Punjab & Haryana H.C : the provisions of ss. 194A, 194-I and 194C were not applicable as no payment has been made separately on account of interest, rent, etc. The transaction was a transaction of purchase and sale and not payment of expenses

High Court Of Punjab & Haryana

CIT vs. Assistant Manager (Accounts), Food Corporation Of India

Section 194A, 194C, 194-I, 201

Hemant Gupta & Rajesh Bindal, JJ.

IT Appeal No. 407 of 2008

21st August, 2008

Counsel appeared :

Yogesh Putney, for the Appellant

JUDGMENT

Rajesh Bindal, J. :

The Revenue has filed the present appeal against the order passed by the Income-tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh (for short, “the Tribunal”), in ITA No. 374/Chd/2006 dt. 16th Oct., 2007, raising the following substantial question of law :

“Whether in the facts and in the circumstances of the case, the Hon’ble Tribunal was right in holding that the provisions of ss. 194A, 194-I and 194C were not applicable as no payment has been made separately on account of interest, rent, etc. The transaction was a transaction of purchase and sale and not payment of expenses ?”

2. The assessee in the present case is Food Corporation of India which is engaged in procurement of food grains for the Central pool. The food grains is procured through the State agencies and directly as well. Proceedings were initiated under s. 201 of the IT Act, 1961, with the allegations that the assessee had failed to deduct tax at source on the interest, rent and transportation charges paid by it to various agencies. The order came to be passed by the ITO (TDS) on 25th Feb., 2005, raising a demand of Rs. 12,34,814. The order was upheld by the CIT(A). In further appeal before the Tribunal, the plea set up by the assessee was accepted. It was noticed that in the invoices raised by various State agencies who procured food grains on behalf of the assessee, the cost of wheat has been shown apart from the cost on account of other incidental expenses incurred by the procurement agencies. VAT had also been charged. It was not evident from there that the expenses so incurred by the procurement agencies were on behalf of the assessee rather it was found to be part of the cost at which the food grains were to be transferred by the procurement agencies to the assessee. With these facts, it was found that as the assessee had not paid any amount to the procurement agencies on account of transportation, interest or storage charges as such, accordingly, there was no liability for deduction of tax. The contention of learned counsel for the Revenue that in fact all these factors had been taken care of while fixing the price at which the food grain was to be billed to the assessee, carries no weight. If expenses incurred by a person on account of transportation, interest, storage, etc., are added to the cost of the goods, it cannot be inferred that the person who is billed had paid certain amount on account of those services separately as the same becomes part of the commodity so sold. For the reasons mentioned above, we do not find any substantial question of law arises in the present appeal. The same is accordingly dismissed.

[Citation : 326 ITR 106]