2016 (7) TMI 68 - HC - Income Tax

Non collection of TCS on sale of scrap - addition made u/s.206C(1) - interest charged u/s.206C(7) - ITAT delted the addition - Held that - In terms of the explanation clause (aa) any person who purchases the goods in retail sale for personal consumption would not be included within the definition of term buyer . It is therefore, that under sub section (1A) of section 206C, calculation of tax under subsection 1 would not be made, 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 be utilized for the purposes of manufacturing process or producing articles or things or for the purpose of generation of power and not for trading purposes. The declaration to be made in subsection (1A) of section 206C thus would enable the Revenue authorities to, as and when the need so arises make proper verifications. This subsection itself does not provide for any time limit within which, such declaration is to be made. The time limit, of course, would be found in Rule 37C of Income Tax Rules, 1962. The main thrust of subsection 1A of section 206C thus is to make a declaration as prescribed, upon which, the liability to collect tax at source under subsection (1) would not apply. When there was no dispute about such a declaration being filed in a prescribed format and there was no dispute about the genuineness of such declaration, mere minor delay in filing the said declaration would not defeat the very claim. The Tribunal therefore, viewed such delay liberally and in essence held that there was substantial compliance with the requirement of filing the declaration. - Decided against revenue

Summary

Issues:
1. Interpretation of section 206C of the Income Tax Act.
2. Applicability of section 206C to the sale of scrap.
3. Submission of Form 27C by the assessee.
4. Consideration of buyer's declaration under section 206C(1A).
5. Tribunal's decision on the case.

Interpretation of section 206C of the Income Tax Act:
The case involved a dispute regarding the application of section 206C of the Income Tax Act, which pertains to profits and gains from trading in specified goods. Subsection 1 of section 206C mandates the collection of tax from buyers at the time of debiting the amount payable. The explanation clause (aa) defines the term 'buyer' and excludes retail buyers for personal consumption. Subsection 1A of section 206C exempts tax collection if the buyer furnishes a declaration stating the goods are for manufacturing, processing, or power generation and not for trading.

Applicability of section 206C to the sale of scrap:
The Assessing Officer had made additions under section 206C due to the non-submission of Form 27C by the assessee in a timely manner for the sale of scrap. The assessee argued that they were not a trader of scrap, hence section 206C did not apply. The Tribunal, relying on a previous decision, held that the items were indeed scrap and ruled in favor of the assessee as they had submitted Form 27C collected from buyers, despite the delay.

Submission of Form 27C by the assessee:
The Tribunal found that the assessee had submitted Form 27C collected from buyers, and there was no dispute regarding its genuineness. Although the form was submitted belatedly, the Tribunal concluded that the additions under section 206C were unwarranted in this case.

Consideration of buyer's declaration under section 206C(1A):
Section 206C(1A) exempts tax collection if the buyer furnishes a declaration that the goods are not for trading purposes but for manufacturing, processing, or power generation. The Tribunal emphasized that the genuineness of such declarations and their submission in the prescribed format are crucial, and a minor delay should not invalidate the claim.

Tribunal's decision on the case:
The Tribunal upheld the lower appellate findings, stating that the belated submission of Form 27C was a procedural lapse and did not warrant the additions made by the Assessing Officer. The Tribunal dismissed the Revenue's appeal, emphasizing that there was no substantive ground to challenge the lower appellate findings. Ultimately, the High Court dismissed the Tax Appeals as no question of law arose from the case.