkari and Shetmajur Sahhaya Samiti We find in this backdrop that the legislature has incorporated section 40(a)(ia) 2nd proviso vide the Finance Act 2012 with effect from 01.04.2013 that the impugned disallowance is not be made in case the assessee’s concerned is not the assessee’s default in the light of the corresponding proviso in section 201(1) of the Act. The Revenue fails to dispute that CIT vs. Ansal Landmark Township (P). Ltd (2015) 377 ITR 635 (Delhi) holds the same to be curative in nature having retrospective effect. And also that the assessee’s forgoing additional evidence(s) contains its payees and their PAN details in light of the TDS non deduction which requires the Assessing Officer’s factual verification . We thus restore the assessee’s instant sole grievance back to the Assessing Officer in very terms .