9911796707
TMI Blog2016 (7) TMI 1482X X X X Extracts X X X X X X X X Extracts X X X X ..... o includes the protection from market fluctuations as also protection from adverse process loss. - Decided in favor of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... partial deduction of tax at source is being made under section 194C of the Income Tax Act, 1961. " 4. In reply, it is stated by the assessee that the rice millers are paid milling charges for custom milling of paddy as fixed by the Govt. And that all the by products shall be property of the rice miller. It is further stated that it will not be appropriate on the part of the assessee of Govt, since the same is the property of the millers as per policy. It is also stated that no transactions/entries of by products are affected in the books of accounts in their office. 5. In the aforesaid explanation, the assessee has admitted that all the by products of paddy, which is the property of the agency, is left with the miller as per the policy of the Government. Obviously, such a policy has been framed in order to compensate the miller in kind as the milling charges of ₹ 15/- are too small for the operational cost of milling which includes transportation, stitching and a number of other expenses borne by the miller. Thus, the value of by products is part of the milling expenses paid in cash. However, tax is deducted at source only out of cash charges paid. 6. The explanation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion, the explanation given by the assessee is not accepted. J hold the assessee in default for not deducting, tax at source on full valve of the milling charges i.e. paid in cash and passed on in kind. Tax is being deducted at source on the milling charges paid in cash while no deduction is being made in respect of the products which are token us stuck of the adder and sold at his convenience. 8. As regards by products, the main by products of paddy are rice bran, khudi phak and husk. Enquiries were made from some rice shelters to arrive at the value per quintal of the these by products. The value of by products from one quintal of paddy, as per information give by different parties ranges between given by these parties is adopted for working out the short deduction. The average value comes to ₹ 82/- per quintal during financial year '2011-12 and ₹ 86/- during financial year 2012-13. The latter figure is also adopted in financial year 2013-14. The figures of paddy got milled during different years have been provided by the assesee. Col.I in the fed owing chart contains figures of total paddy got milled by the assesee in a j particular year and value of by produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.colleagues (CIT(A), Patiala who has, in his order dated 29.11.2015 as referred above, I hereby direct the AO not to treat the assessee in default as far as the provisions of section 201(1)/201(1A) of the I.T Act are concerned." 6. Having heard the rival contentions in the light of the material available on record, we find that the ld. CIT(A) has rightly directed the AO not to treat the assessee in default as far as the provisions of section 201(1)/201(1A) of the I.T Act are concerned. The order of the ld. CIT(A) is reasoned one and does not require any interference. 7. An identical issue has also been decided by this Bench by an order 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, in favour of the assessee and against the Revenue by holding as under: "14. Having considered the rival contentions on the merits of the legal issue raised by the assessee, we find that the facts, as convassed, are not in dispute, the ld. In the case of Punjab State Grain Procurement Corporation Limited, vide order dated 25.01.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for carrying out any work. The fact that the goods manufactured were according to the requirement of the customer did not mean or imply that any work was carried out on behalf of that customer. In case of any issue where the contract is a contract of sale and not a contract for carrying out any work, the matter should be decided in the light of the principles laid down by the Hon'ble Supreme Court in State of Tamil Nadu v. Sh Thirumagal Mills Ltd. AIR 1972 SC 1148. The Bombay High Court has also analyzed the difference between the sale and works contract in the case of BDA Ltd. v. ITO (TDS) [2006] 281 ITR 99 1. The assessee in that case had a distillery at Aurangabad and purchased materials required for bottling and marketing foreign made Indian liquor, including the printing and packing material. 'M', another establishment supplied the printed labels to be wrapped on the bottles to the assessee. The ITO (TDS) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 payment could be of some kind but it is difficult to say that the assessee has made these payments to the extent of shortfall in getting the wheat supplied back and construe it as the payment to the other for processing the wheat into Atta or Daliya. The department must have appreciated the contract as a whole which does not involve any payment or getting the payment for services rendered. It Is a case of barter or exchange or one good against the other. It Is a type of sale contract In a very crude form but it is certainly not a works contract as understood by the courts in cases under the sales tax which was discussed by the Hon'ble Supreme Court in the case cited in Sir Thirumagal Mills Ltd. (supra) or in the case dealt with by the Bombay High Court in the case of BDA Ltd. (supra ). The assessee having regard to the contract which it has entered on 2-2-2005, in our opinion, does not give rise to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 different angle. The assessee gives the wheat and accepts Atta and Dalia in return by weight to weight basis and what he got in return are the value added products of lower quantity. The assessee by this method has prevented itself from factors like fall in the prices of either raw material or of the finished products. The market value of the wheat and the end products are totally different and fluctuate in different directions. All these fluctuations are warded off by the present agreement, which is just exchange of goods for goods and does not involve any cash outflow. Although services were taken, it is difficult to say that the residuals and the losses left by the assessee in favour of AIL are purely consideration for the job that is done The market 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
