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TMI Blog2016 (8) TMI 1393X X X X Extracts X X X X X X X X Extracts X X X X ..... ket fluctuations in the price structure of the raw material and the end product cannot be just ignored in the whole transaction nor the process loss. The process loss could be either more or less than the percentage agreed to between the parties. But still the parties settle the transactions at an agreed proportion. In other words, the residual that is left by the assessee, apart from covering the labour cost of processing, also includes the protection from market fluctuations as also protection from adverse process loss. To conclude, the entire residual is only for the purpose of job work is not fair and correct having regard to the totality of the transaction entered into by the parties - Decided in favour of assessee. - I.T.A Nos. 158 & 159 (Asr)/2016, I.T.A Nos. 160 &161 (Asr)/2016 - - - Dated:- 4-8-2016 - SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER Appellant by: Sh. P.N.Arora Sh. Parshotam K. Singla (Adv.) Respondent by: Sh. Rahul Dhawan (DR.) ORDER Per T. S. Kapoor ( AM ) This is a bunch of four appeals filed by two different assessees against the separate orders of learned CIT(A), Jalandhar, both dated 30.12.2015. In both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that learned CIT(A) has already allowed relief to the assessee by relying on the judgment of Hon ble Supreme Court in the case of Hindustan Cocacola Beverages (Pvt.) Ltd. Vs. CIT, and learned CIT(A) has only held that interest was to be charged from the assessee, therefore, there was no grievance left as learned CIT(A) has already allowed relief to the assessee. 7. The learned AR in his rejoinder submitted that the assessees are contesting the liability to deduct TDS and when the assessee was not liable to deduct TDS there is no question of levying of any interest. 8. We have heard the rival parties and have gone through the material placed on record. We find that similar issue has been decided by the Tribunal in ITA Nos.214 to 216(Asr)/2016 vide order dated 01.07.2016 wherein the Hon ble Tribunal has decided the issue after relying upon the order of the Tribunal in the case of M/s. The Punjab State Co.operative Supply and Marketing Federation Ltd., Nawanshahar vs. ITO, TDS-1, Jlandhar , in ITA Nos.54 to 56(Asr)/2016. The findings of Hon ble Tribunal as contained from 6 onwards are reproduced below. 6. Having heard the rival contentions in the light of the material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f consistency squarely applies. The above apart, in Ahaar Consumer Products (P) Ltd. (supra), it has been held as follows: 12. Now, we have to examine whether the assessee is obliged to deduct tax at source on the so-called constructive payment as construed by the Assessing Officer in terms of the agreement. The assessee, in this case, supplies 100 kg of wheat and takes back 88 Kgs. of Atta or 85 Kgs. Of Dalia after its processing done by the AIL and AM- is required to deliver the end product in this proportion to the assessee who has supplied the raw material. Does the provision of section 194C of the Act create an obligation on the part of assessee to deduct tax at source in respect of any of the transactions it has entered into with the AIL? section 194C of the Act was brought into statute by the Finance Act, 1972. Circular No. 86 dated May 29, 1972 was issued inter alia stating that the provisions of section 194C would apply only in relation to labour contacts and would not cover contracts for sale of goods. If a manufacturer purchases material on his own and manufactures a product as per the requirement of a specific customer, it was a case of sale and not a contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the same product but a different product and not to the same extent but to a different extent. In other words, it is difficult to say that the assessee has made any payment in undertaking this contract on the basis of the agreement that is acted upon by the parties. There is no payment of any sum by the assessee to AIL. Even if one were to say that there is a constructive payment, it is difficult to quantify the same and say that the assessee was under an obligation to deduct tax at source at such construed payments. The assessee has not even credited such construed consideration for supply of labour in the books of account of the assessee. In fact, it has not even claimed any expenditure as deduction. To say that such expenditure has resulted in an outflow without deduction of tax at source is too much and is not borne out from the transaction entered into between the parties. The question of disallowance by applying the provisions of section 40(a)(ia ), in our opinion, is not in accordance with law as the assessee is under no obligation to deduct the tax at source in terms of a contract where it does not require any payment of any sum even if the sum here means that the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction from the profit and gains of business under section 32 to section 38. Only when the claim of the assessee for deduction is under section 32 to section 38, the provisions of section 40(a)( ia) can be pressed into service to disallow such claims for deduction. At the cost of repetition, we may say that to invoke said provision of section 40(a)(ia ), first of all, the case should be made out by the department that the assessee is contemplating deduction under sections 32 to 38 on which tax is deductible and the assessee has not deducted tax at source. In our opinion, tax is not deductible and the assessee has not claimed any deduction under section 32 to section 38. This loss, if any, is in the net profit in the trading account which is a computation under sections 28 and 29 and not claims under sections 32 to 38 of the Income-tax Act. Even taking this view of the matter, in our opinion, the assessee is entitled to succeed and there is no question of deduction of tax at source and consequently no question of making any disallowance by invoking the provisions of section 40(a)(ia ) of the Act. 14. We must also view the whole transaction under the agreement from a differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , decided in favour of the assessee. 17. As noted in the initial portion of this order, the facts in all the appeals of the years under consideration are exactly similar interse , therefore, our observations are, mutatis mutandis, equally applicable to the other years. 18. In the result, all the three appeals of the assessee are allowed. 8. Therefore, respectfully following the aforesaid decision of the Tribunal of even date in the case of M/s. The Punjab State Co-operative Supply and Marketing Federation Ltd., Nawanshahar vs. ITO, TDS-1, Jalandhar , in ITA Nos. 54 to 56(Asr)/2016, for the assessment years 2012-13 to 2014-15, whereby we have allowed the appeals of the assesse, all the three present appeals of the Revenue are dismissed. Therefore, respectfully following the aforesaid decision of the Tribunal of even date in the case of DM, Punjab State Grain Procurement Corporation Ltd. Hoshiarpur in ITA Nos.214 to 216 (Asr)/2016 for Asst. Year 2012-13 2014-15, we allow the appeals of the assessee. 9. In view of the above, all the four appeals filed by assessees are allowed. Order pronounced in the open Court on 04.08.2016. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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