Case Law Details
PCIT (TDS) Vs Nirmal Kumar Kejriwal (Calcutta High Court)
The first objection raised by the assessee was that the tax collected at source is applicable on raw timber which mean timber logs that is obtained from the forest produce. Apart from that they had stated that they were trading in processed wood which are imported from countries like Indonesia, Malaysia and Burma. Further it was stated that ‘sawn timber’ or in other words ‘processed timber’ is derived from timber logs which are cut in different sizes and then planned by a process involving labour and power and the saw mills which undertake such exercise are recognised by the Government of India and they are extended various concessions from various Governmental departments. The reply given by the assessee was not accepted by the assessing officer primarily for the ground that swan timber continues to remain as timber for all purposes and tax should have been collected at the post of sale. Aggrieved by such order, the assessee preferred appeal before the Commissioner of Income Tax (Appeals)-I, Kolkata, (CIT(A). By order dated 19th November, 2012, the appeal was allowed and the order passed by the assessing officer was set aside. Aggrieved by such order, the revenue preferred appeal before the tribunal which has been dismissed by the impugned order.
The object for introducing the said provision namely, Section 206 of the Act by Finance Act, 1988 was intended to levy and collect presumptive tax in the case of trading in certain goods to remove hardship and to remove the lacuna. The trades mentioned therein are alcoholic liquor for human consumption; timber obtained under a forest lease; timber obtained by any mode other than under forest lease and any other forest produce not being timber, at different rates. The object of introduction of the new provisions for working out the profits on presumptive basis was to get over the problems faced in assessing the income and recovering the tax in the case of persons trading in the above mentioned items. Further, it was found that large number of persons who are engaged in these activities do not maintain any books of accounts and locating such persons after the contract or agreement becomes impossible in many cases and even in cases where assessment had been completed by the department, it became extremely difficult to collect taxes from them. Therefore, the provisions were brought into the statute not only to estimate the profits on presumptive basis but also to collect the tax on such transactions at specified rates mentioned in Section 206C of the Act. Thus, we are to bear in mind the object behind insertion of the provision by Finance Act, 1988 as the provision clearly states that Section 206C falls in Chapter-XVII of the Act which deals with collection and recovery of tax. Sub-Chapter BB deals with collection at source. Section 206C deals with profits and gains from business of trading in alcoholic liquor, forest produce, scrap etc. In the instant case, we are not concerned with the alcoholic liquor or scrap or tendu leaves or other products but concerned only about timber. The table under Section 206(1) of the Act leased out four products as of 1990 of which serial No.(ii) deals with timber obtained under a forest lease for which percentage of tax is 15%. Serial no.(iii) deals with timber obtained by any mode other than under a forest lease for which the percentage of tax is 5%. Serial No.(iv) deals with any other forest produce not being timber and the rate of taxs 15%. Thus, what has to be borne in mind is that, the presumptive tax is collectible on a forest produce. This special provision was inserted by Finance Act, 1988 on account of difficulties experienced by the department for levying and collecting taxes on such transactions. Therefore, the test is whether the respondent/assessee had dealt with a forest produce and the test is not whether the timber and sawn timber are one and the same. In fact, such a test is not required to be applied in the case on hand as the same is not the subject-matter. In fact, the assessee, while submitting their reply to the show cause notice at the first instance, pointed out that collection of tax in terms of Section 206C would be applicable only in respect of timber obtained from forests. In effect, the assessee meant to say that they had not dealt with forest produce. Our view is duly supported by the decision of the Hon’ble Division Bench of the Andhra Pradesh High Court in the case of Andhra Pradesh Forest Development Corporation Ltd. vs. Assistant Commissioner of Income Tax & Anr. reported in 2005(2) ITR 245. The facts in the said case was also more or less identical and the only difference being the appellant/assessee, which was Forest Development Corporation of the State of Andhra Pradesh, took a stand that the product was an agricultural produce. Therefore, Section 206(1) of the Act would have no application to the case.
If the timber is being sized, sawn into logs of different dimensions and shapes in activities carried on saw mills authorised by the Government, it would amount to a different produce. Even in respect of timbers which are procured as described in table, if it is used in the process of manufacturing, the provision of Section 206C(1) of the Act would not be applicable due to the fact that the product ceased to be a forest produce.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
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