TaxTMI 
TaxTMI 
TaxTMI 
2009 (11) TMI 915
X X X X Extracts X X X X
X X X X Extracts X X X X
.... called "the Rules") prescribed under sub-s. (3) of s. 40A of the Act which provides for exemption for payments made to producers of fish or fish products for the purchases other than through account payee cheques or demand drafts. The AO, however, took the view that the processor of fish who supplied the same after removal of head, tail and shell to whom payments were made, is not the producer falling under the rule abovereferred and so much so, the entire cash payments were made subject to disallowance under s. 40A(3) of the Act. 2. When assessee filed first appeal before the CIT(A), he felt that fish produce referred to in the above rule covers prawn meat, lobster meat, etc. purchased by the assessee and so much so, the assessee is entitled to claim the benefit of exemption under the rule. However, the appellate authority directed the AO to conduct enquiry with the suppliers based on the details furnished by the assessee, based on which a remand report was called for from the AO. On examining the details contained in the remand report and after hearing the assessee, the appellate authority held that payments made for so much of the supplies which do not stand confirmed by the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lying marine products to export houses for export as a supporting manufacturer. The total export turnover on which income-tax exemption is granted to the assessee during the assessment year is above Rs. 14 crores. Besides processing the fish by itself, the assessee is engaged in purchase of processed fish which is nothing but fresh fish meat obtained after removal of inedible portions like head, tail, shell etc. In fact, the fish meat so purchased are of prawns, lobsters, skud fish etc. The suppliers of the processed fish to the assessee are not actually fishermen but are those who purchase fish from fishermen, process the same and sell the same to the assessee. According to the assessee, suppliers are in the unorganised sector who did not issue bills for sales nor accept payment for the value of the fish supplied in cheques or demand drafts. Therefore, payments are made in cash as and when processed fish, which is a perishable commodity, is supplied to the freezing plant of the assessee. No doubt, the assessee's claim finds acceptability with the Government because r. 6DD among other items provide in cl. (f)(iii) for purchase of fish and fish products by making payments other ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioned therein. Necessarily there has to be one to one correspondence between the items involved and the person who supplies the same to whom payment is made. In other words, unless the supplier of the item referred to therein is the person falling within the description of cultivator, grower or producer of such article, produce or products, the purchase is not covered by the exemption clause. We have to, therefore, consider two questions herein; one is whether the item purchased in this case is fish or fish product and the payment is to its producer. Obviously no one has a case that fish purchased by the assessee are grown in a farm and sold by the producer of it. On the other hand, fish involved is caught from the ocean by the fishermen, purchased by the processors who process the same by removing the inedible portions and supply to the assessee in meat form. On the face of it and admittedly, the supply by the processor to the assessee is not in the form in which the fish is purchased by him. In other words, what is sold, though not a manufactured product of fish, is processed fish which is meat obtained after removal of inedible portions like head, tail, shell etc. for the purpos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it from the very same class. When fish and even manufactured products of fish are covered by the exception clause and the payments to its producers in excess of the limit of Rs. 20,000 are covered by the exception clause, we see no reason why the processed fish which is an intermediary, should be taken out of the scope of the section. In our view, the rule makers never intended processed fish to be taken out of the scope of sub-cl. (iii) of cl. (f) of r. 6DD because the Government under the rule considers fish only in two forms, either fish as such or in it's product form. In other words, sub- r. (iii) of r. 6DD(f) covers all forms of fish, though the broad classification is only between fish and fish products. So much so, in our view, since the processed fish purchased is not fish in the same form it is obtained, it falls within the meaning of fish product under the above rule. Since we have accepted the contention of the assessee that the processed fish purchased is fish product within the meaning of that term in the rule, we have to necessarily hold that the supplier namely, the processor of the fish, is certainly producer to whom payments are made. Therefore, we are of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tablish purchase from a person is the payment made through account payee cheque or demand draft which is the requirement of s. 40A(3). However, Government has chosen to liberalise the operation of s. 40A(3) to augment trade. After granting this facility, we are of the view that the Department cannot insist the assessees to get the suppliers confirm to the Department about the supplies made to the assessee and the payments received by them. In our view, the assessee should be taken to have discharged their burden by furnishing the copies of purchase bills or vouchers issued containing the names and addresses of the suppliers with date, value, quantity etc. Besides this, the Department cannot demand the assessee to get the supplier confirm to the Department about the supplies, which the suppliers are free to deny. In a case where the suppliers deny that the supplies have not been made to the assessee, the remedy open to the Department is to proceed for conducting a survey and enquiry against the activities of the supplier, establish with materials the details of business carried on by him including the supplies made to the assessee and proceed to make assessment on suppliers. No doub....