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Issues Involved:
1. Interpretation of whether cotton waste can be considered as 'scrap' under Section 206 of the IT Act. 2. Compliance with Rule 37C regarding non-collection of tax at source under Section 206C (1A) of the IT Act. Interpretation of 'Scrap' under Section 206 of the IT Act: The Tribunal found that the sale of cotton waste should not be construed as the sale of scrap under Explanation (b) to Section 206C of the Income Tax Act. The Tribunal's decision was based on the fact that the cotton waste generated in the manufacturing process was used as raw material by another manufacturer, indicating its usability. The Departmental representative also acknowledged that the disposed cotton waste was reused as raw material for manufacturing lower count cotton yarn, thus not falling under the definition of scrap as per Explanation (b) of Section 206C. Since this conclusion was a factual finding by the Tribunal, the High Court dismissed the appeal, stating no substantial question of law arose for consideration. Compliance with Rule 37C: Regarding the issue of non-collection of tax at source under Section 206C (1A) of the IT Act, the Tribunal noted that the assessee had obtained Form 27C from the buyers of cotton waste and submitted it to the assessing authority during appellate proceedings. The Tribunal held that the technical breach was condoned as the statutory form was filed, citing precedent. Consequently, the High Court found no grounds to entertain this issue and dismissed the appeal.
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