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TMI Blog2022 (5) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... f Hon'ble ITAT, New Delhi in the case of M/s. Ahaar Consumer Products Pvt. Ltd., which is on different facts. The case of M/s. Ahaar Consumer Products Pvt. Ltd. did not involve any payments of consideration for the services rendered whereas in the present case execution of work is against a consideration which includes the ash and material in lieu of payments and the TDS has been deducted by the assessee on the cash part. (iii) Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in law by ignoring the fact that the provisions of section 194C are applicable on payment of any sum which should include both cash and cash equivalent. (iv) Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in law while wrongly relying on the decision of Hon'ble ITAT, Division Bench 'A', Chandigarh in ITA No Nos. 1309, 1310/CHD, ITA No. 1312 & 1313/CHD/2016, ITA No. 1314/CHD/2016 dated 30.10.2018 in which judgment of Hon'ble Supreme Court in the case of M/s. Kanchanganga Sea Foods Ltd. vs. Commissioner of Income Tax was incorrect appreciated. (v) Whether on the fact and circumstances of the case, the Ld. CIT(A) has erred in law w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... une of 33% of the paddy milled are being retained by the miller free of cost, whereon no TDS has been deducted by the appellant deductor. Detailed submission of the appellant is reproduced in the assessment order. The A.O., however, did not accept the submission of the appellant and held that milling costs paid by the appellant are discounted costs and need to be increased by the cost of by-products (as determined by the A.O.) for the purpose of deduction of tax at source. Thereafter, by holding the appellant as an assessee in default u/s. 194C raised demands of tax for short deduction of Rs. 7,82,41,702/- and interest of Rs. 1,87,78,008/- thereon u/s. 201(1) and 201(1A) respectively. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A). The Ld. CIT(A) following the decision of Coordinate Amritsar Bench in case of Punjab State Civil Supplies Corporation Ltd. in ITA No. 158/Asr/2016 dated 04.08.2016 and decision of Coordinate Chandigarh Benches in case of Punjab State Warehousing Corporation Ltd. in ITA Nos. 1309 & 1310/Chd/2016 dated 30.10.2018 has decided the appeal in favour of the assessee. 3. During the course of hearing both the parties fairly subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to-- (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. (2) Where any sum referred to in sub-section (1) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment/Procurement Agencies will have no right or responsibility in this respect. The Procurement Agency gets the paddy milled or to say gets the rice manufactured out of the raw material (paddy) on behalf of the Government of India/FCI. For the said purpose, the procurement agency enters into an agreement with the miller. The milling charges are fixed by the Government of India. It is not in the hands of the procurement agencies or millers to negotiate on the consideration payable for 'milling charges'. Admittedly, for the year under consideration, milling charges have been fixed @ Rs. 15/- per quintal. The out-turn ratio has also been fixed, which means that the miller has to return 67% of the manufactured rice, irrespective of the fact that the yield of rice manufactured was low or high from the paddy entrusted to him; which of course, not only depends upon the variety and quality of paddy but also on the climactic changes. Under the circumstances, the nature of contract, in our view, is not purely a work contract rather it is something more than that. In this contract, the miller has no choice to say that he will return the rice as well as the by-products as per the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Government and there is no option to the miller even to say that it will not retain the by-product or to demand any sum more than the fixed rate on account of milling. There is no such option available to the miller. Under the circumstances, as contended by the Ld. DR also, though the milling charges are fixed taking into consideration the fact that the by-product have also some marketable value, however, the value of the by-product as per the term of the agreement entered into by the procurement agencies with the millers, cannot said to be a consideration for the work contract of milling of the paddy. These cases are of peculiar circumstances, where the assessee/availer of services is not interested in retaining the by-product. Even as per agreement, the procurement Agency/assessee never becomes the owner of the by-product. The very point of coming into existence of the by-product, the same remains the property of the miller. When as per the terms of the agreement, the by-product is never involved to be the property of the procurement agencies, under the circumstances, it cannot be said that the said by-product has been handed over as consideration in kind by the procurement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arketable value of the byproduct, the Government has opted not to claim any ownership over it and thereby even not any right or responsibility in respect of it. Under the circumstances, even when the market value of the by-product is not ascertainable, hence, the procurement agencies will not otherwise will be in a position to deduct TDS by assuming any value of such by-product. 20. Now coming to the reliance placed by the Ld. DR in the case of 'Kanchanganga Sea Foods Ltd. vs. CIT' (supra), the brief facts of the case of 'Kanchanganga Sea Foods Ltd. vs. CIT,' as extracted from the decision of the Supreme Court, were as under:- "2. Facts giving rise to the present appeals are that the appellant M/s. Kanchanganga Sea Foods Limited is a company incorporated in India and engaged in sale and export of sea food and for that purpose obtained permit to fish in the exclusive economic zone of India. To exploit the fishing rights, the appellant-company (hereinafter referred to as the "assessee") entered into an agreement dated 7th March, 1990 chartering two fishing vessels i.e., two pairs of Bull Trawlers, with Eastwide Shipping Co. (HK) Ltd. a non-resident company incorp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fish sales and subject to the condition that this will not exceed 85% of the sale value of the catch per vessel per annum on voyage to voyage basis, which means that though the hiring/usage charges of the vessel were fixed at US$ 6,00,000 per vessel, the mode of recovery was through sale price of the 85% of the total catch, however, if the 85% of the total catch is not enough to realize the maximum value of US$ 6,00,000, the owner of the vessel will not be entitled to claim more catch or more price, it has to restrict the hiring charges to the sale value of 85% of the catch. Further, it had been agreed that the assessee 'Kanchanganga Sea Foods Ltd.' (supra) would receive minimum 15% of the earning by sale value of catch of fish. It was further agreed that the payment to the owner of the vessel, however, will not exceed the above said agreed charter fee of US$ 6,00,000, which means that the consideration was settled at sale price of 85% of the catch but maximum to the extent of US$ 6,00,000. However, if the sale price of 85% of the catch would exceed US$ 6,00,000, then the exceeded amount will not be retained by the assessee and not by the owner of the vessel. Similarly, min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the view, that it cannot be held straight away in all the cases that provisions will not apply for consideration passed 'in kind'. It all depends upon the relevant facts of each case. If the consideration or the value of the consideration for the 'work contract' is settled in monetary terms, or at a value of money, it will be immaterial if thereafter the consideration is passed in monetary terms or 'in kind.'. Suppose, the consideration in the contract is settled at a certain price and instead of paying the said price in cash or through banking channel, such as, by way of cheque/draft/RTGS etc., the availer of the services/assessee pays/transfer valuable goods of the equal monetary value to the contractor such as gold or any other precious metal or anything else having almost equal monetary value at which the price was settled, to say that the provisions of section 194 will not be attracted in that case, will be against the spirit, intent and purpose of section 194C of the Act and such an interpretation will defeat the real intent and purpose of the provisions. Another important factor to be taken into consideration is that the assessee must be the ow ..... 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