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2016 (10) TMI 433 - ITAT AHMEDABAD

2016 (10) TMI 433 - ITAT AHMEDABAD - TM - TCS u/s 206C(7) - Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc. - Held that:- As certain items generated out of ship breaking activity might be known commercially as “scrap” but they are not waste and scrap. These items are reusable as such, and therefore, would not fall within the definition of “scrap” as envisaged in the Explanation to section 206C(1). The assessee has also contended that it was engaged .....

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additions. - ITA.No.979, 980 and 1535/Ahd/2015 - Dated:- 1-9-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER For The Assessee : Shri B.R. Popat, AR For The Revenue : Shri Sumit Kumar Verma, DR ORDER Present three appeals are directed at the instance of the assessee against common order of the ld.CIT(A)-8 dated 20.3.2015 for the Asstt.Years 2012- 13 & 2013-14 and order dated 24.4.2015 for the Asstt.Year 2011-12. 2. Solitary common grievance of the assessee in all these years relates to raising of d .....

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p scrap materials & machineries. According to the Revenue, assessee was supposed to collect tax at source at the rate of 1% of the sale, and it was required to be deposited in the government account before the date as per Section 206C of the Income Tax Act. In case scrap sale is made to a manufacturer or actual user, then TCS was not required to be deducted provided a declaration in form no.27C is being obtained by the assessee from the buyer. The assessee during the course of survey contend .....

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-13. On identical principle, calculations have been made in other two years. Appeal to the ld.CIT(A) did not bring any relief to the assessee. 4. The ld.counsel for the assessee, at the very outset, contended that in case of M/s.CIT Vs. Priya Blue Industries P.Ltd., the Tribunal has considered scope of expression scrap provided in the definition in Explanation-b to section 206C of the Act. According to the Tribunal, wastage and scrap generated out of manufacturing activity is to be considered as .....

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Tribunal held that these items did not fall within the ambit of definition scrap . This order of the Tribunal passed in ITA No.2207/Ahd/2011 has been upheld by the Hon ble Gujarat High Court in Tax Appeal No.604 of 2015. The judgment of Hon ble High Court reported in 381 ITR 210. On the strength of this decision, the ld.counsel for the assessee contended that though in the invoice scrap is being mentioned, but assessee has not sold any scrap which was generated out of manufacturing activity unde .....

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ection 206C. It reads as under: (b) scrap as waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons . Explanation (b) below Sec.206C(1) has two distinct limbs. Even if one of the limbs is applicable, an assessee can be treated as if he deals in scrpa, not usable as such: (i) scrap means waste; (ii) scrap means scrap generated from the manufacture or mechanical working of materials. 6. .....

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P, OF NICKET 7. WASTE&SCRAPOFGM, GUM, COP, GER.ALU.PRO Assessee has not collected TCS on following type of items sold during the year: 1. Old & used plates 2. Non-excisable (exempted) like furniture, wood, etc. 3. Trading of scrap (melting) 4. High seas sale We find that ITAT B Bench, Ahmedabad in ITA Nos. 1213 and 1214/Ahd/2010 dated 15.02.2011 in case of Navine Fluorine International Ltd Vs. ACIT, TDS Circle Surat, for A Y 2009-10 & 2010- 11, inter alia held that term "waste a .....

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ble. The word "is" as used in this definition of the scrap meant for singular item i.e. "waste and scrap". As stated above, assessee is engaged in ship breaking activity and as given to understand these items/ products in question are finished products obtained from the activity. They constitute sizable chunk of production done by ship breakers. Though such products may be commercially known as "scrap" they are definitely not "waste and scrap". The items i .....

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t and the Hon ble High Court has made the following discussion on the issue: 5. From the facts as narrated hereinabove, it is apparent that the respondent assessee had collected and paid tax at source (TCS) on the seven items as enumerated in the orders passed by the Commissioner (Appeals) as well as the Tribunal and had not collected tax at source on the following four items :- 1. Old and used plates 2. Non-excisable (exempted) like furniture, wood, etc. 3. Trading of scrap (melting) 4. High se .....

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as envisaged in the Explanation to section 206C(1) of the Act. 7. Section 206C of the Act bears the heading, Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap etc. and provides that every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, colle .....

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itely not usable as such because of breakage, cutting up, wear and other reasons. On a plain reading of the said expression, it is evident that any material which is usable as such would not fall within the ambit of the expression scrap as envisaged under clause (b) of the Explanation to section 206C of the Act. 8. The Tribunal, in the impugned order, has recorded that the items/products in question obtained from the activity of ship breaking are usable as such and, therefore, do not fall within .....

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e assessee. Thus, the Tribunal after recording a finding of fact to the effect that the products obtained by the assessee in the course of ship breaking activity are usable as such, and, therefore, do not fall within the definition of scrap has remitted the matter to the Assessing Officer to grant relief accordingly. Essentially, therefore, the impugned order of the Tribunal is based upon a finding of fact which does not give rise to any question of law. 9. Insofar as the course of action adopte .....

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