Commissioner Of Income Tax (Tds), Chandigarh v. The Assistant Manager (Accounts),Food Corporation Of India (Pay Office), Jagadhri

In the High Court of Punjab & Haryana at Chandigarh ITA No. 407 of 2008Date of decision : 21.8.2008 Commissioner of Income Tax (TDS), Chandigarh .....Appellant vs The Assistant Manager (Accounts),Food Corporation of India (Pay office), Jagadhri ..... Respondent Coram:Hon'ble Mr. Justice Hemant GuptaHon'ble Mr. Justice Rajesh Bindal Present: Mr. Yogesh Putney, Advocate, for the appellant. Rajesh Bindal J. The revenue has filed the present appeal against the orderpassed by the Income Tax Appellate Tribunal, Chandigarh Bench 'A',Chandigarh (for short, “the Tribunal”), in I.T.A. No. 374/Chandi/2006 dated16.10.2007, raising the following substantial question of law:- “Whether in the facts and in the circumstances of the case,the Hon'ble ITAT was right in holding that provisions ofsection 194A, 194I and 194C were not applicable as nopayment has been made separately on account of interest,rent etc. The transaction was a transaction of purchase &sale and not payment of expenses ?” The assessee in the present case is Food Corporation of Indiawhich is engaged in procurement of food grains for the Central pool. Thefood grains is procured through the State agencies and directly as well. Theproceedings were initiated under Section 201 of the Income Tax Act, 1961,with the allegations that the assessee had failed to deduct tax at source onthe interest, rent and transportation charges paid by it to various agencies.The order came to be passed by the Income Tax Officer (TDS) on 25.2.2005raising a demand of Rs. 12,34,814/-. The order was upheld by theCommissioner of Income Tax (Appeals). In further appeal before theTribunal, the plea set up by the assessee was accepted. It was noticed that inthe invoices raised by various State agencies who procured food grains on ITA No. 407 of 2008 behalf of the assessee, cost of wheat has been shown apart from the cost onaccount of other incidental expenses incurred by the procurement agencies.VAT had also been charged. It was not evident from there that the expensesso incurred by the procurement agencies were on behalf of the assesseerather it was found to be part of the cost at which the food grains were to betransferred by the procurement agencies to the assessee. With these facts, itwas found that as the assessee had not paid any amount to the procurementagencies 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 factall these factors had been taken care of while fixing the price at which thefood grain was to be billed to the assessee, carries no weight. If expensesincurred by a person on account of transportation, interest, storage etc. areadded to the cost of the goods, it cannot be inferred that the person who isbilled had paid certain amount on account of those services separately as thesame becomes part of the commodity so sold. For the reasons mentioned above, we do not find anysubstantial question of law arises in the present appeal. The same isaccordingly dismissed. ( Rajesh Bindal) Judge 21.8.2008vs. (Hemant Gupta)Judge