TMI Blog2004 (11) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, would not arise. - - - - - Dated:- 3-11-2004 - Judge(s) : BILAL NAZKI., S. ANANDA REDDY. JUDGMENT The judgment of the court was delivered by S. Ananda Reddy J. - This writ petition is filed assailing the order dated May 28, 1997, of the second respondent, Commissioner of Income-tax, passed under section 264 of the Income-tax Act, 1961, revising the order of the Assessing Officer granting partial relief to the petitioner-assessee. The petitioner is Andhra Pradesh Forest Development Corporation Limited. Against the said corporation, the first respondent herein initiated proceedings under section 206C of the Income-tax Act, 1961 (for short "the Act") and passed order for the years 1988-89 to 1993-94 on the ground that the petitioner-corporation failed to collect tax from its buyers in respect of bamboo, cashew, eucalyptus, pepper, firewood, etc. According to the Assessing Officer-first respondent herein, the petitioner-corporation was obligated to collect tax from the buyers of timber and other forest produce at the rates specified under section 206C of the Act. Therefore, the first respondent initiated proceedings proposing to treat the petitioner-corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... othing but timber of a specified dimension under the rules. The Commissioner, however, accepted the claim of the petitioner-corporation with reference to coffee and cashew holding that the same does not fall within the term "forest produce" as defined in section 2 of the Forest Act. Therefore, finally the first respondent was directed to compute the collectible tax under section 206C of the Act from timber, bamboo and firewood and ordered to revise the original order passed by him. While doing so, the Assessing Officer was also directed to consider the non-deduction certificates issued by the officer concerned and produced before the first respondent. Aggrieved by that, the petitioner-corporation has come up with the present writ petition. Learned counsel for the petitioner-corporation contended that the Corporation was formed with an intention to develop the land by cultivating various types of timber or other produce, like coffee, cashew, eucalyptus, pepper, bamboo, etc. For that purpose, the Government has allotted certain land, which was re-claimed by the petitioner-corporation and through the process of development of the said land, the petitioner-corporation has cultivated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is specified empowering him to pass orders in case of default. In the absence of any such specific provision, treating the petitioner-corporation as an assessee deemed to be in default and in the absence of any specific provision authorizing any authority or officer to pass such an order, the impugned order is liable to be quashed. Learned counsel also contended that after the revisional order, the items that are ordered to be considered for collection of tax are bamboo, eucalyptus and pepper. As these items are the products as a result of the agricultural operations carried on by the petitioner-corporation, they cannot be treated either as timber extracted from forest or as forest produce, therefore, he sought for setting aside the impugned order of the second respondent. Learned counsel also relied upon the judgment of the Supreme Court in CIT v. Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466. Learned senior standing counsel for the Department, however, contended that section 206C of the Act was introduced in the statute in order to remedy the tax evasion by those who are purchasing and dealing with the items mentioned in section 206C of the Act. Therefore, as a measure, this pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have collected from its buyers. When it failed to collect and pay to the Central Government, in order to give an opportunity to the assessee, the Assessing Officer has issued notice and passed a detailed reasoned order considering the objections of the petitioner-corporation. Therefore, there is absolutely no material warranting interference. Learned standing counsel also contended that when a revision is filed against the order of the first respondent, the revisional authority-second respondent herein on the merits granted even partial relief. Therefore, there is no merit warranting interference. From the above rival contentions, the issue to be considered is whether the items of sale effected by the petitioner-corporation would attract the provisions of section 206C of the Act and failing to comply with the said provision, whether the Department is entitled to proceed and recover the same from the petitioner-corporation. In order to have a clear idea of the provision, it would be appropriate to extract the relevant provision of section 206C of the Act, which reads as under. "206C. Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is debited or from whom such payment is received, a certificate to the effect that tax has been collected, and specifying the sum so collected, the rate at which the tax has been collected and such other particulars as may be prescribed. (5A) Every person collecting tax in accordance with the provisions of this section shall prepare half yearly returns for the period ending on 30th September and 31st March in each financial year, and deliver or cause to be delivered to the prescribed income-tax authority such returns in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed. (6) Any person responsible for collecting the tax who fails to collect the tax in accordance with the provisions of this section, shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-section (3). (7) Without prejudice to the provisions of sub-section (6), if the seller does not collect the tax or after collecting the tax fails to pay it as required under this section, he shall be liable to pay simple interest at the rate of two per cent, per month or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as no application. But this claim was rejected by both the authorities on the ground that the very name of the petitioner is Forest Development Corporation which would imply that it was dealing with the forest and its produce must be treated as forest produce. Further, the contention of learned standing counsel for the Department is that it is not necessary to go into the issue whether it is forest produce or non-forest produce, the sale by the petitioner of the items specified would attract the provisions of section 206C of the Act, and therefore, the petitioner-corporation is under obligation to collect the tax while effecting the sales of its produce. We are unable to agree with the contention of learned standing counsel for the Department that it is not necessary to go into the nature of the products that were sold by the petitioner-corporation in order to attract the provisions of section 206C of the Act. The provisions of section 206C of the Act would apply only with reference to the timber obtained under a forest lease; or timber obtained by any mode other than under a forest lease; and any other forest produce not being timber. From the above provision, it is clear that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot. In that case the respondent owned an area of Acs. 6,000 of forest land assessed to land revenue and grown with sal and piyasal trees. The forest was originally of spontaneous growth, "not grown by the aid of human skill and labour" and it had been in existence for about 150 years. A considerable income was derived by the assessee from sales of trees from this forest. Though, originally for some assessment years the income was assessed as forest income, thereafter it was not declared between 1923-24 to 1944-45. Therefore, the assessment for the assessment year 1944-45 was reopened proposing to include the receipts on the sale of forest produce. This was contested by the assessee. The apex court after considering elaborately held as under: "'Agriculture' in its primary sense denotes the cultivation of the field and is restricted to cultivation of the land in the strict sense of the term, meaning thereby tilling of the land, sowing of the seeds, planting and similar operations on the land. These are basic operations and require the expenditure of human skill and labour upon the land itself. Those operations which the agriculturist has to resort to and which are absolutely ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y either for consumption or for trade and commerce and would also include forest products such as timber and sal and piyasal trees, casuarina plantations, tendu leaves and horra nuts. There is no warrant at all for extending the term 'agriculture' to all activities which have some relation to the land or are in any way connected with the land, for the term agriculture cannot be dissociated from the primary significance thereof, which is that of cultivation of the land. The extension of the term 'agriculture' to denote such activities as breeding and rearing livestock, dairy farming, butter and cheese-making, and poultry farming, is an unwarranted distortion of the term." From the above, it is clear that a distinction has been drawn between "agricultural operations and agricultural produce" with that of "forest produce". Basically, forest produce is the produce grown spontaneously, may be at the subsequent stages some human effort and skill may be applied in order to protect and extract the resultant product, which could be considered as a forest produce. As is evident from the relevant provisions, the tax collection at the time of sale is intended only to be applied in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacuna in the provisions, such as absence of specific authority empowered to pass an order or in the absence of a consequential action against the seller who fails to collect the tax, in the light of the judgment of the apex court in the case of Fertilizer Corporation of India Limited v. State of Bihar [1988] 68 STC 158, wherein it was held that while interpreting taxation statutes, machinery provisions are to be interpreted liberally and generously so long as the principal object of the provision is not frustrated. If so interpreted, the first respondent being the assessing authority cannot be said to be without jurisdiction to pass an order under section 206C of the Act. Even with reference to the limitation, as the notice was issued in December, 1994 and the order was passed in 1995, the same cannot be said to be beyond the period of limitation. Under the above circumstances, the impugned order of the second respondent is set aside and the matter is restored to the first respondent to consider the claim of the petitioner-corporation and to give a finding as to the nature of the production of the items, which are directed to be treated as forest produce by the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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