Section 206C of Income Tax Act, 1961— Tax collected at source— The question involved in this petition is whether the members of the petitioner-association, who are the contractors of Tendu leaves  are entitled to claim exemption under sub-section (1A) of Section 206C of the act from the collection of tax at source from them by the seller, namely, the Forest Department of the State of Maharashtra?

Held that—It is an integrated process of manufacture or producing bidi in this case, from the processed Tendu leaves, which qualifies for exemption. The placement of the word ‘processing’ in between ‘manufacturing’ and “or producing articles or things” under sub-section (1A) is also significantly indicate such intention of the Legislature. The processing of Tendu leaves in this case may qualify for the purposes of trading or sale, but not for the utilization for the purposes of manufacture of bidis.

Section 11 of the Regulation of Trade Act deals with the registration of the manufacturer of finished goods using the forest produce, who has to get himself registered with the concerned Department of the State Government in a manner provided under Rule 9 of the Rules framed under the Regulation of Trade Act. It is not the claim of the petitioner-association that they are also the manufacturers of bidi and the Tendu leaves purchased by them from the Forest Department of the State Government are processed for utilization in the process of manufacture of bidi. It is not an integral part of the process of manufacture of bidi. It is thus clear that unless the members of the petitioner-association get themselves registered as the manufacturers of bidi under Section 11 of the Regulation of Trade Act, it cannot be said that they are utilizing the processed Tendu leaves for the purposes of manufacture of bidi. The expression ‘processing’ under sub-section (1A) will have, therefore, to be necessarily understood as an intermediary process in the manufacture of bidi.[GONDIA BEEDI LEAVES CONTRACTORS ASSOCIATION, VERSUS UNION OF INDIA, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX, JOINT COMMISSIONER OF INCOME TAX (TDS) , STATE OF MAHARASHTRA THE PRINCIPAL CHIEF CONSERVATOR OF FORESTS, NAGPUR AND OTHER] [2019] 17 ITCD Online (25) [BOMBAY HIGH COURT]