The Asstt. Commissioner of Income Tax (OSD), TDS Circle, Ahmedabad V. Bansal Ship Breakers Pvt. Ltd., Bhavnagar

ITA 151/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9131 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 18-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Assessee Lawyers: B R POPAT
• Keywords: TDS

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 151/AHD/2017 ( ASSESSMENT YEAR : 2008-09) THE ASST. COMMISSIONER OF INCOME TAX (OSD) TDS CIRCLE 2(1)(2), AHMEDABAD ROOM NO.10, 2 ND FLOOR, AMRUT JYANTI BHAVAN, NAVJIVAN BUILDING, B/H GUJARAT VIDDHYAPITH, OFF. ASHRAM ROAD, AHMEDABAD - 380014 / VS. BANSAL SHIP BREAKERS PVT. LTD. D/9, OPP. ORIENTAL BANK OF COMMERCE, NR. RAM MANTRA MANDIR, KALAVIBID, BHAVNAGAR, GUJARAT ./ ./ PAN/GIR NO. : AAACB8758P ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI O. P. SHARMA, CIT.D.R. / RESPONDENT BY : SHRI B. R. POPAT, A.R. DATE OF HEARING 01/07/2019 !'# / DATE OF PRONOUNCEMENT 09/07/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS)-8, AHMEDABAD (CIT(A) IN SHORT), DATED 2 1.11.2016 ARISING ITA NO. 151/AHD/17 [ACIT(OSD) VS. BANSAL SHIP BREAKERS PVT. LTD.] A.Y. 2008-09 - 2 - IN THE ASSESSMENT ORDER DATED 24.03.2014 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 206C(1) R.W.S. 206C(6), 206C( 6A) AND 206C(7) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2008-09. 2. THE REVENUE IN ITS APPEAL HAS CHALLENGED THE AC TION OF THE CIT(A) IN REVERSING THE TAX IMPOSED UNDER S. 206C(1 ) R.W.S. 206C(6), 206C(6A) OF THE ACT AMOUNTING TO RS.27,60,838/- AND INTEREST THEREON AMOUNTING TO RS.23,19,104/- IMPOSED BY THE AO UNDER S. 206C(7) OF THE ACT. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED DR FOR THE REVENUE RELIED UPON THE ORDER OF THE AO AND SUBMITT ED THAT THE ASSESSEE HAS FAILED TO COLLECT TDS AT THE TIME OF S ALE OF SCRAP OF ARISING ON DISMANTLING OF SHIPS ON CERTAIN ITEMS AG GREGATING TO RS.16,98,13,542/- WITH CONTRAVENTION OF SECTION 206 C OF THE ACT. THE LEARNED DR FOR THE REVENUE CONTENDED THAT THE ENTIR E SHIP PURCHASES FOR SCRAPPING/BREAKING/RECYCLING IS SCRAP FOR THE PURPOSES OF SECTION 206C OF THE ACT AND THE ASSESSEE HAS FAILED TO COLL ECT TCS ON CERTAIN SALES OF ITEMS (SCRAP) ARISING FROM SUCH SHIP BREAK ERS. 4. THE LEARNED AR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE CIT(A) AND SUBMITTED THAT THE ASSESSEE COMPANY IS E NGAGED IN THE BUSINESS OF SHIP BREAKING WHERE THE SHIPS ARE DEMOL ISHED AND SOLD IN THE MARKET ON ITEMIZED BASIS AS FINISHED PRODUCT. THE LEARNED AR FOR THE ASSESSEE REFERRED TO THE TABULATED STATEMEN T AS APPEARING IN AT PAGE NOS. 3 & 4 OF THE ORDER OF THE CIT(A) AND SUBM ITTED THAT THE ITEMS WHICH ARE LIABLE FOR TCS HAS BEEN SUBJECTED T O THE PROVISIONS OF THE ACT AND THE ASSESSEE HAS DULY COLLECTED TCS ON THESE ITEMS AS TABULATED MARKED PART-A. THE ASSESSEE HAS ALSO F URNISHED FORM 27- C AND LOW TAX COLLECTION CERTIFICATE UNDER S. 206C( 9) IN THE CASES WHERE TCS HAS NOT BEEN COLLECTED. HOWEVER, THE SUB JECT MATTER OF ITA NO. 151/AHD/17 [ACIT(OSD) VS. BANSAL SHIP BREAKERS PVT. LTD.] A.Y. 2008-09 - 3 - DISPUTE IS TOWARDS SALE OF ITEMS LISTED IN PART-B OF THE TABULAR CHART WHERE THE ASSESSEE HAS NOT COLLECTED TCS ON SUCH IT EMS AS THEY ARE NOT LIABLE FOR TCS COLLECTION UNDER S.206C(1) OF THE AC T. THE LEARNED AR POINTED OUT THAT THE ITEMS SOLD AS PER PART-B COM PRISES OF PLATES, MACHINERY AND MACHINERY PARTS, FUELS AND OILS, FIRE WOOD AND WOODEN ITEMS, ARTICLES OF IRON & STEEL ANCHOR AND SOME MIS CELLANEOUS ITEMS WHICH ARE USABLE AS SUCH AS FINISHED PRODUCT WITH OUT ALTERATIONS. IN THE CONTEXT, THE LEARNED AR REFERRED TO THE EXPLANA TION (B) TO SECTION 206C OF THE ACT WHICH DEFINES EXPRESSION SCRAP TO MEAN WASTE AND SCRAP WHICH IS NOT USABLE AS SUCH I.E. IN THE SAME FORM AS GENERATED. THE LEARNED AR CONTENDED THAT THE ITEMS FALLING IN PART-B OF THE TABULATED STATEMENT AS POINTED OUT ABOVE ARE USABLE IN THE SAME FORM AND THEREFORE DO NOT FALL WITHIN THE DEFINITION OF EXPRESSION SCRAP AND THUS NOT SUSCEPTIBLE TO THE PROVISIONS OF SECTI ON 206C OF THE ACT. THE LEARNED AR RELIED UPON THE DECISION OF THE CO-O RDINATE BENCH OF TRIBUNAL IN ITO VS. M/S. PRIYA BLUE INDUSTRIES PVT. LTD. ITA NO. 2207/AHD/2011 ORDER DATED 14.05.2015 IN THIS REGARD WHICH WAS, IN TURN, APPROVED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT(TDS) VS. PRIYA BLUE INDUSTRIES P. LTD. [2016] 3 81 ITR 0210 (GUJ) . THE LEARNED AR ALSO POINTED OUT THAT BASED ON TH E SUBMISSIONS MADE IN THE SUBSEQUENT YEAR IN RESPONSE TO NOTICE I SSUED UNDER S.206C(6) R.W.S. 206C(6A) & 206C(7) OF THE ACT IN R ELATION TO AYS 2010-11, 2011-12 & 2012-13, PLACED IN THE SIMILAR C IRCUMSTANCES, THE AO HIMSELF HAS ACQUISITIONED WITH THE PLEA OF THE A SSESSEE FOR NON- APPLICATION TO OBLIGATION TO COLLECT TCS. THE PROC EEDINGS UNDER S.206C OF THE ACT WERE CONSEQUENTLY DROPPED BY SPEC IFIC ORDERS IN OTHER ASSESSMENT YEARS. THE LEARNED AR ACCORDINGLY SUBMITTED THAT THERE WAS NO JUSTIFICATION FOR THE AO TO INVOKE THE PROVISIONS OF SECTION 206C OF THE ACT IN RESPECT OF GROUPED IN PA RT B OF TABULATED STATEMENTS OF FACTS AND CIT(A) HAS RIGHTLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. ITA NO. 151/AHD/17 [ACIT(OSD) VS. BANSAL SHIP BREAKERS PVT. LTD.] A.Y. 2008-09 - 4 - 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE APPLICABI LITY OF PROVISION OF SECTION 206C OF THE ACT ON SALE OF CERTAIN ITEMS OF SCRAP ARISING FROM SHIP BREAKING ACTIVITY IS IN QUESTION. THE CI T(A) HAS DEALT WITH ISSUE AS UNDER: 5.5 GROUND NO. 4 TO 7 ARE RELATED TO EACH OTHER AS ARE AGAINST THE ORDER U/S.206C(1) R,W.S.206C(6), 206C(6A) AND 206C(7) OF THE I. T. ACT, 1961 HOLDING THAT THE APPELLANT WAS LIABLE FOR COLLECTIN G TCS OF RS.27,60.838/- ON THE SALES MADE OF RS.24.36,74,974/-DURING THE YE AR UNDER APPEAL AND INTEREST OF RS.23,19,104/- U/S.206C(7) OF THE 1. T. ACT. 1961 FOR THE SAID DEFAULT IN COLLECTION &. PAYMENT OF TCS . THE APPEL LANT HAS ALSO ARGUED THAT AS THE BUYERS OF SUCH GOODS HAVE FURNISHED DEC LARATION THAT THE GOODS SHALL BE USED FOR THE PURPOSE OF MANUFACTURING / PR OCESSING / PRODUCING ARTICLES OR THINGS AND NOT FOR TRADING AND THEY HAV E GIVEN A DECLARATION U/S.206C(IA) OF THE I. T. ACT, 1961 & THEREFORE, TH E PROVISIONS OF SEC.206C ARE NOT APPLICABLE IN RESPECT OF ITEMS SOLD TO THEM . 5.5.1 I HAVE GONE THROUGH THE CONTENTS OF THE PAPER BOOK FILED BY THE APPELLANT AND ALSO THE REMAND REPORT AND THE REJOIN DER THEREON OBTAINED DURING THE COURSE OF THE APPELLATE PROCEEDINGS. THE APPELLANT HAS SUBMITTED THAT THE BUYERS OF SUCH GOODS HAVE FURNIS HED DECLARATION THAT THE GOODS SHALL BE USED FOR THE PURPOSE OF MANUFACT URING / PROCESSING / PRODUCING ARTICLES OR THINGS AND NOT FOR TRADING AN D THEY HAVE GIVEN A DECLARATION U/S.206CC(IA) OF THE I. T. ACT, 1961 & THEREFORE, THE PROVISIONS OF SEC.206C ARE NOT APPLICABLE IN RESPEC T OF ITEMS SOLD TO THEM. IF THE APPELLANT HAS RECEIVED DECLARATIONS IN FORM NO. 27C, HE IS CLEARLY UNDER NO OBLIGATION TO COLLECT TAX AT SOURCE AND TO PAY THE SAME TO THE CREDIT OF GOVERNMENT. THE AO HAS RAISED THE OBJECTI ON IN HIS ORDER AS TO WHETHER AT THE TIME OF COLLECTING THE SALE RECEIPT FROM THE SCRAP SALES MADE WHETHER THE DECLARATION IN FORM 27C WERE AVAIL ABLE WITH THE APPELLANT OR NOT. THE APPELLANT HAS REPLIED TO THIS OBSERVATION OF THE AO AS MENTIONED IN HIS REJOINDER QUOTED ABOVE. AS MENTIONED BY THE AR OF THE APPELLANT ABOVE, THIS ISSUE IS DIRECTLY COVERED BY THE RATIO OF THE JUDGMENT OF H ON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. VALIBHAI KHANBHAI MANK AD. AS REPORTED AT (2013) 216 TAXMAN 18. AFTER CONSIDERING ALL DETAILS PROVIDED BY THE APPELLANT AND THE JUDICIAL PRONOUNCEMENTS ON THE SU BJECT, IT IS NOTICED THAT THE FORM 27C PRODUCED BY THE APPELLANT MAY BE CONSIDERED AND THE ASSESSEE MAY NOT BE TREATED AS 'ASSESSEE-IN-DEFAULT ' FOR NON COLLECTION OF TCS FROM THE MANUFACTURER BUYERS. IN THE CASE OF KARNATAKA FOREST DEVELOPMENT CORPN. LTD. V. INCOME-TAX OFFICER, TDS WARD, DAVANGERE IT APPEAL NOS. 1144 TO 1146 (BANG.) OF 2014 [AY 200 9-10 TO 2011-12] DATED APRIL 17. 2015, HON'BLE ITAT BANGALORE BENCH C' DECIDED ON THE SIMILAR ISSUE AS UNDER: SECTION 206C(1A) MANDATES THAT ANY PERSON RESPONSI BLE FOR COLLECTING TAX. UNDER SECTION 206C(1) NEED NOT DO S O IF HE OBTAINS A DECLARATION FROM THE BUYER THAT HE IS PURCHASING TH E GOODS FOR USE IN MANUFACTURING, PROCESSING OR PRODUCING ARTICLES OR THINGS, H DOES NOT SAY ITA NO. 151/AHD/17 [ACIT(OSD) VS. BANSAL SHIP BREAKERS PVT. LTD.] A.Y. 2008-09 - 5 - THAT SUCH DECLARATION HAS TO BE OBTAINED AT THE VER Y SAME MOMENT WHEN A SALE IS AFFECTED........... RECENTLY, HON'BLE HIGH COURT OF GUJARAT IN TAX APPEAL NO/519'OF 2016 TAX APPEAL NO. 526 OF 2016 COMMISSIONER OF INCOME TAX (TDS)....APPELLANT(S) VERSUS SIYARAM METAL UDYOG PV T LTD .OPPONENT(S) IN ITS ORDER DATED 27/06/2016 CONCLUDED AS UNDER: '...... ............ ......IF THE BUYER FURNISHES T O THE PERSON RESPONSIBLE FOR THE TAX A DECLARATION IN WRITING IN PRESCRIBED FORM DEC LARING THAT THE GOODS IN QUESTION ARE 10 BE UTILIZED FOR THE PURPOSES OF MAN UFACTURING PROCESS OR PRODUCING ARTICLES OR THINGS OR FOR THE PURPOSE OF GENERATION OF POWER AND NOT FOR TRADING PURPOSES. THE DECLARATION TO BE MAD E IN SUBSECTION (1A) OF SECTION 206C THUS WOULD ENABLE THE REVENUE AUTHORIT IES TO, AS AND WHEN THE NEED SO ARISES MAKE PROPER VERIFICATIONS. THIS SUBSECTION ITSELF DOES NOT PROVIDE FOR ANY TIME LIMIT WITHIN WHICH, SUCH D ECLARATION IS TO BE MADE...........' AFTER CONSIDERING ALL THE FACTS OF THE CASE AND THE JUDICIAL PRONOUNCEMENT BY THE HIGHER AUTHORITIES INCLUDING J URISDICTIONAL HIGH COURT OF GUJARAT, IT IS CONCLUDED THAT THERE IS NO DISPUTE THAT THE DELAY IN FILING SUCH FORMS WITH THE OFFICE OF THE DEPARTMENT CANNOT REVIVE THE LIABILITY OF COLLECTION OF TAX AT SOURCE WITH RETRO SPECTIVE EFFECT AND THE SUBSEQUENT SUBMISSION OF FORM 27C PRODUCED BY THE A PPELLANT MAY BE CONSIDERED. 6. I HAVE NOTICED THAT THERE IS NO VIOLATION OF THE PROVISIONS OF SECTION 206C OF THE ACT IN VIEW OF EITHER THE SALE OF SPECIFIED PRODUCTS BEING THAT OF NON-EXCISABLE, NON-SCRAP PRODUCTS (TO THE EXTENT OF RS.16,98,13,542/- ), OR THE SAME BEING AGAINST RECEIPT OF DECLARATIONS IN PRESCRIBED FORM NUMBER 27C (TO THE EXTENT OF RS,9,39,36,107/-). IT HAS ALREADY BEEN HELD, WHILE DEALING WITH THE FIRST GROUND OF APPEAL, THAT THE NON-EXCISABLE PRODUCTS ARE OBTAINED FROM THE SHIPS AND SOLD AS IT IS WITHOUT UNDERGOING ANY MANUFACTURING PROCESS THEREON AND TH E SAME THEREFORE CANNOT PARTAKE THE CHARACTER OF SCRAP WITHIN THE ME ANING OF SECTION 206C OF THE ACT. THE APPELLANT THEREFORE CANNOT BE BURDE NED WITH THE LIABILITY OF TCS IN CONNECTION WITH SALE OF SUCH PRODUCTS. IT IS THEREFORE HELD THAT IN SO FAR AS THE SALE OF RS. 16,98,13,542/- TOWARDS VARIOUS NON EXCISABLE PRODUCTS WAS CONCERNED, THE APPELLANT COULD NOT HAV E BEEN TREATED AS ASSESSEE IN DEFAULT. HOWEVER, THE AO HAS W RITTEN IN HIS REMAND REPORT THAT 'OUT OF AMOUNT OF RS.16,98,13,542/- WHICH INCLUDES NON EXCISABLE, OLD AND USED PLATES ETC, THE ITEMS ON WH ICH NO RELIEF IS AVAILABLE AS PER JUDGMENT DISCUSSED ABOVE ARE CLEAR LY LIABLE FOR TCS .' BUT THE AO HAS NOT GIVEN ANY WORKING WHETHER THIS A MOUNT INCLUDES SUCH ITEMS ON WHICH RELIEF IS NOT AVAILABLE. AT THE TIME OF ASSESSMENT ALSO THE AO HAS NOT POINTED OUT ANY DISCREPANCY IN THE CHAR T OF SALE PROVIDED BY THE ASSESSEE WHICH SHOWS A SALE OF RS.16,98,13,542/ - IN PART 'B' WHICH CONTAINS USED PLATES, MACHINERY AND MACHINERY PART, FUEL AND OIL, FIRE WOOD AND WOODEN ITEMS AND ARTICLES OF IRON STEEL AN CHOR. THESE ARE THE ITEMS OBTAINED BY THE ASSESSEE IN THE COURSE OF SHI P BREAKING ACTIVITY AND THESE ARE 'USABLE AS SUCH' ON WHICH AS PER COURT D ECISION IN THE CASE OF PRIYA BLUE.......(SUPRA ), NO TCS IS TO BE COLLECTED, AND THEREFORE, DO NOT FALL WITHIN THE DEFINITION OF 'SCRAP. HENCE, THE ITEMS SHOWN IN PART B' OF THE CHART GIVEN BY THE ASSESSEE TO THE AO AT THE TI ME OF ASSESSMENT AMOUNTING TO RS. 16,98,13,542/- ARE NOT UNDER THE P URVIEW OF THE ITA NO. 151/AHD/17 [ACIT(OSD) VS. BANSAL SHIP BREAKERS PVT. LTD.] A.Y. 2008-09 - 6 - PROVISION OF TCS. THE AO IS DIRECTED TO TREAT THE A PPELLANT NOT LIABLE TO COLLECT TCS ON THE SALES. ACCORDINGLY, THE GROUNDS NO.4 TO 7 OF APPEAL ALLOWED. 6. THE CONTROVERSY HINGES AROUND THE SALE OF CERTAI N ITEMS ARISING FROM SHIP BREAKING ACTIVITY GROUPED BY ASSE SSEE AS PAR-B OF A TABULATED STATEMENT. IT WOULD THUS BE RELEVAN T TO REPRODUCE DETAILS OF SALES MARKED AS PART-B WHERE THE ASSESSE E HAS NOT COLLECTED TCS ON SUCH ITEMS: PART-B NAME OF THE PRODUCT NET AMT EXCISE EDU. CESS S&H CESS TAX AMT TCS+ TCS CES TOTAL AMT PLATES 129037606 20596927 411935 205976 5895338 117538 156265320 MISC. ITEMS 17000 0 0 0 2125 0 19125 MACHINERY & MACHINERY PANS 3885000 0 0 0 98400 0 3983400 FUEL & OIL 6543961 0 O 0 822047 0 7366008 FIRE WOOD & WOODEN ITEMS 1933748 0 0 0 11295 0 1945043 ARTICLES OF IRON STEEL ANCHOR 332866 53258 1065 533 11632 4526 403880 TOTAL B 141750181 20650185 413000 206509 6840837 122064 169982776 GRAND TOTAL.... A+B 259709307 39170760 783413 391715 11938568 256181 312249944 7. IT IS THE CASE ON BEHALF OF THE ASSESSEE THAT NO N RESIDUARY ITEMS ARE OUTSIDE THE PURVIEW OF EXPLANATION (B) TO SECTI ON 206C OF THE ACT WHERE THE WASTE AND SCRAP ARISING FROM SHIP BREAK ING IS USABLE AS SUCH WITHOUT MODIFICATION. SALE OF SUCH ITEMS CAPA BLE OF BEING USED AS SUCH IS OUTSIDE THE AMBIT OF SECTION 206C OF THE ACT. WE FIND MERIT IN THE PLEA RAISED ON BEHALF OF THE ASSESSEE IN THE LIGHT OF DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT(TDS) VS. PRIYA BLUE INDUSTRIES P. LTD. [2016] 381 ITR 0210 (GUJ). THUS, ON FIRST ITA NO. 151/AHD/17 [ACIT(OSD) VS. BANSAL SHIP BREAKERS PVT. LTD.] A.Y. 2008-09 - 7 - PRINCIPLES, THE ITEMS SOLD WHICH ARE CAPABLE OF BEI NG USED AS SUCH ARE DISCHARGED FROM THE OBLIGATIONS FASTENED UNDER S.20 6C OF THE ACT. THE CIT(A) IN OUR VIEW HAS LOOKED INTO THE CONTROVERSY OBJECTIVELY AFTER TAKING COGNIZANCE OF REMAND REPORT AND REPLIES OF T HE ASSESSEE AND IN THE LIGHT OF EVIDENCE PLACED BEFORE IT. THE ACTION OF THE CIT(A) IS IN TUNE WITH LAW AND CANNOT BE FAULTED. WE THUS DECLI NE TO INTERFERE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 09/07/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 09/07/2019