TaxTMI 
TaxTMI 
2017 (7) TMI 1241
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....issues involved in all the appeals are identical, the same were heard together and are being disposed of by this common order for the sake of convenience. We shall be taking ITA No. 1291/Chd/2016 as the lead case for disposing of all the appeals together. The grounds raised in this appeal are as under:- (i) In the facts and circumstances of the case, the Ld. CIT (A) is erred in deleting the demand ignoring that the provisions of section 194C are squarely applicable on the work carried out by the millers. (ii) In the facts and circumstances of the case, the Ld. CIT(A) is erred in deleting the demand created on account of non / short deduction of tax u/s 201(I) / 201(1A) of the Income- tax Act, 1961 ignoring the fact that the assessee deductor applied provisions of section 194C on the cash part of the payments but not on the payments which were paid in kind and thus not deducted TDS on whole payment. (iii) In the facts and circumstances of the case, the Ld. CIT(A) is erred in l inking 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 as in the case of M/s Ahaa....
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....nto 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 & Othrs 14 course of business and is acted upon by both the sides. Therefore, one cannot ignore the terms of this agreement in determining the nature of the transact ion that have taken place between the parties, as there is nothing in the impugned orders to doubt the genuineness of this agreement. 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 transaction entered into through this agreement. In fact, it is stated that the assessee has given the wheat under a delivery challan-cum- invoice and the value is provided only for settlement of claims. On the basis of the quantity of the wheat supplied by the assessee to AIL, the assessee has collected the end products namely Atta or Dalia and is not bothered about the other products and wastage arising therefrom. In other words, under the terms of agreement, by-products, waste....
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.... 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 declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956) ; or (j) any firm; or (k) any individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor, shall, at the time of credit of such sum to the account of the contractor or at the ti....
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.... 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 section 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 shall be made under sub-section (1) or subsection (2) from- [ (i) the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees: Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds fifty thousand rupees, the person responsible for paying such sums referred to in sub-section (1) or, as the case may be, sub-section (2) shall be liable to deduct income-tax [under th....
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....C 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 principles laid down by the Hon'ble Supreme Court in the AIR 1972 SC 1148. The Bombay High Court has also analyzed the difference between the sale and works contract in the case of BDA Ltd. vs ITO(TDS) 281 ITR 99. 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 bot t les to the assessee. The ITO(TDS) did not accept the content ions of the assessee that the transact ....
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.... 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 At ta 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 case of barter or exchange or one good against the other. It is a type of sale contract in a very crude form 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 AIR 1972 SC 1148 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 ....
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.... invoking the provisions of Section 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. Al l these fluctuations are warded off by the present agreement, which is just exchange of goods for goods and does not involve any cash out f low. 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 transact ion 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 transact ions a....