9911796707
TMI Blog2004 (11) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... ration was obligated to collect tax from the buyers of timber and other forest produce at the rates specified under section 206C of the Act. Therefore, the first respondent initiated proceedings proposing to treat the petitioner-corporation as an assessee deemed to be in default and to collect the tax which it failed to collect from the buyers of timber and other forest produce. The petitioner-corporation appeared before the Assessing Officer and claimed that the produce it sold to various buyers was agricultural produce, as the petitioner-corporation had developed the land and cultivated various tree growth as well as horticultural products and the sale of such items would not attract the provisions of section 206C of the Act. The petitioner also produced some non-deduction certificates issued by various Assessing Officers, claiming exemption from the tax collection at source. The first respondent, however, rejected the claim of the petitioner-corporation that the timber and other products sold by it are agricultural products and even with reference to the non-deduction certificates, the Assessing Officer gave part relief and computed the liability including interest at about Rs.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lyptus, pepper, bamboo, etc. For that purpose, the Government has allotted certain land, which was re-claimed by the petitioner-corporation and through the process of development of the said land, the petitioner-corporation has cultivated and grown various types of trees. It is also stated that the petitioner-corporation has effected the sales of eucalyptus poles to Singareni Collieries Limited, a public sector undertaking. Similarly, eucalyptus, pulpwood, bamboo industrial cuts, etc., were sold to companies like A.P. Paper Mills Limited, Badrachalam Paper Boards Limited, Sirpur Paper Mills Limited, A.P. Rayons Limited, etc.; cashewnuts, pepper, etc., were sold to TTD and other individuals. According to the petitioner-corporation all the produce that was sold by it to various buyers is agricultural produce. In fact, the petitioner-corporation filed an order of assessment for the year 1986-87, where the Assessing Officer passed an assessment considering the contentions elaborately with reference to the sale of various items including the items, which are considered by the respondent now and the sale produce of all those items was claimed by the petitioner-corporation as agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, contended that section 206C of the Act was introduced in the statute in order to remedy the tax evasion by those who are purchasing and dealing with the items mentioned in section 206C of the Act. Therefore, as a measure, this provision has been inserted imposing obligation on the seller to collect tax from the buyers at the time of sale at particular rates specified under the said provision and to remit the same to the Central Government. According to learned counsel, at the stage of collection of tax, it is not open to the collecting agency to go into the issue whether the items that are being sold by it are agricultural produce or a non-agricultural produce as is referred to in the said section. If ultimately the buyers are not liable to pay any tax, they are at liberty to file their returns and claim for refund basing on the certificates issued by the petitioner-corporation showing the collection of tax at the time of purchase. Learned standing counsel also contended that admittedly what was sold by the petitioner-corporation was timber, such as bamboo, eucalyptus, etc., therefore, the petitioner-corporation was under obligation to collect tax. Similarly, with reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r idea of the provision, it would be appropriate to extract the relevant provision of section 206C of the Act, which reads as under. "206C. Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc.-(1) Every person, being a seller referred to in section 44AC, shall, at the time of debiting of the amount payable by the buyer referred to in that section to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax on income comprised therein. S.No. Nature of goods Percentage (i) Alcoholic liquor for human consumption (other than Indian- made foreign liquor) Fifteen per cent. (ii) Timber obtained under a forest lease Fifteen per cent. (iii) Timber obtained by any mode other than under a forest lease Five per cent (iv) Any other forest produce not being timber Fifteen per cent. Provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollecting the tax fails to pay it as required under this section, he shall be liable to pay simple interest at the rate of two per cent, per month or part thereof on the amount of such tax from the date on which such tax was collectable to the date on which the tax was actually paid. (8) Where the tax has not been paid as aforesaid, after it is collected, the amount of the tax together with the amount of simple interest thereon referred to in sub-section (7) shall be a charge upon all the assets of the seller." A perusal of the above shows that this provision was inserted by the Finance Act, 1988, along with section 44AC, which was intended for levy and collection of presumptive tax in the case of trading in certain goods to remove hardship and to remove the lacuna. The trades mentioned therein are alcoholic liquor for human consumption; timber obtained under a forest lease; timber obtained by any mode other than under a forest lease; and any other forest produce not being timber, at different rates. The object of introduction of the new provisions for working out the profits on presumptive basis is to get over the problems being faced in assessing the income of and recovering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained by any mode other than under a forest lease; and any other forest produce not being timber. From the above provision, it is clear that the Legislature intends to apply this provision in respect of timber and other produce obtained from the forest and it is not intended to apply to any produce. Therefore, in order to attract the provisions of section 206C of the Act, one has to examine whether the items sold by the petitioner-corporation are forest produce or not. In fact, the contention advanced by learned standing counsel for the Department would not reflect from the impugned order. On the other hand, the stand of the second respondent is that the provisions of section 206C of the Act are applicable only with reference to the forest produce. But, according to him, the items of produce sold by the petitioner-corporation would fall under items (ii) and (iii) specified in the Table in section 206C of the Act. Therefore, there is absolutely no merit in the contention of learned standing counsel that even if the produce is not forest produce, still the petitioner-corporation is under obligation to collect the tax at the time of effecting the sale. Coming to the nature of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure of human skill and labour upon the land itself. Those operations which the agriculturist has to resort to and which are absolutely necessary for the purpose of effectively raising produce from the land, operations which are to be performed after the produce sprouts from the land, e.g., weeding, digging the soil around the growth, removal of undesirable undergrowth, and all operations which foster the growth and preservation of the same not only from insects and pests but also from depredation from outside, tending, pruning, cutting, harvesting and rendering the produce fit for the market, would all be agricultural operations when taken in conjunction with the basic operations. The human labour and skill spent in the performance of these subsequent operations cannot be said to have been spent on the land itself. The mere performance of these subsequent operations on the products of the land, where such products have not been raised on the land by the performance of the basic operations, would not be enough to characterize them as agricultural operations; in order to invest them with the character of agricultural operations these subsequent operations must necessarily b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forest produce. As is evident from the relevant provisions, the tax collection at the time of sale is intended only to be applied in respect of forest produce and not with reference to agricultural produce. Therefore, in order to hold that the assessee is liable to collect the tax at source, the authorities have to give a finding that it is a forest produce. The finding that was arrived at by the Commissioner, the second respondent herein, is not with reference to the basic facts but only based on the provisions of the A.P. Forest Act. In fact, it was the contention of the assessee that for the assessment year 1986-87 the sale proceeds were treated as receipts from the sale of agricultural produce and exempted from assessability to tax. In fact, it is claimed that even for the subsequent years including the assessment years in question, the petitioner's returns were accepted treating its income as agricultural income. If such is the factual position, there is absolutely no justification for the authorities to proceed against the petitioner-corporation as an assessee deemed to be in default. Though it was contended that there is no specific provision under which any authority is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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