Dhasawala Traders, Ahmedabad V. The Income Tax Officer, TDS-4, Ahmedabad

ITA 979/AHD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0661 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-08-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 20-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B R POPAT
• Keywords: Question of law
• Section: 133A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.979, 980 AND 1535/AHD/2015 / ASSTT. YEAR: 2012-2013, 2013-14 AND 2011-12 DHASAWALA TRADERS 463/, DEPAK TENEMENT PRABHUDAS TALAV ROAD SHISHUVIHAR, BHAVNAGAR. PAN : AAHFD 6690 E VS ITO, TDS-4 AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI B.R. POPAT, AR REVENUE BY : SHRI SUMIT KUMAR VERMA, DR / DATE OF HEARING : 30/08/2016 / DATE OF PRONOUNCEMENT: 01 /09/2016 $%/ O R D E R 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 ASST T.YEAR 2011-12. 2. SOLITARY COMMON GRIEVANCE OF THE ASSESSEE IN ALL THESE YEARS RELATES TO RAISING OF DEMAND AMOUNTING TO RS.85,919/-, RS.10,5 5,845/- AND RS.10,84,223/- U/S.206 R.W.S. 206C(7) OF THE INCOM E TAX ACT, 1961 IN THE ASSTT.YEARS 2011-12 TO 2013-14 RESPECTIVELY. 3. BRIEF FACTS OF THE CASE ARE THAT SURVEY UNDER SE CTION 133A OF THE ACT WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 31.1.2013. DURING THE COURSE OF SURVEY, IT REVEALED TO THE DEPARTMENT THA T THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN IRON, STEEL SCRAP, MS PIPE, OTHER NON-FERROUS SCRAP, SHIP SCRAP MATERIALS & MACHINERIES. ACCORDI NG TO THE REVENUE, ITA NO.979/AHD/2015 (2 OTHERS) 2 ASSESSEE WAS SUPPOSED TO COLLECT TAX AT SOURCE AT T HE RATE OF 1% OF THE SALE, AND IT WAS REQUIRED TO BE DEPOSITED IN THE GOVERNME NT 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 REQUI RED TO BE DEDUCTED PROVIDED A DECLARATION IN FORM NO.27C IS BEING OBTA INED BY THE ASSESSEE FROM THE BUYER. THE ASSESSEE DURING THE COURSE OF SURVE Y CONTENDED THAT HE HAS OBTAINED FORM NO.27, BUT FILE OF THIS FORM WAS NOT TRACEABLE. THE LD.AO HAS HELD THAT THE ASSESSEE FAILED TO COLLECT TAX AT THE RATE OF 1% OF THE SALE, AND ALSO FAILED TO DEPOSIT SUCH AMOUNT TO THE GOVERNMEN T ACCOUNT WITHIN DUE DATE. THEREFORE, HE MADE AN ADDITION OF RS.8,5,488/- IN T HE ASSTT.YEAR 2012-13. HE CHARGED INTEREST AT THE RATE OF 1% FOR 24 MONTHS UN DER SECTION 206C(7) AT RS.2,04,357/-. IN THIS WAY, HE RAISED DEMAND OF RS .10,55,845/- IN THE ASSTT.YEAR 2012-13. ON IDENTICAL PRINCIPLE, CALCULATIONS HAVE BEEN MAD E 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 OUT SET, CONTENDED THAT IN CASE OF M/S.CIT VS. PRIYA BLUE INDUSTRIES P.LTD., T HE TRIBUNAL HAS CONSIDERED SCOPE OF EXPRESSION SCRAP PROVIDED IN THE DEFINIT ION IN EXPLANATION-B TO SECTION 206C OF THE ACT. ACCORDING TO THE TRIBUNAL , WASTAGE AND SCRAP GENERATED OUT OF MANUFACTURING ACTIVITY IS TO BE CO NSIDERED AS SCRAP AND IF THE ASSESSEE WAS ENGAGED IN THE MANUFACTURING ACTIV ITIES, WHICH HAS RISEN TO SCRAP THEN, ON SALE OF THAT SCRAP, THE TAX OUGHT TO BE COLLECTED BY THE ASSESSEE AT THE GIVEN RATE. IN THE CASE OF SHIP B REAKING, NOT ONLY WASTE WOULD BE GENERATED, BUT THERE ARE FINISHED PRODUCTS WHICH ARE RE-USEABLE. THE TRIBUNAL HAS REMITTED THE ISSUE WITH REGARD TO GENE RATION OF SCRAP ARISING OUT OF MANUFACTURING ACTIVITY IN THE COURSE OF SHIP BRE AKING. AS FAR AS SALE OF ITA NO.979/AHD/2015 (2 OTHERS) 3 OTHER ITEMS WAS CONCERNED, THE TRIBUNAL HELD THAT T HESE 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 HONBLE 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 D ECISION, 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 GENER ATED OUT OF MANUFACTURING ACTIVITY UNDERTAKEN BY THE ASSESSEE. THE ASSESSEE HAS SOLD ITEMS WHICH WERE RE-USABLE PRODUCTS IN A SHIP BREAKING ACTIVITY. TH ESE ITEMS ARE SCRAP BY NOMENCLATURE. THEY ARE NOT IN FACT SCRAP. THEREFO RE, ASSESSEE CANNOT BE HELD LIABLE TO COLLECT TAX UNDER SECTION 206C OF THE ACT . THE LD.DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE REVENUE AUTHORI TIES BELOW. 5. I HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GON E THROUGH THE RECORD CAREFULLY. EXPRESSION SCRAP HAS BEEN DEFINED IN EXPLANATION-B ATTACHED TO SECTION 206C. IT READS AS UNDER: (B) SCRAP AS WASTE AND SCRAP FROM THE MANUFACTUR E 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 MANUFACTU RE OR MECHANICAL WORKING OF MATERIALS. 6. THE TRIBUNAL HAS CONSIDERED THIS ASPECT IN THE C ASE OF PRIYA BLUE INDUSTRIES P.LTD. WHO WAS ENGAGED IN THE BUSINESS O F SHIP BREAKING. THE FINDING RECORDED BY THE TRIBUNAL READS AS UNDER: AS PER ASSESSEE, ASSESSEE HAS COLLECTED AND PAID TC S ON FOLLOWING TYPE OF ITEMS OF SALES DURING THE YEAR. 1. ARTICLES OF IRON & STEEL WIRE ROPES ITA NO.979/AHD/2015 (2 OTHERS) 4 2. WASTE & SCRAP OF CASTIRON 3. WASTE & SCRAP OF COPPER 4. WASTE & SCRAP OF IRON & STEEL 5. WASTE & SCRAP OF STAINLESS STEEL 6. WASTE & SCRAP, 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 FL UORINE INTERNATIONAL LTD VS. ACIT, TDS CIRCLE SURAT, FOR A Y 2009-10 & 2010- 11, INTER ALIA HELD THAT TERM 'WASTE AND SCRAP' ARE ONE ITEM. THE WASTE AND SCRAP' MUST BE FROM MANUFACTURE OR MECHA NICAL WORKING OF MATERIAL WHICH IS DEFINITELY NOT USABLE AS SUCH BECAUSE OF BREAKAGE, CUTTING UP, WARE AND TO OTHER REASONS. IT WOULD MEA N THAT THESE WASTE AND SCRAP BEING ONE ITEM SHOULD ARISE FROM MANUFACT URE OR MECHANICAL WORKING OF MATERIAL. THE WORDS WASTE AND SCRAP SHOU LD HAVE NEXUS WITH MANUFACTURING OR MECHANICAL WORKING OF MATERIA LS. THEREFORE, THE WORD USED IS 'WHICH IS' DEFINITELY NOT USABLE. THE WORD 'IS' AS USED IN THIS DEFINITION OF THE SCRAP MEANT FOR SINGULAR ITE M I.E. 'WASTE AND SCRAP'. AS STATED ABOVE, ASSESSEE IS ENGAGED IN SHI P 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 S UCH PRODUCTS MAY BE COMMERCIALLY KNOWN AS 'SCRAP' THEY ARE DEFINITEL Y NOT 'WASTE AND SCRAP'. THE ITEMS IN QUESTION ARE 'USABLE AS SUCH' AND THEREFORE DOES NOT FALL WITHIN THE DEFINITION OF SCRAP AS GIVEN IN OF SECTION 206C(1). HAVING SAID SO, WE RESTORE THE ISSUE TO ASSESSING O FFICER WITH DIRECTION TO GRANT RELIEF TO ASSESSEE UNDER THE PROVISION OF 206C(1) OF ACT, WITH REGARDS TO ONLY SALE OF SCRAP ARISING OUT OF MANUFA CTURING ACTIVITY IN COURSE OF SHIP BREAKING AFTER PROVIDING DUE OPPORTU NITY OF HEARING TO ASSESSEE. ITA NO.979/AHD/2015 (2 OTHERS) 5 7. THE FINDING OF THE TRIBUNAL HAS BEEN UPHELD BY T HE HONBLE HIGH COURT AND THE HONBLE HIGH COURT HAS MADE THE FOLLOWING D ISCUSSION ON THE ISSUE: 5. FROM THE FACTS AS NARRATED HEREINABOVE, IT IS A PPARENT THAT THE RESPONDENT ASSESSEE HAD COLLECTED AND PAID TAX AT S OURCE (TCS) ON THE SEVEN ITEMS AS ENUMERATED IN THE ORDERS PASSED BY T HE COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL AND HAD NOT COLLE CTED 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 ASSESSEE IS ENGAGED IN SHIP BREAKING ACTIVITY AND THE ITEMS IN QUESTION AR E 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 IN THE EXPLANATION TO SECTION 206C(1) 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, SCRAP ETC. AND PROVIDES THAT EVERY PERSON, BEING A SELLER SHAL L, 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 S AID BUYER IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER M ODE, 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 CORRESPONDING ENTRY IN COLUMN (3) OF THE SAI D 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 EXPRE SSION OF SCRAP IS DEFINED UNDER CLAUSE (B) TO THE EXPLANATION TO SECT ION 206 OF THE ACT, TO MEAN WASTE AND SCRAP FROM MANUFACTURE OR MECHANICAL WORKING OF MATERIALS WHICH IS DEFINITELY NOT USABLE AS SUCH BE CAUSE OF BREAKAGE, CUTTING UP, WEAR AND OTHER REASONS. ON A PLAIN READ ING OF THE SAID EXPRESSION, IT IS EVIDENT THAT ANY MATERIAL WHICH I S USABLE AS SUCH ITA NO.979/AHD/2015 (2 OTHERS) 6 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 RECORDE D THAT THE ITEMS/PRODUCTS IN QUESTION OBTAINED FROM THE ACTIVI TY OF SHIP BREAKING ARE USABLE AS SUCH AND, THEREFORE, DO NOT FALL WITH IN THE DEFINITION OF SCRAP. HOWEVER, SINCE THE ASSESSEE HAD NOT COLLECTE D TAX AT SOURCE ON ITEMS OTHER THAN ITEMS OBTAINED OUT OF THE MANUFACT URING ACTIVITY IN THE COURSE OF SHIP BREAKING, THE TRIBUNAL HAS REMITTED THE MATTER TO THE ASSESSING OFFICER FOR THE PURPOSE GRANTING RELIEF T O 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 ASSESSEE. THUS, THE TRIBUNAL AFTER RECORDING A FINDING OF FAC T 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, T HE 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 RE LATION 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 FO UND IN THE APPROACH ADOPTED BY THE TRIBUNAL, INASMUCH AS, OUT OF THE FO UR 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 T O 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. A PERUSAL OF THE PARAGRAPH-6 OF THE ABOVE JUDGME NT, WOULD INDICATE THAT CERTAIN ITEMS GENERATED OUT OF SHIP BREAKING A CTIVITY MIGHT BE KNOWN COMMERCIALLY AS SCRAP BUT THEY ARE NOT WASTE AND SCRAP. 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). THE ASSESSEE HAS ALSO CONTENDED THAT IT WAS ENGAGED IN THE SALE OF MS PIP E, IRON WHICH WERE OBTAINED FROM SHIP BREAKING INDUSTRIES. THE ASSESS EE HIMSELF HAS NOT ITA NO.979/AHD/2015 (2 OTHERS) 7 GENERATED ANY SCRAP IN MANUFACTURING ACTIVITY, AS C ONTEMPLATED IN THE EXPLANATION . HE WAS A TRADER. THEREFORE, THE ASSESSEE HAS NO T 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 THE ACT. THE LD.AO HAS ERRED IN RAISING TH E DEMAND. I ALLOW ALL APPEALS AND DELETE ADDITIONS. 9. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 1 ST SEPTEMBER, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 01/09/2016