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2016 (3) TMI 281 - ITAT RAJKOT

2016 (3) TMI 281 - ITAT RAJKOT - TMI - TCS demands - tax liability of the buyer of the scrap - Held that:- TDS demands raised under section 201, TCS demands raised under section 206C are in the nature of vicarious liabilities which survive only as long as principal liability of the taxpayer remains in existence. When the principal tax liability itself is extinguished, the very reason of the demand raised under section 206C ceases to hold good in law. The details furnished by the assessee before .....

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laid down by the binding judicial precedents. In view of these discussions the CIT(A), in the second round, was indeed justified in granting the impugned relief. As for the appeals filed by the assessee against the order passed by the CIT(A) in the first round, these appeals are now infructuous as the relief is granted to the assessee by the AO while giving effect to the directions of the CIT(A) in the second round which now stands confirmed and approved by us. - I.T.A. Nos. 348 and 349/RJT/201 .....

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his common order. 2. Let us first take a look at the appeals filed by the Assessing Officer. By way of these appeals, the Assessing Officer appellant has called into question correctness of two separate but materially similar orders dated 31st October 2014 passed by the learned CIT(A) in the matter of a demand of ₹ 17,26,998 and ₹ 6,33,864 raised on the assessee under section 206C(6)/ 206(7) of the Income Tax Act, 1961 for the assessment years 2010-11 and 2011-12 respectively. 3. Gri .....

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issue of direction in violation of proviso to sub section (7) of Section 206 C of the IT Act, that the interest should be caluculated only in respect of those buyers who have not paid tax due on the returned income whereas interest should be calculated in cases of all the buyers who have filed form no. 27BA as provided in above section. 3. The learned CIT(A) has erred in law as well as on facts in directing not to treat the assessee in default for non collection of TCS on sale of scrap to manuf .....

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iled in certificate form 27BA, found that the assessee has not complied with the requirements of the appellate decision dated 28.3.2014 of the learned CIT(A), thus reversing the decision of the predecessor CIT(A). 6. On the facts and in the circumstances of the case, the learned CIT(A) ought to have upheld the order of the AO passed under section 206C(6A) and 206C(7) of the Act. 4. Coming to the appeals filed by the assessee, we find that these two appeals filed by the assessee are directed agai .....

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w and bad on facts. 2. The learned CIT(A), as well as learned ITO, has erred in law and on facts by considering the trading of used discarded items as scrap defined in section 206C(1) of the Income Tax Act, 1961, which was neither generated out of any manufacturing activity nor from any of mechanical working of materials at any point of time, which was at all the time of previous sales, finished product and due to non usage of it, is being discarded and worded as used scrap. 3. The learned CIT(A .....

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facturing activity or mechanical working on materials and sale of used discarded item made by item is not generated from any manufacturing activity nor mechanical working or materials traded. 5. The learned CIT(A), as well as learned ITO, has erred in law and on facts while working out the figure of sale of discarded items at ₹ 11,63,40,150 (AY 10/11) and ₹ 4,35,22,374 (AY 11/12) as well as TCS @ 1% amounting to ₹ 11,63,401 (AY 10/11) and ₹ 4,35, 223 (AY 11/12) under the .....

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, containing copper zinc or brass, from different countries, and sells the same in the domestic market. The assessee was subjected to a TDS compliance survey on 2nd December 2010. During the course of this survey, it was noted that the assessee has sold scrap of ₹ 11,63,40,150 during the financial year 2009-10 and of ₹ 4,35,22,374 during the year 2010-11, but has not collected the tax at source as required under section 206C(1). The stand of the assessee was that the assessee is a de .....

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demands for non collection of tax at source and interest thereon were raised on the assessee. Aggrieved, assessee carried the matter in appeal before the CIT(A). Learned CIT(A), inter alia, directed the assessee to furnish form 27BA in the prescribed format and the Assessing Officer to verify the details. He further held that wherever the buyers have complied with section 206C, by furnishing the requisite form 27BA, to that extent, the assessee should not be held to the assessee in default. The .....

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and in respect of sale of ingot. However, as regards the remaining sales, the Assessing Officer noted that since the assessee is not conclusively able to establish that the sales was included in purchases of the buyers and the profits earned by them on these purchases were offered to tax, relief cannot be granted. The assessee once again proceeded in appeal before the CIT(A). The CIT(A) noted that the assessee has duly furnished the form 27BA, and in the light of the Special Bench decision of th .....

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s, inter alia, held as follows: 42. We shall now turn to additional ground no. 3. At the time of hearing, our attention was also drawn to the first proviso inserted in sub-section (6A) of section 206C with effect from 1.7.2012 according to which any person, other than a person referred to in sub-section (1D) of section 206C, responsible for collecting tax in accordance with the provisions of this section, who fails to collect the whole or any part of the tax on the amount received from a buyer o .....

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s a certificate to this effect from an accountant in such form as may be prescribed, which, according to Rule 37J of the Income-tax rules, shall be furnished in Form No. 27BA. The aforesaid proviso relaxes the rigours of consequences flowing from noncollection of tax at source if the conditions stipulated by the said proviso are fulfilled. 43. There is no dispute that the said proviso has been inserted in sub-section (6A) of section 206C with effect from 1.7.2012. Amendments on exactly similar l .....

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is proposed to amend section 201 to provide that the payer who fails to deduct the whole or any part of the tax on the payment made to a resident payee shall not be deemed to be an assessee in default in respect of such tax if such resident payee - (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the payer furnishe .....

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01(1A)(i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident payee. Amendments on similar lines are also proposed to be made in the provisions of section 206C relating to TCS for clarifying the deemed date of discharge of tax liability by the buyer or licensee or lessee. These amendments will take effect from 1st July, 2012. 44. First Proviso inserted in sub-section (6A) of section 206C seeks to achieve three-fold object .....

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in Form No. 27BA confirming the aforesaid; (2) rationalize the provisions relating to collection of tax at source; (3) provide relief to the collector of tax at source from the consequences of non/short deduction collection of tax at source and to that extent it is a beneficial provision. In the aforesaid background, the issue that arises for consideration is whether the first proviso to section 206C(6A) is applicable to pending matters also notwithstanding the fact that it has been made effecti .....

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has crept in in drafting section 43B, it would be just and proper to hold that it would relate back to the date when section 43B was introduced. The aforesaid judgment of the Hon ble jurisdictional High Court has been approved by the Hon ble Supreme Court in Allied Motors (P.) Ltd. v. CIT, 224 ITR 677 (SC). Keeping in view the fact that the first proviso to sub-section (6A) of section 206C not only seeks to rationalize the provisions relating to collection of tax at source but is also beneficial .....

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b- section (6A) of section 206C within two months of the date on which this order is pronounced upon which the AO shall examine the claim of the assessee in the light of the said provisions and pass appropriate order accordingly in conformity with law after giving reasonable opportunity of hearing to the assessee. Thus the issue raised in additional ground no. 3 stands restored to the file of the AO with the aforesaid observations. 46. In view of the foregoing, both the appeals filed by the asse .....

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