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TMI Blog2019 (11) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... as laid down in the decision of the Hon ble Supreme Court in the case of Synco Industries Ltd. [ 2008 (3) TMI 13 - SUPREME COURT] . For the reasons given above, we sustain the order of CIT(A). TDS u/s 194C - harvesting charges paid to labourers by the assessee on behalf of the cane growers - whether it is part and parcel of the cost price of sugarcane and the payment of which cannot be covered within the expression work contract - when as per assessee, the Alland unit cane price was fixed under two different heads? - HELD THAT:- If the contract to supply sugarcane is ex field (cost of harvesting and transportation to be borne by the Sugar manufacturer), then it is the responsibility of the assessee to lift the sugarcane from the field to its factory i.e., the assessee has to bear the harvesting and transportation charges for the sugarcane. There is no such material brought on record to come to the conclusion that the harvesting transportation charges paid by the assessee is on ex- field basis. In such circumstances, we are of the view that, on the basis of probability, the plea of assessee has to be accepted and it has to be held that the payments made by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As far as ground No.2 is concerned, the facts are that the assessee is engaged in the business of manufacture of sugar. In the process of manufacture of sugar, steam is generated. That steam is used to generate electricity. The income earned from such activity is referred to in the order of assessment as income from Cogent plant. The assessee claimed deduction of ₹ 24,36,83,037 u/s. 80IA of the Income Tax Act, 1961 (Act) in respect of profits derived from Cogent plant. There is no dispute that the Assessee was entitled to deduction u/s.80IA of the Act and the quantum of deduction was ₹ 24,36,83,037 computed in accordance with the provisions of Sec.80IA(1) of the Act. The income from business of the assessee as per the computation of total income was a sum of ₹ 22,09,10,637. The gross total income of the assessee was ₹ 31,83,19,275. 5. The AO was of the view that u/s. 80IA of the Act, the deduction allowed cannot be more than the income under the head income from business. In this regard, the AO has observed that if the assessee has 2 or 3 segments of business and if in the eligible business the assessee has earned positive income and in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpretation emerged from the maxim generalia specialibus non derogant the special provision of section 80-IA(5), which is over riding in the nature, must prevail over general provisions to the extent of its scope and limit. In other words it was submitted that for the purpose of determining the amount of deduction u/s 80IA, the taxable income of the eligible business is to be ascertained and computed as if such eligible business were an independent business owned by the assessee and the assessee had no other source of income. Conversally the unabsorbed losses, unabsorbed depreciation etc relating to the eligible business are to be taken into account in determining the quantum of deduction admissible under section 80IA even though these unabsorbed losses ,unabsorbed depreciation etc relating to the eligible business may actually have been set off against the profits of the assessee from the non eligible business or other sources. Thus the gross total income referred in section 80A(1) and (2), 80AB and 80B(5) for the purpose of determining the quantum of deduction available under section 80IA for the relevant assessment year ,would mean the total income computed in accordance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. counsel for the assessee, who relied on the order of CIT(Appeals). 10. The ld. DR submitted that the CIT(Appeals) in agreeing with the submissions of assessee, has placed reliance on the decision of the Hon ble Supreme Court in the case of CIT v. Canara Workshop Pvt Ltd. (supra) . He pointed out that the aforesaid decision was rendered in the context of erstwhile section 80E of the Act and when the provisions of section 80B(5) and section 80AB of the Act were not part of the Act. He brought to our notice the decision of the Hon ble Supreme Court in the case of Synco Industries Ltd. v. AO, 299 ITR 444 (SC) wherein the Hon ble Supreme Court took the view that while working out the gross total income, losses suffered in the earlier years have to be adjusted and if gross total income of assessee is Nil, the assessee will not be entitled to deduction under Chapter VIA. The Court further held that the non obstante clause in section 80I(6) is applicable only to quantum of deduction whereas the total income u/s. 80B(5) which is referred to in section 80I(1) is required to be computed in the manner provided in the Act, which pre-supposes that gross total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nil then there is no question of any deduction being allowed under Chapter VI-A in computing the total income. The AO has to take into account the provisions of s. 71 providing for set off of loss from one head against income from another and s. 72 providing for carry forward and set off of business losses. Sec. 32(2) makes provisions for carry forward and set off of the unabsorbed depreciation of a particular year. The effect of the above mentioned provisions is that while computing the total income, the losses carried forward and depreciation have to be adjusted and thereafter the AO has to work out the gross total income of the assessee. Sub-s. (2) of s. 80A specifically enacts that the aggregate of deductions under Chapter VI-A should not exceed the gross total income of the assessee. If the gross total income is found to be a net loss on account of the adjustment of losses of the earlier years or Nil , no deduction under this Chapter can be allowed. The effect of cl. (5) of s. 80B is that gross total income will be arrived at after making the computation as follows :- (i) making deductions under the appropriate computation provisions; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sustained in one of the units, cannot be taken into account because sub-s. (6) contemplates that only the profits shall be taken into account as if it was the only source of income. However, s. 80A(2) and s. 80B(5) are declaratory in nature. They apply to all the sections falling in Chapter VI-A. They impose a ceiling on the total amount of deduction and therefore the non obstante clause in s. 80-I(6) cannot restrict the operation of ss. 80A(2) and 80B(5) which operate in different spheres. As observed earlier s. 80- I(6) deals with actual computation of deduction whereas s. 80-I(1) deals with the treatment to be given to such deductions in order to arrive at the total income of the assessee and therefore while interpreting s. 80-I(1), which also refers to gross total income one has to read the expression gross total income as defined in s. 80B(5). Therefore, the High Court was justified in holding that the loss from the oil division was required to be adjusted before determining the gross total income and as the gross total income was Nil the assessee was not entitled to claim deduction under Chapter VI-A which includes s. 80-I also. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not violate the mandate of law as laid down in the decision of the Hon ble Supreme Court in the case of Synco Industries Ltd. (supra) . For the reasons given above, we sustain the order of CIT(A). We therefore find no merits in Gr.No.2 raised by the revenue in its appeal for AY 2011-12. 17. Ground No.3 raised by the revenue in its appeal reads as follows:- 3. On the facts and circumstances of the case, the CIT(A) erred in law by stating that harvesting charges paid to labourers by the assessee on behalf of the cane growers is part and parcel of the cost price of sugarcane and the payment of which cannot be covered within the expression work contract as defined u/s 194C, when as per assessee, the Alland unit cane price was fixed under two different heads. 18. This ground of appeal by the revenue for AY 2011-12 can be conveniently dealt with the grounds of appeal raised by the assessee in ITA No.1228/Bang/2017 for AY 2012-13 which reads as follows:- 1. The order of CIT (A) insofar as it is prejudicial to the interest of the appellant, is bad and unsustainable in the eye of law. 2. The CIT(A) g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that it is the obligation and responsibility of the farmers for cutting and harvesting sugarcane and to transport the same from the field to the sugarcane factory. The farmers are paid consolidated price for their sugarcane fixed by Govt. of India and the said price also includes the harvesting and transportation charges. The assessee furnished copies of sugarcane purchase bills depicting the adjustment of harvesting and transportation charges from the cost of purchases. The assessee also placed reliance on the decision of ITAT Ahmedabad Bench in the case of Shree Mahuva Prasad Sahakari Khand Udyog Mandal Ltd. v. ITO, ITA No.305/Ahd/2009 wherein the Tribunal took the view that provisions of section 194-C of the Act are not attracted for payment made to harvesting labourers and transporters because it was an obligation of cane growers to bring sugarcane to the assessee s factory and the aforesaid payments cannot be said to be payment covered by section 194C of the Act. Similar decision rendered by the ITAT Pune Bench in the case of DCIT v. Dwarkadheesh Sakhar Karkhana Ltd. [2015] 55 taxmann.com 415 (Pune Trib.) was also relied upon by the assessee. 21. The CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Tribunal in the case of M/s. Shree Mahuva Pradesh Sahakari Khand Udyog Mandal Ltd vs. ITO, wherein it was held that on the Fact and circumstances of the case the assessee is not liable to deduct the tax at source from the payment made to MUKADAMS (harvesting labourers and transporters by Zone samiti) and also in the case of DCIT vs. Dwarakadeesh Sahakar Kharkhana Ltd. it was held by the special bench that sugar factory was not liable to make TDS u/s.194C from the payments made to Mukadams and Transporters by the samiti. It was for the cane grower to bring the sugarcane to the appellant's factory and on behalf of the cane growers the harvesting charges were paid to the labourers by the appellant along with transport charges which are included in the cost price of the sugar cane which is evident from the invoices furnished before me. Therefore, in the light of the factual and the legal matrix of the case, as discussed above I am of the opinion that the harvesting charges paid to the labourers by the appellant on behalf of the cane growers which is the part and parcel of the cost price of the sugar cane, the payment can not be stated to be covered within the expression work con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment on account of harvesting and transportation charges not being in the nature of payment falling within the ambit of section 194C of the Act is only the available material. 26. We have perused the paperbook filed by the assessee containing sample bills for purchase of sugarcane issued by the assessee. The sample bill shows the value of cane supplied by individual farmers and the transportation harvesting charges are shown as deduction, which by implication means that the cane price is inclusive of transportation harvesting charges. The plea of assessee that supply of cane by the farmers to the assessee is on ex gate of sugar factory basis appears to be correct. In our opinion, it would depend on the agreement between the assessee and cane farmers as to whether the cane price fixed between the parties is inclusive of harvesting transportation charges. If the contract to supply sugarcane is ex field (cost of harvesting and transportation to be borne by the Sugar manufacturer) , then it is the responsibility of the assessee to lift the sugarcane from the field to its factory i.e., the assessee has to bear the harvesting and transportation charges for the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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