TMI Blog2020 (4) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... oming out of manufacture, then the items do not fall under the definition of scrap and thus not liable to TCS. We further find that the Ahmedabad Bench of ITAT in the case of ITO(TDS) vs. Priya Blue Industries Pvt. Ltd.[ 2015 (11) TMI 1263 - ITAT AHMEDABAD ] again relied on the order of the Ahmedbad Bench of the ITAT in the case of Navine Fluorine International Ltd. vs. ACIT(TDS) [supra] and held that the words waste and scrap should have nexus with manufacturing or mechanical working of materials - Decided in favour of assessee. - ITA No.14, 15 And 16/LKW/2019, S.P. No.04, 05 & 06/LKW/2019 [in ITA No.14, 15 & 16/LKW/2019] - - - Dated:- 19-2-2020 - Shri. A. D. Jain, Vice President And Shri. T.S. Kapoor, Accountant Member For the Assessee : Shri Rakesh Garg, Advocate For the Department : Shri Ajay Kumar, D.R. ORDER PER BENCH: These are three appeals filed by the assessee against the orders of the ld. CIT(A), all dated 31/12/2018. Since similar issues are involved in these appeals, these were heard together and for the sake of convenience, a common and consolidated order is being passed. For the sake of completeness, the grounds of appeal tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernational Ltd. vs. ACIT(TDS) in ITA No.1213 and 1214/Ahd/2010, wherein, the Tribunal had held that for invoking the provisions of Explanation (b) to section 206C of the Act, it is necessary that waste and scrap sold by the assessee should arise from the manufacturing or mechanical working of the material. The ld. Counsel for the assessee further relied on the decision of the ITAT Rajkot Bench in the case of Nathulal P. Lavti vs. ITO(TDS) , order dated 17/6/2011, wherein, the Hon'ble Bench held that to bind the assessee with the liability (1) the material sold must be waste and scrap, (2) the material sold should generate from the manufacture or mechanical working of materials, and (3) the material sold is not usable as such, because of breakage, cutting up, wear and other reasons. It was submitted that to fasten an assessee with the liability for TCS under section 206C of the Act, all the conditions should have been met with. It was submitted that in the present cases, it is absolutely clear that the assessee was not into manufacturing and the scrap sold by the assessee did not result from the manufacture or mechanical working of materials. The ld. Counsel for the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance on the orders of the authorities below and submitted that in the case of M/s Bharti Auto Products (supra), the Special Bench has clearly decided the issue in favour of the Revenue by holding that the provisions of section 206C of the Act are applicable to the suppliers and traders in scrap also. It was further submitted that the Hon'ble Gujarat High Court in the case of CIT (TDS) vs. M/s Priya Blue Industries Pvt. Ltd. (supra) has not specifically dealt with the ground taken by the Revenue and therefore, it cannot be said that the Hon'ble Court had overruled the judgment of the Special Bench in the case of M/s Bharti Auto Products (supra). 4. We have heard the rival parties and have gone through the material placed on record. We find that it is an undisputed fact that the assessee is not a manufacturer and is only a dealer in scrap. During the years under consideration, as noted in the assessment orders, the assessee had sold scrap, which included unburned transformer coils from various distribution companies of UPPCL. We find that whether a trader in scrap is liable to be fastened with liability to collect TCS under section 206C came up for consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed above would indicate that same cannot be used for manufacturing or mechanical working of material of fluorine and other refrigeration gases. By the nature of the scrap items noted above, the same cannot be used while manufacturing gases or doing any mechanical working of the material for the gases. The items of the scrap in the case of the assessee would not form part of the definition of the scrap as is provided in Explanation (b) to section 206 C of the IT Act. Thus, the explanation is wrongly applied in the case of the assessee. 13. Considering the facts noted above, we are of the view that the authorities below have wrongly applied the meaning of scrap as is provided in Explanation (b) to section 206 C of the IT Act in the case of the assessee. Therefore, the assessee cannot be held to be in default. The assessee is not required to deduct tax u/s 206 C (6) of the IT Act on the items of scrap as noted above. Resultantly, no Navine Fluorine International Ltd. Vs ACIT, TDS Cir, Surat interest could be charged u/s 206C (7) of the IT Act. We accordingly, set aside the orders of the authorities below and allow both the appeals of the assessee. 5. Further, we find that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The Hon'ble High Court, in CIT(TDS) vs. M/s Priya Blue Industries Pvt. Ltd. (supra), vide order (APB:14-22), dated 3/11/2015, passed in ITA No.604 of 2015, upholding the above findings of the Tribunal, observed as follows: 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 seas sale. 6. The Tribunal, after considering the definition of scrap under clause (b) to section 206C of the Act, has noted that the assessee is engaged in ship breaking activity and the items in question are finished products obtained from the activity and constitute sizeable chunk of production done by ship breakers. Though such products may be commercially known as scrap they are not waste and scrap , as such items are usable as such, and, therefore, do not fall within the definition of scrap as envisaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of fact which does not give rise to any question of law. 9, Insofar as the course of action adopted by the Tribunal in remitting the matter to the Assessing Officer to decide in relation to which of the items the assessee is entitled to relief under the provisions of section 206C(1) of the Act is concerned, no fault can be found in the approach adopted by the Tribunal, inasmuch as, out of the four items of which tax was not collected at source, the matter has merely been referred to the Assessing Officer for the purpose of examining as to what extent relief is required to be granted to the assessee under the provisions of section 206C(1) of the Act having regard to the findings of fact rendered by it. 8. Thus, the Hon'ble High Court held that the expression scrap is defined in clause (b) of the Explanation to section 206C of the Act to mean waste and scrap from manufacture of mechanical working of materials, which is definitely not useable as such, because of breakage, cutting up, wear and other reasons; and that a plain reading of the expression scrap as envisaged under the provisions contained in clause (b) of the Explanation to section 206C of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Therefore, in our considered opinion, the assessee cannot be treated as an assessee in default and on the impugned sales cannot be treated as sale of scrap thereby making the assessee out of the purview of Section 206C of the Act. .. 11. Facts being similar, respectfully following the findings of the Hon'ble Jurisdictional High Court (supra), we do not find any merit in the impugned demand raised by the A.O. 12. Considering the facts of the case in the light of the afore-stated decisions of the Hon'ble Jurisdictional High Court, we set aside the findings of the Id. CIT(A) and direct the A.O. to delete the impugned demand. 11. The facts in either Dhasawala Traders vs. ITO (supra), or Azizbhai A Lada vs. ITO (supra), have not been shown to be any different from those of the case at hand. The only argument is that the Hon'ble High Court has not taken into consideration the Special Bench decision in the case of M/s Bharti Auto Products vs. CIT-II (supra). This argument, however, we find, is prima facie unsustainable. This is so, because a bare perusal of the judgment of the Hon'ble High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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