INCOME TAX ACT, 1961

Section 40(a)(ia)

Business disallownace under section 40(a)(ia) - Non-deduction of tax at source - Charges paid for harvesting of sugarcane to be adjusted against sugarcane bill payable to farmers -

Assessee-company engaged in manufacture of sugar claimed deduction of payment made towars harvesting charges. for harvesting of sugarcane AO made disallowance under section 40(a)(ia) for want of TDS under section 194C. Assessee submitted that it had paid harvesting charges to labourers through the gang leaders on behalf of farmers.Held: Terms of Sugarcane purchase agreement made it clear that responsibility of harvesting sugarcane and transporting them to the factory of assessee was placed upon farmers. It was further stated that the assessee could also arrange harvesting and transportation on behalf of farmers on the request of farmers and in such case, costs incurred in that connection would be adjusted against the Cane bill. This clause made it clear that assessee would be acting on behalf of farmers and hence payment of harvesting charges was also made on behalf of farmers only, to be adjusted against the Sugarcane bill. Hence, harvesting charges did not constitute assessee's own expenditure and there was no requirement of deducting TDS from payments made towards harvesting charges when these payments formed part of sugarcane purchase price payable to farmers.

Relied:NSL Sugars Ltd., ITA No. 1228/Bang/2017 relating to assessment year 2012-13 in its order dt. 8-11-2019] : 2019 TaxPub(DT) 7564 (Bang-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 20014-15 & 2015-16

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