Income Tax Appellate Tribunal - Ahmedabad
Manubhai Narottamdas & Co., , Ahmedabad vs Assessee on 23 February, 2016
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ, अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL "SMC" BENCH, AHMEDABAD BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER आयकर अपील सं./ ITA.No.1110 and 1111/Ahd/2015 नधा रण वष /Asstt. Year: 2014-2015 M/s.Manubhai Narottamdas & Co. ITO, TDS-3 202, Parishram Building Vs Ahmedabad 380 014.
Mithakhali, Navrangpura Ahmedabad.
PAN : AHMM0 0724 D
आयकर अपील सं./ ITA.No.1111/Ahd/2015
नधा रण वष /Asstt. Year: 2014-2015
M/s.Vinod Textiles ITO, TDS-3
India Ginning Press Vs Ahmedabad 380 014.
Opp: Amdupura Petro Pump
Naroda, Ahmedabad.
PAN : AABFV 2697 P
अपीलाथ!/ (Appellant) "#यथ!/ (Respondent)
Assessee by : Shri M.K. Patel AR
Revenue by : Santosh Karnani, Sr.DR
सन
ु वाई क तार ख/ Date of Hearing : 22/02/2016
घोषणा क तार ख / Date of Pronouncement: /02/2016
आदे श/O RDER
These two appeals of the assessee arose from two different orders of the ld.CIT(A)-8, Ahmedabad dated 18.3.2015 in ITA No.1110/Ahd/2015 and dated 19.3.2015 in ITA No.1111/Ahd/2015 for the Asstt.Year 2014-15. Since issue in both the appeals is identical, therefore, both the appeals are being taken up by this consolidated order.
2. First of all, we take up the appeal in the case of M/s.Manubhai Narottamdas & Co., in ITA No.1110/Ahd/2015 for the Asstt.Year 2014-15 and our order hereinbelow shall be identically applicable in ITA No.1111/Ahd/2014 in the case of M/s.Vinod Textiles, Ahmedabad.
ITA No.1110 and 1111/Ahd/2015 2 ITA No.1110/Ahd/2015
3. The assessee has raised the following grounds of appeal are as under:
"(1) That on facts, and in law, the learned CIT (A) has grievously erred in holding that the appellant is liable for collection of TCS u/s 206C of the Income-tax Act,1961.
(2) That on facts, and in law, it ought to have been held that the appellant's business is not covered by the definition of "scrap", as defined in section 206C of the Act, and hence the appellant is not deemed to be an assessee in default within the meaning of the said section.
(3) That the learned CIT(A) has grievously erred in law and on facts in confirming the order of ITO-TDS whereby the appellant is treated in default u/s 206C and demand of Rs. 6,29,359/- is raised u/s 206C(6A), and Rs. 16,508/- is raised u/s 206C(7), totaling to Rs. 6,45,867/-.
(4) That the learned CIT(A) has grievously erred in not giving adequate and reasonable opportunity to the appellant to file certificates in Form no.27C and/or Form no. 27 BA in terms of section 206C, sub-sections (1A) and (6A) of the Act."
4. Brief facts of the case are that the assessee is a trader in cotton, cotton waste and cotton chindi. The AO has noted that for the sale made to traders in respect of cotton waste and cotton chindi, no tax was collected. These items are covered in the definition of "scrap" by very nomenclature and so the AO raised demand for short collation of tax and levied interest on the same. The ld.CIT(A) confirmed the action of the AO.
5. I have heard rival contentions and perused the facts of the case of record. The ld.counsel for the assessee invited our attention to the provisions contained in section 206C of the Act, where it is provided that every person, being a seller shall, at the time of debiting of amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said ITA No.1110 and 1111/Ahd/2015 3 buyer in cash or by the issue of a cheque or draft etc. collect from the buyer of any goods, a sum equal to 1% per entage in respect of scrap amongst other items mentioned in the Act. He further invited our attention to the Explanation to section 206C(b) where meaning of 'scrap' has been mentioned as "waste and scrap' from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons. Therefore, the items which are scrap and not definitely usable, as such are covered under the provisions of section 260C. But in the present case, as pointed out at page no.34 to 39, which are the certificates of the buyer, one of which is reproduced hereinbelow for the sake of convenience:
"AHMEDABD TEXILTE INDUSTRY RESEARCH ASSOCIATION P.O. Ambawadi Vistar, Ahmedabad.
TO WHOMSOEVER IT MAY CONCERN This is to Certify that cotton waste generated from the yearn manufacturing spinning unit that are soft wastes namely blow room waste, carding waste, Comber noil, stripping, cylinder fly, cleaner waste and sweeping are either sold to generate revenues or as such used for mixing with virgin cotton to manufacture yarn. These wastes are also utilized in industries other than textiles, such as paper manufacturing units, mattress and quilting units.
For Ahmedabad Textile Industries Research Association Ahmedabad.
Seal 5.9.2013."
6. Similar certificates have been filed from different buyers available at page nos.35 to 39 of the paper book. A perusal of such certificates, it is evident that such material is used as such for mixing with virgin cotton to ITA No.1110 and 1111/Ahd/2015 4 manufacture yarn and these wastes are utilised for industries other than textiles, such as paper manufacturing units, mattress and quilting units. Therefore, in the circumstances and facts and circumstances, the scrap in the present case is as such usable, and therefore, cannot be covered under the definition under section 206C of the Act. Our attention was invited to page no.82 to 84, being the decision of the Hon'ble Madras High Court in the case of CIT Vs. M/s.Adisankara Spinning Mills Pvt. Ltd., where question of law has been mentioned as under:
"1. Whether on the facts and circumstances of the case, the Tribunal was right in deciding that cotton waste cannot be considered as 'scrap' within the meaning of explanation to Section 206 of the IT Act ?
2. Whether on the facts and circumstances of the case, the Tribunal was right in not considering that the assessee neither collected TCS nor obtained Form 27C as per Rule 37C from the buyers and forwarded it CCIT/CIT in time for non-collection of tax at source u/s. 206C(1A) of the I. T. Act ?"
The observation of the Hon'ble High Court as extracted from page no.84 of the paper book is in favour of the assessee.
7. Accordingly, our views are supported by the above decision of Hon'ble Madras High Court, and therefore, by no means, the scrap in the present case cannot be subjected to tax under section 206C. In the circumstances and facts of the case, the AO is not justified in deducting the TDS under section 206C, and impugned order of the CIT(A) is reversed, and all the grounds of the appeal of the assessee are allowed.
8. Now we take up the appeal in ITA No.1111/Ahd/2015 where the facts of the case are identical in the case of ITA No.1110/Ahd/2015 hereinabove. Accordingly, our order hereinabove in ITA No.1110/Ahd/2015 shall be ITA No.1110 and 1111/Ahd/2015 5 equally applicable in ITA No.1111/Ahd/2015, and accordingly, the grounds of the appeal of the assessee are allowed.
9. In the result, both the appeals of the assessee are allowed.
Order pronounced in the Court on 23rd February, 2016 at Ahmedabad.
Sd/-
(B.P. JAIN)
ACCOUNTANT MEMBER
Ahmedabad; Dated 23/02/2016