TaxTMI 
TaxTMI 
2016 (8) TMI 1393
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....tion to additional grounds of appeal raised by assessee vide letter dated 01.06.2016 and submitted that assessee was not interested in pressing the additional ground of appeal and therefore, the same may be dismissed as not pressed. 5. Inviting our attention to the facts of the case, the learned AR submitted that assessees are Branches of State Government Agency which procures paddy from the market in every crop season and custom milling of this paddy is done by various millers with whom contracts are executed. As per the contracts, the millers are paid Rs. 15 per qntl, as milling charges and millers are also entitled to get by products generated in the process of milling of rice. Further as per the contract the millers are required to supply 67/68 kg of rice for every quintal of paddy supplied by the agency. The learned AR submitted that during assessment proceedings, the Assessing Officer observed that assessee had deducted TDS on the amount of milling charges paid to the millers whereas on the value of byproducts retained by millers no TDS was deducted. The Assessing Officer held that all the byproducts of paddy, as deemed payments and considered them as part of milling charg....
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.... the assessment years 2012-13 to 2014-15, in favour of the assessee and against the Revenue by holding as under: "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 Rs. 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 transaction, legal issues involve....
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....e 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 number of cases an....
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....ainly 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 part of business....
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....oods 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." 16. The facts in the present case are directly and squarely covered by 'Ahaar Consumer Products P Ltd.' (supra). In fact, 'Ahaar....