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2022 (5) TMI 821 - AT - Income TaxTDS u/s 194C - determination of job work charges / miller cost - procurement agency and the miller, by-products to the tune of 33% of the paddy milled are being retained by the miller free of cost, whereon no TDS has been deducted by the appellant deductor - As per AO milling costs paid by the appellant are discounted costs and need to be increased by the cost of by-products (as determined by the A.O.) for the purpose of deduction of tax at source - HELD THAT - The matter is squarely covered in favour of the assessee and against the revenue by the consolidated order passed by the Chandigarh Benches of the Tribunal 2018 (12) TMI 398 - ITAT CHANDIGARH as held property in the by-products comes into ownership of the millers from the very point of coming of it into existence, hence, in this case the assessee were not the owners of the by-products. Another factor for consideration is that the property passed 'in kind' should have some ascertainable and determinable value, which can be taken as part of the consideration paid for the work done. Further, it is the nature of the contract, term of the agreement, the intention of the parties and overall facts and circumstances of the case which are required to be analyzed and considered for determining whether the provisions of section 194C or other similar provisions of the Chapter would be attracted or not in a particular case. As discussed above in detail, since we have held that the property in the by-product was not passed on by the assessee / Procurement Agencies as milling charges, hence, it is held that TDS provisions of section 194C are not attracted in this case. This issue is decided in favour of the assessee / Procurement Agencies.
Issues Involved:
1. Applicability of Section 194C on payments made in kind. 2. Reliance on the decision of Hon'ble ITAT, New Delhi in the case of M/s. Ahaar Consumer Products Pvt. Ltd. 3. Interpretation of "payment of any sum" under Section 194C. 4. Reliance on the decision of Hon'ble ITAT, Division Bench 'A', Chandigarh. 5. Consideration of by-products as part of the milling charges. 6. Cancellation of the order u/s. 201(1)/201(1A) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Applicability of Section 194C on payments made in kind: The primary issue was whether the provisions of Section 194C of the Income Tax Act, 1961, apply to payments made in kind, specifically the by-products retained by millers. The Assessing Officer (A.O.) contended that milling costs should include the value of by-products retained by millers, thus requiring TDS deduction on the total consideration, including the by-products. However, the Tribunal found that the by-products did not constitute payment of consideration for the work contract of milling paddy. The Tribunal noted that the by-products were never owned by the procurement agencies and were retained by the millers as per government policy. Therefore, the by-products could not be considered as consideration in kind for the milling contract. 2. Reliance on the decision of Hon'ble ITAT, New Delhi in the case of M/s. Ahaar Consumer Products Pvt. Ltd.: The revenue argued that the Ld. CIT(A) erred in relying on the decision in M/s. Ahaar Consumer Products Pvt. Ltd., which did not involve payments for services rendered. The Tribunal clarified that the Ahaar case was relevant because it addressed the applicability of Section 194C on non-monetary payments. The Tribunal upheld the Ld. CIT(A)'s reliance on this precedent, stating that the by-products retained by millers did not constitute consideration for the milling services. 3. Interpretation of "payment of any sum" under Section 194C: The revenue contended that Section 194C applies to "payment of any sum," which should include both cash and cash equivalent. The Tribunal examined the language of Section 194C and concluded that it primarily pertains to monetary payments. The Tribunal emphasized that the procurement agencies did not debit the value of the by-products as expenditure in their books, nor did they claim any deduction for it. Thus, the by-products retained by millers were not considered a sum paid for the purposes of Section 194C. 4. Reliance on the decision of Hon'ble ITAT, Division Bench 'A', Chandigarh: The Tribunal addressed the revenue's argument that the Ld. CIT(A) wrongly relied on the decision of the Chandigarh Bench in ITA Nos. 1309, 1310/CHD, and others. The Tribunal found no error in the Ld. CIT(A)'s reliance on these decisions, as they were directly relevant and had not been overturned by a higher judicial authority. The Tribunal noted that the issue was consistently decided in favor of the assessee in similar cases, and the department had not successfully challenged these decisions in higher courts. 5. Consideration of by-products as part of the milling charges: The Tribunal analyzed whether the by-products retained by millers should be considered part of the milling charges. It concluded that the by-products, which were the property of the millers from the moment of their creation, were not part of the consideration for the milling contract. The Tribunal emphasized that the government and procurement agencies had no right or responsibility over the by-products, and their value was not ascertainable for TDS purposes. 6. Cancellation of the order u/s. 201(1)/201(1A) of the Income Tax Act, 1961: The revenue argued that the Ld. CIT(A) erred in canceling the order u/s. 201(1)/201(1A), ignoring the substantial monetary value of the by-products. The Tribunal upheld the Ld. CIT(A)'s decision, stating that the by-products were not part of the consideration for the milling services and, therefore, no TDS was required on their value. The Tribunal dismissed the revenue's appeal, affirming that the procurement agencies were not in default for not deducting TDS on the by-products. Conclusion: The Tribunal dismissed the revenue's appeal, affirming the Ld. CIT(A)'s decision that the by-products retained by millers were not part of the consideration for the milling contract and, therefore, not subject to TDS under Section 194C. The Tribunal relied on consistent judicial precedents and the specific terms of the milling agreements to reach this conclusion.
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