THE HARYANA STATE COOP LA BOUR & CONSTRUCTION FED L TD,PANCHKULA vs. INCOME TAX OFFICER (TDS), KARNAL

ORDER

Per Satbeer Singh Godara, Judicial Member:

to 3243/Del/2025 Haryana State Coop. Labour & Construction Federation Ltd. 3. Learned departmental representative vehemently argues that the lower appellate authority herein has rightly upheld the Assessing Officer’s identical action treating as the assessee/deductor as the “assessee-in-default” in section 201(1) r.w.s 201(1A) proceedings; vide the following detailed discussion:

6.1 I have gone through the facts of the case, the ground of appeal, and the submissions made by the appellant in this case. The AO passed order under section 201(1)/201(1A) on 25.03.2021 for the assessment year 2015-16. It was observed by the AO that the appellant failed to make TDS on account of amount paid to Shri V.P. Singh, Shri Karan Bhardwaj, Shri S.P. Gupta, Shri Pavit Mattewal. Further, the AO held the appellant in default for non-TDS on financial assistance given to the societies and accordingly, the AO held the appellant as assessee in default and accordingly raised demand of Rs.4,94,275/- under section 201(1) and interest under section 201(1A) of the Act. 6.2 The appellant, during appellate proceedings, submitted that the appellant is a co-operative society owned by the State Govt. of Haryana and the main object of the appellant is to provide technical, administrative and financial assistance to its members Primary Co- operative labor Construction Societies functioning in the state of Haryana. In order to achieve its objects, financial assistance to the various primary cooperative labor construction societies given by the appellant. The purpose of financial assistance/loans to the primary cooperative labor construction societies is to render temporary financial assistance to the societies which carried interest also. It is further stated that these construction societies undertook the work contract to the extent of Rs.9.54 cr on behalf of the appellant. Since the works contracts were carried out to the tune of Rs.9.54 cr., TDS on this amount was duly deducted at source by the appellant under the provisions of section 194C of the Act. Accordingly, the appellant also filed copies of the TDS certificates. It is stated by the appellant that the AO calculated non-TDS on the financial assistance given to the sum of Rs.1,25,52,526/-. It is further claimed by the appellant that the action of the AO resulted in requiring TDS on the same amount twice i.e. at the time of giving to 3243/Del/2025 Haryana State Coop. Labour & Construction Federation Ltd. advance and at the time of adjustment of advance against work done. 6.3 On going through the facts and circumstance of the case, it is held that merely because the appellant is provided financial assistance to the various primary cooperative construction societies and thus such transactions does not exclude from the liability for deduction of tax at source u/s 194 C of the act, as the appellant is responsible for making payments to these parties and in fact, undeniably appellant has made the payments and these societies have complete the worked assigned to it. Furthermore, it cannot be a reason for non-deduction of tax at source at the time of granting financial assistance/loan to these recipient and TDS have been made at the time of completion of the work. In view of this I hold that payment made to the above societies are subject to tax deduction at source u/s 194C of the Act and assessee is liable to deduct tax at source u/s 194C of the Act. Therefore, to this extent I uphold the order of the AO dated 25.03.2021. Thus, the ground of appeal of the appellant on this issue is hereby dismissed. 7.1 The appellant taken an alternative ground, relaying on the decision of the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd (2007) 293 ITR 226, and the Circular No. 275/201/92-IT(B) dated 29.01.1997 claimed that these societies have filed their Income tax returns and deposit of income tax is concerned, the demand raised under section 201(1) and 201(1A) may be deleted. 7.2 In this regard, it is found that it is found that the decision of Hon'ble Supreme Court based upon Board Circular No.275/201/95-IT(B) dated 29.01.1997 is that if a person fails to deduct tax at source, there is a shortage in deduction of tax at source, or having deducted tax at source fails to deposit the same to the credit of the Central Government as provided, he shall be treated to be an assessee in default. However, if the payee pays the tax on the income on which tax was not deducted, short deducted or not paid, the amount in respect of which he was deemed to be an assessee in default shall not be collected from him. The reason is that the same tax cannot be collected both from the payer and the payee. The payment of tax by the payee shall, however, not alter the liability regarding interest u/s 201(1A) from the date of default committed by the payer to the date of payment by the payee. 7.3 The Hon’ble ITAT, Delhi vide order dated 06.05.2011 in the case of M/s. Exide Industries Ltd (ITA No. 1205/D/2011) held that: to 3243/Del/2025 Haryana State Coop. Labour & Construction Federation Ltd. “it is mentioned that the aforesaid decision nowhere mentions that if the payee pays the advance tax, then no interest shall be charged u/s 201(1A). We are of the view that this position will have to be seen with reference to the date of default in case of the payer and date of advance tax paid by the payee. Thus, there could be a situation where the two dates coincide. In such a case, no interest will be chargeable as the tax has been paid by way of advance tax by the payee rather than by way of tax deduction at source by the payer. However, if the date of payment of advance tax is subsequent to the date on which default was committed, interest will be chargeable for the period of the default.” 7.4. In view of the above, respectfully following the decisions as discussed above, the AO is hereby directed to verify the exact date of payment by the payee as discussed above and accordingly recalculate the demand under section 201(1) and interest 201(1A) of the Act. In result, the alternative ground of appeal is hereby partly allowed.