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of <h1>Sugar company wins appeal as reusable items don't qualify as waste requiring tax collection under Section 206C</h1> <h3>M/s. Shree Mahuva Pradesh Sahkari Khand Udyog Mandali Ltd. Versus Income-tax Officer, TDS-4, Surat.</h3> M/s. Shree Mahuva Pradesh Sahkari Khand Udyog Mandali Ltd. Versus Income-tax Officer, TDS-4, Surat. - TMI Issues Involved:1. Tax liability under section 201(1) and interest under section 201(1A) for failure to collect tax at source on the sale of material as scrap.Analysis:Issue 1: Tax liability under section 201(1) and interest under section 201(1A) for failure to collect tax at source on the sale of material as scrap.The appeal was filed against the order of the Commissioner of Income-tax (Appeals) regarding the assessment year 2008-09, arising from the Income-tax Officer's order under section 201(1) and 201(1A) of the Income Tax Act, 1961. The dispute centered around the treatment of the assessee company as defaulting in tax collection at source under section 206C of the Act for not deducting tax on the sale of scrap material. The Assessing Officer considered the scrap material sold by the assessee as arising from manufacturing activity, leading to tax liability and interest. The Commissioner differed with a previous decision and held that the scrap sold by the assessee fell under the definition of scrap as per section 206C of the Act.The assessee argued that the items sold were not generated from the manufacturing process of sugar and its by-products and cited legal precedents supporting this claim. The Tribunal analyzed the definition of 'scrap' as per Explanation (b) to section 206C, emphasizing that waste and scrap should be generated from the manufacturing or mechanical working of material and must not be reusable due to breakage, cutting up, wear, or other reasons. The Tribunal reviewed the items sold by the assessee and concluded that they were not connected to the manufacturing processes of a sugar factory, thus not falling under the definition of scrap as provided in the Act. The Tribunal held that the lower authorities had incorrectly applied the definition of scrap and ruled in favor of the assessee, relieving them from tax liability and interest under sections 201(1) and 201(1A) of the Income Tax Act.In conclusion, the Tribunal allowed the appeal of the assessee, overturning the tax liability and interest imposed by the lower authorities.
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