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Income Tax Appellate Tribunal, PANAJI BENCH : PANAJI
Before: SHRI SATBEER SINGH GODARA & SHRI G.D. PADMAHSHALI
PER BENCH :
The instant batch of ten appeals pertains to a single assessee viz., Ryatar Sahakari Sakkare Karkhane Niyamit. All the other relevant particulars already stand tabulated hereinabove.
Cases called twice. None appeared at assessee’s behest. It is accordingly proceeded ex-parte.
We next note that the assessee’s first and foremost assessment year 2005-2006’s appeal ITA.No.152/PAN./2015 raise the following substantive grounds :
“On the facts and in the circumstances of the case, the order of the Learned Commissioner of Income tax (Appeals)
Belgaum [CIT(A)] is opposed to facts and law and accordingly, liable to be cancelled.
2. The L’nd CIT(A) erred to uphold the disallowance of Harvesting / Transportation expenses made u/s 40(a)(ia) by the Assessing Officer and dismiss the appeal.
3. The L’nd CIT(A) failed to appreciate the fact that the agreement (bond) between the Harvester / Transporter and the Appellant did not constitute a CONTRACT for want of ‘Certainty’ and ‘Valid Ratification’ by the Farmer / Land Owner.
3 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka 4. The L’nd CIT(A) also erred in upholding the rule of estoppel to sustain the impugned 40(a)(ia) disallowance
5. The L’nd CIT(A) ought to have appreciated the written arguments of Appellant and allowed the appeal.
6. The L’nd CIT(A) failed to determine the point of controversy viz., whether or not the payments as per agreement between Appellant and Harvester/Transporter was bonafide and whether or not constituted a
7. contract for which Appellant was made liable under the Income tax Act 1961.
8. For these and other grounds that may be urged at the time of appeal hearing, the Appellant prays that the Appeal be allowed.”
It transpires during the course of hearing with the able assistance coming from the department side that this is the second round of proceedings between the parties as the learned coordinate bench’s earlier order dated 04.08.2015 had restored the assessee’s above stated substantive grounds back to the Assessing Officer for his afresh verification in following terms :
“3. As all the appeals relate to the same assessee and are relating to the same issues the appeals are disposed off by this common order. Shri Pukale Manoj Devinder advocate represented on behalf of the assessee and Smt.
4 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka Smriti Bhardwaj ld. DR represented on behalf of the revenue.
It was submitted by the ld. AR that the assessee is a co-operative society registered under the karnataka co-operative societies act 1959 carrying on the activity of manufacturing sugar and its bye-products. It was the submission that the assessment came to be completed u/s 143(3) wherein various additions had been made by invoking the provisions o f sec.40(a)(ia) of the act on account of non-deduction of TDS. It was the submission that one of the main issues was in respect of non- deduction of TDS u/s 194C in respect of payments made to the cane harvesters and cane transporters. It was the submission that consequent to the non- deduction of TDS the A.O. had also passed orders u/s 201(1) & 201(1A) of the Act on account of non-deduction of TDS u/s.194C & 194J of the Act. It was the submission that the assessee has made payment to the transporters and harvesters consultation charges as also to contractors before the due date of filing the return. Consequently in view of the decision of the Hon'ble Allahabad High Court in the case of Vector Shipping Services Pvt. Ltd. reported in 38 taxmann.com 77 and the consequential dismissal of the SLP filed before the Hon'ble Supreme Court by the Revenue
5 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka no disallowance u/s 40(a)(ia) of the Act was called for. On a specific query from the Bench as to show that there was no amount due as on the year end, it was submitted by the ld. AR that he was not carrying the details.
5. In reply the ld. DR vehemently supported the orders of the ld. CIT(A). The ld. DR drew our attention to para 7.2.3 at page 14 of the order of the ld. CIT(A) for the A.Y. 2005-06 to submit that the payments though now claimed to be not as a consequence of a contract were in fact payments on the basis of contracts which were clearly agreements entered into by the assessee with the various contractors. It was also the submission that the decision of the Hon'ble Allahabad High Court not being jurisdictional High Court decision consequently the same was not binding on the Tribunal.
We have considered the rival submissions.
Admittedly the decision of the Hon'ble Allahabad High referred to supra was the subject matter of a SLP before the Hon'ble Supreme Court and the same has also been dismissed. Though the Hon'ble Allahabad High Court decision is not a jurisdictional high court decision, still the said decision of the Hon'ble Allahabad High Court against which the SLP has been dismissed by the Hon'ble
6 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka Supreme Court has a binding precedence over this Tribunal insofar as it is the only decision which has been quoted before us and no contrary decision has been quoted. Further as it is noticed that the facts in its entirety being whether the amounts have been paid before the year end has not been proved before us, in these circumstances we are of the view that the assessment orders are liable to be set aside and all the issues are restored to the file of the A.O. for re-adjudication in respect of the disallowance made by invoking the provisions of sec.40(a)(ia) of the Act.
The assessee shall prove before the A.O. that there is no amount left payable as on the year end and that all the amounts claimed on which the provisions of TDS u/s 194C and 194J has been invoked have been fully paid by the year end. If the assessee is able to prove before the A.O. that there is no outstanding and all the amounts have been fully paid, then, in view of the decision of the Hon'ble Allahabad High Court in the case of Vector Shipping referred to supra, against which the Hon'ble Supreme Court has dismissed the SLP vide order dt. 2.7.2014, the A.O. shall not invoke the provisions of sec. 40(a)(ia) on such amounts. However, if any amount is found to be payable as on the year end the disallowance made by the A.O. shall stand confirmed.
7 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka 7. In regard to the levy u/s 201(1) & 201 (1A) of the Act, the issues are restored to the file of the A.O. for verification as to whether the recipients have offered the receipts for tax subject to the condition that they are liable to Income Tax, the details of which shall be furnished by the assessee. Failure on the part of the assessee shall lead to confirmation of the levy made by the A.O. In the circumstances, the issues in these appeals are restored to the file of the A.O. for re-adjudication after granting the Assessee adequate opportunity to substantiate its case.
8. In the result the appeals of the assessee are partly allowed for statistical purposes.”
4. Both the assessee and the department filed their respective cross-appeals before the hon’ble jurisdictional high court. Their lordships’ common detailed judgment dated 26.02.2016 upheld the Revenue’s contentions in both the batches thereby confirming the CIT(A)'s/First Appellate Authority’s findings upholding the impugned disallowance.
The assessee then filed SLP (C) Nos.14053 to 14062 of 2017 which were converted to Civil Appeal Nos.4515 to 4524 of 2019 in hon’ble apex court. Their lordships’ common judgment dated 01.05.2019 therein restored the issue(s) in question back to hon’ble jurisdictional high court. It is in pursuance to 8 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka the said directions that the hon’ble jurisdictional high court’s common order dated 25.11.2019 in ITA.Nos.100111- 100120/2015 has now remanded the assessees’ cases back to us in the following terms :
“2. These appeals are admitted on the following substantial question of law:
“Whether the order passed by the Income Tax
Appellate Tribunal, Panaji Bench, Panaji suffers from the vice of non-application of mind inasmuch as no reasons had been assigned for making an order of remand?”
3. With the consent of the parties, the matter is heard finally.
4. In these appeals, the assessee has assailed the validity of the order passed by the Income Tax Appellate Tribunal dated 04.08.2015 by which, the Tribunal while placing reliance on the decision of the High Court of Allahabad in the case of has remanded the matter to Adjudicating Officer.
Facts giving rise to filing of these appeals briefly stated are that the appellant which is the Co- operative Society of Sugarcane was carrying on the activity of manufacturing sugar and bye products. It was engaging
9 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka services of harvesting, cutting and transporting sugarcane from the farmers with the help of harvesters and transporters by appointing them by executing bond agreements on behalf of the farmers. The appellant claim harvesting/transporting charges in computing income tax returns as per the CBDT circular. The assessing officer brought the relevant assessment years and disallowed the harvesting/ transporting expenses under Section 40(a)(ia) of the Income Tax Act, 1961 and treated the same as contract payments. Being aggrieved, the appellant filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) by an order dated 16.05.2014, held that the bond agreement between the appellant and the harvesters/transporters did construe a contract as per the Indian Contract Act, 1972. Therefore, the provisions of tax deduction at source applied to the facts situation of the case. The Tribunal heard the appellants and placing reliance on the decision rendered by the Allahabad High Court in the case of Vector Shipping Services Pvt. Ltd., remanded the matter to the respondent assessing officer for re-adjudication. Being aggrieved by the aforesaid order, the assessee as well as the revenue are before us.
10 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka 6. Learned counsel for the assessee submitted that the Income Tax Appellate Tribunal ought to have appreciated that the farmers were not parties to the contract in question and therefore, erred in upholding disallowance of provisions under Section 40(a)(ia) of the Act.
On the other hand, learned counsel for the revenue has submitted that the Tribunal grossly erred in deciding the appeal merely by placing reliance on the decision rendered by the Allahabad High Court in the case of Vector Shipping Services Pvt. Ltd. without reference to the facts of the case on hand. It is further submitted that Section 40(a)(ia) is applicable to the whole contract amount and not to the amount payable at the end of the year.
We have considered the submissions made by the learned counsel for the parties and have perused the records.
The relevant extract of the order passed by the Tribunal reads as under:
“6. We have considered the rival submissions. Admittedly, the decision of the Hon’ble Allahabad High Court in the case of Vector Shipping Services
Pvt. Ltd. referred to supra was the subject matter of a SLP before the Hon’ble Supreme Court and the same
11 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka has also been dismissed. Though the Hon’ble
Allahabad High Court decision is not a jurisdictional
High Court decision, still the said decision of the Hon’ble Allahabad High Court, against which the SLP has been dismissed by the Hon’ble Supreme Court, has a binding precedence over this Tribunal insofar as it is the only decision which has been quoted before us and no contrary decision has been quoted.
Further, as it is noticed that the facts, in its entirety, being whether the amounts have been paid before the year end has not been proved before us, in these circumstances we are of the view that the assessment orders are liable to be set aside and all the issues are restored to the file of the AO for re- adjudication in respect of the disallowance made by invoking the provisions of Sec. 40(a)(ia) of the Act.
The Assessee shall prove before the AO that there is no amount left payable as on the year end and that all the amounts claimed, on which the provisions of TDS u/s 194C and 194J has been invoked, have been fully paid by the year end. If the Assessee is able to prove before the AO that there is no outstanding and all the amounts have been fully paid, then, in view of the decision of the Hon’ble
12 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka Allahabad High Court in the case of Vector Shipping referred to supra, against which the Hon’ble Supreme
Court has dismissed the SLP vide order dt. 2.7.2014, the AO shall not invoke the provisions of Sec. 40(a)(ia) on such amounts. However, if any amount is found to be payable as on the year end, the disallowance made by the AO shall stand confirmed.”
Thus, from perusal of the relevant extract of the order passed by the Income Tax Appellate Tribunal, it is evident that the Tribunal has merely referred to the decision of the Vector Shipping Services Pvt. Ltd. and has not adverted to the facts of the case. The Tribunal has not recorded any finding on the issue whether the provisions of Section 40(a)(ia) of the Act applies to the fact situation of the case and whether the tax was required to be deducted at source under Chapter 17B of the Act with reference to the facts of the case. The order passed by the Tribunal is cryptic in nature and suffers from vice of non-application of mind.
In view of the preceding analysis, we are inclined to answer the substantial question of law in the affirmative.
In the result, the impugned order dated 04.08.2015 passed by the Income Tax Appellate Tribunal, Panaji Bench, Panaji is hereby quashed and set aside and the 13 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka matter is remitted to the Tribunal for decision afresh to decide the issues on the applicability of Section 40(a)(ia) of the Act referred by us supra with reference to the facts of the case by a speaking order.
Let the aforesaid exercise be carried out by the Tribunal within a period of four months from today.
Accordingly, appeals are disposed of.”
It is in this backdrop of facts that we are once again deciding the assessee’s instant appeal(s) afresh.
5. Now comes the sole issue of applicability of sec.40(a)(ia) disallowance regarding the assessee’s payments made under the head “harvesting and transport charges” in pursuance to the corresponding written agreements. Mr. Shrikanth invited our attention to the CIT(A)'s detailed discussion upholding the Assessing Officer’s action invoking sec.40(a)(ia) disallowance as under :
14 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka
15 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka
16 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka
17 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka 6. The assessee on the other hand has filed it’s written note dated 04.07.2023 inter alia pleading therein that both the learned lower authorities have erred in law and on facts in treating these payments as contractual in nature inviting TDS deduction u/sec.194C followed by sec.40(a)(ia) disallowance.
He has relied upon hon’ble Gujarat high court’s twin judgments dated 01.12.2014 Shree Chalthan Vibhag Khand vs. ITO [Tax Appeal No.211 & 440 of 2006] as well as in another batch of Tax Appeals No.1625 of 2008 etc., dated 16.06.2016 reiterating the very legal position in CIT (TDS) vs. Kamrej Vibhag Sahakari Khand Udyog Mandli Ltd., thereby holding that such charges form part of the sugar cane purchase price only not giving rise to TDS deduction as under:
18 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka
19 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka
20 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka
7. We have given our thoughtful consideration to the foregoing vehement rival stands and find no reason to express our agreement with either party(ies)’s stand at this stage. This is for the precise reason that neither the Assessing Officer’s
21 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka detailed discussion in his assessment dated 26.12.2007 nor the CIT(A)'s findings have referred to the specific clauses in the corresponding alleged agreement throwing sufficient light on the nature of the payments made i.e., whether they are part of the sugar cane purchase price or not ? These corresponding agreement(s) also do not form part of records before us so as to arrive at our independent conclusion. Faced with the situation and in light of the fact that the hon’ble apex court’s landmark decision in Palam Gas Services vs. CIT [2017] 394 ITR 300 (SC) has already held that sec.40(a)(ia) disallowance covers both “paid” as well as “payable” amounts; we are of the opinion that the learned Assessing Officer needs to examine and verify the foregoing clinching aspect first as to whether the impugned payments form part of the sugar cane purchase price or not ? Whilst doing so, we are indeed mindful of the fact that much water flown out the stream since the impugned “lead” assessment year 2005-2006. We therefore, make it clear that the learned Assessing Officer shall finalise his consequential verification preferably within three effective opportunities of hearing as per law. We order accordingly.
8. The assessee’s instant “lead” appeal ITA.No.152/ PAN./2015 is allowed for statistical purposes in above terms.
22 ITA.Nos.152 to 161/PAN./2015 Ryatar Sahakari Sakkare Karkhane Niyamit, Timmapur Bagalkot Tq Karnataka 9. Same order to follow in all the remaining appeals ITA.No.153/PAN./2015 [A.Y. 2006-2007]; ITA.No.154/PAN./2015 [A.Y. 2008-2009]; ITA.No.155/PAN./2015 [A.Y. 2009-2010]; ITA.No.156/PAN./2015 [A.Y. 2010-2011]; ITA.No.157/PAN./2015 [A.Y. 2011-2012] in sec.143(3) and ITA.No.158/PAN./2015 [A.Y. 2009-2010]; ITA.No.159/PAN./2015 [A.Y. 2010-2011]; ITA.No.160/PAN./2015 [A.Y. 2011-2012]and ITA.No.161/PAN./2015 [A.Y. 2012-2013] in sec.201(1) and 201(1A) proceedings in the foregoing latter three assessment years (supra). Ordered accordingly.
10. All these assessee’s ten appeals are allowed for statistical purposes in above terms. A copy of this common order be placed in the respective case files.
Order pronounced in the open court on 13.07.2023.