2016 (1) TMI 1110 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on scrap sales under Section 206C.

The Tribunal dismissed all Revenue's appeals and the assessee's cross objections, upholding the CIT(A)'s findings. It confirmed that Section 206C applied ... Tax collected at source (TCS) on sale of scrap - definition of scrap for TCS - belated submission of Form No.27C as procedural lapse - assessee in default for non-collection of TCS - treatment of high seas sales for TCS - interest liability consequent to TCS defaultTax collected at source (TCS) on sale of scrap - definition of scrap for TCS - treatment of high seas sales for TCS - Applicability of TCS provisions to the assessee's trading in imported non-ferrous scrap/high seas sales. - HELD THAT: - The Tribunal upheld the view that section 206C applies to sales of scrap in the business of trading, rejecting the assessee's contention that the provision is inapplicable because it is not a manufacturer or the goods were not generated as scrap by manufacture. The Tribunal relied on the co-ordinate Special Bench precedent treating declared imported brass scrap as falling within the statutory definition of scrap for TCS purposes and found no distinguishing fact or law in the assessee's case to interfere with the CIT(A)'s conclusion. The assessee's plea that certain high seas sales were outside the scope was addressed by noting that part of the turnover was already covered in earlier proceedings and that only the balance period sales were to be considered for TCS liability. [Paras 7, 10]Section 206C is applicable to the assessee's scrap trading/high seas sales; the Tribunal affirms the CIT(A)'s finding rejecting the assessee's legal plea.Belated submission of Form No.27C as procedural lapse - assessee in default for non-collection of TCS - Whether belated filing of Form No.27C disentitles the assessee from being treated as an assessee in default for non-collection of TCS. - HELD THAT: - The Tribunal agreed with the CIT(A) that late submission of declarations in Form No.27C is a procedural lapse and does not automatically render the seller an assessee in default where the declarations have in fact been furnished by the buyers. Relying on a coordinate bench decision, the Tribunal held that once the declaration referred to in the proviso was received, the seller could not legally collect TCS and therefore could not be treated as in default for non-collection from such buyers. The Court noted that the Forms were genuine and placed on record, and declined to disturb the CIT(A)'s direction to treat belatedly filed forms as sufficient compliance insofar as they covered the balance period sales. [Paras 8, 9]Belated filing of Form No.27C is a procedural lapse only; where declarations are furnished (even belatedly), the assessee shall not be treated as in default for non-collection of TCS in respect of sales covered by those forms.Interest liability consequent to TCS default - assessee in default for non-collection of TCS - Chargeability of interest in respect of the TCS demand where Form No.27C has been filed belatedly. - HELD THAT: - The Tribunal treated the question of interest as consequential to the finding on liability for TCS. Having held that the assessee was not liable for TCS to the extent declarations in Form No.27C covered the sales (despite belated filing), the Tribunal upheld the CIT(A)'s conclusion that there was no liability for interest on those amounts. The Revenue's challenge to restore the interest component was rejected as the interest issue followed from the appellate finding on default and compliance by filing declarations. [Paras 8, 9]No interest is chargeable in respect of sales covered by the declarations in Form No.27C which the CIT(A) accepted, and the Tribunal upholds that conclusion.Treatment of high seas sales for TCS - belated submission of Form No.27C as procedural lapse - Remand to the Assessing Officer to quantify TCS liability after excluding sales already covered in earlier proceedings and after considering belatedly filed Form No.27C. - HELD THAT: - The Tribunal accepted the CIT(A)'s direction that the Assessing Officer should restrict consideration to the balance high seas sales not covered by the earlier survey period and should treat belatedly filed Form No.27C as sufficient compliance for those buyers to the extent indicated. The Tribunal remitted the matter to the Assessing Officer for fresh adjudication in accordance with this direction and applicable law, noting that the Revenue did not contest the factual aspect that part of the turnover had been covered earlier and that the Forms were on record. [Paras 8, 9, 11]Matter remitted to the Assessing Officer to consider only the balance period high seas sales and to adjudicate afresh after treating the belated Form No.27C as sufficient compliance for those sales.Final Conclusion: The Tribunal dismissed the Revenue appeals and dismissed the assessee's cross-objections to the extent indicated: it affirmed applicability of TCS to the assessee's scrap trading, held that belatedly filed Form No.27C are procedural lapses and prevent treating the assessee as in default for sales covered thereby, directed that interest not be charged in respect of such sales, and remitted to the Assessing Officer the limited task of quantifying liability after excluding turnover already covered in prior proceedings and after considering the belated forms. 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.