2016 (1) TMI 1110 - AT - Income Tax

Additions made u/s.206C(1) on account of non-collection of TCS on sale of scrap - interest charged u/s.206C(7) - whether the CIT(A) has erred in accepting the assessee s argument on merit submitting belated Form No.27C along with consequential interest? - Held that - We make it clear in Revenue s appeal that there is no substantive ground challenging lower appellate findings of the CIT(A) s order clarifying that a part of its high seas sales is already covered in earlier survey. There is also no dispute about the fact that the assessee has belatedly submitted relevant Form No.27C collected from its buyers. The same were placed on record before the Assessing officer itself who declined to accept the same in view of delay in submission thereof. There is no issue qua genuineness of these Forms. We find that the co-ordinate Bench decision of Tribunal (supra) already holds that such a belated submission of relevant Form is a procedural lapse only. The Revenue is unable to point any distinction on facts or law therein. We accordingly see no reason to interfere with lower appellate findings remitting the issue back to the Assessing Officer for adjudication afresh as per law. The Revenue s corresponding ground accordingly fails. The Revenue s next argument seeks to restore interest component of the above stated impugned demand. We are of the view that this issue is a consequential one only. We uphold lower appellate findings qua this interest issue as well. - Decided against revenue Challenging applicability of section 206C we have already extracted hereinabove Special Bench finding in the case of M/s. Bharti Auto Products vs. CIT 2013 (9) TMI 274 - ITAT RAJKOT rejecting an identical plea. The assessee fails in pointing out any distinction on facts or law therein - Decided against assessee

Summary

Issues Involved:
1. Applicability of Section 206C(1) of the Income Tax Act, 1961 to the assessee's scrap sales.
2. Validity of the assessee's claim of not being a manufacturing unit and thus not liable under Section 206C.
3. Consideration of belatedly filed Form No. 27C and its impact on tax collection at source (TCS) liability.
4. Treatment of high seas sales under Section 206C.
5. Chargeability of interest under Section 206C(7) for belated submission of Form No. 27C.

Issue-wise Detailed Analysis:

1. Applicability of Section 206C(1) of the Income Tax Act, 1961 to the assessee's scrap sales:
The Revenue argued that the CIT(A) erred in deleting the additions made under Section 206C(1) on account of non-collection of TCS on scrap sales. The assessee contended that it was a trader of recycled non-ferrous metals and not engaged in manufacturing, thus Section 206C(1) did not apply. The Tribunal referenced the Special Bench decision in M/s. Bharti Auto Products vs. CIT, which applied Section 206C to scrap trading businesses. The CIT(A) upheld this view, stating that the goods were declared as scrap under the Customs Tariff Act, thus falling within the definition of "scrap" under Section 206C Explanation (b).

2. Validity of the assessee's claim of not being a manufacturing unit and thus not liable under Section 206C:
The assessee argued that since it was not a manufacturing unit, the provisions of Section 206C did not apply. The CIT(A) dismissed this claim, emphasizing that the definition of "scrap" under Section 206C was broader than that under the Customs Tariff Act. The Tribunal upheld this view, noting that the assessee's declaration of goods as scrap bound it to the definition under Section 206C.

3. Consideration of belatedly filed Form No. 27C and its impact on TCS liability:
The assessee submitted Form No. 27C belatedly, which was initially not accepted by the Assessing Officer. The CIT(A) ruled that late submission of Form No. 27C was a procedural lapse and did not make the assessee liable for TCS, referencing the ITAT decision in K.P.G. Enterprise vs. The Income-tax Officer. The Tribunal upheld this decision, stating that the belated submission of Form No. 27C did not affect the genuineness of the forms and was a procedural lapse only.

4. Treatment of high seas sales under Section 206C:
The assessee argued that high seas sales should not be considered under Section 206C as the goods never reached Indian territory. The CIT(A) directed the Assessing Officer to consider only the balance period high seas sales and not those already covered in previous proceedings. The Tribunal upheld this decision, noting that the earlier survey covered part of the high seas sales, and the remaining sales were subject to Form No. 27C compliance.

5. Chargeability of interest under Section 206C(7) for belated submission of Form No. 27C:
The Revenue sought to restore the interest component of the TCS demand due to the belated submission of Form No. 27C. The CIT(A) ruled that since the assessee was not liable for TCS due to the submission of Form No. 27C, no interest was chargeable. The Tribunal upheld this view, stating that the interest issue was consequential and there was no liability for interest in the absence of a TCS demand.

Conclusion:
The Tribunal dismissed all the Revenue's appeals and the assessee's cross objections, upholding the CIT(A)'s findings. The Tribunal confirmed that Section 206C applied to the assessee's scrap sales, the belated submission of Form No. 27C was a procedural lapse, and no interest was chargeable due to the absence of a TCS demand. The decision was pronounced in the open Court on January 18, 2016.