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2016 (3) TMI 859 - AT - Income TaxAdditions made u/s. 206C(6)/206C(7) - non collection of TCS on sale of DOC (de-oiled cake), maize husk and cotton waste nspite of the fact that those items were scrap as defined u/s 206(c) - Held that:- To elaborate, perusal of manufacturing process of DOC amply testifies that the entire manufacturing process is designed to obtain two main products which are usable as such, namely, oil and DOC. This DOC which is high in protein content is used as a fertilizer or chicken feed or cattle feed. This DOC also is pass through various other manufacturing stages to suit the customers as is required by them. The enormous economical value of DOC is testified by the fact that more than 80% is generated and out of such generation, around 90% is exported to different countries. All the aforesaid facts indicate that DOC is a by-product and it certainly cannot be categorized as scrap and waste and it has its own market value. Generally, the scrap is either thrown out or sold at cheaper rate because it cannot be used as raw material for manufactured or different items. In the case of a by-product, it has its own market value and can be used as such. In view of above, we find that the CIT(A) was justified in holding that the Assessing Officer has erred in categorizing DOC as scrap within the meaning of Explanation to Section 206C. Regarding the raw cotton being treated as scrap we find raw cotton is only a part of raw material which is of lower quality (lower count cotton) from which the thin yarn cannot be manufactured such thick quality cotton was separated at the initial warehousing stage and sold off to other yarn manufacturers including that for export. So, the CIT(A) was justified in holding that such raw cotton does not arise from manufacturing or mechanical working as it is merely a segregation of raw material as was pointed out by the assessee. Therefore, these reasoned finding of the CIT(A) need no interference from our side, which is confirmed. Regarding Maize Husk (Fiber)percentages of husk as a by-product is close to 10% and it is mainly used in poultry farm, animal food and pharma industries. Since maize husk fiber is itself subjected to various manufacturing stages and as enormous economic value, it is one product manufactured and cannot be considered as a waste or scrap within the manufacturing process. In view of the above, the CIT(A) was justified in holding that main husk is a by-product and the same cannot be considered as scrap and waste as provided in the Explanation to Section 206C of the Income-tax Act. TDS u/s 194C OR 194j - short deduction of tds - non deduction of tax at source on payment of port charges - TDS @ 10% OR 2% - Demand u/s 201/201(1A) for non-deduction of tax at source on the differential amount - Held that:- CIT(A) rightly found that C&F agents were nowhere remotely indicated in the explanation to section 194J of Income tax Act nor has been explained by the AO that how C&F was covered u/s. 194J of the Income-tax Act. Therefore, under the given facts and circumstances of the case, the CIT(A) was justified in holding that the action of Assessing Officer invoking provision u/s 194J in respect to port charges payment for all the assessment years as unsustainable in law. Therefore, the order of the CIT(A) in this regard does not require any interference from our side, which is confirmed.
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