TMI Blog2011 (6) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... ANESAN, JJ. J.C. Ranpura for the Appellant. N.R. Sane and Avnish Kumar for the Respondent. ORDER A.L. Gehlot, Accountant Member. These four appeals filed by two different assesses, viz. Shri Nathulal P. Lavti and Shri Ramgopal O. Maheshwari against the two separate orders, assessee-wise passed by CIT(A)-II, Rajkot both dated 16-07-2010 respectively. Since issue raised in all the appeals is based on identical set of facts, for the sake of convenience, we decide all the four appeals by this common order. 2. The ground raised in these appeals by the assessee pertains to invoking of provisions of section. 206C of the Act and thereby raising demand of Rs. 3,17,214 for A.Y. 2009-10 and Rs. 7,93,430 for A.Y.2010-11 in each case. 3. The brief facts of the case noticed order of the assessing officer for A.Y.2009-10 are that the assessee, an importer and dealer in recycled ferrous and non-ferrous metals, mainly brass and copper, sold the said recycled metals to manufacturers as well as to certain other traders. A survey action u/s. 133A of the Act was carried out at assessee's premises on 23-02-2010. It was revealed to the Income Tax Officer (TDS)-3, Jamnagar that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is neither a manufacturer of any product nor is he conducting any mechanical working of materials which are definitely not usable as such. The learned A.R. submitted that Explanation (b) to Sec. 206C, defines a 'scrap' as "waste and scrap from the manufacture or mechanical working of materials which is definitely not usable because of breakage, cutting-up wear and other reasons. The learned A.R. submitted that the C.I.T.(A) is not correct in holding that even a trader can be brought under the purview of Sec. 206C of the Act as the substantive portion of the title of section describes so. The learned A.R. submitted that the C.I.T.(A) failed to appreciate the fact on record that the assessee was importing scrap and after recycling sold the same to brass manufacturers as raw-materials. The learned A.R. submitted that metal/scrap sold by the assessee was not generated as a result of any manufacturing or mechanical working of materials by the assessee. Therefore, as per Explanation (b) to sec.206C, the assessee was not required to deduct tax at source from the buyer. The interpretation of section has to be done literally along with the relevant Explanation and it is therefore, nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and (ii) scrap from the manufacture or mechanical working of materials The above indicates that only 'waste' materials may partake the character of 'scrap'. This first limb of the definition definitely applies to the appellant's case, because he imports non-ferrous waste materials from dismantled buildings. This further conveys that there is no need to apply the second limb to the appellant (i.e.) scrap need not to have arisen from any manufacture, or mechanical activity, if the first limb is applicable and applied. 7. From the above it is clear that there is no dispute regarding the fact that goods (scrap) sold by assessee was not from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons. Even during the course of survey no such material was found and put on record based from which it can be said that the scrap/goods sold was of above nature. The main thrust of argument of the assessees is that they are only traders; they are not into any manufacturing activity which would yield any scrap; and what they sold, is not scrap as defined in Explanation (b) to section 206C of the Act. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons." From a plain reading of the Explanation (b) to section 206C we understand that to bind an assessee, who is a dealer in scrap, the scrap sold must be - (1) the material should be waste; and scrap (2) the material sold should generate from the manufacture or mechanical working of materials; (3) the material sold is not usable as such because of breakage, cutting up, wear and other reasons." 10. In our opinion, to saddle an assessee with the provisions of section 206C(1) read with Explanation (b) , the conditions explained above from (1) to (3) above have necessarily to be satisfied. The case of the revenue is that the head of section reads, "Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc." and therefore, the assessee cannot escape from the rigors of provisions of section 206(1) of the Act. We are not inclined to accept this proposition made out by the revenue. Had it been the intention of the legislature that every section has to be read by its heading only, then there is no case for the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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