TAX COLLECTION AT SOURCE ON SCRAP

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Query 1]

  1. In Steel Industry by products like DRI ASH, FLY ASH  & Granulated Slag are generated from their production centers like Mini Blast Furnace or Sponge Iron Unit (Direct reduction Plant).  Please enlighten me whether sale of these products attracts TCS (Tax Collection At Source) provisions under Income Tax Act? [tscbose@sunflagsteel.com]

  2. Sir, we are a private limited company engaged in the business of chemicals processing & packing. We are selling our un-usable furniture & fixtures. Please elaborate whether Tax Collection at source is compulsory in such sale? We are getting the contradictory opinion on the issue. Please elaborate the legal provision. [LP]

Opinion:

  1. Under Section 206C of the Income Tax Act-1961, tax is required to be collected by certain seller on sale of “Scrap” to certain buyer.

    The explanation to section 206C outlines the meaning of buyer, scrap & seller. According to explanation (b) to section 206C,

    “Scrap” means 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.
    We are of the opinion that all the three items mentioned are within the purview of waste or scrap generated from manufacturing and are not usable at the factory & as such TCS provision shall be applicable.

  2. It may be noted that the “Scrap” would not include any waste or scrap:

    (i) which doesn’t arise from manufacturing or mechanical working of material; or

    (ii) which is usable as such.

    The unusable furniture & fixtures that you are selling can not be said to be arising from manufacture & accordingly TCS provision would not be applicable in case on sale of unusable furniture & fixtures.

  3. It may be note that no Tax is require to be Collect At Source from a resident buyer who purchases goods for the purpose of manufacturing, processing or producing any article or thing and not for the purpose of trading. For this, resident buyer has to give the declarations in Form No. 27C in duplicate to the seller that the goods to be purchases are going to be utilize by him for the purpose of manufacturing etc.

Query 2]

The amount of LTCG has been deposit in a public sector bank for 3 years under capital gain fixed deposit Account Scheme. Will it be taxable after maturity period if the maturity amount is not invested / utilized for purchase of land/building etc? The Bank is deducting TDS from the annual accrual of interest on the above deposit. Please advice. [gouramahananda@yahoo.com]

Opinion:

If the amount deposit in the Capital Gain Deposit Account Scheme is not utilize within the specific period for the intend purpose [U/s 54, 54B, 54D, 54F or 54G], the amount not so utilized shall be charg to tax as capital gain of the previous year in which the period of 3 years from the date of LTCG expires and it will be taxable as LTCG of that pervious year. The assessee then shall be eligible to withdraw the amount from the scheme. As per scheme, he is require to submit an application in Form G after getting the approval of the Assessing Officer.

 

Query 3]

I am working with a Govt. Department & I have some doubt about tax benefits:

  1. I got injured in accident before 6 months & got operated. I want to know whether I can get tax benefit. If yes, then under which section? Please elaborate about the deduction u/s 80DDB.

  2. My second doubt is can we take tax benefit of HRA & Home loan at the same time. If yes, under which section? [kene73@gmail.com]

Opinion:

  1. Deduction towards HRA & Home loan can be claimed simultaneously. For claiming an exemption u/s 10(13A) towards HRA, Assessee should have incurred the expenditure on payment of rent and should not be the owner of the same house property.

  1. It is presume that you are talking about the tax benefit in respect of medical expenditure incur by you as a result of operation. General deduction towards medical expenses resulted out of accident is not available under the Income Tax Act-1961. However, you may examine if the deduction is admissible u/s 80DDB or U/s 80U of the Income Tax Act-1961.

  2. Deduction u/s 80DDB :

    The deduction u/s 80DDB is available if the expenses for the medical treatment of specified disease or ailment is incur by assessee on himself or on dependent. The specific disease for the purpose of section 80DDB is prescrib in Rule 11DD as under:

    11DD. (1) For the purposes of section 80DDB, the following shall be the eligible diseases or ailments :

    (i) Neurological Diseases where the disability level has been certified to be of 40% and above,—
    (a) Dementia ;

    (b) Dystonia Musculorum Deformans ;

    (c) Motor Neuron Disease ;

    (d) Ataxia ;

    (e) Chorea ;

    (f) Hemiballismus ;

    (g) Aphasia ;

    (h) Parkinsons Disease ;

    (ii) Malignant Cancers;

    (iii) Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ;
    (iv) Chronic Renal failure ;
    (v) Hematological disorders :
    (i) Hemophilia ;
    (ii) Thalassaemia.
    The amount of deduction allowable under section 80DDB is the expenditure actually incurred or Rs. 40,000/- (Rs. 60,000/- for senior citizen) whichever is lower.

  3. Section 80U of the I.T. Act, 1961 allows a deduction to an individual who is resident and who at any time during the previous year is certified by a medical authority to be a person with disability. If accident has resulted in the disability mentioned hereunder, then you can opt for deduction u/s 80U.

    “Person with Disability” means a person suffering from not less than 40% of any of the disability given below:
    i) blindness
    ii) low vision
    iii) leprosy-cured
    iv) hearing impairment
    v) locomotor disability
    vi) mental retardation
    vii) mental illness
    viii) austim
    ix) cerebral palsy
    x) multiple disability referred to in clauses (a), (c), & (h) of section 2 of the National Trust for welfare of persons with Austim Cerebral Palsy, Mental Retardation & Multiple Disabilities Act-1999.
    The deduction under this Section is a sum of Rs 50,000/- in normal cases and if the person is suffering from a severe disability (80% or more) then with effect from F.Y. 2009-10, a sum of Rs. 1,00,000/- is allowable as deductions

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