TaxTMI 
TaxTMI 
2016 (3) TMI 859
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....ng to the Revenue's appeals, for the facility of reference, we take the lead case as ITA No. 1542/Ahd/2013 for AY 2009-10. The Revenue has raised following grounds of appeal in ITA No. 1542/Ahd/2013 for Assessment Year 2009-10:- 1. The Ld. CIT(A) has erred on facts and in law because while passing the order he has completely violated the Rule 46(A) hence his order is null and void, 2. The Ld. CIT(A) has erred on facts and in law in deleting the additions made u/s. 206C(6)/206C(7) of the I.T. Act on non collection of TCS of Rs. 8,16,68,350/- on sale of DOC (de-oiled cake), maize husk and cotton waste inspite of the fact that those items were scrap as defined u/s 206(c). 3. The Ld. CIT (A) has erred on facts and in law in holding that the above items were "by products and there by failed to appreciate that even by products like Molasses and bagasses have been held as scrap within the definition of scrap u/s 206(c) as the definition is of wider import to cover even by product within it's sphere. 4. The Ld. CIT(A) has erred on facts and in law in deleting the addition made u/s 206C(6) / 206C(7) by wrongly relying on the I.T.A.T decision in the case of Navin Flourine....
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....ese scrap items took place. The break-up of sales made for the four Assessment Years and upto the date of survey is as under: (Rs. Crores) Unit Type of scrap Asst. Year 2009-10 2009-10 Asst. Year 2010-11 Asst.Year 2011-12 Asst, Year 2012-13 Total Bio Himmatnagar Maize Husk 8.05 11.24 7.47 2.13 28.89 Bio Uttaranchal Maize Husk 0.99 4.64 6.48 2.58 14.6 Cotspin Himmatnagar Cotton Waste 20.56 27.44 30.69 11.26 89.95 DOC All Units DOC 533.63 303.69 413.36 65.54 1316.22 Total 566.23 347.01 458.20 81.51 1452.75 4.1 During the course of survey, statement of Shri N. Giridhar, CFO was also recorded, inter alia, he submitted that the assessee-company has neither collected TCS on sale of cotton waste, maize husk and DOC. It was further submitted that no declaration in form No. 27C was submitted to the office of Chief Commissioner of Income-tax, Ahmedabad as per provisions of Section 206C(1B) of the Act. Before the Assessing Officer, various contentions were raised on behalf of the assessee. The stand of the assessee has been that they are manufact....
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....king material like gunny bags, tins, SS & Plastics Drums, Plastic bags, etc. are not covered under the definition of waste and scrap. Further, it is submitted that appellant was not manufacturing any of these materials. It is further submitted that packing materials are purchased by the company which is used for packing the finished goods in local as well as in export market as per the requirement of the buyer. The damaged packing material/gunny bags, which are of no use are sold out by company as defective. Thus, such items are not generated from manufacturing/mechanical working as required in the definition of scrap, the said fact and position of law is clarified by the Hon'ble ITAT, Ahmedabad in the case of Navin Fluorine International Ltd. Maize Husk (Fiber) is scrap/waste or not? In the maize processing plant, maize seeds are processed and the products viz. maize starch, gluten, germs, fiber (husk) and maize oil are produced. Further from starch various value added derivatives are produced viz. Liquid Glucose, dextrose, maltose, sorbitol, etc. The complete anatomy of maize grain is enclosed as Exhibit-4 which clearly specifies that the various products are generated dur....
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....not a scrap or waste." 4.2 The Assessing Officer rejected the contention of the assessee primarily on the ground that the aforesaid items were of the nature of scrap and the assessee as well as its buyer was covered within the definition of seller and buyer respectively as provided in Section 206C of the Income-tax Act. The Assessing Officer rejected the contentions of the assessee vide para-8 of his order which is reproduced herein as under, for the sake of convenience:- "In the instant case, the De-Oiled Cake (DOC) as admitted by the assessee is mainly used as animal feed is not sold to the actual user i.e. the animal keepers. The fact is that DOC is sold to other traders or intermediates who in turn sales it to the actual users because De-Oiled Cake (DOC) is of no use to the traders as such. Similarly, Cotton Waste and Husk were also sold to other traders/intermediatories. As alternative argument, in case, the assessee company is selling the above items, which it terms as solvable/manufactured product to actual users/manufacturers. Then, the company should have obtained declaration in Form 27C from the buyer and should have furnished the same within 7 days of the next mont....
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....case due to monetary limit and the decision could not be followed as precedent. Besides, the ld. Departmental Representative relied on the detailed statement of facts filed before us, inter alia, submitting that the assessee-company is manufacturer and exporter of Agro waste products. In the case of assessee a survey u/s 133A of the Act was carried out on 09.08.2011 and during the course of survey, it was noticed by the Assessing Officer that the assessee-company was mainly engaged in extraction of solvent from soya seeds, mustard seeds, castor seeds, cotton seeds, etc. On processing of these seeds the assessee besides oil received de-oiled cake (DOC) which is mainly used as cattle feed. The assessee also has units at Himmatnagar and Uttaranchal which processes maize. The processing of maize besides starch generates liquid glucose, dextrose, sorbitol and other products including maize husk (fibre). The assessee-company also has unit at Himmatnagar which manufactures cotton yarn and re-processable raw cotton. The main raw material used in this unit is raw cotton from which cotton yarn is manufactured. In the process the lower quality of cotton is separated which is scrap and waste. ....
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....ll the so called by products were generated from manufacturing process of the assessee. Further the CIT(A) relying on the case of Navin Fluorine International Ltd. (supra) observed that such scrap should not be definitely usable as such. According to the Departmental Representative, this observation is also strengthens the stand of the department because the so called by products could not be definitely usable as such like the raw material which was used in the process of manufacturing for example. De Oil Cake cannot be used as raw material and also no oil will come out from DOC by inputting the same in the manufacturing process as raw material hence, it cannot be definitely usable as such. Hence, he submitted that the CIT(A) was not correct in his observation that the by-products generated from manufacturing process are not covered by above definition since same could be used as such by other consumers. He has further erred in holding that DOC is a by-product and it certainly cannot be categorized as scrap and waste having its own market value because he has failed to appreciate that even scrap and waste has also have its own market value and the same cannot be sold on no or nil v....
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....r to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax. The nature of goods specified at serial No.(vi) is scrap, and the percentage provided is 1%. The expression of scrap is defined under clause (b) to the Explanation to section 206 of the Act, to mean waste and scrap from manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons. On a plain reading of the said expression, it is evident that any material which is usable as such would not fall within the ambit of the expression "scrap" as envisaged under clause (b) of the Explanation to section 206C of the Act. 8. The Tribunal, in the impugned order, has recorded that the items/products in question obtained from the activity of ship breaking are usable as such and, therefore, do not fall within the defin....
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....206C of the IT Act. Section 206C reads as under:- "Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc. 206C. (1) Every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax: TABLE Sl. No. Nature of goods Percentage (1) (2) (3) (i) Alcoholic Liquor for human consumption One per cent (ii) Tendu leaves Five per cent (iii) Timber obtained under a forest lease Two and one-half per cent (iv) Timber obtained by any mode other than under a forest lease Two and one-half per cent (v) Any other forest produce not being timber or tendu leaves Two and one-half per cent (vi) Scrap One per cent (vii) Minerals, being coal or lignite or iron....
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....tatute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning, unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute to suggest to the contrary. The golden rule is that the words of a statute must prima facie be given their ordinary meaning. It is yet another rule of construction that when the words of the statute are clear, plain and unambiguous, then the Courts are bound to give effect to that meaning, irrespective of the consequences. It is said that the words themselves best declare the intention of the law giver. The Courts have adhered to the principle that efforts should be made to give meaning to each and every word used by the legislature and it is not a sound principle of construction to brush aside words in a statute as being inapposite surpluses, if they can have a proper application in circumstances conceivable within the contemplation of the statute." 10.1 By following the above decision, the Hon'ble High Court held as under : "It is now a well-settled principle of law that a literal meaning should be attributed to a statute. Th....
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....er refrigerant gases and list of scrap items noted above would indicate that same cannot be used for manufacturing or mechanical working of material of fluorine and other refrigerant gases. By the nature of the scrap items noted above, the same cannot be used while manufacturing gases or doing any mechanical working of the material for the gases. The items of the scrap in the case of the assessee would not form part of the definition of the scrap as is provided in Expln. (b) to s. 206C of the IT Act. Thus, the Explanation is wrongly applied in the case of the assessee. 5.2 According to this judgement, the ITAT-Ahmedabad has held that waste and scrap are one item and it is necessary to read waste and scrap together. It is further pointed by the Tribunal that waste and scrap is a singular item, same arise out of the manufacturing/mechanical working on the material and same is not usable as such. It was also pointed out by the Tribunal that fundamentally scrap and waste is small or lesser quantity of material which is left after the greater part is used in manufacturing process. According to American dictionary, DOC is defined as "the solid residue that is left after certain oily s....
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....t 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 of the Income-tax Act. This view is also fortified by the decision in M/s. Priya Blue Industries Pvt Ltd (supra). 5.3 Regarding the raw cotton being treated as scrap, the CIT(A) has referred to the manufacturing process of cotton yarn which is reproduced below:- "Under this division company manufactures Cotton Yarn, Reprocessable raw cotton, etc., manufacturing process is furnished in the Exhibit-2. The main raw material is Raw Cotton. In Cotton Yarn division raw cotton is processed and cotton yarn is generated, which is also largely exported. In that process the lower quality of cotton is separated, which is usable as such. From such lower quality cotton thick qualify cotton yarn is manufactured or such cotton is sold out to the manufacturers of cotton yarn. During the process the lower quality cotton is separated at various processes, which are called as Dropping, Comber Noil, and Flat & Hard sweeping ....
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....otton 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. 5.4 Regarding Maize Husk (Fiber), the stand of the assessee has been that it is a by-product and is sold off commercially. The manufacturing process suggests that the maize seeds are processed and various products like maize starch, blulan, gems, fiber (husk) and maize Oil are produced. From maize starch, various value added products like liquid glucose, dextrose, maltos, sorbitol, etc are produced. Even maize husk is a liquid or in a dry form after due processing as per the requirement of the customers. The percentages of husk as a by-product is close to 10% and it is mainly used in poultry farm, animal food and ....
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....e for 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 work0 in pursuance of a contract between 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." "It is further submitted that in circular no. 715 dated 08-08-1995, the clarification on various provisions relating to TDS were given in the form of questions and answers, Q. No. 6 & 7 are reproduced with replies: Question 6: Whether payment under of contract for carriage of goods or passengers by any mode of transport would include payment made to a travel agent for purchase of a ticket or payment made to a clearing and forwarding agent for carriage of goods? Answer: The provision of section 194C shall, however, apply when a plane or a bus or any other mode of transport is chartered by one of the entities mentioned in section 194C of the Act As regards payments made to clearing and forwarding agent for carriage of goods, the same shall be subjected to tax deduct....
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....s documents to the custom authorities. The Assessing Officer concluded that since services rendered by C& F agents include preparation and submission of documents to custom authorities for getting import and export clearance, it is clearly the services in the nature of professional services. According to the Assessing Officer, on such services squarely fall within the ambit of provisions of Section 194J being the professional services, TDS @ 10% should have been deducted. With respect to Circular No. 715 dated 8.8.1995, the Assessing Officer observed that question No. 6 of the Circular refers to payments made to C & F agents for carriage of goods and not for documentation or paper work done by C & F agents. The Assessing Officer thus rejected the contention of the assessee and held that for such payments under the head 'port charges', TDS @ 10% as provided u/s. 194J should have been deducted. 6.2 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of the assessee. The ld. Authorized Representative for the assessee before the CIT(A) pointed out the recent decision of ITAT-Delhi Bench in the case of Glaxo Smithkline Co....
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....e and that Chapter XVII deals with a particular kind of payment to the exclusion of all other sections in this Chapter. Thus, payment of any sum shall be liable for deduction of tax only under one section. Therefore, payment is also liable for tax deduction only under one section, as warranted by the nature of services stipulated therein. Since, in the instant case, payment made by the assesses to the agent was for the services, which was predominantly for 'carrying out work' inter alia, relating to storage, dispatch, transportation, loading and unloading of goods, etc., the assesses had rightly deducted tax at source under section 194C. [Para 7]" 6.3 In this background, the CIT(A), having considered the aforesaid submissions of the assessee, allowed the claim of the assessee as claimed and the same has been opposed before us on behalf of the Revenue, inter alia, submitting that the CIT(A) erred in deleting the addition made u/s. 201(1)/201(1A) of the Act for AY 2009-10, on short deduction of tax at source of 1,56,24,221/- by applying provisions of section 194C of the IT Act instead of 194J of the Act on payment of 'Port Charges' made to C&F agents. On the other ....
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....526,122 371,075 THE SHIPPING CORPORATION OF INDIA LTD SHIPPING LINE AGENT 2,609,273 59,125 PANLLOYD LOGISTICS PVT LTD TRANSPORTER 230,379 5,221 LILADHAR PASOO FORWARDERS P LTD C&F AGENT 3,890,628 88,126 ALMIGHTY INTERNATIONAL LOGISTICS TRANSPORTER 450,477 10,208 INOIAL SHIPPING PVT LD SHIPPING LINE AGENT 223,250 5,058 POSEIDON SHIPPING AGENCY PVT LTD SHIPPING LIME AGENT 29,117 659 WSA SHIPPING SOMQAV PVT LTD SHIP PING LINE AGENT 6,252 142 SEAWAYS SHIPPING AND LOGISTICS LTD SHIPPING LINE AGENT 18,727 423 BENCHMARX LOGISTICS SOLUTIONS P,LTD TRANSPORTER 90,127 2,042 GRAND TOTAL 125,049,423 2,104,765 BREAK-UP OF PAYMENT TO C & F AGENTS I.E.. REIMBURSEMENTS AND AGENCY CHARGES NAME OF C&F AGENT REIMBURSEMENTS AGENCY CHARGES TOTAL ASHAPURA FORWARDERS PVT LTD 3,808,202 1,555,849 5,364,051 KHIMJI POONJA FREIGHT FORWARDERS PVT. LTD, 3,231,357 3,006,252 6,237,609 S RAMDAS PRAGJI FORWARDERS PVT LTD 28,476,689 1,049,433 29,526,122 LILADHAR PASOO FORWAR....