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

ITA 1945/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1066 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 29-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P PATHAK
• Assessee Lawyers: B R POPAT
• Keywords: TDS
• Section: 133A

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO. 1945/AHD/2017 / ASSESSMENT YEAR: 2014-15 ACIT(OSD), TDS CIRCLE AHMEDABAD. VS M/S.BANSAL SHIP BREAKERS P. LTD. D/9, OPP: ORIENTAL BANK OF COMMERCE, NR.RAM MANTRA MANDIR, KALAVIBID, BHAVNAGAR. GUJARAT. PAN : AAACB 8758 P / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI O.P. PATHAK, SR.DR ASSESSEE BY : SHRI B.R. POPAT, AR / DATE OF HEARING : 18/03/2019 /DATE OF PRONOUNCEMENT : 20/ 03/2019 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF THE LD.CIT(A)- 8, AHMEDABAD DATED 19.6.2017 PASSED FOR THE ASSTT.YEAR 2014-15. 2. REVENUE HAS TAKEN FIVE GROUNDS OF APPEAL, BUT IT S GRIEVANCE REVOLVES AROUND A SINGLE ISSUE VIZ. THE LD.CIT(A) H AS ERRED IN DELETING THE DEMAND OF RS.37,47,061/- UNDER SECTION 206C(1) AND RS.10,18,010/- UNDER SECTION 206C(7) OF THE INCOME TAX ACT, 1961. IN OTHER WORDS, THE GRIEVANCE OF THE REVENUE IS THAT THE ASSESSEE WAS R EQUIRED TO COLLECT TAX AT SOURCE WHILE SELLING SCRAP. SINCE IT FAILED TO COLLECT SUCH TAXES ON SALE ITA NO.1945/AHD/2017 - 2 - OF RS.37,46,06,052/- A DEMAND UNDER SECTION 206C AL ONG WITH INTEREST DESERVES TO BE RAISED AGAINST THE ASSESSEE. THE AO HAS RAISED SUCH DEMAND WHICH HAS BEEN QUASHED BY THE LD.CIT(A). 3. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF SHIP BREAKING. A SURVEY UNDER SECTION 133A OF THE ACT WAS CARRIED OUT AT THE BUSINESS OF PREMI SES OF THE ASSESSEE- COMPANY ON 17.9.2013. ACCORDING TO THE AO, THE ASS ESSEE WAS REQUIRED TO COLLECT TAXES ON THE SALE OF SCRAP AT THE RATE O F 1% FROM THE BUYER AT THE TIME OF SALE AS PER SECTION 206 OF THE ACT. ACCORD ING TO HIM, THE ASSESSEE FAILED TO COLLECT SUCH TAXES, AND THEREFORE, HE RAI SED A DEMAND UNDER SECTION 206C(6A) R.W.S 206C(7) AND 206C(7) OF THE I NCOME TAX ACT. DISSATISFIED WITH THE DEMAND, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LDCIT(A). IT HAS RAISED TWO FOLD SUBMIS SIONS. IN THE FIRST FOLD OF CONTENTION, IT SUBMITTED THAT THE SALES MADE BY THE ASSESSEE WERE NOT CONSIDERED AS SCRAP MATERIAL, RATHER THESE WERE IDE NTIFIABLE USEFUL PRODUCTS, WHICH HAVE BEEN EXTRACTED FROM THE SHIP. ON THOSE SALES, THE ASSESSEE WAS NOT REQUIRED TO COLLECT TAX. IT RELIE D UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. P RIYA BLUE INDUSTRIES LTD., (2016) 65 TAXMANN.COM 206 (GUJ). IN THE SECOND FOLD OF CONTENTIONS, IT WAS SUBMITTED THAT SECTION 206C(1A) MANDATES THAT ANY PERSON RESPONSIBLE FOR C OLLECTING TAXES UNDER SECTION 206C(1) WAS NOT REQUIRED TO COLLECT S UCH TAXES IF A BUYER WHO IS RESIDENT IN INDIA AND SUCH BUYER FURNISHES T O THE PERSON RESPONSIBLE FOR COLLECTING TAXES A DECLARATION IN W RITING THAT SUCH MATERIAL WILL BE UTILIZED FOR THE PURPOSE OF MANUFA CTURING PROCESS OR ITA NO.1945/AHD/2017 - 3 - PRODUCING ARTICLE OR THINGS AND IT WILL NOT BE USED FOR TRADING PURPOSES. THUS, ON THE STRENGTH OF THIS CLAUSE, THE ASSESSEE HAS SUBMITTED BEFORE THE LD.CIT(A) THAT IT HAS SUBMITTED REQUIRED DETAIL S IN FORM NO.27BA/27C. THE LD.CIT(A) ACCEPTED BOTH FOLD OF C ONTENTIONS AND DELETED THE DEMAND. 4. FOR ADJUDICATION OF THIS ISSUE, WE DEEM IT PERTI NENT TO TAKE NOTE OF SECTION 206C(1A) OF THE ACT, WHICH READS AS UNDER: .. (1A) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (1), NO COLLECTION OF TAX SHALL BE MADE IN THE CASE OF A BU YER, WHO IS RESIDENT IN INDIA, IF SUCH BUYER FURNISHES TO THE PERSON RESPON SIBLE FOR COLLECTING TAX, A DECLARATION IN WRITING IN DUPLICATE IN THE PRESCR IBED FORM AND VERIFIED IN THE PRESCRIBED MANNER TO THE EFFECT THAT THE GOO DS REFERRED TO IN COLUMN (2) OF THE AFORESAID TABLE ARE TO BE UTILISED FOR TH E PURPOSES OF MANUFACTURING, PROCESSING OR PRODUCING ARTICLES OR THINGS OR FOR THE PURPOSES OF GENERATION OF POWER AND NOT FOR TRADING PURPOSES. 5. A PERUSAL OF THE ABOVE WOULD INDICATE THAT IT MA NDATES ANY PERSON RESPONSIBLE FOR COLLECTING TAXES UNDER SECTION 206( 1) NEED NOT TO DO SO IF HE OBTAINS A DECLARATION FROM THE BUYER THAT HE IS PURCHASING THE GOODS FOR RE-USE IN MANUFACTURING PROCESS OR PRODUCING AR TICLE OR THINGS. IT DOES NOT SAY THAT SUCH DECLARATION HAS TO BE OBTAIN ED AT THE VERY SAME MOMENT WHEN SALE IS EFFECTED. IN THE PRESENT CASE, THE ASSESSEE HAS SUBMITTED DECLARATION BEFORE THE AO IN REQUISITE FO RMS. THE LD.FIRST APPELLATE AUTHORITY HAS APPRECIATED THIS ASPECT AND THE FINDING RECORDED BY THE LD.CIT(A) READS AS UNDER: 5.5 THE APPELLANT HAS ALSO ARGUED THAT AS THE BUYE RS OF SUCH GOODS HAVE FURNISHED DECLARATION THAT THE GOODS SHALL BE USED FOR THE PURPOSE OF MANUFACTURING / PROCESSING / PRODUCING ARTICLES OR THINGS AND NOT FOR TRADING AND THEY HAVE GIVEN A DECLARATION U/S.206C( IA) OF THE I. T. ACT, ITA NO.1945/AHD/2017 - 4 - 1961 & THEREFORE, THE PROVISIONS OF SEC.206C ARE NO T APPLICABLE IN RESPECT OF ITEMS SOLD TO THEM. I HAVE GONE THROUGH THE CONT ENTS OF THE PAPER BOOK FILED BY THE APPELLANT AND ALSO THE REMAND REPORT O BTAINED DURING THE COURSE OF THE APPELLATE PROCEEDINGS. THE APPELLANT HAS SUBMITTED THAT THE BUYERS OF SUCH GOODS HAVE FURNISHED DECLARATION THA T THE GOODS SHALL BE USED FOR THE PURPOSE OF MANUFACTURING / PROCESSING / PRODUCING ARTICLES OR THINGS AND NOT FOR TRADING AND THEY HAVE GIVEN A DE CLARATION U/S,206CC(IA) OF THE I. T. ACT, 1961 & THEREFORE, TH E PROVISIONS OF SEC.206C ARE NOT APPLICABLE IN RESPECT OF ITEMS SOL D TO THEM. IF THE APPELLANT HAS RECEIVED DECLARATIONS IN FORM NO. 27C /27BA, 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/27BA WERE AVAIL ABLE WITH THE APPELLANT OR NOT. AS MENTIONED BY THE AR OF THE APPELLANT ABOVE, THIS ISSUE IS DIRECTLY COVERED BY THE RATIO OF THE JUDGMENT OF HO N'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 KA RNATAKA 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 RESPONS IBLE FOR COLLECTING TAX UNDER SECTION 206C(1) NEED NOT DO SO 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. IT DOES NOT SAY THAT SUCH DECLARATION HAS TO BE OBTAIN ED AT THE VERY SAME MOMENT WHEN A SALE IS AFFECTED........... RECENTLY, HON'BLE HIGH COURT OF GUJARAT IN TAX APPE AL NO. 519 OF 2016 TAX APPEAL NO.526 OF 2016 COMMISSIONER OF INCOME TA X (TDS)....APPELIANT(S) VERSUS SIYARAM METAL UDYOG PVT LTD.....OPPONENT(S) IN ITS ORDER DATED 27/06/2016 CO NCLUDED AS UNDER: ITA NO.1945/AHD/2017 - 5 - '....................... IF THE BUYER FURNISHES TO THE PERSON RESPONSIBLE FOR THE TAX A DECLARATION IN WRITING IN PRESCRIBED FORM DECLARING THAT THE GOODS IN QUESTION ARE TO B E UTILIZED FOR THE P URPOSES OF MANUFACTURING PROCESSOR PRODUCING ARTICLES OR THING S OR FOR THE PURPOSE OF GENERATION OF POWER AND NOT FOR TRADING PURPOSES. THE DECLARATION TO BE MADE IN SUBSECTION (IA) OF SECTION 206C THUS WOULD ENABLE THE REVENUE AUTHORITIES TO, AS AND WHE N THE NEED SO ARISES MAKE PROPER VERIFICATIONS. THIS SUBSECTIO N ITSELF DOES NOT PROVIDE FOR ANY TIME LIMIT WITHIN WHICH SUCH DECLAR ATION IS TO BE MADE........... ' AFTER CONSIDERING ALL THE FACTS OF THE CASE AND THE JUDICIAL PRONOUNCEMENT BY THE HIGHER AUTHORITIES INCLUDING JURISDICTIONAL HIGH COURT OF GUJARAT, IT IS CONCLUDED THAT THERE IS NO DISPUTE T HAT THE DELAY IN FILING SUCH FORMS WITH THE OFFICE OF THE DEPARTMENT [CANNO T REVIVE THE LIABILITY OF COLLECTION OF TAX AT SOURCE WITH RETROSPECTIVE E FFECT AND THE 27C PRODUCED BY THE APPELLANT MAY BE CONSIDERED. 6. IN HIS ORDER ITSELF , THE ITO TDS-1 HIMSE LF HAS POINTED OUT THE JUDGMENT OF SPECIAL BENCH OF IT AT IN THE CASE OF B HARTI AUTO PRODUCTS WHICH REFERS TO THE AMENDMENTS IN LAW PERMITTING FI LING OF FORM NO.27BA/ 27C IS TO BE TREATED AS RETROSPECTIVE IN N ATURE. HE FURTHER HAS ACKNOWLEDGED THE FACT THAT SINCE THE DETAILS FURNIS HED IN THIS FORMS PROVE ABOUT THE DUE TAXES HAVING ALREADY BEEN PAID BY THE RESPECTIVE BUYERS THE SAME WILL ALSO BE COVERED BY THE RATIO OF THE JUDGM ENT OF THE HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCACOLA BEV ERAGE LTD. (2007) 293 ITR 226. AS THE APPELLANT HAS SUBMITTED FORM 27 C/27BA FROM THE PARTIES IN QUESTION, THE DEFAULT COMPUTED BY THE AO IS TO BE DELETED. IN VIEW OF ABOVE DISCUSSION, IT IS NOTICED THAT THERE IS NO VIOLATION OF THE PROVISIONS OF SECTION 206C OF THE ACT IN VIEW OF EI THER THE SALE OF SPECIFIED PRODUCTS BEING THAT OF NON-EXCISABLE, NON-SCRAP PRO DUCTS, OR THE SAME BEING AGAINST RECEIPT OF DECLARATIONS IN PRESCRIBED FORM NUMBER 27C/27BA. THE AO IS DIRECTED TO DELETE THE DEMAND R AISED BASED ON THE DEFAULT DUE TO NON AVAILABILITY OF FORM 27C AT THE TIME OF ASSESSMENT. ACCORDINGLY, THE APPEAL IS ALLOWED. 6. ON DUE CONSIDERATION OF THE FACTS AND FINDINGS, WE ARE OF THE VIEW THAT THE LD.CIT(A) HAS APPRECIATED THE FACTS IN RIG HT PERSPECTIVE AND RIGHTLY HELD THAT THE ASSESSEE WAS NOT REQUIRED TO COLLECT TAXES AT SOURCES WHEN SALES WERE MADE AS REQUIRED UNDER SECTION 206C . WE DO NOT FIND ITA NO.1945/AHD/2017 - 6 - ANY ERROR IN THE ORDER OF THE LD.CIT(A), HENCE, APP EAL OF THE REVENUE IS DEVOID OF ANY MERIT. IT IS REJECTED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 20 TH MARCH, 2019. SD/- SD/- (WASEEM AHMED) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER