Case Law Details
Gondia Beedi Leaves Contractors Association Vs Union of India (Bombay High Court)
It is admitted that the re-sale of Tendu leaves, as it is without any process, after purchase from the Forest Department would amount to trading which does not qualify for exemption under sub-section (1A) of Section 206C of the Income Tax Act. It is the submission that the unprocessed Tendu leaves cannot be utilized for the purposes of manufacture or production of bidis and in such a case, the character of Tendu leaves is not changed. According to Shri Kaptan, the processed Tendu leaves sold are actually utilized for manufacture of bidi, a distinct product, which comes into existence, and hence qualify for exemption under sub-section (1A) of Section 206C of the said Act.
Relying upon the decision of the Apex Court in the case of Chowgule & Co. Pvt. Ltd. and another v. Union of India and others, reported in (1981) 1 SCC 653, it is urged that what is necessary in order to characterize an operation as processing is that the commodity must, as a result of operation, experience a change, which does not necessarily bring into existence a different product like bidi. The nature and extent of change is not material. From the said decision, a distinction is pointed out between manufacture and processing to urge that it is not necessary that the processing of commodity or goods should result in bringing into some different product so as to qualify for grant of exemption under sub-section (1A) of Section 206C of the Income Tax Act.
Now we proceed to deal with the contentions advanced. The first contention being that the Tendu leaves purchased from the Forest Department of the State of Maharashtra are processed so that it can be utilized for manufacture of bidi, it is covered by the word ‘processing’ employed under sub-section (1A) of Section 206C of the Income Tax Act. Shri Kaptan does not dispute that the identical process carried on the Tendu leaves was considered in decisions of several High Courts deciding the question as to whether the exemption under Section 206C of the said Act can be made available.
Even assuming that it is the processing of Tendu leaves, which is involved in terms of sub-section (1A), we are unable to understand the argument as to how the purchase and sale of processed Tendu leaves would not constitute ‘trading’ within the meaning of sub-section (1A). There is no restriction that the sale of processed or unprocessed Tendu leaves should only be to the manufacturer or producer of bidis, and Section 206C of the Income Tax Act does not provide for exemption from the collection of tax at source, if such Tendu leaves are sold to the manufacturer or producer of bidis therefrom. As a matter of fact, the members of the petitioner-association are collecting such tax at source from such manufacturers of bidi, at the time of sale of processed leaves and there is no grievance in respect of it. In view of this, even if the members of the petitioner-association are engaged in the sale of such Tendu leaves to the manufacturer or producer of bidis, it would be the trading, which would not qualify for exemption under sub-section (1A) of Section 206C of the Income Tax Act.
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