Tribunal was justified in holding that the provisions of Section 194C of the Income Tax Act are not attracted in respect of payments made by the Assessee to Mukadams and Transporters

BOMBAY HIGH COURT

No.- Income Tax Appeal No. 480 of 2015

Commissioner of Income Tax-1, Nashik......................................................Petitioner
Verses
Dwarkadheesh Sakhar Karkhana Ltd...........................................................Respondent

Hon'ble M. S. Sanklecha And Riyaz I. Chagla, JJ.

Date :January 8, 2018

Appearances

For the appellant : Mr. Sham Walve
For the Respondent : Mr. J. D. Mistri, Sr. Advocate with Mr. Sameer Dalal

Section 194C of the Income Tax Act, 1961 — TDS — Tribunal was justified in holding that the provisions of Section 194C of the Income Tax Act are not attracted in respect of payments made by the Assessee to Mukadams and Transporters.
Facts: Being aggrieved of the order of Tribunal, Revenue went on appeal before High Court and raised the question of law that “(a) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in holding that the provisions of Section 194C of the Income Tax Act are not attracted in respect of payments made by the Assessee to Mukadams and Transporters?
(b) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in holding that the Bakshish paid to the harvesting and transport contractors directly by the assessee sugar factory is made on behalf of the sugarcane grower farmers when the Assessee itself kept Bakshish on the same pedestal with commission, having paid to the same set of contractors?”
Held, that from the various details furnished by the assessee in the paper book as well as the findings given by the Ld. CIT(A) we find as per clause (3) of the agreement between the farmers and the assessee company, (a copy of which is placed at paper book page 117 and 118 and English Translation in page 114), it is the responsibility of the farmer to harvest and transport the sugarcane crop to the factory. Clause (4) of the said agreement states that if harvesting and transporting charges and commission is paid by the factory then the farmer authorises the factory to deduct such harvesting and transporting charges including commission from the cane price payable to the farmers. Therefore, we find force in the argument of the learned counsel for the assessee that the above clauses clearly indicate that it is the responsibility of the farmer to reach the sugar crop to the factory and bear the harvesting and transportation charges. We further find from the details furnished by the assessee as well as the finding given by the CIT(A) that the harvesting and transportation cost paid by the assessee have not been claimed as separate deduction by the Assessee, over and above the price paid for sugarcane. In fact all such expenses of harvesting and transportation are included in the cane purchase price account only.” The aforesaid concurrent finding of facts by the CIT(A) and the Tribunal that the harvesting and transportation charges form the part of the purchase price of the sugarcane payable to the farmer by the assessee . It found that only for the sake of convenience that the assesee makes payments to the harvesting and transport contractor and, subsequently, took the same into account while making payments under the agreement to the farmers for delivery of the sugarcane at the factory of the assessee. Therefore, no occasion to deduct any TDS on such a payment can arise. These findings of fact are not shown to be perverse and/or arbitrary in any manner. Further, on an identical facts, the Gujarat High Court in CIT (TDS)
v/s. Khedut Sahakari Khand Udyog Mandli Ltd held that there is no liability to deduct the tax at source on payments made to Mukadam and Transport Contractor for supply of sugarcane to sugarcane factories. The SLP filed by the Revenue has also been dismissed by the Apex Court.Nothing has been shown to us to justify/ warrant taking a view different from that taken by Gujarat High Court in Khedut Sahakari Khand Udyog Mandli Ltd. Counsel for the Revenue places reliance upon the order dated 18th December, 2017 of this Court, admitting the Revenue's appeal in CIT v/s. Manisha Construction (ITA No.412 of 2015) to submit that an identical question has been admitted. However, Counsel for the Revenue is not able to point out the facts and circumstances in the case of Manisha Construction being identical to the facts in the present case. In the present case, there is a concurrent finding of fact recorded by the CIT(A) and the Tribunal that the payment made to the harvesting and transport contractor are on behalf of the Sugarcane farmers, is a part of the price payable to them. Further no separate deduction for payments made to the Mukadam and transport contractor was claimed by the assessee. Therefore, the above decision does not assist the Revenue. In the above view, on account of concurrent findings of fact which are not shown to be perverse, the question (a) does not give rise to any substantial question of law. Thus, not entertained. With regards to question(b), it was held that It is an admitted position between the parties that both the CIT(A) as well as Tribunal have found as a matter of fact that the payment made as bakshish as an individual, did not exceed to threshold limit of Rs. 20,000/under Section 194C( 5). In the above fact, no occasion to deduct the tax at source would arise. Therefore, the question as proposed, is academic. Thus, the question as framed does not give rise to any substantial question of law. Thus, not entertained.

ORDER

P.C.
This Appeal under Section 260A of the Income Tax Act, 1961 (the Act), challenges the order dated 2nd June, 2014 passed by the Income Tax Appellate Tribunal (the Tribunal), Pune. The impugned order dated 2nd June, 2014 is in respect of Assessment Year 2009-10.

2 The Revenue urges the following two questions of law, for our consideration:

"(a) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in holding that the provisions of Section 194C of the Income Tax Act are not attracted in respect of payments made by the Assessee to Mukadams and Transporters?

(b) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in holding that the Bakshish paid to the harvesting and transport contractors directly by the assessee sugar factory is made on behalf of the sugarcane grower farmers when the Assessee itself kept Bakshish on the same pedestal with commission, having paid to the same set of contractors?"

3 Re. Question (a):

(a) Respondent is engaged in the manufacture of sugar and for that purpose, purchases sugarcane from farmers. During the course of Assessment Proceedings for the subject Assessment Year, the Assessing Officer noted that Respondent had made payments to the harvesting and transport contractor without deduction of tax at source (TDS) under Section 194C of the Act. The Respondent pointed out that there was no occasion for TDS on payments made to harvesting and transport contractors as it was payment made on behalf of the sugarcane farmer. This amount was out of the purchase price payable to sugarcane farmer for delivery of sugar at the factory gate. No separate deduction was even claimed for the aforesaid payment to harvesting and transport contractor. It was a payment made on behalf of the farmer and deducted (taken into account) while paying the price to sugarcane farmers. Therefore, it was a mere facilitator. However, the Assessing Officer not being satisfied with the Respondent's explanation for failing to deduct TDS, disallowed the entire payments made to the harvesting and transport contractor under Section 40(a)(ia) of the Act;

(b) Being aggrieved, Respondent filed an appeal before the CIT(A). By an order dated 7th March, 2012, the CIT(A) deleted the addition made of the entire payments made to harvesting (Mukadam) and Transport Contractor for failure to deduct TDS. This on the ground that the aforesaid two payments were made on behalf of the sugarcane farmers and taken into account while making contractual payments to farmers for supply of sugarcane at the RespondentAssessee's factory. Further, no deduction was separately claimed in respect of payments made to harvesting and transport contractor;

(c) Being aggrieved, Respondent carried the issue to the Tribunal. The Tribunal in the impugned order at paragraph 8.1, records as under:

"From the various details furnished by the assessee in the paper book as well as the findings given by the Ld. CIT(A) we find as per clause (3) of the agreement between the farmers and the assessee company, (a copy of which is placed at paper book page 117 and 118 and English Translation in page 114), it is the responsibility of the farmer to harvest and transport the sugarcane crop to the factory. Clause (4) of the said agreement states that if harvesting and transporting charges and commission is paid by the factory then the farmer authorises the factory to deduct such harvesting and transporting charges including commission from the cane price payable to the farmers. Therefore, we find force in the argument of the learned counsel for the assessee that the above clauses clearly indicate that it is the responsibility of the farmer to reach the sugar crop to the factory and bear the harvesting and transportation charges. We further find from the details furnished by the assessee as well as the finding given by the CIT(A) that the harvesting and transportation cost paid by the assessee have not been claimed as separate deduction by the Assessee, over and above the price paid for sugarcane. In fact all such expenses of harvesting and transportation are included in the cane purchase price account only."

(d) The aforesaid concurrent finding of facts by the CIT(A) and the Tribunal that the harvesting and transportation charges form the part of the purchase price of the sugarcane payable to the farmer by the assessee. It found that only for the sake of convenience that the assesee makes payments to the harvesting and transport contractor and, subsequently, took the same same into account while making payments under the agreement to the farmers for delivery of the sugarcane at the factory of the Respondent. Therefore, no occasion to deduct any TDS on such a payment can arise. These findings of fact are not shown to be perverse and/or arbitrary in any manner;

(e) Further, on an identical facts, the Gujarat High Court in CIT (TDS) v/s. Khedut Sahakari Khand Udyog Mandli Ltd., 76 taxmann.com 117 as held that there is no liability to deduct the tax at source on payments made to Mukadam and Transport Contractor for supply of sugarcane to sugarcane factories. The SLP filed by the Revenue has also been dismissed by the Apex Court. Nothing has been shown to us to justify/ warrant taking a view different from that taken by Gujarat High Court in Khedut Sahakari Khand Udyog Mandli Ltd., (supra);

(f) Mr. Walve, learned Counsel for the Revenue places reliance upon the order dated 18th December, 2017 of this Court, admitting the Revenue's appeal in CIT vs. Manisha Construction (ITA No.412 of 2015) to submit that an identical question has been admitted. However, Mr. Walve is not able to point out the facts and circumstances in the case of Manisha Construction (supra) being identical to the facts in the present case. In the present case, there is a concurrent finding of fact recorded by the CIT(A) and the Tribunal that the payment made to the harvesting and transport contractor are on behalf of the Sugarcane farmers, is a part of the price payable to them. Further no separate deduction for payments made to the Mukadam and transport contractor was claimed by the RespondentAssessee. Therefore, the above decision does not assist the Revenue;

(g) In the above view, on account of concurrent findings of fact which are not shown to be perverse, the question (a) does not give rise to any substantial question of law. Thus, not entertained.

4 Re. Question (b):

(a) It is an admitted position between the parties that both the CIT(A) as well as Tribunal have found as a matter of fact that the payment made as bakshish as an individual, did not exceed to threshold limit of Rs. 20,000/under Section 194C( 5) of the Act;

(b) In the above fact, no occasion to deduct the tax at source would arise; and
(c) Therefore, the question as proposed, is academic. Thus, the question as framed does not give rise to any substantial question of law. Thus, not entertained.

5 Accordingly, Appeal dismissed. No order as to costs.

In favour of Assessee.

[2018] 45 ITCD 36 (BOM)