TaxTMI 
TaxTMI 
2017 (8) TMI 1485
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.... 194C on the cash part of the payments but not on the payments which were made in kind? (iii) Has the Ld. CIT(A) not erred in linking the facts of present case with the case of Ahaar Consumer Products Pvt. Ltd. wherein the Hon'ble ITAT, Bench 'A', New Delhi finds that - 'It is just an exchange and barter of one commodity against the other and the whole contract cannot be termed as works contract. ' (iv) Has the Ld. CIT(A) not erred in linking the judgment of Hon'ble ITAT, Bench 'A', New Delhi in the case of M/s Ahaar Consumer Products Pvt. Ltd. , with the facts of the present case when the case of M/s Ahaar Consumer Products Pvt. Ltd., did not involve any payment of consideration for the services rendered whereas in the present case execution of work upon supplied material is in lieu of payments on which TDS has also been deducted by the assessee ? (v) Has the Ld. CIT(A) not erred in holding that the assessee has not paid any sum except milling charges @ Rs. l5/- per quintal) to the millers given that the milling charges paid in cash are not adequate remuneration for the services obtained under contract, and that the miller....
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....vt . Ltd. would give 85% Dalia or 88% At ta by weight of the wheat supplied by the assessee. The waste or the remaining quantity of wheat / residuals, if any, shall be kept by AIL as a consideration for the services rendered. The Delhi Bench of the Tribunal while relying upon various case laws held that no TDS was liable to be deducted in respect of the value of the by-products retained by the miller. For the sake of convenience, the relevant part of the order of the Tribunal is as under: - - "8. There is no dispute that the parties, apart from entering into agreement have also acted upon the agreement and the transact ions appear to be strictly falling within the agreement that is entered into by the parties. That is to say, this agreement, although between the two related concerns, is entered in the ITA No.2310/Del/2010 & Others 14 course of business and is 8.1 Now, it is for the revenue to understand this agreement and determine the nature of the assessee's tax liability arising from the transact ion entered into through this agreement. In fact, it is stated that the assessee has given the acted upon by both the sides. Therefore, one cannot ignore the terms of ....
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....ed below: - [Payments to contractors and sub-contractors. 194C. [ (1) Any person responsible for paying any sum to any resident (hereinafter in this sect ion refer red to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and- (a) the Central Government or any State Government; or (b) any local authority; or (c) any corporation established by or under a Central, State or Provincial Act; or (d) any company; or (e) any co-operative society; or (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or (h) any trust; or (i) any university established or incorporated by or under a Central, State or Provincial Act and an institution de....
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....on.] [Explanation I.- For the purposes of sub-section (2), the expression "contractor" shall also include a contractor who is carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and the Government of a foreign State or a foreign enterprise or any association or body established outside India. ] [Explanation II].- For the purposes of this section, where any sum referred to in sub-section (1) or sub-section (2) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this sect ion shall apply accordingly. ] [Explanation III. - For the purposes of this section, the expression "work" shall also include- (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods and passengers by any mode of transport other than by railways; (d) catering.] (3) No deduct ion sha....
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....es 100 kg of wheat and takes back 88 Kgs of Atta or 85 Kgs of Dalia after its processing done by the AIL and AIL is required to deliver the end product in this proport ion to the assessee who has supplied the raw material. Does the provision of Sect ion 194C of the Act create an obligation on the part of assessee to deduct tax at source in respect of any of the transactions it has entered into with the AIL? Section 194C of the Act was brought into statute by the Finance Act, 1972. Circular No. 86 dated May 29, 1972 was issued inter alia stating that the provisions of section 194C would apply only in relation to labour contacts and would not cover contracts for sale of goods. I f a manufacturer purchases material on his own and manufactures a product as per the requirement of a specific customer, it was a case of sale and not a contract for carrying out any work. The fact that the goods manufactured were according to the requirement of the customer did not mean or imply that any work was carried out on behalf of that customer. In case of any issue where the contract is a contract of sale and not a contract for carrying out any work, the matter should be decided in the light of the p....
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.... quantify the same and say that the assessee was under an obligation to deduct tax at source at such construed payments. The assessee has not even credited such const rued consideration for supply of labour in the books of accounts of the assessee. In fact, it has not even claimed any expenditure as deduct ion. To say that such expenditure has resulted in an out f low without deduct ion of tax at source is too much and is not borne out from the transact ion entered into between the parties. The quest ion of dis allowance by applying the provisions of Sect ion 40(a) (ia), in our opinion, is not in accordance with law as the assessee is under no obligation to deduct the tax at source in terms of a contract where it does not require any payment of any sum even if the sum here means that the payment could be of some kind but it is difficult to say that the assessee has made these payments to the extent of short fall in getting the wheat supplied back and construe it as the payment to the other for processing the wheat into Atta or Daliya. The department must have appreciated the contract as a whole which does not involve any payment or getting the payment for services rendered. It is a....
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....ee is contemplating deduct ion u/s 32 to 38 on which tax is deductible and the assessee has not deducted tax at source. In our opinion, tax is not deductible and the assessee has not claimed any deduct ion u/s 32 to sect ion 38. This loss, if any, is in the net profit in the trading account which is a computation u/s 28 and 29 and not claims u/s 32 to 38 of the Income Tax Act. Even taking this view of the matter, in our opinion, the assessee is entitled to succeed and there is no quest ion of deduct ion of tax at source and consequently no quest ion of making any disallowance by invoking the provisions of Sect ion 40(a) (ia) of the Act. 14. We must also view the whole transact ion under the agreement from a different angle. The assessee gives the wheat and accepts Atta and Dalia in return by weight to weight basis and what he got in return are the value added products of lower quantity. The assessee by this method has prevented itself from factors like fall in the prices of either raw material or of the finished products. The market value of the wheat and the end products are totally different and fluctuate in different directions. All these fluctuations are warded off by ....