TMI Blog2016 (7) TMI 1483X X X X Extracts X X X X X X X X Extracts X X X X ..... in favor of assessee. - ITA Nos.54, 55 & 56(Asr)/2016 (A. Y. 2012-13, 2013,14 & 2014-15) - - - Dated:- 1-7-2016 - SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER Appellant by: Sh.Atul Goyal, CA Respondent by: Sh. A.N. Mishra, DR ORDER PER A.D. JAIN, JM; These are three assessee s appeals for the assessment years 2012-13, 2013-14 2014-15 against the common order dated 29.10.2015, passed by the ld. CIT(A)-1, Jalandhar. As the issue involved in all the appeals is common, they are being disposed of by this consolidated order. 2. For the sake of convenience, the grounds of appeal and facts are being taken from ITA No.54(Asr)/2016: 1. That the order passed by the Hon ble CIT(A) under provisions of Section 201(1 )/201 (1 A) of the Income Tax Act 1961 is against law and facts on the file. 2. That the CIT(A) erred in law by ignoring the facts of the milling agreement. 3. That the appellant assessee is not required to deduct any sum under the provisions of Section 194C of the Income Tax Act on the indeterminate value of bye products retained free of cost by the rice millers in accordance with policy framework and guidelines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or as the stock of the millers. The value of the byproducts is determinate as each of them has its specific usage in different industries. For practical purposes, the milling charges are paid in two parts viz. ₹ 15/- per quintal in cash and value of the by products. Thus, for all intents and purposes, deduction is being made on cash part of the milling expense i.e. ₹ 15/- per quintal and not on the total amount (in cash and kind). Thus, 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 po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account or In fat t, the by products (their value) arc passed on to the miller at the tune when paddy is given for milling as in turn, only 67/68kg. Of rice are taken back per every quintal of paddy. Thus, the law takes care of the payment in kind also and for all intents and purposes, the by products do compensate for the low cost of milling and the Government has famed a policy in tins regard far their convenience. 7. In view of the aforesaid discussion, 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 adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,09,180/- 2,18,203 11,27,383/- 2012-13 7,82,911/- 93,949/- 8,76,860/- 2013 -14 2,74,7607- - 2,74,760/- 5. By virtue of the impugned order, the ld. CIT(A) allowed the relief to the assessee observing as follows: 4. During the appellate proceedings, Sh. Atul Goyal C.A. appeared and filed written submissions. He argued that as per alternate argument taken by him that in view of the decision of Honourable Supreme Court in case of M/s Hindustan Coca Cola Beverages (P) Ltd. 293 ITR 226 the assessee couldn t be treated in default as the deductees have paid due taxes on their income. He during the appellate proceedings filed the relevant details by filing copies of balance sheet, profit and loss accounts and copies of returns of income of deductees. 5. I have carefully considered the submissions and find that the following details are filed: A.Y.2012-13 Sr. NO. Name Qt. Rate Total Amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 580 48692 x24 11686 Balance Demand Interest Total 201(1) 48692 201(1 A) 63026 111718 6. These documents were verified by the Inspector of the O/s Income Tax Office (TDS)-1, Jalandhar alongwith me and the findings are as under:- A.Y. 2012-13 Except for in respect of 3 rice shellers i.e. Phantom Rice Mills, Angad Agro Foods and Ranjan Rice Mills complete details are on records as filed. A.Y. 2013 - 14 Except for in respect of M/s Angad Agro Foods complete details are on records, as filed. A.Y. 2014-15 Complete details are on records. 7. I find that the ratio of the decision of Honourable Supreme Court in case of M/s Hindustan Coca Cola Beverages(P) Ltd. 293 ITR 226, the deductor is not to be treated as assessee in default in respect of taxes paid though paid by the deductees, is squarely applicable to the facts of this case and respectfully following the same it is held as under: (i) A.Y. 2012-13 Except for the tax deductible in cases of M/s Phantom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant appeals have unnecessarily been filed. 8. We have heard the rival contentions and have gone through the material available on record. A perusal of the ld. CIT(A) s order shows that in para-4 of his order, the ld. CIT(A) has ensconced on deciding the alternate argument, i.e., that the deductees having paid due tax on their income, in view of Hindustan Coca Cola Beverages (P) Ltd. , 293 ITR 226 (SC), the assessee cannot be treated as an assessee in default. 9. Now, obviously, this alternate issue is ordinally secondary to the main larger issue raised by the assessee, i.e., whether at the outset, the TDS was required to be made by the assessee under the provisions of section 194C of the Act. If this jurisdictional issue is decided, the addition made in pursuance of the alleged applicability of the provisions of section 194C of the Act will stand checked at the threshhold. Therefore, we deem it appropriate to consider and decide this issue. 10. In this regard, it is seen that the assessee filed an appeal before the ld. CIT(A) against the order of the AO on these accounts: i) Whether the assessee can be deemed to be assessee in default under the provisions of section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdened with the liability of transporting such broken rice to its godown and taking up the responsibility either of disposing of it or of selling it. The TDS is to be deducted u/s 194C of the Act, when the amount is paid or credited either through cash or cheque or otherwise. The monetary/transaction value of the wastage was never calculated, credited or paid. The residual product of paddy after shelling remains with the miller, as per the policy of the GOI. As such, the assessee has no lien on such residual. Therefore, its monetary value is zero for the assessee. So, the question of deduction of tax on the source doesn t arise. When the terms between the parties are under the agreement, the terms are sacrosanct between them and they can neither be varied nor altered nor explained otherwise by adducing oral evidence. There is nothing in the agreement to suggest that the milling charges are paid at the discounted rate and the bye products are left with the millers for any hidden consideration or against any cut/alleged discount in the milling charges. There is nothing in the agreement to show that the bye products are left with the millers as a consideration of the milling charges. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. Reliance has been placed on the decision of the ITAT, Delhi Bench, in the case of ITO vs. Ahaar Consumer Products (P.) Ltd , inITA No.2310/Del/2010. 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 25.01.2016, on exactly similar facts and circumstances, as deciding the legal issue raised herein, held TDS not liable to be deducted, in a similar situation. The relevant portion of the said order, reads as follows: 8. I have carefully gone through the order of my ld. Colleague (CIT(A), Patiala and also the order of the Hon ble ITAT, Delhi, as referred above. The only difference between the contracts as discussed in the decision of the Hon ble ITAT, Delhi and the assessee government agency and the rice millers is that apart from the bye products left with millers, the millers are paid ₹ 15/- per qtl. On which TDS is duly deducted and there is no dispute as to the facts. Rest of the facts are identical. The Hon ble ITAT has discussed in great details every aspect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalyzed 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) did not accept the contentions of the assessee that the transaction with IVI was a contract for sale and not a works contract. When the printing work was being carried out in the premises of M , though as per the specifications of the assessee, the supply was limited to the quantity specified in the purchase order. There was nothing on record to show that, all other ancillary costs like the labels, ink, papers, screen- printing screens, etc. were being supplied by the assessee to IVI . In the facts of this case, the supply of printed labels by M to the assessee was contract of sale and it could not be termed a works contract . Hence the provisions of section 194C were held to be not applicable. 13. The High Court while deciding this case has reviewed a num ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 any obligation for it to deduct tax at source as in our opinion it is not simply a works contract executed for consideration in the form of some payment for which deduction has been claimed under the Act. The assessee has nowhere claimed the payment as deduction. Only purchase once of wheat is what it had paid on which no deduction of tax is required and that got lost in exchange for obtaining a finished product in the form of Atta or Dalia, not involving the medium of payment. It is a contract of business which does not involve any payment of consideration for the services rendered. We must examine the issue from another angle. Had the assessee owned the plant and got the Atta and Dalia manufactured from wheat, it could have claimed a process loss and that could have been impliedly a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange 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 process loss could be either more or less than the percentage agreed to between the parties. But still the parties settle the transactions at an agreed proportion. In other words, the residual that is left by the assessee, apart from covering the labour cost of processing, also includes the protection from market fluctuations as also protection from adverse process loss. To conclude, the entire residual is only for the purpose of job work is not fair and correct having regard to the totality of the transaction entered into by the parties. The CIT(A) has given the favourable order relying upon the order of the Hon ble Delhi ITAT in the above noted case. In light of the above, the provisions of Section 194C are not applicable to the case of the appellant and the appellant prays that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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