O/TAXAP/211/2006 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 211 of 2006 With TAX APPEAL NO. 440 of 2006 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER 1 Whether Reporters of Local Papers may be allowed to see judgment ? 2 To be referred to Reporter or not ? 3 Whether their Lordships wish to see fair copy of judgment ? 4 Whether this case involves substantial question of law as to interpretation of Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to civil judge? SHREE CHALTHAN VIBHAG KHAND....Appellant(s) Versus INCOME TAX OFFICER Opponent(s) Appearance: MR JP SHAH, ADVOCATE for Appellant(s) No. 1 MR MANISH J SHAH, ADVOCATE for Appellant(s) No. 1 MR SUDHIR M MEHTA, ADVOCATE for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 01/12/2014 COMMON ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) Page 1 of 7 O/TAXAP/211/2006 JUDGMENT 1. Since, issue involved in both these appeals is common, they are heard together and disposed of by this common judgment. 2. Tax Appeal No. 211 of 2006 is filed by Shree Chalthan Vibhag Khand Udyoug Sahakari Mandli Ltd., seeking to challenge order of learned ITAT, Surat (for short, Tribunal ), Dated : 31.08.2005, rendered in ITA No.3691/Ahd/2004 for A.Y. 2003-04, whereas, Tax Appeal No. 440 of 2006 is preferred by Shree Madhi Vibhag Khand Udyoug Sahakari Mandli Ltd., seeking to challenge order of learned ITAT, Surat, Dated : 31.08.2005, rendered in ITA No.3734/Ahd/2004 for A.Y. 2003-04. 3. brief facts of case are that appellants-assesses in both appeals are Cooperative Societies, which deal in manufacture of sugar from sugarcane supplied by farmers and sell, thereof. According to appellants, they used to purchase sugarcane from farmers on condition that farmers will supply same to gate of factory of respective appellant. Later on, Revenue issued notices to appellants, holding them defaulter under Section 201(1) of Income Tax Act, 1962 ( Act for short). revenue also levied penalty on appellants Page 2 of 7 O/TAXAP/211/2006 JUDGMENT for committing breach of aforesaid section. Hence, appellants approached learned CIT(A), which dismissed appeals of assesses. Being aggrieved thereby, assesses carried matter before learned ITAT, which passed impugned orders. Hence, present appeals. 4. At time of admitting these appeals, this Court framed following question; Whether in facts and in circumstances of case, Tribunal was right in law in holding that assessee was liable under Section 194C to deduct tax from payments made by farmer s Samiti in respect of various expenses including labour charges, transport charges, insurance charges etc. on behalf of farmers? 5. Mr. Shah, learned Advocate for appellants, submitted that Tribunal committed grave error in passing impugned orders, as it failed to appreciate material on record as well as provisions of Section 194C of Act in its proper perspective. Mr. Shah, submitted that assesses purchased sugarcanes from farmers, on condition that they shall supply same at factory gate and same being part of sale transaction, they are not required to deduct TDS. Page 3 of 7 O/TAXAP/211/2006 JUDGMENT 6. In support of his submissions, Mr. Shah placed reliance on decision of this Court in COMMISSIONER OF INCOME TAX (TDS) VS. KRISHAK BHARTI CO-OPERATIVE LTD. , [2012] 349 ITR 68 (Guj). 7. As against this, Mr. Mehta, learned Advocate for respondent-Revenue, supported orders passed by Tribunal and submitted that supply of sugarcanes at factory gate being work contract, Tribunal rightly passed impugned order and present appeals be dismissed. 8. In support of his submissions, Mr. Mehta relied on following decisions; (1) SHREE CHOUDHARY TRANSPORT COMPANY Vs. ITO , [2009]225 CTR 125 (Raj.); (2) PALAM GAS SERVICE VS. CIT , [2014] 47 taxmann.com 310 (HP). 9. Heard, learned Counsels for parties and perused material on record as well as orders passed by learned CIT(A) and Tribunal. It is admitted position that in case on hand assesses-cooperative societies Page 4 of 7 O/TAXAP/211/2006 JUDGMENT used to purchase sugarcanes from farmers, on condition that farmers shall supply same at gate of their respective factory. Meaning thereby, here, supply of sugarcane at gate of factories of assesses is not separate work contract, but, it is essentially part of sell transaction. In that view of matter, here, it would be relevant to refer to decision of this Court in CIT (TDS) VS. KRISHAK BHARTI CO-OPERATIVE LTD. (Supra). In that case, assessee was engaged in manufacture of fertilizers and for said purpose, it used to consume natural gas. assessee, therein, was supplied natural gas by different agencies through pipelines. In that case, according to Revenue, while purchasing gas from different agencies, assessee had entered into work contract for transportation of natural gas from seller s premises to buyer s consumption point, and therefore, they held that assessee, therein, was required to deduct TDS. However, this Court, in that case, held that to transport gas was part of sale transaction, and therefore, assessee, therein, was not required to deduct TDS. In our view, therefore, decision of Apex Court in case of CIT (TDS) VS. KRISHAK BHARTI CO- OPERATIVE LTD. (Supra) applies in full force to facts of this case. aforesaid provision Page 5 of 7 O/TAXAP/211/2006 JUDGMENT would apply to person, who had paid any sum, and respondent has not paid any charges. case of assessee in Tax Appeal No. 211 of 2006 is identical, and hence, authorities below grossly erred in interpreting provisions of law, and therefore, grounds urged by appellant find favour with us. 10. In case on hand, supply of sugarcanes at gates of factories of respective assesses was part of sale transaction, and therefore, we are of opinion that assesses are not liable to deduct TDS. In view of above discussion, decisions relied on by Mr. Mehta shall not apply to facts of present case. Hence, present appeals deserve to be allowed. 11. In result, both appeals are ALLOWED. orders of Tribunals, Dated : 31.08.2005, are QUASHED and set aside. question of law arising in these appeals is answered in favour of appellant-assesses and against respondent-Revenue. No order as to costs. (K.S.JHAVERI, J.) (K.J.THAKER, J) Page 6 of 7 O/TAXAP/211/2006 JUDGMENT UMESH Page 7 of 7 Shree Chalthan Vibhag Khand v. Income-tax Officer