The Punjab State Cooperative Supply and marketeing, Nawanshahr V. The Income Tax Officer, (TDS) I, Jalandhar

ITA 55/ASR/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0580 (ITAT-AMRITSAR)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-06-2016
• Assessment Year: 2013-2014
• Appeal Filed On: 14-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A N MISHRA
• Keywords: Rule of consistency; Question of law
• Section: 194C; 201(1); 32; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. (CAMP AT JALANDHAR) BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NOS.54, 55 & 56(ASR)/2016 ASSESSMENT YEAR:2012-13, 2013,14 & 2014-15 PAN: JLDAT00925B M/S. THE PUNJAB STATE CO-OPERATIVE VS. INCOME TAX OFFICER, SUPPLY AND MARKETING FEDERATION LTD. TDS-1, JALANDH AR, NAWANSHAHAR (APPELLANT) (RESPONDENT) APPELLANT BY: SH.ATUL GOYAL, CA RESPONDENT BY: SH. A.N. MISHRA, DR DATE OF HEARING: 22/06/2016 DATE OF PRONOUNCEMENT: 01/07/2016 ORDER PER A.D. JAIN, JM; THESE ARE THREE ASSESSEES APPEALS FOR THE ASSESSM ENT YEARS 2012-13, 2013-14 & 2014-15 AGAINST THE COMMON ORDER DATED 29 .10.2015, PASSED BY THE LD. CIT(A)-1, JALANDHAR. AS THE ISSUE INVOLVED IN ALL THE APPEALS IS COMMON, THEY ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORD ER. 2. FOR THE SAKE OF CONVENIENCE, THE GROUNDS OF APPE AL AND FACTS ARE BEING TAKEN FROM ITA NO.54(ASR)/2016: 1. THAT THE ORDER PASSED BY THE HONBLE CIT(A) UND ER PROVISIONS OF SECTION 201(1 )/201 (1 A) OF THE INCOME TAX ACT 196 1 IS AGAINST LAW AND FACTS ON THE FILE. 2. THAT THE CIT(A) ERRED IN LAW BY IGNORING THE FAC TS OF THE MILLING AGREEMENT. 2 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 3. THAT THE APPELLANT ASSESSEE IS NOT REQUIRED TO D EDUCT ANY SUM UNDER THE PROVISIONS OF SECTION 194C OF THE INCOME TAX ACT ON THE INDETERMINATE VALUE OF BYE PRODUCTS RETAINED FREE O F COST BY THE RICE MILLERS IN ACCORDANCE WITH POLICY FRAMEWORK AN D GUIDELINES OF THE CENTRAL GOVERNMENT AGENCY. 4. THAT THE APPELLANT SHOULD NOT BE DEEMED TO BE AS SESSEE IN DEFAULT UNDER THE PROVISIONS OF SECTION 201(1) OF THE INCOM E TAX ACT. 5. THAT THE APPELLANT CARVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL DURING THE COURSE OF APPELLANT PROCEEDINGS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PROCUREMENT AGENCY OF THE PUNJAB GOVERNMENT WHICH PROCURES PADDY AND S UPPLIES RICE TO FOOD CORPORATION AS PER THE AMOUNTS DECIDED BETWEEN THE STATE GOVERNMENT AND FCI. THE PADDY IS GIVEN TO THE MILLERS FOR MILLING. THE MILLERS ARE PROVIDED WITH PADDY AND THEY AFTER MILLING HAVE TO SUPPLY RICE @6 7% OF THE PADDY MILLED TO THE PROCUREMENT AGENCIES AS PER THE SPECIFICATIONS. AS PER THE AGREEMENT BETWEEN THE MILLERS AND THE PROCUREMENT AGENCIES, T HE MILLERS GET RS. 15 PER QUINTAL AS MILLING CHARGES WHICH IS PAID TO THEM IN CASH. FURTHER, AS PER THE AGREEMENT BETWEEN THE PROCUREMENT AGENCIES AND THE MILLERS, THE BYE PRODUCTS, IF ANY, ARISING FROM THE PROCESS SHALL BE RETAINED BY THE MILLERS AND THE PROCUREMENT AGENCIES SHALL HAVE NO RIGHT/LIABIL ITY IN RESPECT THEREOF. THE ASSESSING OFFICER ISSUED NOTICE ON THE ASSESSSEE WH Y HE SHOULD NOT BE DEEMED TO BE ASSESSSEE IN DEFAULT UNDER THE PROVISIONS OF SECTION 201/201A OF INCOME TAX ACT 1961. 3 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 4. THE ASSESSING OFFICER TREATED THE ASSESSEE IN DE FAULT FOR NON- DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C OF THE INCOME TAX ACT, 1961, OBSERVING AS FOLLOWS: 3. IN VIEW OF THE AFORESAID FACTS THE ASSESSEE WAS REQ UIRED TO SHOW CAUSE VIDE THIS OFFICE LETTER DATED 03.02.2014 WHY IT SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT AS IT WAS DEDUCTING TAX AT SOURCE PARTIALLY AND THUS, NOT COMPLYING WITH THE P ROVISIONS OF SECTION 194C OF INCOME TAX ACT. THE SHOW CAUSE NOTI CE IS EXTRACTED AS UNDER:- YOUR AGENCY AWARDS CONTRACTS FOR MILLING OF PADDY TO VARIOUS MILLERS EVERY YEAR. AS PER INFORMATION AVAILABLE, F OR EVERY QUINTAL OF PADDY SUPPLIED TO THE MILLER, THE AGENCIES PROCURE 67/68 KG RICE. MILLING CHARGES OF RS. 15/- PER QUINTAL ARE PAID IN CASH. SUCH MODEST AND UNAFFORDABLE RATE OF MILLING IS ACCEPTABLE TO T HE MILLERS AS THE AGENCIES, APART FROM THE AFORESAID MILLING CHARGES, ALSO PROVIDE IN THE CONTRACT THAT THE BY PRODUCTS OF PADDY I.E. RIC E BRAN, KHUDI PHAK AND HUSK ETC. SHALL BE THE PROPERTY OF THE MILLER A ND NOT THE AGENCY. THESE BY PRODUCTS ARE THUS, ACCOUNTED FOR AS THE ST OCK OF THE MILLERS. THE VALUE OF THE BYPRODUCTS IS DETERMINATE AS EACH OF THEM HAS ITS SPECIFIC USAGE IN DIFFERENT INDUSTRIES. FOR PRACTIC AL PURPOSES, THE MILLING CHARGES ARE PAID IN TWO PARTS VIZ. RS. 15/- PER QUINTAL IN CASH AND VALUE OF THE BY PRODUCTS. THUS, FOR ALL IN TENTS AND PURPOSES, DEDUCTION IS BEING MADE ON CASH PART OF T HE MILLING EXPENSE I.E. RS. 15/- PER QUINTAL AND NOT ON THE TO TAL AMOUNT (IN CASH AND KIND). THUS, PARTIAL DEDUCTION OF TAX AT S OURCE IS BEING MADE UNDER SECTION 194C OF THE INCOME TAX ACT, 1961 . 4. IN REPLY, IT IS STATED BY THE ASSESSEE THAT THE RICE MILLERS ARE PAID MILLING CHARGES FOR CUSTOM MILLING OF PADDY AS FIXED BY THE GOVT. AND THAT ALL THE BY PRODUCTS SHALL BE PROPERT Y OF THE RICE MILLER. IT IS FURTHER STATED THAT IT WILL NOT BE APPROPRIAT E ON THE PART OF THE ASSESSEE OF GOVT, SINCE THE SAME IS THE PROPERTY OF THE MILLERS AS PER POLICY. IT IS ALSO STATED THAT NO TRANSACTIONS/ENTR IES OF BY PRODUCTS ARE AFFECTED IN THE BOOKS OF ACCOUNTS IN T HEIR OFFICE. 5. IN THE AFORESAID EXPLANATION, THE ASSESSEE HAS A DMITTED THAT ALL THE BY PRODUCTS OF PADDY, WHICH IS THE PROPERTY OF THE AGENCY, IS LEFT WITH THE MILLER AS PER THE POLICY OF THE GOVER NMENT. OBVIOUSLY, SUCH A POLICY HAS BEEN FRAMED IN ORDER TO COMPENSAT E THE MILLER IN KIND AS THE MILLING CHARGES OF RS. 15/- ARE TOO SMA LL FOR THE 4 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 OPERATIONAL COST OF MILLING WHICH INCLUDES TRANSPOR TATION, STITCHING AND A NUMBER OF OTHER EXPENSES BORNE BY THE MILLER. THUS, THE VALUE OF BY PRODUCTS IS PART OF THE MILLING EXPENSES PAID IN CASH. HOWEVER, TAX IS DEDUCTED AT SOURCE ONLY OUT OF CASH CHARGES PAID. 6. THE EXPLANATION IS NOT ACCEPTABLE FOR THE FOLLOW ING REASONS: 1. THE MILLING CHARES PAID IN CASH @ RS. 15/- PER QUINTAL ARE THE DISCOUNTED COST OF MILLING AND THIS PETTY R ATE OF MILLING (IN CASH) IS BEING ACCEPTED BY MILLERS YEAR AFTER Y EAR AS THEY ARE BEING COMPENSATED WITH BY PRODUCTS WHOSE VALUE IS MANY TIMES OF THIS CASH MILLING. IN ACTUALITY, THE COST OF THE MILLING PER QUINTAL IS MUCH HIGHER THAN RS. 15/- AND THE SA ME IS SUPPLEMENTED BY THE COST OF BY PRODUCTS WHICH GET T RANSFERRED TO THE MILLER. IN CASE, THESE ARE TAKEN BY THE AGEN CY, IT WILL BE HAVE TO PAY HIGHER AMOUNT IN CASH AS MILLING CHARGE S. II. IN FACT, THIS POLICY OF MILLERS RETAINING THE B Y PRODUCTS AND THE AGENCIES PAYING A FRACTION OF MILLING CHARG ES IN CASH SUITS THE AGENCIES AS IT WILL BE CUMBERSOME IF THEY TAKE THE BY PRODUCTS BACK WHICH ARE THEIR PROPERTY BEING A PART OF THE PADDY OWNED BY THEM. SO, IN ORDER TO FACILITATE THE MSELVES, THE GOVERNMENT HAS MADE A POLICY IN REGARD TO MILLI NG AS DISCUSSED ABOVE. ON THE OTHER HAND, THIS SYSTEM SUI TS THE MILLER AS WELL AS THE BY PRODUCTS ARE SOLD BY THEM AS THEIR STOCK. III. IT DOES NOT MATTER IF THE MILLING CHARGES BEIN G PAID IN CASH ARE ONLY RS.15/- WHEN THE MILLERS ARE COMPENSA TED BY TRANSFERRING THE BY - PRODUCTS I.E. PAYING IN KIND. THUS, THE MILLING CHARGES BEING PAID IN CASH ARE DISCOUNTED C OST OF MILLING AND NEED TO BE INCREASED BY THE COST OF BY PRODUCTS FOR THE PURPOSE OF TDS. THE AGENCIES THUS, DO NOT MEREL Y PAY THE CASH CHARGES TO THE MILLER BUT A PAN OF THEIR PROPE RTY IN THE SHAPE OF BY PRODUCTS WHICH IS NOTHING BUT PAYMENT O F MILLING CHARGES IN KIND. IV THE RELEVANT TDS PROVISIONS AS REPRODUCE ABOVE, ARE VERY CLEAR ON THE ISSUE AS THEY PROVIDE FOR TDS ON NOT ONLY THE CREDIT OF A CONTRACTORS ACCOUNT WITH SOME AMOUNT O R IN RESPECT OF PAYMENT BY WAY CASH/CHEQUE/DRAFT BUT ALSO OUT OF PAYMENT IN KIND (BY ANY OTHER MODE) IRRESPECTIVE OF WHETHER THE SAME IS CREDITED IN THE MILLER'S ACCOUNT OR IN FAT T, THE BY PRODUCTS (THEIR VALUE) ARC PASSED ON TO THE MILLER AT THE TUNE WHEN PADDY IS GIVEN FOR MILLING AS IN TURN, ONLY 67 /68KG. OF RICE ARE TAKEN BACK PER EVERY QUINTAL OF PADDY. THU S, THE LAW TAKES CARE OF THE PAYMENT IN KIND ALSO AND FOR ALL INTENTS AND PURPOSES, THE BY PRODUCTS DO COMPENSATE FOR THE LOW COST OF 5 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 MILLING AND THE GOVERNMENT HAS FAMED A POLICY IN TI NS REGARD FAR THEIR CONVENIENCE. 7. IN VIEW OF THE AFORESAID DISCUSSION, THE EXPLANA TION GIVEN BY THE ASSESSEE IS NOT ACCEPTED. J HOLD THE ASSESSEE IN DE FAULT FOR NOT DEDUCTING, TAX AT SOURCE ON FULL VALVE OF THE MILLING CHARGES I.E. PA ID IN CASH AND PASSED ON IN KIND. TAX IS BEING DEDUCTED AT SOURCE ON THE MILLING CHARGES PAID IN CASH WHILE NO DEDUCTION IS BEING MADE IN RESPECT OF THE PRODUCTS WHICH ARE TOKEN US STUCK OF THE ADDER AND SOLD AT HIS CONVENIENCE. 8. AS REGARDS BY PRODUCTS, THE MAIN BY PRODUCTS OF PADDY ARE RICE BRAN, KHUDI PHAK AND HUSK. ENQUIRIES WERE MADE FROM SOME RICE SHELTERS TO ARRIVE AT THE VALUE PER QUINTAL OF THE THESE BY PRODUCTS. THE VALUE OF BY PRODUCTS FROM ONE QUINTAL OF PADDY, AS PER INFORMATION GIVE BY DIFFERENT PARTIES RANGES BETWEE N GIVEN BY THESE PARTIES IS ADOPTED FOR WORKING OUT THE SHORT DEDUCT ION. THE AVERAGE VALUE COMES TO RS. 82/- PER QUINTAL DURING FINANCIA L YEAR '2011-12 AND RS. 86/- DURING FINANCIAL YEAR 2012-13. THE LAT TER FIGURE IS ALSO ADOPTED IN FINANCIAL YEAR 2013-14. THE FIGURES OF P ADDY GOT MILLED DURING DIFFERENT YEARS HAVE BEEN PROVIDED BY THE AS SESEE. COL.I IN THE FED OWING CHART CONTAINS FIGURES OF TOTAL PADDY GOT MILLED BY THE ASSESEE IN A J PARTICULAR YEAR AND VALUE OF BY PROD UCTS IS WORKED OUT BY APPLYING THE AFORESAID FIGURES IN DIFFERENT YEAR S. THE SHORT DEDUCTION OF TAX IS CALCULATED C, COL. 3 AND DEMAND UNDER SECTION 201(1)/201(1A) IS CREATED ACCORDINGLY. 9. ALTHOUGH THE BY PRODUCTS GET PASSED ON TO THE M ILLER WHEN PADDY IS GIVEN TO HIM FOR MILLING, HOT THIS PAYMENT IS DEEMED TO HAVE BEEN MADE IN MARCH OF THE RELEVANT FINANCIAL Y EAR WHEN THE ACCOUNTS ARE SETTLED, THUS, INTEREST UNDER SECTION 201(IA) HAS BEEN CALCULATED FROM APRIL FOLLOWING THE FINANCIAL YEAR TO THE DATE OF ORDER I.E. MARCH, 2014. THE SHORT DEDUCTION OF TAX INTERE ST -THEREON IS CALCULATED AS UNDER BY APPLYING THE AFORESAID VALUE S OF BY PRODUCTS PER QUINTAL: F.Y.2011-12 F.Y.2012-13 F.Y.2013-14 1. TOTAL PADDY GOT MILLED FROM MILLERS 554378 QTL. 455181QTL. 159744 QTL. 2 VALUE OF BY PRODUCTS 4,54,58,996/- 3,91,45,566 1,37,37,984/- 6 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 3 TDS DEDUCTIBLE @ 2% A 9,09,180/- 7,82,911 2,74,760/- 4 PERIOD OF DEFAULT 24 MONTHS 12 MONTHS 5 INTEREST @ 1% PER MONTH B 2,18,203/- 93,949/- 6 TOTAL TAX PLUS INTEREST (A+B) 11,27,383/- 8,76,860/- 2,74,760/- 10. IN VIEW OF THE ABOVE CALCULATION, DEMAND IS CRE ATED AS WIDER: FINANCIAL YEAR TAX DEMAND UNDER SECTION 201(1) INTEREST DEMAND UNDER SECTION 201(1A) TOTAL DEMAND 2011-12 9,09,180/- 2,18,203 11,27,383/- 2012-13 7,82,911/- 93,949/- 8,76,860/- 2013 -14 2,74,7607- - 2,74,760/- 5. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) ALLOWED THE RELIEF TO THE ASSESSEE OBSERVING AS FOLLOWS: 4. DURING THE APPELLATE PROCEEDINGS, SH. ATUL GOYAL C.A. APPEARED AND FILED WRITTEN SUBMISSIONS. HE ARGUED THAT AS PER AL TERNATE ARGUMENT TAKEN BY HIM THAT IN VIEW OF THE DECISION OF HONOURABLE S UPREME COURT IN CASE OF M/S HINDUSTAN COCA COLA BEVERAGES (P) LTD. 293 ITR 226 THE ASSESSEE COULDNT BE TREATED IN DEFAULT AS THE DEDUCTEES HAV E PAID DUE TAXES ON THEIR INCOME. HE DURING THE APPELLATE PROCEEDINGS F ILED THE RELEVANT DETAILS BY FILING COPIES OF BALANCE SHEET, PROFIT AND LOSS ACCOUNTS AND COPIES OF RETURNS OF INCOME OF DEDUCTEES. 5. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND FI ND THAT THE FOLLOWING DETAILS ARE FILED: A.Y.2012-13 SR. NO. NAME QT. RATE TOTAL AMOUNT RETURN FILED ON TDS MONTH INTEREST 1 CHIRAG RICE MILLS 42033.3 3 82 3446733 28.09.12 68935 6 4136 7 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 2 G. N. RICE MILLS 24728.2 3 82 2027715 17.08.15 405543 5 I$2'8 3 JAGDAMBAY RICE 26100.5 5 82 2140245 25.09.12 42805 6 2568 I 4 MAHAL RICE 78651.4 3 82 6449417 28.09.12 128988 6 7739 5 MAHAVIR RICE 74716.7 8 82 6126776 29.09.12 122535 6 7352 6 R.S. RICE MILLS 75510.7 5/- 82 6191882 30.09.12 123838 6 7430 7 SATKARTAR RICE 7232.40 82 593057 03.10.12 11861 7 830 LI 8 SHIVA AGRO 39883.5 5 82 3270451 30.09.12 65409 6 3934 9 SHREE RAM INDUSTRY 9997.80 82 819820 20.09.12 16396 6 984 10 SOMA RICE 27341.3 0 82 2241987 28.09.12 44840 6 2690 524688 4302441 6 860478 51340 24689.5 4 2434580 48692 X 24 11686 BALANCE DEMAND INTEREST TOTAL 201(1) 48692 201(1 A) 63026 111718 A.Y. 2013 -14 SR. NO. NAME QT. RATE TOTAL AMOUNT RETURN FILED ON TDS MONTH INTEREST 1 CHIRAG RICE MILLS 50610.6 1 86 4352512 26.9.13 87050 6 5233 2 G.N. RICE MILLS 294.28 86 25309 23.8.13 506 5 25 3 JAGDAMBAY RICE 18447.9 2 86 1586521 .9.13 32176 6 1904 4 LAXMI RICE MILLS 18707.1 5 86 1608815 19.3.14 32176 12 3861 .5 MAHAL RICE MILLS 67881.4 9 86 5837808 21.9.13 116756 6 7005 8 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 6 MAHAVIR RICE 755760 3 86 6499539 27.9.13 129971 6 7800 7 R. S. RICE MILLS 762800 5 86 6560084 1.10.13 131202 7 9184 8 SATKARTAR RICE 8543.85 86 734771 06.10.14 14695 19 2792 9 SHIVA AGRO INDUSTRIES 25661.5 4 86 2206892 15.11.13 44138 8 3531 10 SHIVA RICE MILL 59761.0 7 86 5139452 27.09.13 102789 6 6167 11 SOMA RICE MILLS 534166 5 86 4593832 30.913 91877 6 5513 NO PROPP 0.62 53 782910 1 53005 1 BALANCE DEMAND INTEREST TOTAL 201(1) 53 201(1 A) 53006 53059 A.Y. 2014-15 SR. NO. NAME QT. RATE TOTAL AMOUNT RETURN FILED ON TDS MONTH INTEREST 1 CHIRAG RICE MILLS 16691.0 4 86 1433429 22.11.14 28709 - . ' 2 MAHAL RICE MILLS 176963 3 86 1521884 19.11.14 30438 - 3 MANU RICE MILLS 21572.1 2 86 1855202 28.11.14 37104 - - 4 R. S. RICE 24554.6 0 86 2111696 29.11.14 42234 - - 5 . SHIVA RICE 63012.4 4 86 5419070 17.11.14 108381 6 SOMA RICE 16217.5 9 86 1394713 07.10.14 27894 - - 159744. 12 1373794 - 274760 - 6. THESE DOCUMENTS WERE VERIFIED BY THE INSPECTOR O F THE O/S INCOME TAX OFFICE (TDS)-1, JALANDHAR ALONGWITH ME AND THE FIND INGS ARE AS UNDER:- 9 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 A.Y. 2012-13 EXCEPT FOR IN RESPECT OF 3 RICE SHELLERS I.E. PHAN T OM RICE MILLS, ANGAD AGRO FOODS AND RANJAN RICE MILLS COMPLETE DET AILS ARE ON RECORDS AS FILED. A.Y. 2013 - 14 EXCEPT FOR IN RESPECT OF M/S ANGAD AGRO FOODS COMP LETE DETAILS ARE ON RECORDS, AS FILED. A.Y. 2014-15 COMPLETE DETAILS ARE ON RECORDS. 7. I FIND THAT THE RATIO OF THE DECISION OF HONOUR ABLE SUPREME COURT IN CASE OF M/S HINDUSTAN COCA COLA BEVERAGES(P) LTD. 2 93 ITR 226, THE DEDUCTOR IS NOT TO BE TREATED AS ASSESSEE IN DEFAUL T IN RESPECT OF TAXES PAID THOUGH PAID BY THE DEDUCTEES, IS SQUARELY APPLICABL E TO THE FACTS OF THIS CASE AND RESPECTFULLY FOLLOWING THE SAME IT IS HELD AS UNDER: (I) A.Y. 2012-13 EXCEPT FOR THE TAX DEDUCTIBLE IN CASES OF M/S PHANTOM RICE MILLS, M/S ANGAD AGRO FOODS AND M/S RA NJAN RICE MILLS, THE ASSESSEE IS NOT TO BE TREATED AS ASSESSE E IN DEFAULT IN RESPECT OF OTHER RICE SHELLERS. HOWEVER, INTEREST U NDER SECTION 201(1 A) OF INCOME TAX IN CHARGEABLE AS PER LAW EVEN IN R ESPECT OF THE CASES WHERE TAXES ARE PAID BUT BELATEDLY. THE ASSES SEE IS TO BE TREATED AS IN DEFAULT IN RESPECT, OF TAX DEDUCTIBLE AND INTEREST PAYABLE UNDER SECTION 201(1A) OF INCOME TAX ACT IN RESPECT OF M/S PHANTOM RICE MILLS, M/S ANGAD AGRO FOODS AND M/S RA NJAN RICE MILLS. J- (II) A.Y. 2013-14 EXCEPT FOR M/S PHANTOM RICE MILLS, THE ASSESSEE IS NOT BE TREATED IN DEFAULT. (III) A.Y. 2014-15 THE ASSESSEE IS NOT TO BE TAKEN AS ASSESSEE IN DEFAULT AS COMPLETE DETAILS ARE FILED. NO INTEREST WAS CHARGED IN THE ORDER OF A.O. 8. GROUND NO. 1 IS THUS DECIDED, SINCE THE ISSUE H AS BEEN DECIDED CONSIDERING AND IN THE LIGHT OF THE DECISION OF HON OURABLE APEX COURT IN CASE OF HINDUSTAN COCA COLA BEVERAGES (P) LTD. ITR 226, THE OTHER GROUNDS ON ALTERNATE MERIT NEED NOT BE GONE INTO. 9. IN THE RESULT, APPEALS FOR AY 2012-13 AND AY 201 3-14 ARE PARTLY ALLOWED AND AY 2014-15 IS ALLOWED. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THOUGH RELIEF HAS BEEN ALLOWED TO THE ASSESSEE, THE LEGAL ISSUE RAISED WAS NEITHER DEALT 10 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 WITH, OR TO DECIDED BY THE LD. CIT(A); AND THAT TH IS LEGAL ISSUE WAS AS TO WHETHER THE ASSESSEE WAS REQUIRED TO DEDUCT TAX UND ER THE PROVISIONS OF SECTION 194C OF THE ACT ON THE VALUE OF THE BY-PRO DUCTS AS DETERMINED BY THE AO. IT HAS BEEN CONTENDED THAT THIS LEGAL ISSUE OUG HT TO HAVE BEEN DECIDED BY THE LD. CIT(A) FIRST OF ALL AND NOT THE ALTERNATIV E CONTENTION OF THE ASSESSEE, AS HAS BEEN DONE; THAT SINCE THE ISSUE ON MERITS IS A RECURRING ISSUE, REQUIRING DETERMINATION AS TO WHETHER THE ASSESSEE IS REQUIRE D TO MAKE TDS U/S 194C AT ALL; THAT IF THE ISSUE IS DECIDED AND IT GOES IN FAVOUR OF THE ASSESSEE, FOR WHICH, THE ASSESSEE IS SANGUINE, IT SHALL PUT THE C ONTROVERSY TO REST AND THAT NO FURTHER ADDITION ON THIS SCORE WOULD BE INVITED. 7. ON THE OTHER HAND, THE LD. DR HAS CONTENDED THAT THE GRIEVANCE SOUGHT TO BE RAISED BY THE ASSESSEE IS TOTALLY MISCONCEIVE D IN AS MUCH AS RELIEF HAS ALREADY BEEN GRANTED TO THE ASSESSEE BY THE LD. CIT (A) IN ALL THE THREE YEARS CONCERNED, AFTER PASSING AN ELABORATE SPEAKING ORDE R, WHICH HAS NOT AT ALL BEEN DISPUTED BY THE ASSESSEE. THEREFORE, THE INSTANT AP PEALS HAVE UNNECESSARILY BEEN FILED. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE GON E THROUGH THE MATERIAL AVAILABLE ON RECORD. A PERUSAL OF THE LD. CIT(A)S ORDER SHOWS THAT IN PARA-4 OF HIS ORDER, THE LD. CIT(A) HAS ENSCONCED ON DECIDIN G THE ALTERNATE ARGUMENT, I.E., THAT THE DEDUCTEES HAVING PAID DUE TAX ON THE IR INCOME, IN VIEW OF HINDUSTAN COCA COLA BEVERAGES (P) LTD., 293 ITR 2 26 (SC), THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT. 11 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 9. NOW, OBVIOUSLY, THIS ALTERNATE ISSUE IS ORDINALLY SECON DARY TO THE MAIN LARGER ISSUE RAISED BY THE ASSESSEE, I .E., WHETHER AT THE OUTSET, THE TDS WAS REQUIRED TO BE MADE BY THE ASSESSEE UN DER THE PROVISIONS OF SECTION 194C OF THE ACT. IF THIS JURISDICTIONAL ISS UE IS DECIDED, THE ADDITION MADE IN PURSUANCE OF THE ALLEGED APPLICABILITY OF T HE PROVISIONS OF SECTION 194C OF THE ACT WILL STAND CHECKED AT THE THRESHHOLD. TH EREFORE, WE DEEM IT APPROPRIATE TO CONSIDER AND DECIDE THIS ISSUE. 10. IN THIS REGARD, IT IS SEEN THAT THE ASSESSEE FI LED AN APPEAL BEFORE THE LD. CIT(A) AGAINST THE ORDER OF THE AO ON THESE ACCOUNT S: I) WHETHER THE ASSESSEE CAN BE DEEMED TO BE ASSESSE E IN DEFAULT UNDER THE PROVISIONS OF SECTION 201/201(IA) OF THE INCOME TAX ACT, 1961. II) WHETHER THE ASSESSEE WAS REQUIRED TO DEDUCT TDS UNDER THE PROVISIONS OF SECTION 194C OF THE INCOME TAX ACT, 1 961 ON THE VALUE OF THE BY-PRODUCTS AS DETERMINED BY THE A.O. III) WHETHER THE ASSESSEE CAN BE DEEMED TO BE ASSES SEE IN DEFAULT UNDER THE PROVISIONS OF SECTION 201/201(1A) OF THE ACT IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (P) LTD. VS. CIT 29 3 ITR 226 (SC). 11. THE STAND OF THE ASSESSEE ALL THROUGH HAS BEEN, AS REITERATED BEFORE US, IS THAT THE WHOLE ACTIVITY OF PROCUREMENT OF FOOD GRAI NS, SHELLING, DELIVERY, STORAGE, PAYMENTS, ETC., IS UNDERTAKEN BY THE PROCUREMENT AG ENCIES UNDER THE POLICY AND INSTRUCTIONS LAID DOWN BY THE GOVT. OF INDIA ( GOI, FOR SHORT). THE ACTIVITY IS UNDERTAKEN FOR THE WELFARE OF THE PEOPLE AND FOR TH E FOOD SECURITY OF THE NATION. THE GOVERNMENT OF INDIA HAS FIXED THE MILLING AT R S.15 PER QT. OF PADDY MILLED PAYABLE TO MILLERS FOR THE RELEVANT YEAR. AS PER TH E MILLING POLICY OF THE GOI, THE BYE PRODUCTS OF THE MILLING OPERATIONS, I.E., BROKE N RICE, KANI, HUSK AND RICE 12 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 BRAN, ETC., SHALL BE THE PROPERTY OF THE MILLERS AN D THE GOVT. SHALL NOT HAVE ANY RIGHT OR RESPONSIBILITY ON IT. THE POLICY FOR REMUN ERATION TO BE PAID IN LIEU OF SHELLING CANNOT BE ALTERED BY THE PROCUREMENT AGEN CIES AND IS BOUND BY RULES AND REGULATION MENTIONED THEREIN. THE ASSESSEE GOT THE PADDY MILLED FROM THE APPROVED MILLERS DURING THE CONCERNED YEARS AND PAI D THE MILLING CHARGES @ RS.15/- PER QTL. AFTER THE DEDUCTION OF TDS AT AP PLICABLE RATES. THE ITO TDS- 1, HAS DETERMINED THE SHORT DEDUCTION OF TDS ON ACC OUNT OF DEFAULT OF NON- DEDUCTING OF TAX AT SOURCE ON THE VALUE OF 33% OF THE BYE PRODUCTS WHICH REMAINED AFTER SHELLING OF PADDY FOR RICE. THE SO C ALLED BYE PRODUCTS ARE WASTAGES FOR THE ASSESSEE, SINCE THE ASSESSEE, BEIN G A FOOD GRAIN PROCUREMENT AND STORAGE COMPANY, PROCURES AND STORES THE FOOD GRAINS WHICH ARE FIT FOR HUMAN CONSUMPTION. THE BYE PRODUCTS ARE NOT FIT FOR HUMAN CONSUMPTION. FURTHER, THESE SO CALLED BYE PRODUCTS ARE THE LOSSE S ON ACCOUNT OF PADDY, WHICH ARE INCIDENTAL TO THE ACTIVITY OF SHELLING PR OCESS AND IN EVERY MANUFACTURING PROCESS, SUCH WASTAGE IS INEVITABLE. THEREFORE, NO QUESTION OF DEDUCTION OF TAX AT SOURCE ARISES. THE BYE PRODUCTS ARE LEFT WITH THE MILLERS, BECAUSE THE ASSESSEE DOES NOT WANT TO BE BURDENED W ITH THE LIABILITY OF TRANSPORTING SUCH BROKEN RICE TO ITS GODOWN AND TAK ING UP THE RESPONSIBILITY EITHER OF DISPOSING OF IT OR OF SELLING IT. THE TDS IS TO BE DEDUCTED U/S 194C OF THE ACT, WHEN THE AMOUNT IS PAID OR CREDITED EITHER THROUGH CASH OR CHEQUE OR OTHERWISE. THE MONETARY/TRANSACTION VALUE OF THE WA STAGE WAS NEVER CALCULATED, CREDITED OR PAID. THE RESIDUAL PRODUCT OF PADDY AFTER SHELLING REMAINS WITH THE MILLER, AS PER THE POLICY OF THE G OI. AS SUCH, THE ASSESSEE 13 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 HAS NO LIEN ON SUCH RESIDUAL. THEREFORE, ITS MONETA RY VALUE IS ZERO FOR THE ASSESSEE. SO, THE QUESTION OF DEDUCTION OF TAX ON T HE SOURCE DOESNT ARISE. WHEN THE TERMS BETWEEN THE PARTIES ARE UNDER THE AG REEMENT, THE TERMS ARE SACROSANCT BETWEEN THEM AND THEY CAN NEITHER BE VAR IED NOR ALTERED NOR EXPLAINED OTHERWISE BY ADDUCING ORAL EVIDENCE. THE RE IS NOTHING IN THE AGREEMENT TO SUGGEST THAT THE MILLING CHARGES ARE P AID AT THE DISCOUNTED RATE AND THE BYE PRODUCTS ARE LEFT WITH THE MILLERS FOR ANY HIDDEN CONSIDERATION OR AGAINST ANY CUT/ALLEGED DISCOUNT IN THE MILLING CHA RGES. THERE IS NOTHING IN THE AGREEMENT TO SHOW THAT THE BYE PRODUCTS ARE LEFT W ITH THE MILLERS AS A CONSIDERATION OF THE MILLING CHARGES. THE ITO, TDS -1 HAD ARBITRARILY CALCULATED THE DEEMED VALUE OF THE BYE PRODUCTS, AS THE DEEMED CONSIDERATION FOR MILLING, WITHOUT ANY DOCUMENTARY EVIDENCE THAT THE ASSESSEE HAD PAID THE FRACTION OF THE MILLING CHARGES IN CASH JUST TO SAV E THE CASH AND REST IN THE FORM OF POSITION OF BYE PRODUCTS. THERE IS NO DEEMING P ROVISION IN SECTION 194C OF THE ACT. THE ITO, TDS-1 HAS ARBITRARILY CALCULATED THE FINANCIAL VALUE OF THE LEFTOVER BYE PRODUCTS AND TREATED THE SAID ARBITRAR Y VALUE AS DEEMED CONSIDERATION AND RAISED THE DEMAND ON THE ASSESSEE . FURTHER, IN THE CASE OF THE ASSESSEE, IT IS DIFFICULT TO SAY THAT THERE IS A PAYMENT AS A CONSIDERATION FOR THE LABOUR, OR THE WORK THAT IS RENDERED. THE ASSES SEE IS JUST EXCHANGING THE PRODUCT. IN THE EXCHANGE, HE IS NOT GETTING THE SAM E PRODUCT BUT A DIFFERENT PRODUCT AND NOT TO THE SAME EXTENT, BUT TO A DIFFER ENT EXTENT. FURTHER, EVEN IF ONE WERE TO SAY THAT THERE IS A CONSTRUCTIVE PAYMEN T, IT IS DIFFICULT TO QUANTIFY THE SAME AND SAY THAT THE ASSESSEE WAS UNDER AN OBL IGATION TO DEDUCT TAX AT 14 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 SOURCE AT SUCH CONSTRUED PAYMENTS. THE ASSESSEE HAS NOT EVEN CREDITED SUCH CONSTRUED CONSIDERATION FOR SUPPLY OF LABOUR IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. FURTHER, IT IS DIFFICULT TO DETERMINE WHE THER THE SERVICES RENDERED BY THE MILLERS WERE ON ACCOUNT OF PROCESS LOSS, OR FL UCTUATION IN MARKET PRICE. THE PROCESS LOSS CAN BE MORE OR LESS THAN AS AGREED BET WEEN THE PARTIES. AS PER THE AGREEMENT, THE MILLER SHALL SUPPLY 67% RICE AS PER THE SPECIFICATION OF THE AGENCIES. EVEN IF THE PROCESS LOSS IS MORE, THE MIL LER IS BOUND TO SUPPLY 67% RICE AS PER THE SPECIFICATION OF THE AGENCIES AND I F THE RICE DOES NOT MEET THE SPECIFICATION, THE MILLER IS FURTHER LEVIED PENALTI ES IN THE NATURE OF QUALITY CUTS. THEREFORE, TO SUGGEST THAT THE VALUE OF THE BYE PR ODUCTS IS COMPENSATION FOR MILLING CHARGES, IS HIGHLY EXAGGERATED. THEREFORE, TO CONCLUDE THAT THE ENTIRE RESIDUAL IS FOR THE PURPOSE OF MILLING IS NOT FAIR AND CORRECT, AND THAT THE ASSESSEE BEING A STATE GOVT. UNDERTAKING, THE QUEST ION OF ANY EVASION OR ADOPTION OF ANY ILLEGAL MEANS TO PROVIDE UNDUE BENE FIT TO ANY PERSON DOES NOT ARISE. 12. IT HAS ALSO BEEN CONTENDED THAT THE LD. CIT(A) , VIDE ORDER DATED 25.01.2016, IN IDENTICAL FACTS AND CIRCUMSTANCES, ALLOWED THE APPEAL OF THE ASSESSEE AND HELD THAT THE ASSESSEE IS UNDER NO LIA BILITY TO DEDUCT TDS IN RESPECT OF BYE PRODUCTS. 13. RELIANCE HAS BEEN PLACED ON THE DECISION OF THE ITAT, DELHI BENCH, IN THE CASE OF ITO VS. AHAAR CONSUMER PRODUCTS (P.) LTD, INITA NO.2310/DEL/2010. 15 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 14. HAVING CONSIDERED THE RIVAL CONTENTIONS ON TH E 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 PROCUREM ENT CORPORATION LIMITED, VIDE ORDER DATED 25.01.2016, ON EXACTLY SIMILAR FAC TS AND CIRCUMSTANCES, AS DECIDING THE LEGAL ISSUE RAISED HEREIN, HELD TDS N OT 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 L D. COLLEAGUE (CIT(A), PATIALA AND ALSO THE ORDER OF THE HONBLE ITAT, DEL HI, AS REFERRED ABOVE. THE ONLY DIFFERENCE BETWEEN THE CONTRACTS AS DISCUS SED IN THE DECISION OF THE HONBLE ITAT, DELHI AND THE ASSESSEE GOVERNMENT AGENCY AND THE RICE MILLERS IS THAT APART FROM THE BYE PRODUCTS LEFT WI TH 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 IDEN TICAL. THE HONBLE ITAT HAS DISCUSSED IN GREAT DETAILS EVERY ASPECT OF THE TRANSACTION, LEGAL ISSUES INVOLVED AND HAD EXAMINED THE ISSUE AT HAND FROM VA RIOUS ANGLES AND FOUND THAT IN TERMS OF SECTION 194C OF THE I.T. ACT NO TAX WAS DEDUCTIBLE. MOREOVER, THIS IS THE ONLY DECISION AVAILABLE BEFOR E ME AND NO ADVERSE DECISION IS KNOWN AND RESPECTFULLY FOLLOWING THE SA ME AS WELL AS THE ORDER OF MY LD. COLLEAGUE (CIT(A), PATIALA WHO HAS, IN HI S ORDER DATED 29.11.2015 AS REFERRED ABOVE, I HEREBY DIRECT THE A O NOT TO TREAT THE ASSESSEE IN DEFAULT AS FAR AS THE PROVISIONS OF SEC TION 201/201(1A) OF THE I.T. ACT ARE CONCERNED. 15. HENCE, THE SAME LD. CIT(A), IN OUR CONSIDERED, COULD NOT HAVE BEEN TAKEN A DIFFERENT VIEW IN THE CASE OF A SIMILARLY PLACED ASSESSEE. THE RULE OF CONSISTENCY SQUARELY APPLIES. THE ABOVE APART, IN AHAAR CONSUMER PRODUCTS (P) LTD. (SUPRA), IT HAS BEEN HELD AS FOLLOWS: 12. NOW, WE HAVE TO EXAMINE WHETHER THE ASSESSEE IS OBL IGED TO DEDUCT TAX AT SOURCE ON THE SO-CALLED CONSTRUCTIVE PAYMENT AS CONSTRUED BY THE ASSESSING OFFICER IN TERMS OF THE AGREEMENT. THE AS SESSEE, IN THIS CASE, SUPPLIES 100 KG OF WHEAT AND TAKES BACK 88 KGS. OF ATTA OR 85 KGS. OF DALIA AFTER ITS PROCESSING DONE BY THE AIL AND AM- IS REQUIRED TO DELIVER THE END PRODUCT IN THIS PROPORTION TO THE ASSESSEE WHO HAS SUPPLIED THE RAW MATERIAL. DOES THE PROVISION OF SECTION 194C OF THE ACT CREATE AN 16 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 OBLIGATION ON THE PART OF ASSESSEE TO DEDUCT TAX AT SOURCE IN RESPECT OF ANY OF THE TRANSACTIONS IT HAS ENTERED INTO WITH THE AI L? SECTION 194C OF THE ACT WAS BROUGHT INTO STATUTE BY THE FINANCE ACT, 1972. CIRC ULAR NO. 86 DATED MAY 29, 1972 WAS ISSUED INTER ALIA STATING THAT THE PROVISIONS OF SECTION 194C WOULD APPLY ONLY IN RELATION TO LABOUR CONTACT S AND WOULD NOT COVER CONTRACTS FOR SALE OF GOODS. IF A MANUFACTURER PURC HASES MATERIAL ON HIS OWN AND MANUFACTURES A PRODUCT AS PER THE REQUIREME NT 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 ACC ORDING TO THE REQUIREMENT OF THE CUSTOMER DID NOT MEAN OR IMPLY T HAT 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 F OR CARRYING OUT ANY WORK, THE MATTER SHOULD BE DECIDED IN THE LIGHT OF THE PR INCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN STATE OF TAMIL NADU V. SH THIRUMAGAL MILLS LTD. AIR 1972 SC 1148. THE BOMBAY HIGH COURT HAS ALSO AN ALYZED THE DIFFERENCE BETWEEN THE SALE AND WORKS CONTRACT IN T HE 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 BOT TLING AND MARKETING FOREIGN MADE INDIAN LIQUOR, INCLUDING THE PRINTING AND PACKING MATERIAL. M, ANOTHER ESTABLISHMENT SUPPLIED THE PRINTED LAB ELS 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 O F 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 BE ING SUPPLIED BY THE ASSESSEE TO IVI. IN THE FACTS OF THIS CASE, THE S UPPLY OF PRINTED LABELS BY M TO THE ASSESSEE WAS 'CONTRACT OF SALE' AND IT C OULD NOT BE TERMED A 'WORKS CONTRACT'. HENCE THE PROVISIONS OF SECTION 1 94C WERE HELD TO BE NOT APPLICABLE. 13. THE HIGH COURT WHILE DECIDING THIS CASE HAS REV IEWED A NUMBER OF CASES AND DECIDED THAT THE SALE OF CONTRACT DOES NO T CONVERT A CONTRACT OF SALE INTO A WORKS CONTRACT ALTHOUGH WE AGREE THAT T HESE CASES BY THEMSELVES MAY NOT BE ABLE TO THROW ANY LIGHT ON TH E PRESENT CONTRACT ENTERED INTO BY THE ASSESSEE. HENCE, THE ASSESSEE I S SUPPLYING WHEAT AND GETTING BACK ATTA OR DALIA AS THE CASE MAY BE, IN A N AGREED PROPORTION. FOR SUCH EXCHANGE, THERE IS ABSOLUTELY NO PAYMENT OF AN Y CONSIDERATION. EVEN IF ONE WERE TO TREAT IT AS A WORK CONTRACT AND NOT A CONTRACT OF SALE, IT IS 17 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 DIFFICULT TO SAY THAT THERE IS A PAYMENT AS A CONSI DERATION FOR THE LABOUR OR THE WORK THAT IS RENDERED. THE ASSESSEE IS JUST EXC HANGING THE PRODUCT; IN THE EXCHANGE HE IS NOT GETTING THE SAME PRODUCT BUT A DIFFERENT PRODUCT AND NOT TO THE SAME EXTENT BUT TO A DIFFERENT EXTEN T. IN OTHER WORDS, IT IS DIFFICULT TO SAY THAT THE ASSESSEE HAS MADE ANY PAY MENT IN UNDERTAKING THIS CONTRACT ON THE BASIS OF THE AGREEMENT THAT IS ACTED UPON BY THE PARTIES. THERE IS NO PAYMENT OF ANY SUM BY THE ASSE SSEE TO AIL. EVEN IF ONE WERE TO SAY THAT THERE IS A CONSTRUCTIVE PAYMEN T, IT IS DIFFICULT TO QUANTIFY THE SAME AND SAY THAT THE ASSESSEE WAS UND ER AN OBLIGATION TO DEDUCT TAX AT SOURCE AT SUCH CONSTRUED PAYMENTS. TH E ASSESSEE HAS NOT EVEN CREDITED SUCH CONSTRUED CONSIDERATION FOR SUPP LY OF LABOUR IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN FACT, IT HAS N OT EVEN CLAIMED ANY EXPENDITURE AS DEDUCTION. TO SAY THAT SUCH EXPENDIT URE HAS RESULTED IN AN OUTFLOW WITHOUT DEDUCTION OF TAX AT SOURCE IS TOO M UCH AND IS NOT BORNE OUT FROM THE TRANSACTION ENTERED INTO BETWEEN THE PARTI ES. THE QUESTION OF DISALLOWANCE BY APPLYING THE PROVISIONS OF SECTION 40(A)(IA ), IN OUR OPINION, IS NOT IN ACCORDANCE WITH LAW AS THE ASSESSEE IS UN DER NO OBLIGATION TO DEDUCT THE TAX AT SOURCE IN TERMS OF A CONTRACT WHE RE IT DOES NOT REQUIRE ANY PAYMENT OF ANY SUM EVEN IF THE SUM HERE MEANS T HAT THE PAYMENT COULD BE OF SOME KIND BUT IT IS DIFFICULT TO SAY TH AT THE ASSESSEE HAS MADE THESE PAYMENTS TO THE EXTENT OF SHORTFALL IN GETTIN G THE WHEAT SUPPLIED BACK AND CONSTRUE IT AS THE PAYMENT TO THE OTHER FO R PROCESSING THE WHEAT INTO ATTA OR DALIYA. THE DEPARTMENT MUST HAVE APPRE CIATED THE CONTRACT AS A WHOLE WHICH DOES NOT INVOLVE ANY PAYMENT OR GETTI NG THE PAYMENT FOR SERVICES RENDERED. IT IS A CASE OF BARTER OR EXCHAN GE 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 HONBLE SUPREME COUR T 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 DEDU CT 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 C LAIMED UNDER THE ACT. THE ASSESSEE HAS NOWHERE CLAIMED THE PAYMENT A S DEDUCTION. ONLY PU R CHASE ONCE OF WHEAT IS WHAT IT HAD PAID ON WHICH NO DEDUCTION OF TAX IS REQUIRED AND THAT GOT LOST IN EXCHANGE FOR OBTAININ G 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 PAY MENT OF CONSIDERATION 18 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 FOR THE SERVICES RENDERED. WE MUST EXAMINE THE ISSU E FROM ANOTHER ANGLE. HAD THE ASSESSEE OWNED THE PLANT AND GOT THE ATTA A ND DALIA MANUFACTURED FROM WHEAT, IT COULD HAVE CLAIMED A PR OCESS LOSS AND THAT COULD HAVE BEEN IMPLIEDLY A PART OF BUSINESS TRANSA CTION AND NO QUESTION OF ANY DISALLOWANCE OF SUCH LOSS COULD POSSIBLY HAV E ARISEN. MERELY BECAUSE THE ASSESSEE HAS GOT IT ROUTED THROUGH ANOT HER CONCERN ON A SORT OF OUTSOURCING BASIS, IT DOES NOT RESULT IN AN OUTF LOW. IT IS JUST AN EXCHANGE AND BARTER OF ONE COMMODITY AGAINST THE OTHER AND T HE WHOLE CONTRACT CANNOT BE TERMED AS WORKS CONTRACT IN THE STRICT SE NSE OF THE TERM WHICH IS GENERALLY UNDERSTOOD UNDER THE PROVISIONS OF SECTIO N 194C. IN OUR OPINION, THE ASSESSING OFFICER WENT WRONG IN PRESUMING THAT THE DIFFERENCE IN THE WHEAT SUPPLY AND THE ATTA OR DALIA GOT IN RETURN RE PRESENTS SUM PAID FOR SERVICES RENDERED AND PAYMENTS FOR SUCH SERVICES AR E CLAIMED AS DEDUCTION FROM THE PROFIT AND GAINS OF BUSINESS UND ER SECTION 32 TO SECTION 38. ONLY WHEN THE CLAIM OF THE ASSESSEE FOR DEDUCTI ON IS UNDER SECTION 32 TO SECTION 38, THE PROVISIONS OF SECTION 40(A)( IA) CAN BE PRESSED INTO SERVICE TO DISALLOW SUCH CLAIMS FOR DEDUCTION. AT THE COST OF REPETITION, WE MAY SAY THAT TO INVOKE SAID PROVISION OF SECTION 40(A)(IA ) , FIRST OF ALL, THE CASE SHOULD BE MADE OUT BY THE DEPARTMENT THAT THE ASSES SEE IS CONTEMPLATING DEDUCTION UNDER SECTIONS 32 TO 38 ON WHICH TAX IS D EDUCTIBLE AND THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE. IN OUR OPI NION, TAX IS NOT DEDUCTIBLE AND THE ASSESSEE HAS NOT CLAIMED ANY DED UCTION UNDER SECTION 32 TO SECTION 38. THIS LOSS, IF ANY, IS IN THE NET PROFIT IN THE TRADING ACCOUNT WHICH IS A COMPUTATION UNDER SECTIONS 28 AND 29 AND NOT CLAIMS UNDER SECTIONS 32 TO 38 OF THE INCOME-TAX ACT. EVEN TAKIN G THIS VIEW OF THE MATTER, IN OUR OPINION, THE ASSESSEE IS ENTITLED TO SUCCEED AND THERE IS NO QUESTION OF DEDUCTION OF TAX AT SOURCE AND CONSEQUE NTLY NO QUESTION OF MAKING ANY DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA ) OF THE ACT. 14. WE MUST ALSO VIEW THE WHOLE TRANSACTION UNDER THE AGREEMENT FROM A DIFFERENT ANGLE. THE ASSESSEE GIVES THE WHEAT AND A CCEPTS 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 T HIS METHOD HAS PREVENTED ITSELF FROM FACTORS LIKE FALL IN THE PRIC ES OF EITHER RAW MATERIAL OR OF THE FINISHED PRODUCTS. THE MARKET VALUE OF THE W HEAT AND THE END PRODUCTS ARE TOTALLY DIFFERENT AND FLUCTUATE IN DIF FERENT DIRECTIONS. ALL THESE FLUCTUATIONS ARE WARDED OFF BY THE PRESENT AGREEMEN T, WHICH IS JUST EXCHANGE OF GOODS FOR GOODS AND DOES NOT INVOLVE AN Y CASH OUTFLOW. ALTHOUGH SERVICES WERE TAKEN, IT IS DIFFICULT TO SA Y THAT THE RESIDUALS AND THE LOSSES LEFT BY THE ASSESSEE IN FAVOUR OF AIL AR E PURELY CONSIDERATION FOR 19 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 THE JOB THAT IS DONE THE MARKET FLUCTUATIONS IN THE PRICE STRUCTURE OF THE RAW MATERIAL AND THE END PRODUCT CANNOT BE JUST IGN ORED IN THE WHOLE TRANSACTION NOR THE PROCESS LOSS. THE PROCESS LOSS COULD BE EITHER MORE OR LESS THAN THE PERCENTAGE AGREED TO BETWEEN THE PART IES. BUT STILL THE PARTIES SETTLE THE TRANSACTIONS AT AN AGREED PROPOR TION. IN OTHER WORDS, THE RESIDUAL THAT IS LEFT BY THE ASSESSEE, APART FROM C OVERING THE LABOUR COST OF PROCESSING, ALSO INCLUDES THE PROTECTION FROM MARKE T 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 CO RRECT HAVING REGARD TO THE TOTALITY OF THE TRANSACTION ENTERED INTO BY THE PAR TIES. THE CIT(A) HAS GIVEN THE FAVOURABLE ORDER RELYING U PON THE ORDER OF THE HONBLE DELHI ITAT IN THE ABOVE NOTED CASE. IN LIGHT OF THE ABOVE, THE PROVISIONS OF SECTION 19 4C ARE NOT APPLICABLE TO THE CASE OF THE APPELLANT AND THE APP ELLANT PRAYS THAT THE QUESTION OF LAW BE ANSWERED IN FAVOUR OF THE AP PELLANT. 16. THE FACTS IN THE PRESENT CASE ARE DIRECTLY AND SQUARELY COVERED BY AHAAR CONSUMER PRODUCTS P LTD. (SUPRA). IN FACT, AHAAR CONSUMER PRODUCTS P LTD. (SUPRA) FORMED THE BASIS OF THE DECISION OF T HE LD. CIT(A), DECIDING THE LEGAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF PU NJAB STATE GRAIN PROCUREMENT CORPORATION LTD. (PUNGRAIN), HOSHIARPUR. TO REITER ATE, THE STAND OF THE PRESENT ASSESSEE IS EXACTLY SIMILAR TO THAT OF PUNG RAIN. THEREFORE, IT CANNOT BE DISPUTED THAT THE OBSERVATIONS OF THE TRIBUNAL IN AHAAR CONSUMER PRODUCTS P LTD. (SUPRA) ARE ALSO DIRECTLY APPLICABLE TO THE PRESENT ASSESSEE AS WELL. THEREFORE, FOLLOWING AHAAR CONSUMER PRODUCTS P LTD . (SUPRA), WE HOLD THAT THE ASSESSEE WAS NOT REQUIRED TO MAKE TDS UNDER SECTION 194C ON THE VALUE OF THE BYE PRODUCTS. THIS ISSUE IS, ACCORDINGLY, DECIDED I N FAVOUR OF THE ASSESSEE. 20 ITA NOS. 54, 55 & 56 A.YS. 2012-13 TO 2014-15 17. AS NOTED IN THE INITIAL PORTION OF THIS ORDER, THE FACTS IN ALL THE APPEALS OF THE YEARS UNDER CONSIDERATION ARE EXACTLY SIMILAR I NTER-SE , THEREFORE, OUR OBSERVATIONS ARE, MUTATIS MUTANDIS, EQUALLY APPLI CABLE TO THE OTHER YEARS. 18. IN THE RESULT, ALL THE THREE APPEALS OF THE ASS ESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/ 07/2016. SD/- SD/- (T. S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: /07/2016. /SKR/ COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE:THE PUNJAB STATE COOPERATIVE SUPPLY AN D MARKETING FEDERATION LIMITED, NAWANSHAHAR. (2) THE ITO (TDS)-1, JLR (3) THE CIT(A), JLR (4) THE CIT, JLR (5) THE SR DR, I.T.A.T. TRUE COPY BY ORDER INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.