2020 (2) TMI 19 - AT - Income Tax

Additions u/s 206C(A)/206C(7) - non collection of TCS on sale of DOC, Maize husk and cotton waste - HELD THAT - As decided in own case 2016 (3) TMI 859 - ITAT AHMEDABAD CIT(A) was justified in holding that the Assessing Officer has erred in categorizing DOC as scrap within the meaning of Explanation to Section 206C. Regarding the raw cotton being treated as scrap we find raw cotton is only a part of raw material which is of lower quality (lower count cotton) from which the thin yarn cannot be manufactured such thick quality cotton was separated at the initial warehousing stage and sold off to other yarn manufacturers including that for export. So, the CIT(A) was justified in holding that such raw cotton does not arise from manufacturing or mechanical working as it is merely a segregation of raw material as was pointed out by the assessee. Therefore, these reasoned finding of the CIT(A) need no interference from our side, which is confirmed. Regarding Maize Husk (Fiber)percentages of husk as a by-product is close to 10% and it is mainly used in poultry farm, animal food and pharma industries. Since maize husk fiber is itself subjected to various manufacturing stages and as enormous economic value, it is one product manufactured and cannot be considered as a waste or scrap within the manufacturing process. CIT(A) was justified in holding that main husk is a by-product and the same cannot be considered as scrap and waste as provided in the Explanation to Section 206C of the Income-tax Act. Short deduction of tax at source - TDS u/s 194C or 194J on payments made to C F Agents - HELD THAT - CIT(A) rightly found that C F agents were nowhere remotely indicated in the explanation to section 194J of Income tax Act nor has been explained by the AO that how C F was covered u/s. 194J of the Income-tax Act. Therefore, under the given facts and circumstances of the case, the CIT(A) was justified in holding that the action of Assessing Officer invoking provision u/s 194J in respect to port charges payment for all the assessment years as unsustainable in law. Therefore, the order of the CIT(A) in this regard does not require any interference from our side, which is confirmed.

Summary

Issues:
1. Deletion of demand under sections 201(1)/201(1A) and 206C(6A)/206C(7) of the Income Tax Act, 1961 for the Asstt.Year 2008-09.
2. Application of provisions of section 194C instead of 194J on payments made to C&F Agents.

Analysis:

Issue 1: Deletion of demand under sections 201(1)/201(1A) and 206C(6A)/206C(7)
The Revenue appealed against the deletion of demand made by the Assessing Officer under sections 201(1)/201(1A) and 206C(6A)/206C(7) for the Asstt.Year 2008-09. The Tribunal noted that similar issues had been decided in favor of the assessee for subsequent assessment years. The ld.CIT(A) and ITAT had already allowed the claim of the assessee for the Asstt. years 2009-10 to 2012-13, which was upheld by the Hon'ble Gujarat High Court. The Tribunal found that the facts were identical, and the ld.CIT(A) had followed the previous order of the ITAT. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the order of the ld.CIT(A).

Issue 2: Application of provisions of section 194C instead of 194J on payments made to C&F Agents
Regarding the application of provisions of section 194C instead of 194J on payments made to C&F Agents, the Tribunal referred to a previous order by the ITAT for the assessment years 2009-10 to 2012-13 where the claim of the assessee was allowed. The Tribunal analyzed the details of payments made to C&F Agents and concluded that the C&F agents were independent contractors, not falling under the purview of section 206C of the IT Act. The Tribunal upheld the decision of the ld.CIT(A) in this regard, finding no infirmity in the order. The Tribunal noted that the issues were similar in other assessment years as well, and following the same reasoning, dismissed the appeal filed by the Revenue.

In conclusion, the Tribunal upheld the decisions of the ld.CIT(A) based on previous orders and found no merit in the grounds of appeal raised by the Revenue. Therefore, the appeal of the Revenue was dismissed, and the order of the ld.CIT(A) was upheld.