Bharatpur Dugdha Utpadak Sahkari Sangh Ltd. Vs ITO (ITAT Jaipur)
ITAT Jaipur held that the provision of section 194C of the Income Tax Act is applicable to work and not for purchase made which are liable for VAT. Hence, TDS u/s. 194C is not leviable as payments were made for purchase of material and not for any work contract.
Facts- A TDS survey u/s. 133A(2A) of the Income-tax Act 1961 was conducted at the business premises of the assessee. During the course of the survey, it was found that the assessee/deductor M/s Bharatpur Dugdh Utpadak Sahakari Sangh Ltd. Bharatpur, has made the contract through the government to supply the packing material and payment made for purchase of packing material, but TDS not deducted under the head contractor payment as per Section 194C of the I.T. Act and TDS required to be deducted @1%/2% as applicable as per section 194C amounts to Rs. 63,700/-.
In this regard the show cause was issued to the assessee and the assessee filed the reply which was considered but AO held the assessee in default for short/non-deduction of TDS of Rs. 63,700/- u/s. 194C of the Act. The interest u/s. 201(1A) was also worked out at Rs. 36,309/-. As the assessee did not find any favour from the order of the ld. CIT(A) the assessee has preferred the present appeal.
Conclusion- Held that the provision of section 194C of the Act is applicable to work and not for purchase made which are liable for VAT. Based on the evidences so produced and argument advanced before us we are of the considered view that all are purchases of material with some specifications supported by the levy of the value added tax on material and therefore, the same is no for any work contract. Since, the assessee has discharged the burden that all these payments made by the assessee is not for any work contract the provision of section 194C of the Act is wrongly invoked by the lower authorities and therefore, the levy TDS made by the ld. AO is queshed for an amount of Rs. 63,700/- and therefore the appeal filed by the assessee in ITA NO. 321/JPR/2023 stands allowed.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
These five appeals are filed by the assessee aggrieved from the order of the National Faceless Appeal Centre (NFAC), Delhi [ Here in after referred as “NFAC/ld.CIT(A)” ] for the assessment years 2015-16 to 2019-20 dated 09.03.2023 which in turn arises from the order of the ITO, TDS, Alwar passed under Section 201(1)/201(1A) & 206C of the Income tax Act, 1961 (in short ‘the Act’) dated 28.06.2019.
2. Since the issues involved in the assessee’s appeal for different years are almost identical and are almost common, except the difference in figure of demand raised and disputed. Therefore, these appeals were heard together with the agreement of both the parties and are being disposed off by this consolidated
3. At the outset of the hearing the ld. AR submitted that the matter pertaining to Bharatpur Dugdha Utpadak Sahkari Sangh Limited in ITA no. 321/JPR/2023 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical except the difference in the amount in other assessment year. The ld. DR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 321/JPR/2023 is taken as a lead case.
3.1 Based on the above arguments we have also seen that for these appeals are on similar facts, similar arguments were raised and grounds of appeal are also similar. Therefore, were heard together these five appeals and are disposed by taking lead case facts, grounds and arguments from the folder in ITA No. 321!JPR!2023 for the assessment year 2015-16 and the order there in passed shall mutatis mutandis apply to the ITA Nos. 322 to 325!J PR!2023.
4. Before we move to the merits of the case the bench noted that as per the report of the registry these appeals are filed with a delay of 11 days. On this issue the ld. AR of the issue pointed out the appeal is filed online as well as offline in physical. The online appeal is filed on 03.05.2023 as per the acknowledgment filed before us and the physical! hard copy is filed on 19.05.2023. Since the appeal filed online is in time the same is treated as valid and thus we are deciding on the merits.
5. The assessee assailed the appeal in ITA No. 321/JPR/2023 on the following grounds;
“1. That, on the facts and in law, the Ld. Commissioner (Appeals) erred in sustaining the order of the I.T.O., TDS, Alwar whereby he (the I.T.O.).by considering the assessee as assessee in default in regard to non-deduction of TDS u!s 194C of the IT. Act on payment of Rs.31 .85 lacs made for purchase of packing material, held the assessee liable to deduct TDS @ 2% on the payment of Rs. 31.85 lacs u!s 194C of the I.T. Act at Rs. 63,700, which sustenance by the Ld. Commissioner (Appeals) of the order of the I.T.O., TDS, Alwar holding the assessee liable to deduct TDS @ 2% on payment of packing material of Rs. 31.85 lacs u/s 194C at Rs. 63,700 and raising a total demand of Rs. 1,00,009 (Demand u/s 201(1) Rs. 63,700 plus demand u/s 201(1A) Rs.36,309) against the assessee, is most arbitrary, unjust and not maintainable in law and liable to be cancelled.
2. That, the Ld. Commissioner (Appeals) failed to appreciate that the assessee’s case is covered by exclusion provision given in the definition of word “Work” in clause (iv)(e) of explanation to section 194C of the I.T. Act saying, “but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer”
3. That, the appellant craves leave to add, alter, amend and/or substitute one or more grounds of appeal as and when necessary.”
6. The fact as culled out from the records is that in this case, a TDS survey u/s 133A(2A) of Income-tax Act 1961 was conducted on 28.01.2019 at the business premises of the assessee. During the course of survey it was found that the assessee/deductor M/s Bharatpur Dugdh Utpadak Sahakari Sangh Ltd. Bharatpur, TAN JPRB02179C has made the contract through government to supply the packing material since F.Y. 2014-15 onwards and payment made for purchase of packing material, but TDS not deducted under the head contractor payment as per u/s 194C of the I.T. Act, 1961 and TDS required to be deducted @ 1%/2% as applicable as per u/s 194C amounts to Rs. 63,700/-. Therefore, assessee was asked to furnish the details of TDS/TCS deducted by them on packing material of an amount of Rs. 31.85 lacs. On perusal of the details filed it is noted by the ld. AO that the assessee has made purchase of packing material but the TDS has not been deducted. Thus, assessee failed to deduct TDS under the provisions of section 194C of the Act. In this regard the show cause was issued to the assessee and the assessee filed the reply which was considered but the ld. AO held the assessee in default for short/non deduction of TDS of Rs. 63,700/- u/s. 194C of the Act. The interest u/s. 201(1A) was also worked out at Rs. 36,309/-.
7. Aggrieved from the order of the Assessing Officer, assessee preferred an appeal before the ld. CIT(A)/NFAC. A propose to the grounds so raised the relevant finding of the ld. CIT(A)/NFAC is reiterated here in below:
“I find from the above order passed by assessing officer (AO) u/s 201 (1 )/206C(6)/206C(7) of the I.T. Act that tax was levied as above for non deduction of TDS @ 2% on the payment made for purchase of packing materials based on the findings made by the AO in course of survey operation u/s 1 32A(2A) of I T.Act. As per said order it is also observed that the appellant deductor made the contract through government with the suppliers to supply the packing materials but no TDS was made in contravention of section u/s 194C of I.T Act. Whereas the appellant contended that contracts entered by the assessee are for supply of packing materials and not for carrying out any work and such purchase does not fall in the definition of WORK as specified in clause (iv) of the explanation of section 194C of the Income Tax Act.
After carefully observing both the interpretation I find no merit in the submission of the appellant in as much as the section 194C of the I.T Act has the wider import of the term “Contract” which includes carrying out “any work” under it. In other words the appellant’s interpretation is not treated as acceptable if the letter of approval cum Contract order as submitted by the appellant in course appeal hearing is observed and considered, where it is is clearly established the nature of “Work” assigned to the supplier.
In view of above I find no logic in appellant’s submission of contractual purchase of packing material won’t be qualified as a contract. The assesseefirm since engaged this resident contractors [M/s Shakun Plastics (P) Ltd., M/s Satyam Industries,M/s Radhey Polymerrs etc..] on its own account on principal-to-principal basis, for a services under a valid enforceable contracts and paid them sum of money in terms of such contracts/agreements for the services availed, consequently, held as liable to comply with the provisions of section 194C.
I find that the appellant is unable to submit any cogent, justified reason in support of his claim raised in “grounds”. At the same time the appellant has miserably failed to comply with the provision of section 194 C of the Income Tax Act and therefore the ground taken by the appellant is misconceived, incorrect and not corroborated with supporting evidence as per law.
Considering the entire conspectus of the case and in the light of foregoing findings vis-à-vis discussion, substantial force is found in the order of the AO, passed order u/s 201(1)/201(1A). In the light of above discussion I find that the AO is justified in imposing tax & interest u/s 201 (1 )/201 (1 A) of the Income Tax Act after providing ample opportunity to appellant. Accordingly, the levy of tax with interest stand confirmed.
In view of above I find no logic in appellant’s submission of contractual purchase of packing material won’t be qualified as a contract. The assesseefirm since engaged this resident contractors [M/s Shakun Plastics (P) Ltd., M/s Satyam Industries, M/s Radhey Polymerrs etc..] on its own account on principal-to-principal basis, for a services under a valid enforceable contracts and paid them sum of money in terms of such contracts/agreements for the services availed, consequently, held as liable to comply with the provisions of section 194C.
I find that the appellant is unable to submit any cogent, justified reason in support of his claim raised in “grounds”. At the same time the appellant has miserably failed to comply with the provision of section 194 C of the Income Tax Act and therefore the ground taken by the appellant is misconceived, incorrect and not corroborated with supporting evidence as per law.
Considering the entire conspectus of the case and in the light of foregoing findings vis-à-vis discussion, substantial force is found in the order of the AO, passed order u/s 201/201(1A). In the light of above discussion I find that the AO is justified in imposing tax & interest u/s 201 (1 )/201 (1 A) of the Income Tax Act after providing ample opportunity to appellant. Accordingly, the levy of tax with interest stand confirmed.
In the result, the appeal of the appellant is dismissed.”
8. As the assessee did not find any favour from the order of the ld. CIT(A) the assessee has preferred the present appeal on the grounds as reiterated here in above. A propose to the grounds so raised the ld. AR appearing on behalf of the assessee has placed their written submission which is extracted in below;
“In the case of the abovementioned appellant in all there are five appeals for five different assessment years, namely, A.Y.201 5-16,2016-17,2017-18,2018- 19, 2019-20. In each appeal there are three grounds of appeal. Grounds of appeal No.1 & 2 are against invoking of provisions of section 194C of the I.T. Act and consequential levy of tax u/s 201 (1) and charging of interest u/s 201 (1A) of the I.T.Act on the payments made by the assessee for purchase of packing material and third Ground of appeal is of general nature. Thus in all the five appeals issue involved is that of non-deduction of TDS u/s 194C of the I.T. Act on payment made for purchase of packing material and disputed total demands involved are as under :-
