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2017 (7) TMI 1241 - AT - Income TaxTDS u/s 194C - indeterminate value of bye products retained free of cost by the rice millers in accordance with policy framework and guidelines of the Central Government agency - consideration in kind - Held that - As decided in ITO VERSUS AHAAR CONSUMER PRODUCTS (P) LTD. 2011 (2) TMI 488 - ITAT, DELHI occurrence of just exchange of goods for goods and does not involve any cash outflow. Although services were taken, it is difficult to say that the residuals and the losses left by the assessee in favour of AIL are purely consideration for the job that is done. The market fluctuations in the price structure of the raw material and the end product cannot be just ignored in the whole transaction nor the process loss. The process loss could be either more or less than the percentage agreed to between the parties - the residual that is left by the assessee, apart from covering the labour cost of processing, also includes the protection from market fluctuations as also protection from adverse process loss. - Decided in favor of assessee.
Issues Involved:
1. Applicability of Section 194C on the work carried out by millers. 2. Deletion of demand on account of non/short deduction of tax under Sections 201(1) and 201(1A). 3. Appropriateness of linking the judgment in the case of M/s Ahaar Consumer Products Pvt. Ltd. to the present case. Detailed Analysis: Issue 1: Applicability of Section 194C on the Work Carried Out by Millers The Revenue contended that the provisions of Section 194C were applicable to the work carried out by millers. However, the Tribunal referenced a prior decision in the case of ACIT(TDS) vs. Punjab State Grain Procurement Corporation Ltd., where it was held that Section 194C did not apply to the value of by-products retained by the miller. The Tribunal reiterated that the transaction in question was more akin to a barter or exchange rather than a contract for work, thus not necessitating TDS under Section 194C. Issue 2: Deletion of Demand on Account of Non/Short Deduction of Tax Under Sections 201(1) and 201(1A) The Revenue argued that the assessee did not deduct TDS on payments made in kind, thus violating Sections 201(1) and 201(1A). The Tribunal, however, upheld the CIT(A)'s decision, which was based on the precedent set by the Delhi Bench in the case of Aahar Consumer Products Pvt. Ltd. It was noted that the assessee had deducted TDS on the cash part of the payments made as milling charges but was not required to deduct TDS on the value of by-products retained by the miller. Consequently, the Tribunal found no merit in the Revenue's appeal and confirmed the deletion of the demand. Issue 3: Appropriateness of Linking the Judgment in the Case of M/s Ahaar Consumer Products Pvt. Ltd. to the Present Case The Revenue contended that the CIT(A) erred in linking the judgment of the ITAT Delhi Bench in the case of M/s Ahaar Consumer Products Pvt. Ltd. to the present case. The Tribunal reviewed the facts and found that the issues were indeed identical. In both cases, the transaction involved the supply of raw material and receipt of processed goods without any monetary consideration for the services rendered. The Tribunal emphasized that the nature of the transaction was such that it did not attract the provisions of Section 194C or Sections 201(1) and 201(1A). Conclusion The Tribunal concluded that the CIT(A) had rightly deleted the additions imposed by the AO on account of non/short deduction of tax under Sections 201(1) and 201(1A). The decision was based on the precedent set by the ITAT Delhi Bench in the case of Aahar Consumer Products Pvt. Ltd., which was found to be applicable to the present case. Consequently, all the appeals filed by the Revenue were dismissed. Order All appeals filed by the Revenue were dismissed, and the order was pronounced in the Open Court on 13.07.2017.
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