Case Law Details

Case Name : Conservator of Forest and Field Tiger Project Sariska Vs ITO (ITAT Jaipur)
Appeal Number : ITA Nos. 450, 466, 470 to 475/JP/2023
Date of Judgement/Order : 08/11/2023
Related Assessment Year : 2016-17

Conservator of Forest and Field Tiger Project Sariska Vs ITO (ITAT Jaipur)

ITAT Jaipur held that requirement of TDS deduction u/s. 194C of the Income Tax Act on payments made to Eco Development Committee remanded back to AO with a direction to relook on various aspects.

Facts- The assessee deductor is State Government i.e. Conservator of Forest & Field Director, Tiger Project, Sariska, Alwar in the spot verification u/s. 133A(2A) was conducted on 18.11.2015 and required details were called for. After verification of details filed, the original order u/s. 201(1)/201(1A) was passed on 06.06.2018 determining the total tax liability including interest of Rs. 44,43,240/-.

During the course of verification it was found that the payments are being made for civil construction work relating to environmental development, forestation, forest development, buffer area development etc. through Eco Development Committees (hereinafter referred as EDCs). The EDCs are the bodies registered with the forest department and are mainly constituted of local villagers and with one representative of Forest Department. The work completed through the EDCs includes construction and maintenance of roads, anicuts and enclosures etc. No TDS is being made on such payments made to various EDCs.

AO alleging non-deduction of TDS determined total tax liability including interest of Rs. 44,43,240/-. CIT(A) dismissed the appeal.

Limited issue involved here is whether the assessee is liable to deduct the tax on the payments made to these EDCs or not.

Conclusion- Held that the matter is again required to be set aside to the file of the ld. AO to deal with these facets of the case and thereby to decide the issue as the assessee has categorically submitted that there is no contract with the EDCs, they are working with no profit no loss and their income are not chargeable to tax and considering that aspect of the matter the ld. AO be directed to relook all the aspect as argued and decide by passing a speaking order the TDS liability if any or not. Based on these observations we are of the considered view that the assessee is deprived of justice on the issue as discussed and argued by the ld. AR of the assessee. Based on these set of facts we are inclined to accept the request of the ld. AR of the assessee to set aside the case to the file of the ld. AO, so as to decide the case of the assessee after giving proper opportunity of being heard to the assessee. At the same time, the assessee is directed to represent and present all the facts before the ld. AO and should not ask for adjournment of trifles grounds. At this stage, we remand back the matter without commenting upon the merits of the case and ld. AO is directed to pass a speaking order in accordance with law.

FULL TEXT OF THE ORDER OF ITAT JAIPUR

These eight 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 2016-17, 2009-10, 2010-11 to 2015-16 dated 29/09/2022 which in turn arises from the order of the ITO, TDS, Alwar passed under Section 201(1)/201(1A) of the Income tax Act, 1961 (in short ‘the Act’) dated 13.01.2021.

2. At the outset of hearing, the Bench observed that there is delay of 232 days in filing of the present appeal by the assessee and in support filed a petition for condonation of delay with following prayers:

“SUB: APPLICATION REGARDING CONDONATION OF DELAY IN FILING THE APPEAL AGAINST THE ORDER PASSED BY THE HON’BLE COMMISSIONER OF INCOME TAX (CIT) APPEALS, NATIONAL FACELESS (NFAC) DATED 29.09.2022 FOR THE ASSESSMENT YEAR 2009-10.

Most respectfully, this humble petition showeth as under:

1. That the above appeal has been filed against the order of the Ld. Commissioner of Income Tax (Appeals) ITBA/NFAC/S/250/2022- 23/1046104508(1) Dated 29.09.2022.

2. That the said Appellate order was served on the assessee on 29.09.2022 and as such the last date for filing the appeal was 29. 11.2022.

3. That, an appeal is being filed before Your Honor for AY 2009-10 with the delay of 5 months & 12 days.

4. The reason of late filing was that as the applicant is a Department and we have to follow various procedures which takes so much times. All the relevant dates and procedure have been mentioned in the List of Dates and Events enclosed herewith and marked as Annexure A.

5. That only due to all these reason the appeal could not be filed within time.

6. That the contents or averment of application for condonation of delay are true and correct.”

3. On this issue during hearing, the ld. DR objected to assessee’s application for condonation of delay stating that 232 days delay is not considerable as genuine and the reasons is Cobble up to show the genuine reasons against the lapses on the part of the assessee. The ld. DR also pointed out that the assessee is in the second round of litigation and therefore, considering that aspect of the matter, the delay is not properly justified by the assessee. But since the assessee is one of the government agencies bench may take appropriate view in the matter as deem fit in the interest of justice.

4. We have heard the contention of the parties and perused the materials available on The prayer by the assessee for condonation of delay of 232 days ( 5 months and 12 days ) because the assessee is a government department and before raising the appeal has to take financial as well as administrative approval of higher authority. The order has been passed on 29.09.2022 and the effect of the covid 19 was becoming normal. The reasons advanced are sufficient to condone the delay and the assessee has the follow up in the form of the office order to support the contention raised in the condonation petition. Thus, the delay of 232 days in filing the present appeal by the assessee is condoned in view of the decision of Hon’ble Supreme Court in the case of Collector, land Acquisition vs. Mst. Katiji and Others, 167 ITR 471 (SC) as the assessee is prevented by sufficient cause and therefore, we admit this appeal.

5. Admitting the appeal of the assessee, on merits moving further, the ld. AR submitted that the matter pertaining to Conservator of Forest and Field Director, Tiger Project Sariska in ITA 450/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. 450/JPR/2023 is taken as a lead case.

6. In the lead case ITA No. 450/JP/2023 the assessee has assailed the appeal in on the following grounds;

“1. That the Ld. Commissioner of Income Tax (Appeals) erred in law as well as on facts and in the circumstances of the case while confirming the following demand for non-deduction of TDS under section 194 (C) on payment made to Eco Development Committee (EDC) and passed the impugned order under sections 201 (1) and 201(1A).

Order passed under Section AY Total Demand
201(1)/201(1A) read with Section 254 2016-17 54,77,400/-

2. That, the following observations of the learned CIT(Appeals) in the Order are perverse, arbitrary, baseless and misleading :-

a. EDCs are Contractors as they were paid as per BSR rates similar to the Contractors. (para 24)

b. The banks have also deducted the TDS u/s (Para 24.2)

3. That, the Ld. CIT (Appeals) has erred in overlooking and in summarily rejecting the detailed statement of facts submitted along with memorandum of appeal, various documents and evidence placed in paper book filed.

4. That, the Ld. AO have erred in assuming that EDCs are Contractors as they are made payment based on BSR rates like that of Contractors.

5. That, EDCs are associations of persons and are known as Eco Development Committees or Van Suraksha and prabandh Samiti (VFPMC). The work of these VFPMC include supplying of labour and carrying out of any such work which include defense of forest in their assigned zone, helping out forest department in re-plantation of tree on waste land, helping forest department in preparation of nursery and providing work force for construction activities conducted by forest department in their area.

6. That, AO as well as CIT(A) did not verified the documents and details as directed by Hon’ble ITAT Jaipur.

7. The Appellants craves leave to add/alter any of the grounds of appeal before or at the time of hearing.”

7. The fact as culled out from the records is that the assessee deductor is State Government i.e. Conservator of Forest & Field Director, Tiger Project, Sariska, Alwar in the spot verification u/s 133A(2A) was conducted on 18.11.2015 and required details were called for. After verification of details filed, the original order u/s 201(1)/201(1A) was passed on 06.06.2018 determining the total tax liability including interest of Rs. 44,43,240/- for year under consideration i.e. F.Y 2015-16.

7.1 During the course of verification it was found that the payments are being made for civil construction work relating to environmental development, forestation, forest development, buffer area development etc. through Eco Development Committees (hereinafter referred as EDCs). The EDCs are the bodies registered with the forest department and are mainly constituted of local villagers and with one representative of Forest Department. The work completed through the EDCs includes construction and maintenance of roads, anicuts and enclosures etc. No TDS is being made on such payments made to various EDCs.

7.2 During the course of original assessment proceedings, the assessee deductor was asked to provide details of payments made to various EDC’s during the financial year 2015-16 along with details of PAN of such The assessee deductor provided a list of EDCs to whom the payments were made during the F.Y 2015-16 for conducting the above nature works. As per the details submitted, name of the payee, payments made to each EDCs and their PAN were not provided. It was gathered during spot verification that the EDCs do not have any PAN. The assessee deductor vide its letter No. 2229 dated 06.03.2018 submitted details of payment made to various EDCs. The assessee deductor was asked to furnish reasons for non-deduction of TDS on above payments. On perusal of the reply of assessee deductor, it is revealed that the Eco Development Committee has been constituted with the aim to conduct the development works in the reserve areas with active local participation of the villagers and to create job opportunities among them. It also submitted that the above EDCs has been exempted from the category of ‘Contractor’ vide Rajasthan State Government’s order dated 24.10.2002 and accordingly no TDS was made from the payments made to such EDCs. The assessee deductor has made total payments of Rs.1,66,65,050/- to various EDCs registered with Forest Department for carrying out development works of the nature of civil construction in reserve areas but have not deducted TDS on such payments. As the assessee deductor has made total payment of Rs.1,66,48,515/- (Rs. 16665050 – 16535) to various EDCs during the F.Y 2015-16 on which the TDS was to be deducted @ 20% but no TDS has been deducted, therefore, the TDS liability of Rs. 33,29,700/- was calculated by the then AO. As the assessee deductor has made non-deduction of income-tax of Rs. 33,29,700/- from the above payments made during the F.Y 2015-16. The interest u/s 201(1A) worked out at Rs. 11,13,540/- on the above amount of short deduction assuming the entire payment has been made in equal monthly basis for the entire financial year as no details regarding date of payments have been provided by the assessee deductor. Thus, the then AO determined total tax liability including interest of Rs. 44,43,240/- for the F.Y 2015-16.

8. Aggrieved by the order passed by the AO, the assessee preferred appeal before the ld. CIT(A), Alwar.

8.1 The appeal filed by the assessee before ld. CIT(A) has been dismissed. Subsequent to that aggrieved by the said order, the assessee preferred an appeal before ITAT, Jaipur wherein ITAT, Jaipur Bench restore back the matter to file of the AO vide order dated 03.10.2019 in compliance to the said order, the assessee has filed the required information but the ld. AO has raised the similar demand of Rs. 33,29,700/- + interest to the interest till date of the date of second round order for an amount of Rs. 21,17,695/- thereby as against the original demand of Rs. 44,43,240/- the fresh demand of Rs. 54,77,395/- was raised against the assessee.

9. Aggrieved from the order of the Assessing Officer in the second round of litigation, assessee preferred an appeal before the ld. CIT(A) who has dismissed, the appeal of the assessee holding as under:-

“23. I have considered the order of the AO, written submissions of the appellant, facts of the case and material on record. With reference to Hon’ble ITAT’s direction vide its order in ITA Nos. 554, 555, 760, 761, 762, 763, 764, 765/JP/2019 dated 03.10.2019, the case was restored to the file of the AO. In view of direction of the Hon’ble ITAT, the AO examined the submissions made by the appellant and reaffirmed the original assessment order. The documents listed in paper book relating to budget allocation for forest work, bills of work done through EDCs bank statements, proceedings of EDC’s meetings, application of EDC registration, etc. were cited to prove that work done through EDC is not contractual obligation but an arrangement as per decision of the State Forest Department, which was in turn to fulfill the aims and objectives under the ‘National Forest Policy 1988’ of Government of India.

24. The appellant through its submissions, has claimed that the work done by EDCs is not deemed to fall under Contractor category as the payments made to the villagers for the work done does not fall under income category and that the work done by EDCs was not civil work but miscellaneous work like environment protection, ECO restoration and there was no profit motive. The case law cited by the appellant of Jal Grahan Vikas Committee State of Rajasthan (2003) has different set of facts and in the case of the appellant, financial transactions were involved attractive appropriate Acts in force including the Income Tax Act, 1961 and moreover, an entity, the EDC had its own bank accounts However, it is observed that the EDCs were paid as per BSR rates similar to a contractor. Further, the appellant could not prove that EDCs were covered u/s 10(20) of the Income Tax Act, 196 or that it is under the category of a panchayat or a municipality as per the spirit of Article, 243 of the Indian Constitution. Even if EDC involves a social cause, it also cannot be denied that there is no financial profit or incentive and if the payment of financial work exceeds, the prescribed limit the payee entity has to comply with law. The AO found that Para 12 of the order dated 24.10.2002 provides details of profits awardable to the EDCs in lieu of the work done by them. Further, Para 12(A)(1) clearly enumerates that contract of collection of certain forest products will be awarded to the members of the EDCs. Thus, the AO noted that the EDCs as well as its members are deriving profit from activities of EDCs.

24.1 Wherever payment above threshold limit for deducting tax is involved for any contract or sub-contract, responsibility of deductor and deductee arises for statutory obligation of deducting tax. A law enacted by the parliament even unintentionally cannot be bypassed by any state directive.

24.2 In case of these EDCs, the banks have also deducted TDS u/s 192A.

24.3 The EDCs have not objected either before the bank or the Income Tax Department against TDS made and the EDCs are not covered u / s 10(2) of the Income Tax Act. Moreover, in subsequent years, the appellant has started deducting tax on such payment to EDCs. In view of above detailed observation, it is held that based on spot verification u / s 133A(2A), the AO rightly invoked liability of the appellant deductor u/s 201(1) and computed the interest liability u/s 201(1A) of the The same is hereby confirmed subject to recomputation by the AO based on exact date of payment to EDCs instead of taking payments on monthly average basis. Hence, this ground raised by the appellant is dismissed.”

10. As the appeal of the assessee was dismissed without any favour, the assessee preferred this appeal on the ground has raised and reiterated hereinabove. All the grounds are interconnected challenging the levy of TDS(+) interest thereon.

The ld. AR of the assessee relied upon the submission made before ld. CIT(A) and the same is reproduced herein below for the sake of brevity:

“1. That the Honorable ITAT Jaipur Bench in his order directed to AO verify the documents in paper book serial no. 3,4,5,6 and 10 to 13 and also to pass afresh assessment order providing adequate opportunity of being hear to the assessee.

2. That the AO issued notice and ask to send written submission online to my govt AO Email Id because covid-19 pandemic no hearing by physical appearance said by AO.

3. That the assesse went to income tax office several times and contact by mobile phone but AO could not meet assesse for this case and AO ask to mobile phone and said written submission filed to my govt. email id. I said to AO as per The Honorable ITAT Jaipur Bench order given adequate opportunity to verify the documents in paper book serial no. 3,4,5,6 and 10 to 13 but AO has not given any opportunity hearing to verify documents.

A. In serial 3 copy of budget allocation for forest work are enclosed.

B. In serial 4 copy of bill of work done through EDC’s are enclosed

C. In serial 5 copy of bank statements are enclosed.

D. In serial 6 copy of proceeding of EDC’s meeting are enclosed

E. In serial no. 10 copy of application of EDC’s registration and copy of registration are enclosed.

F. In serial 11 copy of format for preparation of village relocation plan are enclosed. E TAX DEPART

G. In serial no. 12 copy of compensation and community work for relocation packages are enclosed.

H. In serial 13 copy of guideline of NTCA 2011 in enclosed.

4. That the AO in his order the given facts are already discussed in hearing in the Honorable ITAT Jaipur Bench and further The Honorable ITAT Jaipur Bench order AO to verify the documents in paper book serial no.3,4,5,6 and 10 to 13 but AO failed to verify the documents and AO passed the order without opportunity given to assesse.

5. That the forest department of rajasthan government in his order F11(4) forest/96/24/10/2002 Edc constitute in whole Rajasthan payment to EDC not deducted TDS. Sir in this circular assesse could not deduct TDS.

6. That The conservator of forest and field director Tiger Project Sariska, Alwar governed by govt. of Rajasthan and Govt. of India. Forest and pollution department.

7. That the AO refused to obey Order of The Honorable ITAT Jaipur Bench and against of natural justice hence, order of AO will be null and void.

1. In the present case the main issue are that whether the EDC’s are contractor as per Sec. 194C of the IT Act and whether payment to them are receipts and income in their hand for that we want to bring the correct facts and modus operandi of the same as under.

1.1 The Appellant assesse “Conservator of Forest & Field Director” came into being as a policy decision of Forest Department Ministry of Forest, Goverment of Rajasthan, Jaipur since 17.10.2000 framed in accordance with National Forest Policy, 1988. The policy envisages as under

1. Mode of procedures and implementation of policy.

2. Village forest security and formation of village Managing Committees thereof.

3. Formation of membership of the Managing Committee.

4. To Set up Advisory Sub-Committee of women.

5. To outline the modus-operandi of Managing Committee.

6. To ensure Forest security, duties and obligation of Managing Committee.

7. To ensure rights, duties and obligation of officers and employees of forest department.

8. To ensure rights, duties and obligation of Non-Govt. Agencies and Non-Govt. Organization (NGO).

9. To set up Dispute Resolution Mechanism.

10. To take action against persons non-working in accordance with plans and policies and procures as laid down by the Forest Department.

11. To constitute the committee called ECO DEVELOPMENT COMMITTEE (EDC’S) mainly with following the aims and objectives:

a) To prevent hunting of wild animals.

b) Prohibiting of picking, uprooting etc of specified trees and plants.

c) To bring on records offences under Wild Life (Protection) Act, 1972 (53 of 1972) under section 51 read with sections 09, 17a139.44,48 and 49-B.

d) To prevent discharging of environment pollutant and in case of violation impose penalty.

e) To prevent causing explosion likely to endanger wild……

f) To prevent for pollution of stream of DEPARTMENT or well.

g) To seek vacation of forest area occupied by villages and rehabilitate them either by providing land in exchange of land so vacated or award compensation to them.

h) To preserve and maintain natural heritage of forest area under control.

i) To preserve and maintain botanical and biological environment in the forest area under control.

j) To prevent spread of sand dunes in the forest area under control.

k) To develop large scale forestation in the barren land in the forest area under control.

1) To meet the need of villages and Adiwasis in terms of providing them small produce, fodder, wood etc., for their kitchen camp fire use.

1.2 In order of achieve the aforesaid aims and objectives, it was considered, that only the Government forest Department would not be able to do so. Hence it was decided by the State Govt. Forest Department to constitute a ECO DEVELOPMENT COMMITTES (E.D.C.)in all the related area’s with the active participation and cooperation of the villages of those areas. And for that the Raj State Govt. In her order dated 24.10.2002 in para 8.9 stated that “Related Deputy Conservator of forest will make plan of every year to execute the work of that reserve area through the EDC’s and according the geographical condition of EDC’S through them will do the Eco Development The work done by EDC’s for those work EDC’s shall not be deemed in the category of contractor. The appellant assesses is being an Govt. Department and the order of the Govt. Is binding upon him and the appellant has to honor that order of the State Govt. Therefore, the EDC is not contractor within the meaning of section 194-c of the Income Tax, 1961 and as consequence not liable to deduct any amount of income-tax at source while meeting the expenditure incurred in achieving the sain aims and objectives. We also Clarify that the order of State Govt. Has been given following the “National Forest Policy 1988” by Govt. of India.

Further the them “Contract or Contractor “have not been defined in Income Tax Act, 1961. However, Dictionary meaning of “Contract” as per Law Dictionary (page 169- 170) is as under:

“CONTRACT: A Contract is agreement made between two or more persons which in intended to be enforceable at law, and is constituted by the acceptance by one party of an offer made to him by the other party to do or to abstain from doing some act The offer and acceptance may be either express or inferred by implication from the conduct of the parties, Halsbury’s Laws of England, 3rd. Vol. 8p. 54.A contract is an agreement between competent parties, upon a lawful consideration, to do or to abstain from doing some act which is binding. The making of one contract may itself be consideration which binds another party to an antecedent promise, so that the latter becomes a collateral contract is one which has been wholly performent by one of the parties, but remains to be done under it by both parties. Halsbury’s Laws of England, 3rd Vol. 8p. 55. An agreement which is enforceable by law the option of one or more of the parties thereto but not at the option of the other or others, is a voidable contract, Indian Contract Act, 1972cos 2m . A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable Indian Contract Act, 1872, sec.2(0).

All agreement are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Indian Contract Act, 1872 sec. 10.”

As per above there is no contract between the appellant and EDC’s The EDC’s cannot challenge or question of any action or work of the Appellant, therefore there is no enforceable contract binding on both the parties.

1.3 The modus operandi of the EDC’s and how it works is given in Chapter 2 at page 8-9 of Book issued by the Forest Department by the Govt. Of Raj. On the Book Heading Joint Forest Management and its Implementation and Guideline and the id AO has already taken the cognizance of the same. The book was first published in the year 2002 and in a series 4th Edition in 2015 The book contain 17 chapters and 13 Annexure (Format) Edition in 2015 T

The book outlines plans and policies and how to manage and implement the aims and objectives. The book specifically provide that activities and works carried by the EDC’s would not come under the category of contractor (Bokklet page 150 apra 8.8 and 8.9). 1.5 As per the same the payment made to the villages for above works through the EDC’s are not the income and receipts in the hands of the EDC’s. The distribution of payment to the villages has been made under the superintendence. control and direction of the Appellant assessee. The appellant assessee receives the budget from the Govt. And central Govt. According annual plan proposed by the forest Deportment for reictted works, which it done through the EDC’s and when the works ore completed, the bills of those works are given by the EDC’s to the Appellant and after verification of work, by the president of EDC. forester (Secretary), vide specimen bill, the payment is transferred to the Bank account of EDC’s, thereafter EDC’s mode Payment to the labouers/villagers etc., after the signature of manogement committee of EDC’s. If when the payment made to EDC’s Ore neither the income nor receipts in the hands of the EDC’s then how it is Can be said that the same is subjected to obligation of TDS. Thus the EDC’s is the like a self help group of villagers registered with the Appellant. 1.6As per the terms. conditions and stipulations contained in para 8.3 and 8.4 appearing on page 150 of the booklet, the appellant is not empowered and authorized to award any nature of contract to the EDC persons. Thus the appellant has been debarred in exercising any power to award any contract in the capacity as a contractor. There is nothing on record and finding to suggest that the appellant has awarded any contract in the capacity of contactor. There is no case on record and fining that the authorized person of the appellant has contravened any stipulations and subjected to any punishment under the service rules applicable on him.

1.7 There is no finding on record that EDC’s has entered in to contract with any person residing in the forest area under control. Hence non deduction of TDS is not to be held a default on the part of assessee.

1.8 Further if a Govt. Department has worked as per the order of the Govt and in the bona-fide belief of TDS has not been deducted, the same should not be treated or deemed a default.

2. The work done by EDC’s are not for the Purpose of carrying out Civil work but. other work: As per the above facts and circumstances, the payments have been made by the Appellant assessee to the various villagers through the EDC’s has not only been made for the purpose of civil construction but the same has been made for various works as like environment protection, forest protection, Eco restoration works, rehabilitation of villagers etc. and all such payments to the villagers are not subject to the TDS.

3. No Agreement for contract, no tender, No Profit. Further it has not been proved by the Revenue that there was any contract between the assessee and EDC’s and also there is no element of profit of EDC’s involve therein and also no tenders are invited for civil construction The payment of expenses is made by the Appellant assessee to the villagers after the verification of all bills submitted by the EDC’s by the President of EDC’s, forester(Secretary) etc.

4. Receipts by the EDC’s have not been Taxed: Further it is very important to note that if the EDC’s are the contractor and separate assessee, then why the revenue has not given any notice to those EDC’s to tax them when as per the Revenue they are getting such huge receipts from the Appellant. It shows that the Revenue itself admit the version of the assessee which support our contention.

5. No notice has been given to the EDC’s: Further the AO has not given any notice and made any inquiry from the EDC’s to know the correct facts, works and position of payment and receipts etc…

6. Control of financial transaction lies with the forest department not with the EDC’s Further any payment for expenditure incurred for the work done relevant forest area payable for any work relating done by villages/labours ore given by the assessee through the EDC’s. EDC’s are only a mediator between the assessee and the villagers. Because the EDC’s is a group of villagers and they are well accustomed with the persons of its area and know how the work to be executed from villages.

7. Forester is Secretary: in starting of the constitution of EDC’s the to/ester iwno is the officer and employee of the Appellant) is the secreary of the EDC’S vide para 2 of the State Govt. order dt. 24.1C:2002 if so than how it can be said that the EDC’s are the Separate assesse and contractor. If there is transfer of funds to self branch or unit temporary created for the some specific works for time being, its c( be treated as the payment to other and does not falls in the dei’i of payment to other or contractor or separate entity.

8. Thus EOCs are inteorai stakeholders being envisaged under the ‘Basic Objectives’ of National Forest Policy.1988 and State Govt. Policy as above. These are constituted by and under the order of the government mandated under the statutory policy not by the EDC’s itself or ossessee. These EDC’s are instrumentality of Gram Sabha/Panchayat succinctly put, they ore their extended arm especially for villages which geographically falls under Forest Hence EDC’s a committee constituted out of Gram Sabha/ Panchayat are local authority not outsiders and not formed to the motive to earn or with profit and their entire activity is member/resident villager centric where the members are residents of that particular village. Thus these are mutual self help groups constituted by the government to engage and involve the local village residents in preserving, restoring, flourishing the Forest covers in the areas where forests are depleting, therefore even if there is some income or surplus arising out of their activities the same is exempt under the principles of “doctrine of mutuality

In the case of CIT vs. Common Effluent Treatment Plant (Thane Belapur) Association (2010) 328 ITR 0362 (Born) where it has That “The principle of mutuality postulates that all the contricutors to the common fund must be entitled to participate in the surplus and that all the participators in the surplus are contricutors to the common fund. It is in this sense that the law postulates that there must be a complete identity between the contributors and the participators. The essence of the doctrine of mutuality lies in the principle that what is returned is what is contributed by a member. A person cannot trade with himself. It is on this hypothesis that the income which falls within the purview of the doctrine of mutuality is exempt from taxation. (Para 7)

There can be no manner of doubt that the surplus generated by the assessee representing the excess of its income over expenditure would fall within the purview of the doctrine of mutuality. The income of the assessee is contributed by its members. The assessee has been formed specifically with the object of providing a common effluent facility to its members. The income is not generated out of dealings with any third party. The entire contribution originates in its members and is expended only in furtherance of the objects of the association, for the benefit of the members. On these facts, both the OT(A) and the Tribunal were justified in coming to the conclusion that the surplus so generated falls within the purview of the doctrine of mutuality and was not exigible to tox-Chelmsford Club vs. CIT (2000) 159 CTR (SC) 235 (2000) 243 1TR 89 (SC) relied on. (Para 10)

The same principal is applicable here. Thus one cannot earn profits from himself nor can give any contract to itself Branch or unit made temporary for a short period. And covered under this principle of mutuality.

As EDC’s are instrumentality of local self-government Gram Sabha/ Panchayats therefore are exergot entities under section 10(20) of the Income-tax Act. Further the ED C^ prime prime S are purely and pristinely covered by principles and concept of mutuality and therefore there receipts or income cannot be brought to tax under the Income Tax Act. These are constituted under the statutory mandate and order of the government and not constituted by the villagers in order to carry out any venture in the nature of trade collectively so as to christen EDC’s as AOP under the Income-tax Act. Therefore the provisions of TDS do not get attracted to these payments.

9.1 Further That para 4 of the Notional Forest Policy-1988 covers “Strategy” and para 4.6 deals with “Tribal people and forests” which reads as “Having regard to the symbiotic relationship between the tribal people and forests, a primary task of all agencies responsible for forest management, including the forest development corporations should be to associate the tribal people closely in the protection, regeneration and development of forests as well as to provide gainful employment to people living in and around the forest. While safeguarding the customary rights and interests of such people, forestry programmes should pay special attention to the following:

9.2.1 One of the major causes for degradation of forest is illegal cutting and removal by persons. In order to put an end to this practice, such Persons should be replaced by institutions such as tribal cooperatives, labour cooperatives, government corporations, as early as possible. ……..

9.2.2 Protections, regeneration and optimum collection of minor forest produce along with institution arrangements for the marketing of such produce

9.2.3 Development of forest villages on par with revenue villages; Family oriented schemes for improving the status of the tribal beneficiaries; and

9.2.4 Undertaking integrated area development programmes to meet the needs of the tribal economy in and around the forest areas, including the provision of alternative sources of domestic energy on a subsidized basis, to reduce pressure on the existing forest areas.”

9.2.5 That similar nature and objectives echoes in the Rajasthan State Forest Policy- A state where area under forest is around 9% of its total geographical area which is much below the national average of 23- 33% of forestation is a critical requirement so also is the dependence of tribal communities on the forest produce for their very survival and hence to assimilate the two divergent objectives participation of these communities into forest policy objectives would meet their economic objectives and also act as catalyst for attaining forest policy objectives.

9.2.6 That the overview of forest policy and interplay of tribal community needs and enhancing the forest cover in the State has been given to bring home the point that EDC’s are the groups from the families of tribal community or villagers created under the policy to engage every family into forest development program of the These EDC’s are created under statutory policy under the aegis of the government and are not Association of Persons getting together with common objective to carry out a business venture or activity to collectively eam profits.

9.2.7 Further it is very important to note that the sums paid to the individuals engaged in the forest development programs through these EDC’s are at the BSR issued by the government from time to time. These EDC’s are only medium or channel of routing payments to the individuals and in the process they are not left with any surplus arising out of these sums.

9.2.8. However both the lower authorities failed to capture these essential ingredients of social welfare and community development which is the real essence and not engaging these EDC’s as contractors or an agency to get the work done on commercial contract basis. DEPA

9.2.9 Thus the Id. AO has wrongly and without considering the above facts nature, position of law, even showing the basic ingredients of an AOP in constitution of these EDC’s deemed contractor.

9.2.10 That an order dated 17.10.2000 came to be issued by the Forest Department of the Government of Rajasthan outlining the plan to reforesting the barren and treeless forest areas with the participation/ partnership of villagers and voluntary organizations. Copy of the order dated 17.10.2000 is enclosed (PB73-79). The order in its preface itself records that joint forest management directions is based on the premise that villagers are always forthcoming for conservation & management of forest land and forests as their survival and self reliance is benefited out of the same. It further records that government should be readily accepting not only EDC’s but also to any other NGO etc who wish to contribute to this cause without any motive of profit so that this effort becomes a comprehensive public movement. Para 8.8 of the order dated 17.10.2000 amended by order doted 24.10.2002 categorically provides that for the works done by EDC’s they shall not be considered as contractors. And the aim of the Govt. is also to abolish the custom of contractor ship.

9.2.11 The order dated 10.2000 amended by order dated 24.10.2002 has prescribed the procedure and format for constitution and registration of EDC’s and a copy of model form is enclosed(PB96- 99). A bare perusal of the form would show that EDC’s is constituted for a reserved village and it is the Gram Sabha which executes the constitution with representation of women, SC, ST and other constituents. In substance the EDC’s is an arm of the Gram Sabha. As per Article 243(b) of the Constitution of India, 1950, “Gram Sabha” is a body consisting of persons registered in the electoral rolls relating to a village comprised within the area of Panchayat at the village level. Article 243-A of the Constitution of India enshrines the powers of Gram Sabha and the Article reads as “A Gram Sabha may exercise such powers and perform such functions at the village level as the Legislature of – may, a Statemuy by law, provide.” In view of the above the EDC’s consists of Eititizens at village level who constitute the Gram Sabha and Panchayat and therefore are covered by the expression “local authority” as defined vide Explanation to section 10(20) of the Income-tax Act. For this useful reference may be made to observations of the Hon’ble Supreme Court in the case of Orissa Mining Corporation Ltd Vs. Ministry of Environment & Forest reported at [2013] 6 SCC 476; 2013 Supp AIR SC 191; Para 32, 33, 36

9.2.12 That it is pertinent lo note that for all the works done for Forest management the State government has prescribed a Basic Schedule of Rates [BSR] to be paid to every unskilled worker on the basis of nature of work done by that individual. The total amount payable on the basis of works done is paid to the EDC’s concerned and the entire amount, in turn, is being paid by the EDC’s to the individual villager. Thus there is no surplus or residue or profit remaining to the EDC’s.

9.2.13 That the Hon’ble Rajasthan High Court in the case of Jal Grahan Vikas Committee vs State of Rajasthan reported at [2003] 2 RLW (Raj) 742 where the question was as to separate juristic identity of a committee constituted by Gram Sabha was involved. The Hon’ble Court held that a petition by a committee

Constituted by Gram Sabha against gram panchayat is not maintainable as juristic personality is vested in gram panchayat and not in every limb or manifestation through which it discharges its function as a local authority, such functioning by such human agency does not cloth it with status of juristic person or a body corporate. It cannot sue and be sued in its own name. It cannot claim different status from the authority for whom it is functioning.”

11. The AR in addition to the submission so made before ld. CIT(A) also relied upon the CBDT circular No. 502 dated 27.01.1988. The ld. AR of the assessee also submitted that the liability of TDS has been fixed upon the assessee @ 20% considering that EDC’s are having any PAN. That information is already on record as the assessee started compliance to avoid unnecessary litigation. The ld. AR of the assessee submitted that in almost all cases there are available PAN. Therefore, even if on merit are not considered then the liability fasten in assessee cannot be @ 20%. Therefore, even if this plea is considered the demand will substantially reduce if these details are considered.

12. Per contra, the ld. DR relied upon the finding of the lower authorities and vehemently argued that the subsequent action of the assessee taking PAN making compliance of TDS itself demonstrate that the assessee for the year under consideration is liable for TDS liability. The assessee in the second round has not submitted the details of the payment made to each EDS date wise, pan number of each EDCs., status of filling the return or the copy of the account so as to establish that these EDCs are chargeable to tax or not. Based on this aspect of the matter he supported the order of lower authority.

13. We have heard the rival contentions and perused the material placed on record. The bench noted that the assessee is in the second round of litigation before us. But the is limited that whether the assessee is liable to deduct the tax on the payments made to these EDCs or not. The bench noted that in the year under consideration in the second round of litigation the assessee has not placed on record the details of the payment made to each EDCs., PAN number of the each EDCs (which we have been informed that the EDCs have availed). The ld. AR of the assessee submitted that these EDCs (Payees) are AOP and are known as Eco Development Committees or Van Suraksha and Prabandh Samiti. The work of these samiti include supply of labour and carrying out of any such work which include defense of forest in their assigned zone helping out forest department in re-planation of tree on waste land, helping forest department in preparation of nursery and providing work force for construction activities conducted by forest department in their assigned zone. The ld. AR of the assessee also submitted that there is specific ban on employment of contractors for the execution of the work under the programme and thus it is clear that such programmes are executed with the participation of the people, panchayati raj and state government in conformity with the central government and there is no contract between the village committee, voluntary agencies and the state government which is sine qua non for attracting the provision of section 194C of the Act which has been decided without verifying all these aspect of the case and the CBDT’s instructions no. 502 dated 27.01.1988 which squarely covers the issue of the assessee. Alternatively it has been also argued by the ld. AR of the assessee that all EDCs are just taking the payment for reimbursement of expenses since the object of all these EDCs/Samiti is to work on no profit no loss basis and thus circular no. 715 dated 08.08.1995 will also apply and needs to be dealt with. Considering that aspect of the matter the ld. AR of the assessee also submitted that as per provision of section 206AA read with section 139A of the Act and as per the article 14 of the Constitution of India the facts are to be examined that whether the deduction of tax at source requirement of PAN is mandatory?. To this fact effect the bench noted that the Karnataka High Court in the case of Smt. A Kowsalya Bai Vs UOI [ 208 taxmann.com 157 ] decided that

“section 139A which is introduced way back in April 1991 is in vogue and this provision stands the scrutiny of article 14 of the constitution for reasonableness. But, section 206AA which is contrary to section 139A appears to be discriminatory as it is overriding section 139A introduced earlier. Though the intention of the legislature is to bring the maximum persons under the net of income tax when necessarily it provided for exemption upto taxable limit. It may not insist such persons whose income is below the taxable limit to compulsorily go for PAN. If any mischief of avoiding of tax or any other act of concealing the income is detected that could be taken care of by penal provisions.

Accordingly, the case of the assessee of obtaining the PAN from such EDCs who have no income or below the taxable income does not arise. Based on this aspect of the case the ld. AR of the assessee submitted that the ld. AO and that of the ld. CIT(A) has not examined these facets and therefore, the matter is again required to be set aside to the file of the ld. AO to deal with these facets of the case and thereby to decide the issue as the assessee has categorically submitted that there is no contract with the EDCs, they are working with no profit no loss and their income are not chargeable to tax and considering that aspect of the matter the ld. AO be directed to relook all the aspect as argued and decide by passing a speaking order the TDS liability if any or not. Based on these observations we are of the considered view that the assessee is deprived of justice on the issue as discussed and argued by the ld. AR of the assessee. Based on these set of facts we are inclined to accept the request of the ld. AR of the assessee to set aside the case to the file of the ld. AO, so as to decide the case of the assessee after giving proper opportunity of being heard to the assessee. At the same time, the assessee is directed to represent and present all the facts before the ld. AO and should not ask for adjournment of trifles grounds. At this stage, we remand back the matter without commenting upon the merits of the case and ld. AO is directed to pass a speaking order in accordance with law.

In the result, the appeal of the assessee in ITA no. 450/JPR/2023 is allowed for statistical purposes.

14. The fact of the case in ITA Nos. 466, 470 to 475/JP/2023 are similar to the facts of the case in ITA No. 450/JP/2023 and we have heard both the parties and persuaded the materials available on record. The bench has noticed that the issues raised by the assessee in appeal 466, 470 to 475/JP/2023 are equally similar on set of facts and grounds. Therefore, it is not imperative to repeat the facts and various grounds raised by the assessee. Hence, the bench feels that the decision taken by us in ITA No. 450/JP/2023 for the Assessment Year 2016-17 shall apply mutatis mutandis in ITA Nos. 466, 470 to 475/JP/2023. Based on these observations the appeal of the assessee in ITA Nos. 466, 470 to 475/JP/2023 stands allowed for statistical purpose.

In the result, the appeals of the assessee are allowed for statistical purpose.

Order pronounced in the open Court on 08/11/2023

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