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03.01.2020, Tahir Scrap Traders, Section 206C(1), Tribunal Jaipur

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8 months 2 weeks ago #11920 by amit
Section - 206C(1), 201(1), 271CA
Order Date - 03-01-2020
Favouring - Assessee allowed for Statistical purposes
Court - Tribunal Jaipur
Appellant - Tahir Scrap Traders
Respondent - ITO
Justice - RAMESH C SHARMA AM
Citation - 120Taxpundit42
Appeal No. - ITA No. 60 & 61/JP/2018
Asstt. Year - 2010-11

Order

PER : R.C. SHARMA, A.M

These are the appeals filed by the assessee against the separate orders of ld CIT(A), Kota dated 12/10/2017 and 13/10/2017 respectively for the A.Y. 2010-11 in the matter of imposition of penalty U/s 271CA r.w.s. 274 and for treating the assessee in default U/s 201(1)/201(1A) of the Income Tax Act, 1961 (in short, the Act).

2. There is marginal delay of four days in filing the appeal. After going through the contents of the condonation petition, I am satisfied that there was sufficient reason for delay, accordingly, the delay is condoned and appeals are heard on merit.

3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is a scrap dealer and engaged in the business of scrap. The A.O. passed order U/s 201(1) and 201(1A) of the Act wherein he observed that the assessee was liable to deduct tax U/s 206C(1) in respect of scrap sale affected by it. As per the A.O. the assessee was liable to deduct tax at source in respect of scrap sold by him under the provisions of Section 206C(1) of the Act and held that the assessee was in default for non deduction of tax, passed order U/s 201(1)/201(1A) of the Act By the impugned order, the ld. CIT(A) confirmed the action of the A.O., against which the assessee is in appeals before the ITAT.

4. At the outset, the ld AR of the assessee placed on record the order of the ITAT Ahmadabad Bench in the case of Shri Azizbhai A. Lada Vs ITO in ITA No. 765/Ahd/2015 order dated 10/01/2018 wherein trading of scrap was not held to be liable to deduction of tax U/s 206C(1) of the Act. The precise observation of the Tribunal was as under:

“6. We have carefully considered the orders of the authorities below. There is no dispute that the assessee is engaged in the business of trading of scraps obtained from Ship Breaking Yard. In our considered opinion, provisions of Section 206C do not apply in case of scrap generated in the course of ship breaking activity. Items generated out of ship breaking activity might be commercially known as “scrap” since such items are not waste and scrap. Since such items are re-useable. Once such items sold cannot be termed as “scrap” would make the provisions of Section 206C of the Act in applicable. For this proposition, we draw
support from the decision of the Co-ordinate Bench in the case of Dhasawala Traders in ITA No. 979, 980 & 1535/Ahd/2015. The relevant findings of the Co-ordinate Bench read as under:-

8. A perusal of the paragraph-6 of the above judgment, would indicate that certain items generated out of ship breaking activity might be known commercially as "scrap" but they are not waste and scrap. These items are reusable as such, and therefore, would not fall within the definition of "scrap" as envisaged in the Explanation to section 206C(1). The assessee has also contended that it was engaged in the sale of MS pipe, iron which were obtained from ship breaking industries. The assessee himself has not generated any scrap in manufacturing activity, as contemplated in the Explanation. He was a trader. Therefore, the assessee has not sold scrap as such. He has sold the products resulted from ship breaking activity, which are re-usable. Thus, the assessee was not supposed to collect tax under section 206C of the Act The Id.AO has erred in raising the demand. I allow all appeals and delete additions.

7. The Hon’ble Jurisdictional High Court of Gujarat in the case of Priya Blue Industries (P.) Ltd. (supra) was seized with the following substantial questions of law:-

"(A) Whether the Appellate Tribunal has substantially erred in law in interpreting the term Scrap as defined in clause (b) to Explanation to section 206C of the Income Tax Act by holding that the words 'waste and scrap' is a singular item and not distinct?

B) Whether the Appellate Tribunal has substantially erred in law in placing reliance upon the case of Navin Flourine Chemicals despite the fact that the Hon'ble Special Bench in the case of Bharti Auto Products had held that the words 'waste and scrap' are two different and distinct words? (C) Whether the Appellate

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