ITO Vs. The Ankleshwar Taluka ONGC
ITAT Ahmedabad
ITA No. 2303/Ahd/2008
[Asst. Year : 2005- 2006]
O R D E R
PER T.K. SHARMA, JUDICIAL MEMBER : This appeal of the assessee is directed against the order of the Commissioner of Income Tax(Appeals)-VI, Baroda dated 15.04.2008 arising out of the order of the Assessing Officer passed under Section 143(3) of the Income Tax Act, 1961.
2. The only ground raised in this appeal reads as under:“1 On the facts and in the circumstances of the case the CIT(A) has erred in the law in deleting the addition of Rs. 2,57,36,353/- made u/s.40(a)(ia) of the Act being amounts paid to Sub contractors without deducting the tax at source as required under section 194C(2) of the IT Act, 1961.”
3. The facts in brief relating to controversy involved in the aforesaid matter are that the assessee is a co-operative society. For the assessment year under appeal, it has declared total income at NIL. The AO framed assessment under Section 143(3) of the Act on 29-10-2007 wherein he disallowed a sum of Rs.2,57,36,253/- by invoking the provisions of section 40a (ia) of the Act of the IT Act, 1961. The AO gave the following reasons for dis allowance:
i) The ONGC has deducted “TDS on payment to contractor” and periodically payment were made to the assessee only and ONGC has not stated that these payment has made to the society on behalf of its members;
ii) As per section 199 of the IT Act, credit shall be given to the assessee for the TDS for AY for which such income is asses-sable. The assessee has claimed the credit for the entire TDS and therefore the entire income is asses-sable in the hands of the assessee. In view of this, the stand taken by the assessee that the society is only distributing income does not have any merit;
iii) The assessee is a person as per section 2(31) and the status of the assessee is AOP. Assessee is carrying on the business of Travelling Agency as per the tax audit report. Annual accounts of the assessee are audited.
iv) The assessee itself has stated that the service tax paid is allowable as per section 43B of the Act and has claimed credit for TDS as per section 199 of the IT Act. The assessee cannot take a stand that only those sections which suit the assessee are applicable to the assessee and those sections which do not suit the assessee are not applicable.
4. On appeal before the CIT(A), it was contended that main object of the society was that when ONGC acquired the land of various farmers, in compensation, the farmers could not get any job or services as promised. So it was decided that each land looser who could not be provided job would buy a vehicle and rent out to ONGC. Over the years, the ONGC was not able to maintain the accounts of each farmers. So it was decided to form a co-operative society of such land loosing farmers. Such society was to manage on behalf of the members, the payment from ONGC and after deducting administrative expenses, the remaining amount was to be distributed amongst the members of the society as per the vehicle rented out during the period. It was also stated before the AO there was no intention to earn profit from such activity but only to help such illiterate farmers by maintaining accounts of each member of his vehicle and then distribute amount after deduction of expenses etc. The assessee also furnished complete details of such farmers viz. name and address of the members, details of month-wise hiring income distribution etc. It is submitted that there is no parallel to the concept of contractor and sub contractor. It was submitted that the member of the society owning a vehicle and giving out to the society to carry out the work. The society is a whole a unit consisting of its members. The hiring of the work of the society cannot be split up into parts and cannot be separated or identified because the society is media or collective body. The society’s identity is with its members without which there is no existence of the society. There is no concept of contractor- contractee or contractor and sub contractor exist in the present case. Therefore, provisions of section 194C(2) and section 40A(3) of the Act were not applicable to the present case. Considering all these, the CIT(A) deleted the dis-allowance with the following findings:
