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TMI Blog2009 (11) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... cers in excess of the limit of 20,000 are covered by the exception clause, we see no reason why the processed fish which is an intermediary, should be taken out of the scope of the section. Rule makers never intended processed fish to be taken out of the scope of sub-cl. (iii) of cl. (f) of r. 6DD because the Government under the rule considers fish only in two forms, either fish as such or in it s product form. In other words, sub- r. (iii) of r. 6DD(f) covers all forms of fish, though the broad classification is only between fish and fish products. So much so, in our view, since the processed fish purchased is not fish in the same form it is obtained, it falls within the meaning of fish product under the above rule. As accepted the contention of the assessee that the processed fish purchased is fish product within the meaning of that term in the rule, we have to necessarily hold that the supplier namely, the processor of the fish, is certainly producer to whom payments are made. Decided in favour of the assessee and against Revenue. Part disallowance sustained by the CIT(A) and reversed by the Tribunal on the ground that the assessee cannot be expected to prove purchase against p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. 2001-02, assessee made massive purchases from various suppliers of processed fish by paying cash instead of making payment through account payee cheques or demand drafts as required under s. 40A(3) of the IT Act (hereinafter called "the Act"). When proposal was made in assessment to make disallowance of purchases in excess of ₹ 20,000 through payment of cash, the assessee claimed the benefit of exemption provided under r. 6DD(f)(iii) of the IT Rules (hereinafter called "the Rules") prescribed under sub-s. (3) of s. 40A of the Act which provides for exemption for payments made to producers of fish or fish products for the purchases other than through account payee cheques or demand drafts. The AO, however, took the view that the processor of fish who supplied the same after removal of head, tail and shell to whom payments were made, is not the producer falling under the rule abovereferred and so much so, the entire cash payments were made subject to disallowance under s. 40A(3) of the Act. 2. When assessee filed first appeal before the CIT(A), he felt that fish produce referred to in the above rule covers prawn meat, lobster meat, etc. purchased by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and in the circumstances of the case, was the Tribunal justified in cancelling the part disallowance confirmed by the CIT(A) on the ground that the assessee has discharged their burden of purchase of fish products from the suppliers in terms of r. 6DD(f)(iii) of the IT Rules ?" 4. Before proceeding to consider the issue, we have to refer to the undisputed facts in the case which are the following. The assessee is a marine exporter who directly export marine products and is also engaged in supplying marine products to export houses for export as a supporting manufacturer. The total export turnover on which income-tax exemption is granted to the assessee during the assessment year is above ₹ 14 crores. Besides processing the fish by itself, the assessee is engaged in purchase of processed fish which is nothing but fresh fish meat obtained after removal of inedible portions like head, tail, shell etc. In fact, the fish meat so purchased are of prawns, lobsters, skud fish etc. The suppliers of the processed fish to the assessee are not actually fishermen but are those who purchase fish from fishermen, process the same and sell the same to the assessee. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the expenditure in respect of which claim is made should have been incurred in the cases and circumstances specified under the rules. On examining the rule in detail, we notice that in order to qualify for the benefit of exemption, two conditions have to be satisfied. In the first place, the exemption is available only for the purchase of items referred to therein. Secondly, the payment should be made only to the persons referred to therein who are cultivators, growers or producers of such articles, produce or products mentioned therein. Necessarily there has to be one to one correspondence between the items involved and the person who supplies the same to whom payment is made. In other words, unless the supplier of the item referred to therein is the person falling within the description of cultivator, grower or producer of such article, produce or products, the purchase is not covered by the exemption clause. We have to, therefore, consider two questions herein; one is whether the item purchased in this case is fish or fish product and the payment is to its producer. Obviously no one has a case that fish purchased by the assessee are grown in a farm and sold by the producer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oducts of fish and not processed fish. It is worthwhile to note that produce of animal husbandry covered by sub-cl. (ii) of cl. (f) takes in even hides and skins. Hides and skins are obtained in the process of taking meat from the slaughtered animal. Payments made to even industries engaged in manufacture of fish products are covered by the exemption clause contained in cl. (iii). We feel the exemption clause generally covers a class of goods in all forms without confining itself to any particular form leaving other forms of it from the very same class. When fish and even manufactured products of fish are covered by the exception clause and the payments to its producers in excess of the limit of ₹ 20,000 are covered by the exception clause, we see no reason why the processed fish which is an intermediary, should be taken out of the scope of the section. In our view, the rule makers never intended processed fish to be taken out of the scope of sub-cl. (iii) of cl. (f) of r. 6DD because the Government under the rule considers fish only in two forms, either fish as such or in it's product form. In other words, sub- r. (iii) of r. 6DD(f) covers all forms of fish, though the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments the suppliers are absolutely free to disown the transaction and assessee obviously cannot be blamed for the same. It is seen from the contents of the remand report extracted by the CIT(A) in its order that in many cases suppliers owned up the transactions, even though not to the extent covered by the documents produced by the assessee. The assessee normally should purchase goods based on supplier's bills, but if suppliers do not raise bills, assessee can only keep purchase vouchers. The only fool proof evidence to establish purchase from a person is the payment made through account payee cheque or demand draft which is the requirement of s. 40A(3). However, Government has chosen to liberalise the operation of s. 40A(3) to augment trade. After granting this facility, we are of the view that the Department cannot insist the assessees to get the suppliers confirm to the Department about the supplies made to the assessee and the payments received by them. In our view, the assessee should be taken to have discharged their burden by furnishing the copies of purchase bills or vouchers issued containing the names and addresses of the suppliers with date, value, quantity etc. B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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