ITO(TDS),Wd-58(4),Kolkata, Kolkata V. Sri Nirmal Kumar Kejriwal., Kolkata

ITA 249/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5057 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 06-02-2013
• Court: TRIBUNAL
• Section: 133A; 63

Judgement Text

ITA NOS.249-253 & CO.NO.39/KOL/2013-B-AM SRI NIRMAL KUMAR KEJRIWAL 1 IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, K OLKATA BEFORE : SHRI M. BALAGANESH, ACCOUNTAN T MEMBER, AND SHRI S.S VISWANETHRA RAVI JUDICIAL MEMBER ITA NOS.249 TO 253/KOL/2013 A.YS 2005-06 TO 2009-10 I.T.O (TDS) WARD 58(4) VS. SRI NIRMAL KUMAR KEJ RIWAL PAN:CALNO 3844B (APPELLANT) (RE SPONDENT) C.O NO. 39/KOL/2013 [ ARISING OUT OF ITA NO. 249/KOL/2013 A.Y 2005-06] SRI NIRMAL KUMAR KEJRIWAL VS. I.T.O (TDS) WARD 5 8(4) (CROSS OBJECTOR/ASSESSEE) (DEPARTMENT) FOR THE APPELLANT/DEPARTMENT: NONE A PPEARED FOR THE CROSS OBJECTOR/ASSESSEE: SHRI A.K.TIBREWAL, FCA, LD.AR DATE OF HEARING: 30-03-2016 DATE OF PRONOUNCEMENT: 6-4 -201 6 ORDER SHRI M.BALAGANESH, AM THESE APPEALS OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE ARISE OUT OF THE CONSOLIDATED ORDER OF THE LEARNED CIT(A)-I, KOL KATA IN APPEAL NOS. 85-89 / CIT(A)-I/58(4)/11-12 DATED 19.11.2012 AGAINST THE C ONSOLIDATED ORDER OF THE LEARNED AO FRAMED FOR THE ASST YEARS 2005-06 TO 2009-10 U/S 206C(6)/206C(7) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). SINCE THE ISSUE INVOLVED IN ALL THE APPEALS OF THE REVENUE ARE IDENTICAL IN NATURE, THE Y ARE TAKEN UP TOGETHER AND DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONV ENIENCE. 2. THE ONLY ISSUE TO BE DECIDED IN THESE APPEALS I S AS TO WHETHER THE ASSESSEE COULD BE SAID TO HAVE VIOLATED THE PROVISIONS OF SECTION 206C OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NOS.249-253 & CO.NO.39/KOL/2013-B-AM SRI NIRMAL KUMAR KEJRIWAL 2 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE LE ARNED AO OBSERVED THAT THE ASSESSEE IS ENGAGED IN DEALING IN SAWN TIMBER FROM THE PREVIOUS YEAR RELEVANT TO ASST YEAR 2005- 06. IN THE COURSE OF SURVEY PROCEEDINGS U/S 133A OF THE ACT ON 25.3.2009, THE LEARNED AO FOUND THAT THE ASSESSEE FAILED TO COLLEC T INCOME TAX (TAX COLLECTED AT SOURCE TCS) FROM THE BUYERS ON SALE OF SAWN TIMBER IN ACCORDANCE WITH THE PROVISIONS OF SECTION 206C OF THE ACT. THE ASSESS EE TRIED TO EXPLAIN THAT NO TAX WAS COLLECTIBLE ON SALE OF SAWN TIMBER AS SECTION 206C OF THE ACT STIPULATES TAX TO BE COLLECTED AT SOURCE (TCS) AND REMITTED ONLY IN RESP ECT OF TIMBER AND NOT SAWN TIMBER. IT WAS FURTHER EXPLAINED THAT ARTICLES LIKE SAWN TI MBER RESULTED DIFFERENT ARTICLES THAN TIMBER AS CONTAINED IN TABLE IN SECTION 206C(1) OF THE ACT BY OPERATION OF SAWING MACHINES AND SAWN TIMBER COULD NOT BE EQUATED WITH TIMBER WHICH MEANT LOG OR CUTTING PIECES OF TIMBER. IT WAS EXPLAINED THAT WHEN WOOD, PLANKS OR LOGS ARE SAWED, WHAT IS PRODUCED IS DIFFERENT THING FROM TIMBER CAP ABLE OF BEING PUT TO DIFFERENT USES. IT WAS EXPLAINED THAT A NEW KIND OF ARTICLE IS MADE OUT OF TIMBER. IT WAS FURTHER EXPLAINED BEFORE THE LEARNED AO THAT THE SAWN TIMBE R IS SOLD BY THE ASSESSEE TO VARIOUS MANUFACTURERS AND HENCE THE PROVISIONS OF SECTION 206C OF THE ACT CANNOT BE IMPOSED ON THE ASSESSEE. THE LEARNED AO NOT BEING SATISFIED WITH THE REPLIES OF THE ASSESSEE, TREATED THE ASSESSEE AS ASSESSEE IN DEFAU LT FOR FAILURE TO COLLECT TAX AT SOURCE IN TERMS OF SECTION 206C(1) OF THE ACT. ON FIRST APPE AL, THE LEARNED CIT(A) HELD THAT SAWN TIMBER IS DIFFERENT FROM TIMBER AS THERE WAS R ADICAL CHANGE FROM TIMBER TO SIZED TIMBER. ACCORDINGLY, HE HELD THAT THE PROVISIONS O F SECTION 206C(1) IS NOT APPLICABLE TO THE ASSESSEE. AGGRIEVED, THE REVENUE IS IN APPE AL BEFORE US BY RAISING THE SIMILAR GROUNDS FOR THE ASST YEARS 2005-06 TO 2009-10. T HE GROUNDS RAISED FOR THE ASST YEAR 2005-06 ARE AS BELOW FOR THE PURPOSE OF ADJUDICATIO N:- THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEAL)-I, KOLKATA HAS ERRED IN HOLDING THAT SE CTION 206C(1) & SECTION 206C(6A) ARE NOT APPLICABLE IN THIS CASE IG NORING THE FOLLOWING FACTS COMPLETELY :- ITA NOS.249-253 & CO.NO.39/KOL/2013-B-AM SRI NIRMAL KUMAR KEJRIWAL 3 1. THE PROVISIONS OF SECTION 206C (1) ARE VERY CLEA R AND UNAMBIGUOUS AND PROVIDES FOR TCS ON SALE OF ALL TIMBER WHETHER THE SAME IS OBTAINED UNDER THE FOREST LEASE OR OTHER MODES. EACH AND EVERY TIM BER WHICH IS OBTAINED FROM TREE IS CUT THROUGH BY HAND SAW OR MECHANICAL SAW MACHINE AND ONLY BY CUTTING THROUGH A SAW MACHINE THE TIMBER IS DETA CHED FROM ITS PLANT/TREE. 2. THE SAWN TIMBER IS THE SAME TIMBER WITH THE SAME CHEMICAL, PHYSICAL, CORE PROPERTIES, SAME CONSTITUENTS, SAME INTERNAL B ONDING ETC. AND IT IS NOT A NEW PRODUCT. 3. THE CIT (A) WAS NOT JUSTIFIED IN STATING THAT TH E WORD TIMBER CANNOT BE EXTENDED TO THE MEANING OF THE SAWN TIMBER, AS THER E WAS RADICAL CHANGE FROM TIMBER TO SAWN TIMBER, WHEREAS THE DEPARTMENTA L CIRCULAR 528 OF 1988, CLEARLY STATES THAT SAWING OF TIMBER TO SMALL ER SIZES IS NEITHER MANUFACTURING OR PROCESSING AND SQUARELY FALLS UNDE R THE PURVIEW OF SEC. 206C (1) OF THE ACT. 4. THE LEARNED AR VEHEMENTLY RELIED ON THE ORDER OF THE LEARNED CIT(A) AND FILED THE FOLLOWING DOCUMENTS TO PROVE THAT THE TIMBER IS DIFFERENT FROM SAWN TIMBER :- A) TENDER DOCUMENT FOR TIMBER FLOATED BY HIMACHAL PRAD ESH STATE FOREST DEVELOPMENT CORPN. LTD, WHEREIN, IN PARA 14 OF THE TENDER DOCUMENT UNDER THE CAPTION RESTRICTION OF SALE ETC. B) PICTORIAL REPRESENTATION OF BUSINESS PROCESS OF TIM BER INTO SAWN TIMBER. HE FURTHER PLACED RELIANCE ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF SHAW BROS. AND CO VS THE STATE OF WEST BEN GAL REPORTED IN 1963 14 STC 878 (CAL) . HE FURTHER ARGUED THAT THE SAWN TIMBER WERE SOLD TO THE PERSONS WHO UTILIZED GOODS FOR THE PURPOSE OF MANUFACTURING, PR OCESSING AND PRODUCING ARTICLES OR THINGS FOR THE PURPOSES OF MAKING FURNITURE AND ALL THOSE TRANSACTIONS WERE EXCLUDED FROM COLLECTION OF TAX AT SOURCE U/S 206C(1A) OF TH E ACT. ITA NOS.249-253 & CO.NO.39/KOL/2013-B-AM SRI NIRMAL KUMAR KEJRIWAL 4 IN RESPECT OF CROSS OBJECTIONS OF THE ASSESSEE, THE LEARNED AR WITHOUT PREJUDICE TO HIS ARGUMENTS ABOVE, ARGUED THAT IF THE BUYER OF THE SA WN TIMBER HAD FILED HIS RETURN OF INCOME U/S 139(1) OF THE ACT ; HAD TAKEN INTO ACCOU NT SUCH AMOUNT FOR COMPUTING INCOME IN SUCH RETURN OF INCOME ; AND HAD PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME, THEN THE SELLER OF TH E SAWN TIMBER (ASSESSEE HEREIN) SHALL NOT BE TREATED AS ASSESSEE IN DEFAULT. FOR THIS HE PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P) LTD VS CIT REPORTED IN 293 ITR 226 (SC) . 5. THE LEARNED DR VEHEMENTLY RELIED ON THE ORDER OF THE LEARNED AO AND ARGUED THAT THE PROVISIONS OF SECTION 206C OF THE ACT USE THE WORD TIMBER, WHICH INCLUDES ALL TYPES OF TIMBER. HE FURTHER STATED THAT THE DECISI ON RELIED UPON BY THE LEARNED AR ON THE HONBLE CALCUTTA HIGH COURT DECISION WAS RENDER ED IN THE CONTEXT OF SALES TAX PROCEEDINGS AND HENCE THE SAME CANNOT BE APPLIED IN INCOME TAX PROCEEDINGS. 6. WE FIND THAT THE ISSUE INVOLVED HERE IS RELAT ED TO LEVY AND COLLECTION OF TAX AT SOURCE IN RESPECT OF PROFITS AND GAINS OF TRADING I N SAWN TIMBER, WHEREIN , EVERY PERSON, BEING A SELLER OF THE SPECIFIED GOODS IS RE QUIRED TO COLLECT INCOME TAX AT SOURCE FROM THE BUYER AT THE SPECIFIED RATE. THE TAX SO COLLECTED FROM THE BUYER SHALL BE PAID BY THE SELLER WITHIN THE PRESCRIBED TIME TO THE ACC OUNT OF THE CENTRAL GOVERNMENT. OTHERWISE, THE SELLER SHALL BE TREATED AS ASSESSEE IN DEFAULT. WE FIND THAT THE LEARNED AO HAD INVOKED THE ITEM NO. (IV) OF TABLE IN SECTIO N 206C(1) OF THE ACT I.E TIMBER OBTAINED BY ANY MODE OTHER THAN UNDER A FOREST LEAS E. THE LEARNED CIT(A) HAD GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE HAD T RADED ONLY IN SAWN TIMBER AND NOT TIMBER. WE HAVE TO DECIDE WHETHER THE TIMBER COU LD BE DIFFERENT FROM SAWN TIMBER. THE TERM TIMBER AND SAWN TIMBER IS NOT DEFINED IN THE ACT. FOR THIS PURPOSE, WE FIND LOT OF FORCE IN THE ARGUMENTS OF THE LEARNED A R AND THE DOCUMENTS RELIED UPON BY HIM. WE FIND FROM THE TENDER DOCUMENT FLOATED BY HIMACHAL PRADESH STATE FOREST ITA NOS.249-253 & CO.NO.39/KOL/2013-B-AM SRI NIRMAL KUMAR KEJRIWAL 5 DEVELOPMENT CORPORATION LIMITED FOR TIMBER , IN PAR A 14 UNDER THE CAPTION RESTRICTION OF SALE ETC, IT IS MENTIONED AS BELOW :- 14. NO PURCHASER SHALL SELL TIMBER PURCHASED BY HI M TO ANOTHER PARTY WHILE SUCH TIMBER IS LYING IN THE CORPORATION DEPOT. NO SAWING OR CONVERSION OF TIMBER IS TO BE PERMITTED IN THE DEPOT PREMISES UND ER ANY CIRCUMSTANCES WHAT SO EVER . THIS PARTICULAR RESTRICTIVE COVENANT IN THE TENDER DOCUMENT FOR TIMBER PROVES THAT THE TERM TIMBER IS DIFFERENT FROM SAWN TIMBER. 6.1. WE FIND THAT WHEN TIMBERS ARE SAWED OUT OF LO GS OR BIG SIZE OF TIMBER, WHAT IS PRODUCED IS A DIFFERENT THING FOR DIFFERENT USES. A NEW KIND OF COMMODITY IS MANUFACTURED BECAUSE SAWN TIMBER MADE OUT OF TIMBER IS NOT TIMBER IN ITS NASCENT STATE. WE FIND THAT WHEN A PERSON CUTS A TREE, HE GETS TIMBER. THE SAID TIMBER IS SAWED AND CUT INTO VARIOUS SIZES AND KEPT IN RECTANGULAR SHAPE IN ORDER TO MAKE IT A SEPARATE MARKETABLE COMMODITY. THIS IS CALLED SAWN TIMBER. THIS PROCESS IS NOT DONE BY THE ASSESSEE. THE PROCESSED TIMBER I.E SAWN TIMBER IS BOUGHT BY THE ASSESSEE FROM THE PERSON WHO HAD CONVERTED THE TIMBER INTO SAWN TIMBE R. LATER THE SAID SAWN TIMBER IS SOLD BY THE ASSESSEE IN ITS TRADING ACTIVITY. 6.2. WE ALSO FIND THAT THE TERM MANUFACTURE IS N OT DEFINED IN THE ACT. THE HONBLE SUPREME COURT IN THE CASE OF ASPINWALL AND CO. LTD VS CIT REPORTED IN 251 ITR 323 (SC) HAD HELD THAT :- THE WORD MANUFACTURE HAS NOT BEEN DEFINED IN T HE INCOME-TAX ACT. IN THE ABSENCE OF A DEFINITION, THE WORD MANUFACTU RE HAS TO BE GIVEN A MEANING AS IS UNDERSTOOD IN COMMON PARLANCE. IT IS TO BE UNDERSTOOD AS MEANING THE PRODUCTION OF ARTICLES FOR USE FROM RAW OR PREPARED MATERIALS BY GIVING SUCH MATERIALS NEW FORMS, QUALITIES OR CO MBINATIONS WHETHER BY HAND LABOUR OR MACHINES. IF THE CHANGE MADE IN THE ARTICLE RESULTS IN A NEW AND DIFFERENT ARTICLE THEN IT WOULD AMOUNT TO MANUFACTURING ACTIVITY. ITA NOS.249-253 & CO.NO.39/KOL/2013-B-AM SRI NIRMAL KUMAR KEJRIWAL 6 6.3. WE FIND THAT THE LEARNED CIT(A) HAD PLACED RE LIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF DEPUTY CIT VS PIO FOOD PACKERS REPORTED IN 46 STC 63 SC , THAT :- FURTHER, IN THE CASE OF STATE OF ORISSA VS PATEL MI LLS (37 STC 392 ORI) HELD THAT PURCHASING LOGS OR TIMBER, SAWING THEM IN TO PLANKS , SLEEPERS , ETC., AMOUNT TO MANUFACTURE. HENCE IT COULD BE SAFELY CONCLUDED THAT THE TIMBER IS DIFFERENT FROM SAWN TIMBER AND HENCE THE PROVISIONS OF SECTION 206C OF THE ACT WOU LD NOT BE APPLICABLE TO THE ASSESSEE. 6.4. WE FIND THAT THE LEARNED CIT(A) HAD GIVEN A C ATEGORICAL FINDING THAT THE SAWN TIMBER WERE SOLD BY THE ASSESSEE TO THE PERSONS WHO WERE ENGAGED IN MANUFACTURING AND PROCESSING FURNITURE AND SUCH OTHER PRODUCTS. HENCE THE ASSESSEES CASE FALLS UNDER THE EXCEPTION PROVIDED IN PROVISIONS OF SECTI ON 206C(1A) OF THE ACT. THIS CATEGORICAL FINDING GIVEN BY THE LEARNED CIT(A) IS NOT CONTROVERTED BY THE REVENUE BEFORE US. 6.5. WE FIND THAT THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF SHAW BROS. AND CO VS THE STATE OF WEST BENGAL REPORTED IN 1963 14 ST C 878 CAL DATED 26.6.1963, WHEREIN IT WAS HELD THAT :- 5. IN MY OPINION, THE OBSERVATION QUOTED ABOVE WILL NOT HELP MR.BHATTACHARYA. WHEN PLANKS ARE SAWED OUT OF LOGS , WHAT IS PRODUCED IS A DIFFERENT THING FROM LOGS CAPABLE OF BEING PUT TO DIFFERENT USES. THEREFORE, WHEN PLANKS ARE MADE FROM LOGS OR DAMAGE D WOOD, A NEW KIND OF COMMODITY IS MANUFACTURED BECAUSE PLANK MADE OUT OF TIMBER IS NOT TIMBER IN ITS NASCENT STATE. ITA NOS.249-253 & CO.NO.39/KOL/2013-B-AM SRI NIRMAL KUMAR KEJRIWAL 7 THOUGH THIS DECISION WAS RENDERED IN THE CONTEXT OF SALES TAX PROCEEDINGS, WE FIND THAT THERE IS NOTHING WRONG IN UNDERSTANDING THE BUSINES S PROCESS AND THE ANALOGY DRAWN THEREON IN INCOME TAX PROCEEDINGS. 7. IN VIEW OF THE AFORESAID FINDINGS AND VARIOUS J UDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE FIND THAT THE SALE OF SAWN TIMBER D OES NOT FALL UNDER THE AMBIT OF TAX COLLECTION AT SOURCE WITHIN THE MEANING OF SECTION 206C OF THE ACT. HENCE WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT (A) IN THIS REGARD. CO NO. 39/KOL/2013( ARISING OUT OF ITA NO.249/K OL/2013) ASST YEAR 2005-06 8. THE ASSESSEE HAS FILED CROSS OBJECTIONS FOR THE ASST YEAR 2005-06. IN VIEW OF OUR FINDINGS IN ITA NOS. 249/KOL/2013 FOR ASST YEAR 2005-06, THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED AS INFRUCTUOUS AND WE RE FRAIN TO GIVE OUR DECISION ON THE GROUNDS RAISED THEREON. 9. IN THE RESULT, THE APPEALS OF THE REVENUE ARE ALLOWED AND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 6-4 - 20 16 SD/- ( S.S VISWANETHRA RAVI, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE: DATE 6-4 -2016 ITA NOS.249-253 & CO.NO.39/KOL/2013-B-AM SRI NIRMAL KUMAR KEJRIWAL 8 1.. THE APPELLANT/DEPARTMENT: THE I.T.O (TDS) WARD 58(4), KOLKATA 10B, MIDDLETON ROW, 8 TH FL., KOL-71. 2 THE RESPONDENT/ASSESSEE: SRI NIRMAL KUMAR KEJRIWA L PROP: M/S. ARVIND TRADERS 6/1B PALM AVENUE, BASEMENT FL., KOL-19. 3 /THE CIT, 4.THE CIT(A ) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP SPS COPY OF THE ORDER FORWARDED TO:-