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TMI Blog2016 (8) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the ld AR that since the iron scrap like steel, ingots, iron etc. is being used by the industries without any change, is not correct as the nature of goods shall remain same, therefore, it comes under the definition of the scrap. In our view, the material sold by the assessee cannot be used as such without any modification by the buyer of the said scrap. As the said material/goods come from the breaking of the ship, these goods were sold to the manufacturer/rerolling mills, as scrap therefore, the goods (scrap) sold by the assessee were not usable as such and therefore, the assessee was required to deduct TCS from the buyer. In view thereof, the ground No. 1 of the assessee’s appeal is decided against the assessee. Calculation of the TCS U/s 206 - Held that:- The consequences of failure to file the declaration in the requisite format as mentioned in the Rules should be provided by the IT Act and not by the Rules. The Rules, in our opinion, cannot extend or restrict the provisions of the Parent Act. The Rules are framed by the Legislature by exercising its power under the Act and therefore, if any penalty provision by way of the exclusion of declaration benefit and submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date when the TCS was required to be deducted then the assessee is liable to pay the interest, for example if the TCS is required to be deducted and paid and the due date as per rule 37 was 30th July of the year 2008 and the advance tax was deposited on 01/2/2009, then the assessee is liable to pay interest for the period 01/8/2008 up to the date of deposit of the advance tax. In the light of the above observation, this issue is also remanded back to the file of the Assessing Officer with direction to (i) to verify as to the date when the TCS was due by the seller/assessee, (ii) the date on which the advance tax was paid/deposited by the buyer, (iii) in case the advance tax is deposited prior to the due date of TCS, then no interest shall be charged. However, if the advance paid after the due date then the interest shall be charged for the intermediary period. The ld Assessing Officer is directed to verify all these facts in respect of both the assessment years. In view thereof, this ground of the appeal is also allowed for statistical purposes only. - ITA Nos. 344 & 345/JP/2015 - - - Dated:- 16-8-2016 - SHRI BHAGCHAND, AM SHRI LALIET KUMAR, JM For The Assessee : Shri P.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the details of purchase and sale of scrap along with stock register for financial year 2007-08 and 2008-09. The ld Assessee was called upon by the above said notice to reply to the following queries: Against the above sale, you have claimed that some items were non-scrap'. While verifying the bill vouchers of such sales, it was seen that in some cases, you have paid TCS on purchase of such non-scrap items whereas you have not collected TCS yourself on sale of the same. You are requested to clarify the same. You are therefore required to show cause as to why necessary order treating you in default in respect of collection of 1% TCS on the above sales u/s 206C(6A) and accordingly interest thereon u/s 206C(7) may not be passed. Your reply should reach in the office of the undersigned on 23-12-2013 at 11.30AM. Please note that in case of failure to reply to' this show cause notice, it shall be presumed that you have no objection in treating above mentioned sale as being without collection of tax and order treating you as assessee in default in respect of the above amount shall be passed on the basis of available facts on the record. The assessee has fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee has claimed that some sale out of his gross sale pertained to items which were not scrap. While verifying the bill vouchers of such sales, it was seen that in some cases, he had paid TCS on purchase of such non-scrap items but he had not collected TCS himself on sale of the same. For this, his clarification was that such materials were old used plates which are fit for re-rolling and could be used as such . He has also enclosed a copy of Tariff of Central Excise Customs, which also considers this to be separate from scrap. However, his contention in this regard is not acceptable as the words as such in the context means that the material which is sold should have been in a condition to be used as it is , i.e. as a plate only. The metal plates etc., which he has purchased, have come out of ship breaking and therefore, there is no way that it can be used as such. These plates were sold to manufacturers or rerolling mills which made different items out of these plates. Therefore, it cannot be said that these items were used as such . He has also claimed that sale to rerolling mills should not be included in scrap sales as these mills use the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has purchased such scrap, TCS was collected on such purchases by the seller party. Alternatively the appellant has also contended that part of scrap was sold to the to the manufacturers and as per sec.206C(l A) when such scrap is sold to the manufacturing units the seller is not required to collect TCS on the sale amount provided that he has collected the declaration in Form No. 27C of IT Act. The appellant has submitted that part of the scrap sold was useable in the shape MS Bar, angle, channel, MS Ingots, Pig Iron, Sillico Manganese etc. which are useable and that provision of sec. 206C would not apply. The appellant has also submitted that the AG has accepted these facts and in AY 2009-10 excluded the sale of MS ingots and Pig Iron for working out the liability of collection of tax but in AY 2008-09 sale of such items were not excluded. Similarly in AY 2008-09 the AO excluded the sale of Sillico Manganese for determining the liability determined the liability u/s 206C but the sale of such items was not excluded in AY 2009-10 . The another contention of the appellant was that all such purchasers have shown such purchase in their books of accounts and also paid due taxes on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of those items of scraps which are of useable nature and for which Form No. 27C were also filed in time. Similarly in respect of alternative contention of the appellant that when the purchasing parties have shown such purchase in their books of accounts and also paid due taxes by way of filing of income tax return and all such evidences are already filed before the AO, keeping in view the decision of Hon ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. Vs. CIT 293 ITR 163, the assessee is not to be treated to be in TCS default, the AO is directed to verify such claim and if it is found that the purchasing parties have shown such purchases in their books of account and have paid due taxes on the same then demand raised against the assessee u/s 206C(6A) may be deleted to such extent. However it will not affect the demand raised u/s 206C(7A) of IT Act on account of charging of interest. Subject to such verification as directed above the ground of appeal is treated to be partly allowed. 5. Being aggrieved by the order of the ld CIT(A), the assessee preferred appeal before us. The ld AR of the assessee has submitted that the assessee is not pressing ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other hand, the ld DR has relied upon the order passed by the authorities below. More particularly paragraph No. 4.3 and 5 to substantiate that the assessee comes within the definition of scrap dealer and such provision of Section 206C of the Act are attracted. 7. We have heard the rival contentions of both the parties and perused the material available on the record. Before we adjudicate the issue, it will be useful to reproduce relevant provisions of applicable section, sub-Section and explanation of Section 206C of the Act, which provides as under: 206C. PROFITS AND GAINS FROM THE BUSINESS OF TRADING IN ALCOHOLIC LIQUOR, FOREST PRODUCE, SCRAP, ETC. (1) Every person, being a seller shall, 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 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 percentage specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax : Table ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------------------------- 11) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (9) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith. Explanation For the purposes of this section,- (a) accountant shall have the meaning assigned to it in the explanation to sub-section (2) of section 288; (aa) buyer with respect to- (i) sub-section (1) means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table in subsection (1) or the right to receive any such goods but does not include,- (A) a public sector company, the Central Government, a State Government, and an embassy, a High Commission, legation, commission, consulate and the trade representation, of a foreign State and a club ; or (B) a buyer in the retail sale of such goods purchased by him for personal consumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act are attracted and the assessee was duty bound to collect the TCS on the sale on the nature of goods (scrap) at the rate specified in the table. Further , the contention of the assessee that as per the definition of scrap reproduced hereinabove only the person dealing in manufacturing or mechanical working of material shall be liable to be recovered under this provision, in our view, is not correct interpretation. It is a matter of fact that Section 206C provides the category of persons namely seller dealing in the nature of goods on which TCS is required to be collected. The nature of goods has been defined in the table and in that table the nature of goods also includes the scrap. Therefore, the definition of scrap, as per the table and as per the explanation of the Act is only indicative of the nature of goods on which the TCS is required to be collected however the definition of scrap by no stretch of imagination indicates the person, who is dealing in such goods i.e manufacturer or dealer. Scrap, as defined in the explanation to the Section only talks about the waste and scrap from the manufacturing or mechanical working. This definition of scrap provides wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. 8. The 2nd ground of the assessee s appeal is with respect to declaration in Form No. 27C is not furnished within the prescribed period; the assessee is liable to collect tax at source u/s 206C. He has further erred in ignoring the various case laws relied upon by the assessee. The ld Assessing Officer has allowed the ground to the extent of the certificate made available by the assessee up to day of assessment from the manufacturer. However, the ld Assessing Officer has not granted the relief in respect of the buyers, whose declaration were not provided up to day of the finalization of the assessment by the assessee. The ld CIT(A) in the appeal has directed the ld Assessing Officer to verify such claims and if it is found that the purchasing parties have shown such purchases in the books of account and has also issued declaration as required in law, then in that eventuality, the addition made U/s 206C(CA) is directed to be deleted. Further the ld CIT(A) has held that the assessee was required to furnish declaration from the buyers in form 27D of the Income Tax Rules, 1962 (in short the Rules) and the assessee was required to submit the certificate within the time limits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with delay of several years . The ld AR of the assessee has submitted that it is an admitted position that the assessee has collected declaration form and submitted on 23/12/2013 and 25/2/2014, therefore, though, the assessee has submitted declaration at the appellate stage but in view of the judgments passed by the various Tribunals and Courts, the benefit of the declaration should be given to the assessee. The ld AR has further relied on the following case laws: 1. CIT Vs. Adisankara Spinning Mills (P.) Ltd. 226 Taxman 44 (Mad.) (HC) (Magz.) In this case, the High Court in Para 2 of the order held as under:- As far as the second question is concerned, the Tribunal has noted in paragraph 3 that the assessee had obtained Form 27C from the buyers of the cotton waste. In the course of the appellate proceedings, the same was also filed before the assessing authority by applying the provisions of section 154 of the Act. The Tribunal held that the assessee having filed the statutory form, viz., Form 27C, the technical breach was liable to be condoned by following the decision of this court in the case of CIT v. A.N. Arunachalam [1994] 208 ITR 481/75 Taxman 529 (Mad.). Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inor 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. 3. Karnataka Forest Development Corporation Ltd. Vs. ITO, TDS 2015 ITL 1007 (Bang.) (Trib.) Section 206C(1A) mandates that any person responsible for collecting tax under section 206C(1) need not do so if he obtains a declaration from the buyer that he is purchasing the goods for use in manufacturing, processing or producing articles or things. It does not say that such declaration has to be obtained at the very same moment when a sale is affected. A reading of sub section (1B) clearly brings out this since obligation of the assessee to file a copy of the declaration arises only when the declaration is furnished to him by the buyer. The point of reference is furnishing of declaration by the buyer and not the month or date on which sale is affected by the assessee. Even if it is considered that there is a breach on the part of the assessee in not obtaining the declaration from the buyer the moment a sale was affected, and in filing it before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not legally collect the TCS from such buyers and consequently the assessee cannot be treated as an assessee in default for not collecting TCS from such buyers. The above view finds support from the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Valibhai Khanbhai Mankad (2013) 261 CTR 538 (Guj.) wherein it has been held that, ITA No. 2384/A/2012 K.P.G. Enterprise, Bhavnagar AY 2010-11 Once the conditions of section 194C(3) were satisfied, the liability of the payer to deduct tax at source would cease. The requirement of such payer to furnish details to the income tax authority in the prescribed form within prescribed time would arise later and any infraction in such a requirement would not make the requirement of deduction at source applicable. Our view also finds support from the decision of Mumbai Bench of the Tribunal in the case of Karwat Steel Traders Vs. ITO (2013) 37 taxmann.com 190(Mum.) wherein it was held that, Where declaration in Form 15G/15H were received by the person responsible to deduct tax, there was no liability on him to deduct TDS. Since separate provisions were prescribed on default for non-filing or delayed filing of Form 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strict the provisions of the Parent Act. The Rules are framed by the Legislature by exercising its power under the Act and therefore, if any penalty provision by way of the exclusion of declaration benefit and submission of the declaration belatedly should be provided by the Act and the rules . The provision of sub-Section (1A) of section 206C, in our view, do not provide the consequences of the delayed filing of the declaration. Though, it provides that it is to be filed on or before the 7th day of the next following month in which declaration is furnished to him. Therefore, though there is delay in issuing the declaration by the buyer, the assessee cannot be penalized or deprived from the benefit of the declaration given by the buyer. The only duty cast upon the seller to submit declaration in the following month in which the declaration received. No time limit has been provided by the statute on the buyer to submit the declaration in Form 27. In view thereof, the ground is required to be allowed. In the light of above, we deem it appropriate to remand the matter back to the file of the Assessing Officer with direction to verify whether the declaration has been filed by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 206C of the Act. In view thereof, the revenue is only entitled to the recovery of the interest on the unpaid tax amount/deposit/short tax deposited by the buyer. If the taxes deposited by the buyer is fair and more than the tax required to be deducted by the assessee then in that eventuality, no interest is payable. However, if the tax deposited by the buyer was found to be less than the amount to be deposited by the assessee then the assessee is liable to pay the interest up to the month in which the returns were been filed by such buyers. Since the declaration is required to be submitted in terms of Rule 37 read with Form 27, therefore, if the tax is not deposited up to the date when the TCS was required to be deducted then the assessee is liable to pay the interest, for example if the TCS is required to be deducted and paid and the due date as per rule 37 was 30th July of the year 2008 and the advance tax was deposited on 01/2/2009, then the assessee is liable to pay interest for the period 01/8/2008 up to the date of deposit of the advance tax. In the light of the above observation, this issue is also remanded back to the file of the Assessing Officer with direction to (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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