2017 (9) TMI 1746 - AT - Income Tax

TDS u/s 194C on the value of the by-products - nature of liability - assumption of Payment in kind - assessee is a Branch of State Government agency which procures paddy from the market in every crop season and milling of this paddy is done by various millers with whom contracts are executed - Held that - There is no dispute that the parties, apart from entering into agreement have also acted upon the agreement and the transactions appear to be strictly falling within the agreement that is entered into by the parties. One cannot ignore the terms of this agreement in determining the nature of the transaction that have taken place between the parties, as there is nothing in the impugned orders to doubt the genuineness of this agreement. It is for the revenue to understand this agreement and determine the nature of the assessee s tax liability arising from the transaction entered into through this agreement. In fact, it is stated that the assessee has given the wheat under a delivery challan-cum-invoice and the value is provided only for settlement of claims. On the basis of the quantity of the wheat supplied by the assessee to AIL, the assessee has collected the end products namely Atta or Dalia and is not bothered about the other products and wastage arising therefrom. Under the terms of agreement, by-products, waste and the residual of the wheat after manufacture belong to AIL and not to the assessee. Nowhere in the books of the assessee, the assessee has made any payment towards the services rendered by AIL in producing the Atta and Dalia for and on behalf of the assessee in the packets and containers provided by the assessee in terms of the agreement. The assessee was not required to make TDS u/s 194C of the Act on the value of the by-products. - Decided in favour of assessee.

Summary

Issues involved:
- Correctness of separate orders dated 11.11.2016 of CIT (Appeals) Chandigarh for 2013-14 and 2014-15 assessment years
- Whether the assessee was required to deduct TDS on the value of by-products retained by millers
- Application of previous judgments and orders by ITAT in similar cases

Analysis:
The judgment by the Appellate Tribunal ITAT Chandigarh involved appeals by the assessee challenging the correctness of separate orders by CIT (Appeals) Chandigarh for the 2013-14 and 2014-15 assessment years. The key issue revolved around whether the assessee was obligated to deduct TDS on the value of by-products retained by millers. The assessee argued that the issue was fully covered in their favor based on previous judgments and circumstances identical to those considered by the ITAT in other cases. The ld. CIT-DR did not present any contrary facts to support a different view. The record indicated that the assessee, a branch of a State Government agency, procured paddy from the market and engaged millers for milling, with contracts specifying payment terms and obligations regarding milling by-products.

The judgment referred to specific agreements between the parties and highlighted that the transactions were in line with the agreements entered into by the related concerns. The agreement detailed the terms of production, quality standards, pricing, and dispute resolution mechanisms. It was emphasized that the by-products, waste, and residual materials belonged to the millers as per the agreement, and the assessee did not make any additional payments for the milling services. The ITAT held that, based on the facts and consistent precedents, the assessee was not required to deduct TDS on the value of the by-products, leading to the allowance of both appeals.

In conclusion, the ITAT Chandigarh ruled in favor of the assessee, emphasizing the importance of contractual terms and the absence of payment for milling services beyond the agreed terms. The judgment underscored the significance of previous decisions and the application of consistent interpretations in similar cases. The appeals were allowed, affirming that the assessee was not liable to deduct TDS on the value of the milling by-products.