Shri Azizbhai A.Lada, Bhavnagar V. Income Tax Officer,TDS-4, Ahmedabad

ITA 765/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6323 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 06-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: PARIMAL SINGH PARMAR
• Keywords: Question of law
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 765/AHD/2015 (ASSESSMENT YEAR: 2005-06) SHRI AZIZBHAI A. LADA 497/6AB, GULMOHAR PARK,SHISHUVIHAR CIRCLE, BHAVNAGAR-364001 V/S INCOME TAX OFFICER, TDS-4, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AANPL 4907G APPELLANT BY : SHRI PARIMAL SINGH PARMAR , AR RESPONDENT BY : SHRI V.K. SINGH, SR. D.R. ( )/ ORDER DATE OF HEARING : 04 -01-201 8 DATE OF PRONOUNCEMENT : 10-01-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-4, AHMEDABAD DATED 11.02.2015 PERTAINING TO A.Y. 2005- 06. ITA NO. 765/ AHD/2015 . A.Y.2005-06 2 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE A.O. IN HOLDING THAT THE ASSESSEE WAS LIABLE TO COLLECT TAX AT SOURCE @ 1% ON SALE OF ALLEGED SCRAP AMOUNTING TO R S. 4,84,56,288/-. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF SCRAPS OBTAINED FROM SHIP BREAKING YARD. THE RETURN FOR THE YEAR WAS SEL ECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY STATUTORY NOTICES WERE I SSUED AND SERVED UPON THE ASSESSEE. THE A.O. OBSERVED THAT THE ASSESSEE IS NO T COLLECTING ANY TCS IN RESPECT OF SALE OF SCRAP. THE A.O. FURTHER FOUND TH AT THE ASSESSEE HAS NEITHER SUBMITTED FORM NO. 27C NOR OBTAINED FORM 27C FROM T HE BUYERS. THE A.O. ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE ASKING IT TO EXPLAIN WHY IT SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT WITHIN THE MEA NING OF SECTION 206C OF THE ACT. IN ITS REPLY, THE ASSESSEE POINTED OUT THAT SA LES MADE AGAINST TCS AMOUNTS TO RS. 28,50,300/- ON WHICH TCS COLLECTED IS RS. 31 ,536/- WHICH HAS BEEN DEPOSITED IN TREASURY IN TIME. THE A.O. FOUND THAT THE ASSESSEE HAS NOT SUBMITTED PROOF OF FILING OF FORM 27C NOR IT HAS OB TAINED THE SAME FROM THE BUYERS OF SCRAP. THE A.O. CONCLUDED BY HOLDING THAT THE ASSESSEE WAS LIABLE FOR COLLECTING TCS @ 1% AND ACCORDINGLY RAISED THE DEMA ND U/S. 206C(1) AT RS. 5,43,679/- AND U/S. 206C(7) RS. 5,87,173/-. 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT MUCH SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERA TED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O. ITA NO. 765/ AHD/2015 . A.Y.2005-06 3 6. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW. THERE IS NO DISPUTE THAT THE ASSESSEE IS ENGAGED IN THE BUSINES S OF TRADING OF SCRAPS OBTAINED FROM SHIP BREAKING YARD. IN OUR CONSIDERED OPINION, PROVISIONS OF SECTION 206C DO NOT APPLY IN CASE OF SCRAP GENERATE D IN THE COURSE OF SHIP BREAKING ACTIVITY. ITEMS GENERATED OUT OF SHIP BREA KING ACTIVITY MIGHT BE COMMERCIALLY KNOWN AS SCRAP SINCE SUCH ITEMS ARE NOT WASTE AND SCRAP. SINCE SUCH ITEMS ARE RE-USEABLE. ONCE SUCH ITEMS SOLD CAN NOT BE TERMED AS SCRAP WOULD MAKE THE PROVISIONS OF SECTION 206C OF THE AC T IN APPLICABLE. FOR THIS PROPOSITION, WE DRAW SUPPORT FROM THE DECISION OF T HE CO-ORDINATE BENCH IN THE CASE OF DHASAWALA TRADERS IN ITA NO. 979, 980 & 1535/AHD/2015. THE RELEVANT FINDINGS OF THE CO-ORDINATE BENCH READ AS UNDER:- 8. A PERUSAL OF THE PARAGRAPH-6 OF THE ABOVE JUDG MENT, WOULD INDICATE THAT CERTAIN ITEMS GENERATED OUT OF SHIP BREAKING ACTIVI TY MIGHT BE KNOWN COMMERCIALLY AS 'SCRAP' BUT THEY ARE NOT WASTE AND SC RAP. THESE ITEMS ARE RE- USABLE AS SUCH, AND THEREFORE, WOULD NOT FALL WITHI N THE DEFINITION OF 'SCRAP' AS ENVISAGED IN THE EXPLANATION TO SECTION 206C(1). TH E ASSESSEE HAS ALSO CONTENDED THAT IT WAS ENGAGED IN THE SALE OF MS PIPE, IRON WH ICH WERE OBTAINED FROM SHIP BREAKING INDUSTRIES. THE ASSESSEE HIMSELF HAS NOT G ENERATED ANY SCRAP IN MANUFACTURING ACTIVITY, AS CONTEMPLATED IN THE EXPL ANATION. HE WAS A TRADER. THEREFORE, THE ASSESSEE HAS NOT SOLD SCRAP AS SUCH. HE HAS SOLD THE PRODUCTS RESULTED FROM SHIP BREAKING ACTIVITY, WHICH ARE RE- USABLE. THUS, THE ASSESSEE WAS NOT SUPPOSED TO COLLECT TAX UNDER SECTION 206C OF T HE ACT. THE ID.AO HAS ERRED IN RAISING THE DEMAND. I ALLOW ALL APPEALS AND DELETE ADDITIONS. 7. THE HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF PRIYA BLUE INDUSTRIES (P.) LTD. (SUPRA) WAS SEIZED WITH THE FO LLOWING SUBSTANTIAL QUESTIONS OF LAW:- '(A) WHETHER THE APPELLATE TRIBUNAL HAS SUBSTANTIAL LY ERRED IN LAW IN INTERPRETING THE TERM SCRAP AS DEFINED IN CLAUSE (B) TO EXPLANAT ION TO SECTION 206C OF THE ITA NO. 765/ AHD/2015 . A.Y.2005-06 4 INCOME TAX ACT BY HOLDING THAT THE WORDS 'WASTE AND SCRAP' IS A SINGULAR ITEM AND NOT DISTINCT? (B) WHETHER THE APPELLATE TRIBUNAL HAS SUBSTANTIAL LY ERRED IN LAW IN PLACING RELIANCE UPON THE CASE OF NAVIN FLOURINE CHEMICALS DESPITE THE FACT THAT THE HON'BLE SPECIAL BENCH IN THE CASE OF BHARTI AUTO PR ODUCTS HAD HELD THAT THE WORDS 'WASTE AND SCRAP' ARE TWO DIFFERENT AND DISTINCT WO RDS? (C) WHETHER THE APPELLATE TRIBUNAL HAS SUBSTANTI ALLY ERRED IN DELETING THE ORDER PASSED UNDER SECTION 201(1) OF THE INCOME TAX ACT O F RS. 40,16,418/- AND INTEREST CHARGED UNDER SECTION 201(1 A) OF THE ACT OF RS. 23 ,29,522?' 8. AND THE RELEVANT FINDINGS OF THE HONBLE HIGH COURT READS AS UNDER:- 5. FROM THE FACTS AS NARRATED HEREINABOVE, IT IS AP PARENT 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, E TC. 3. TRADING OF SCRAP (MELTING) 4. HIGH SEAS SALE. 6. THE TRIBUNAL, AFTER CONSIDERING THE DEFINITION O F SCRAP UNDER CLAUSE (B) TO SECTION 206C OF THE ACT, HAS NOTED THAT THE ASSESSE E IS ENGAGED IN SHIP BREAKING ACTIVITY AND THE ITEMS IN QUESTION ARE FINISHED PRO DUCTS OBTAINED FROM THE ACTIVITY AND CONSTITUTE SIZEABLE CHUNK OF PRODUCTION DONE BY SHIP BREAKERS. THOUGH SUCH PRODUCTS MAY BE COMMERCIALLY KNOWN AS 'SCRAP' THEY AR E NOT 'WASTE AND SCRAP', AS SUCH ITEMS ARE USABLE AS SUCH, AND, THEREFORE, D O NOT FALL WITHIN THE DEFINITION OF SCRAP AS ENVISAGED IN THE EXPLANATION TO SECTION 206C(L) OF THE ACT. 7. SECTION 206C OF THE ACT BEARS THE HEADING, 'PROF ITS AND GAINS FROM THE BUSINESS OF TRADING IN ALCOHOLIC LIQUOR, FOREST PRODUCE, SCR AP ETC.' AND PROVIDES THAT EVERY PERSON, BEING A SELLER SHALL, AT THE TIME OF DEBITI NG 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, COLLECT FROM THE BUYER OF ANY GOODS OF THE NATURE SPECIFIED IN COLUMN (2) OF THE TABLE BELOW, A SUM EQUAL TO THE P ERCENTAGE SPECIFIED IN THE ITA NO. 765/ AHD/2015 . A.Y.2005-06 5 CORRESPONDING ENTRY IN COLUMN (3) OF THE SAID TABLE , OF SUCH AMOUNT AS INCOME- TAX. THE NATURE OF GOODS SPECIFIED AT SERIAL NO.(VI ) IS SCRAP, AND THE PERCENTAGE PROVIDED IS 1%. THE EXPRESSION OF SCRAP IS DEFINED UNDER CLAUSE (B) TO THE EXPLANATION TO SECTION 206 OF THE ACT, TO MEAN WAST E AND SCRAP FROM MANUFACTURE OR MECHANICAL WORKING OF MATERIALS WHIC H IS DEFINITELY NOT USABLE AS SUCH BECAUSE OF BREAKAGE, CUTTING UP, WEAR AND OTHE R 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 EXPRESS ION 'SCRAP' AS ENVISAGED UNDER CLAUSE (B) OF THE EXPLANATION TO SECTION 206C OF TH E ACT. 8. THE TRIBUNAL, IN THE IMPUGNED ORDER, HAS RECORDE D THAT THE ITEMS/PRODUCTS IN QUESTION OBTAINED FROM THE ACTIVITY OF SHIP BREAKIN G ARE USABLE AS SUCH AND, THEREFORE, DO NOT FALL WITHIN THE DEFINITION OF SCR AP. HOWEVER, SINCE THE ASSESSEE HAD NOT COLLECTED TAX AT SOURCE ON ITEMS OTHER THAN ITEMS OBTAINED OUT OF THE MANUFACTURING ACTIVITY IN THE COURSE OF SHIP BREAKI NG, THE TRIBUNAL HAS REMITTED THE MATTER TO THE ASSESSING OFFICER FOR THE PURPOSE GRANTING RELIEF TO THE ASSESSEE UNDER THE PROVISIONS OF SECTION 206C(1) OF THE ACT WITH REGARD TO ONLY SALE OF SCRAP ARISING OUT OF MANUFACTURING ACTIVITY IN THE COURSE OF SHIP BREAKING AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO THE ASSESSE E. 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 AR E USABLE AS SUCH, AND, THEREFORE, DO NOT FALL WITHIN THE DEFINITION OF SCRAP HAS REMI TTED THE MATTER TO THE ASSESSING OFFICER TO GRANT RELIEF ACCORDINGLY. ESSENTIALLY, T HEREFORE, 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 ADOPTED BY THE T RIBUNAL IN REMITTING THE MATTER TO THE ASSESSING OFFICER TO DECIDE IN RELATION TO W HICH 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 TH E 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 PURP OSE OF EXAMINING AS TO WHAT EXTENT RELIEF IS REQUIRED TO BE GRANTED TO THE ASSE SSEE UNDER THE PROVISIONS OF SECTION 206C(1) OF THE ACT HAVING REGARD TO THE FIN DINGS OF FACT RENDERED BY IT. 10. IN THE OPINION OF THIS COURT, THE IMPUGNED ORDE R PASSED BY THE TRIBUNAL DOES NOT SUFFER FROM ANY LEGAL INFIRMITY SO AS TO GIVE R ISE TO ANY QUESTION OF LAW, MUCH ITA NO. 765/ AHD/2015 . A.Y.2005-06 6 LESS, A SUBSTANTIAL QUESTION OF LAW WARRANTING INTE RFERENCE. THE APPEAL, THEREFORE, FAILS AND IS, ACCORDINGLY, DISMISSED. 9. IF THE FACTS OF THE CASE IN HAND ARE CONSIDERED IN THE LIGHT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA), WE FIND THAT THE ITEMS SOLD BY THE ASSESSEE DO NOT FIT INTO THE CATEGORY OF SCRAP AS E XPLAINED BY THE HONBLE HIGH COURT (SUPRA). THEREFORE, IN OUR CONSIDERED OPINION , THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT AND ON THE IMPUGN ED SALES CANNOT BE TREATED AS SALE OF SCRAP THEREBY MAKING THE ASSESSEE OUT OF TH E PURVIEW OF SECTION 206C OF THE ACT. 10. INSOFAR AS THE SUBMISSIONS OF FORM 27C IS CONCERNED , THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF SIYARAM METAL UDYOG (P.) LTD. (SUPRA), HAS HELD THAT NO TIME LIMIT IS PROVIDED IN SECTION 206C(1A) TO M AKE A DECLARATION IN FORM 27C COLLECTED FROM BUYERS; MERE MINOR DELAY IN FURN ISHING FORM 27C WOULD NOT MAKE ASSESSEE LIABLE FOR NON-COLLECTION OF TCS . 11. FACTS BEING SIMILAR, RESPECTFULLY FOLLOWING THE FIN DINGS OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA), WE DO NOT FIND A NY MERIT IN THE IMPUGNED DEMAND RAISED BY THE A.O. 12. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF T HE AFORE-STATED DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT, WE SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO DELETE THE IMPUGNED DEMAND. ITA NO. 765/ AHD/2015 . A.Y.2005-06 7 13. APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON 10- 01- 20 18 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 10 /01/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD