Andhra Pradesh Forest Development Corporation Ltd. v. Assistant CIT & Anr.

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The Tax Publishers2005 TaxPub(DT) 0876 (AP-HC) : (2005) 002 (I) ITCL 0296 : (2005) 272 ITR 0245 : (2005) 195 CTR 0081 : (2005) 144 TAXMAN 0051 Andhra Pradesh Forest Development Corporation Ltd. v. Asstt. CIT & Anr. () INCOME TAX --Tax Collection at source----Applicability of provisions of section 206CNo finding that timber, bamboo, eculayptus, etc., forest produce-- Catch Note: The AO treated the assessee as deemed to be in default on the ground that it failed to collect tax at source on sale of timber, bamboo, eculayptus, fire wood, etc. The assessee contended that all that it sold were agricultural produce and not forest produce, therefore, it was not incumbent on it to collect tax at source. Held: There was absence of finding of lower authorities as to whether products sold by assessee were forest produce, or agricultural produce therefore, matter was remanded back. Ratio: In the absence of relevant finding as to whether timber, bamboo, eculaptus, etc., are forest produce or agricultural produce, provisions of section 206C could not be applied. Held: The provisions of section 206C would apply only with reference to the timber obtained under a forest lease; or timber obtained by any mode other than under a forest lease; and any other forest produce not being timber. From the above provision, it is clear that the Legislature intends to apply this provision in respect of timber and other produce obtained from the forest and it is not intended to apply to any produce. Therefore, in order to attract the provisions of section 206C, one has to examine whether the items sold by the petitioner-corporation are forest produce or not. In fact, the contention advanced by the department would not reflect from the impugned order. On the other hand, the stand of the second respondent is that the provisions of section 206C are applicable only with reference to the forest produce. But, according to him, the items of produce sold by the petitioner-corporation would fall under items (ii) and (iii) specified in the Table in section 206C . Therefore, there is absolutely no merit in the contention of revenue that even if the produce is not forest produce, still the petitioner-corporation is under obligation to collect the tax at the time of effecting the sale. A perusal of the impugned order shows that the Commissioner was more influenced by the terms contained in the Andhra Pradesh Forest Act rather than confining himself to the provisions of the Income Tax Act and to the facts of the case. The Commissioner accepted the claim that coffee, cashew, etc., grown on the land assigned to the petitioner-corporation do not fall under the term 'forest produce'. But with reference to eucalyptus, bamboo and firewood, the Commissioner felt that they would fall under the term 'forest produce'. There is no finding either by the assessing officer or by the revisional authority whether the produce sold by the petitioner-corporation was actually grown and cultivated by the petitioner-corporation or not. In order to decide the issue whether the items that are directed to be treated as forest produce, one has to examine and consider the claim of the petitioner-corporation and must arrive at a finding whether these products were, in fact, grown by carrying on the operations on the soil and obtained as a result of such operations. Basically, forest produce is the produce grown spontaneously, may be at the subsequent stages some human effort and skill may be applied in order to protect and extract the resultant product, which could be considered as a forest produce. As is evident from the relevant provisions, the tax collection at the time of sale is intended only to be applied in respect of forest produce and not with reference to agricultural produce. Therefore, in order to hold that the assessee is liable to collect the tax at source, the authorities have to give a finding that it is a forest produce. The finding that was arrived at by the Commissioner, the second respondent herein, is not with reference to the basic facts but only based on the provisions of the A. P. Forest Act. In fact, it was the contention of the assessee that for the assessment year 1986-87 the sale proceeds were treated as receipts from the sale of agricultural produce and exempted from assessability to tax. In fact, it is claimed that even for the subsequent years including the assessment years in question, the petitioner's returns were accepted treating its income as agricultural income. If such is the factual position, there is absolutely no justification for the authorities to proceed against the petitioner-corporation as an assessee deemed to be in default. Under the above circumstances, the impugned order of the second respondent is set aside and the matter is restored to the first respondent to consider the claim of the petitioner-corporation and to give a finding as to the nature of the production of the items, which are directed to be treated as forest produce by the Commissioner the second respondent herein, and after ascertaining the nature of the produce, it is open to the first respondent to pass appropriate order. While doing so, the first respondent is also directed to consider the assessment order already passed against the petitioner-corporation for the relevant assessment years in question. It is needless to clarify, if the income of the petitioner-corporation is accepted as agricultural income and exempted from tax, the question of applying the provision of section 206C of the Act, would not arise. Case Law Analysis: Applied :CIT v. Raja Benoy Kumar Sahas Roy (1957) 32 ITR 466 (SC). Decision: Matter remanded. Date of Judgment: 3 November 2004 Assessment Year: 1988-89 to 1993-94 Cases Referred: Fertilizer Corporation of India Limited v. State of Bihar (1988) 68 STC 158 (SC) SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2005 TaxPub(DT) 0876 (AP-HC) : (2005) 002 (I) ITCL 0296 : (2005) 272 ITR 0245 : (2005) 195 CTR 0081 : (2005) 144 TAXMAN 0051

Andhra Pradesh Forest Development Corporation Ltd. v. Asstt. CIT & Anr. ()

INCOME TAX

--Tax Collection at source----Applicability of provisions of section 206CNo finding that timber, bamboo, eculayptus, etc., forest produce--

Catch Note:

The AO treated the assessee as deemed to be in default on the ground that it failed to collect tax at source on sale of timber, bamboo, eculayptus, fire wood, etc. The assessee contended that all that it sold were agricultural produce and not forest produce, therefore, it was not incumbent on it to collect tax at source. Held: There was absence of finding of lower authorities as to whether products sold by assessee were forest produce, or agricultural produce therefore, matter was remanded back.

Ratio:

In the absence of relevant finding as to whether timber, bamboo, eculaptus, etc., are forest produce or agricultural produce, provisions of section 206C could not be applied.

Held:

The provisions of section 206C would apply only with reference to the timber obtained under a forest lease; or timber obtained by any mode other than under a forest lease; and any other forest produce not being timber. From the above provision, it is clear that the Legislature intends to apply this provision in respect of timber and other produce obtained from the forest and it is not intended to apply to any produce. Therefore, in order to attract the provisions of section 206C, one has to examine whether the items sold by the petitioner-corporation are forest produce or not. In fact, the contention advanced by the department would not reflect from the impugned order. On the other hand, the stand of the second respondent is that the provisions of section 206C are applicable only with reference to the forest produce. But, according to him, the items of produce sold by the petitioner-corporation would fall under items (ii) and (iii) specified in the Table in section 206C . Therefore, there is absolutely no merit in the contention of revenue that even if the produce is not forest produce, still the petitioner-corporation is under obligation to collect the tax at the time of effecting the sale. A perusal of the impugned order shows that the Commissioner was more influenced by the terms contained in the Andhra Pradesh Forest Act rather than confining himself to the provisions of the Income Tax Act and to the facts of the case. The Commissioner accepted the claim that coffee, cashew, etc., grown on the land assigned to the petitioner-corporation do not fall under the term 'forest produce'. But with reference to eucalyptus, bamboo and firewood, the Commissioner felt that they would fall under the term 'forest produce'. There is no finding either by the assessing officer or by the revisional authority whether the produce sold by the petitioner-corporation was actually grown and cultivated by the petitioner-corporation or not. In order to decide the issue whether the items that are directed to be treated as forest produce, one has to examine and consider the claim of the petitioner-corporation and must arrive at a finding whether these products were, in fact, grown by carrying on the operations on the soil and obtained as a result of such operations. Basically, forest produce is the produce grown spontaneously, may be at the subsequent stages some human effort and skill may be applied in order to protect and extract the resultant product, which could be considered as a forest produce. As is evident from the relevant provisions, the tax collection at the time of sale is intended only to be applied in respect of forest produce and not with reference to agricultural produce. Therefore, in order to hold that the assessee is liable to collect the tax at source, the authorities have to give a finding that it is a forest produce. The finding that was arrived at by the Commissioner, the second respondent herein, is not with reference to the basic facts but only based on the provisions of the A. P. Forest Act. In fact, it was the contention of the assessee that for the assessment year 1986-87 the sale proceeds were treated as receipts from the sale of agricultural produce and exempted from assessability to tax. In fact, it is claimed that even for the subsequent years including the assessment years in question, the petitioner's returns were accepted treating its income as agricultural income. If such is the factual position, there is absolutely no justification for the authorities to proceed against the petitioner-corporation as an assessee deemed to be in default. Under the above circumstances, the impugned order of the second respondent is set aside and the matter is restored to the first respondent to consider the claim of the petitioner-corporation and to give a finding as to the nature of the production of the items, which are directed to be treated as forest produce by the Commissioner the second respondent herein, and after ascertaining the nature of the produce, it is open to the first respondent to pass appropriate order. While doing so, the first respondent is also directed to consider the assessment order already passed against the petitioner-corporation for the relevant assessment years in question. It is needless to clarify, if the income of the petitioner-corporation is accepted as agricultural income and exempted from tax, the question of applying the provision of section 206C of the Act, would not arise.

Case Law Analysis:

Applied :CIT v. Raja Benoy Kumar Sahas Roy (1957) 32 ITR 466 (SC).

Decision:

Matter remanded.

Date of Judgment:

3 November 2004

Assessment Year:

1988-89 to 1993-94

Cases Referred:

Fertilizer Corporation of India Limited v. State of Bihar (1988) 68 STC 158 (SC)