Sale of scrap not generated out of manufacturing activities isn’t liable to TCS

 

Lala Bharat Lal & Sons v. ITO – [2020] 117  411 (Lucknow – Trib.)

 

 

 

Assessee was dealing in the business of trading of scrap.

 

 

Assessing Officer (AO) held that assessee was liable to collect TCS @ 1% of the sale amount.

 

 

Assessee contended that sale or trading done by it did not tantamount to sale of scrap as defined in Explanation to section 206C, as the same had not been generated from manufacture or mechanical working done by the assessee.

 

 

Assessee further submitted that the ITAT in case of Navine Fluorine International Ltd. v. Asstt. CIT [2011] 10 taxmann.com 78/45 SOT 86, had held that for invoking the Explanation to section 206C of the Act, it is necessary that waste and scrap sold by the assessee should arise from the manufacturing or mechanical working of the material.

 

 

On appeal, ITAT, following the ruling of Tribunals, held that the words ‘waste’ and ‘scrap’ should have nexus with manufacturing or mechanical working of materials.

 

 

Where the assessee had not generated any scrap in manufacturing activity and where the assessee was only a trader, having not sold scrap as such, but having sold products which were re-useable and had resulted from ship breaking activity, he was not supposed to collect tax under section 206C of the Act.

 

Thus, assessee could not be fastened with the liability to deduct TCS under section 206C.