COMMISSIONER OF INCOME TAX CHANDIGARH vs. M/S NAWASHAHAR COOP SUGAR MILLS LTD

ITA/144/2013HC Punjab & HaryanaPHHC01104992201312 August 2014Author: MR. JUSTICE DR. RAVI RANJAN,MR. JUSTICE SURINDER GUPTA14 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s Nawanshahar Coop. Sugar Mills Limited, engaged in sugar manufacturing, was inspected on 29.12.2010. The revenue authorities noted that the assessee sold molasses and bagasse, byproducts of sugar manufacturing, without collecting tax at source (TCS) under Section 206C of the Income Tax Act, 1961. The Assessing Officer (AO) held the assessee liable for TCS and interest. The Commissioner of Income Tax (Appeals) [CIT(A)] partly allowed the appeal, upholding TCS on molasses but deleting it for bagasse. The Income Tax Appellate Tribunal (ITAT) dismissed the revenue's appeals and allowed the assessee's appeals, holding both molasses and bagasse as byproducts, not scrap. The revenue has filed these appeals before the High Court.

What did the High Court hold?

The High Court held that both molasses and bagasse are byproducts and do not fall within the definition of 'scrap' as per Explanation (b) to Section 206C of the Income Tax Act, 1961. The court found no error in the Tribunal's approach. The reasoning was that 'scrap' implies waste and scrap from manufacture or mechanical working of material which is not usable as such. Molasses is a byproduct of sugar crystallization, and bagasse is fibrous waste used as fuel or for manufacturing paper, pulp, and building materials. Neither is considered scrap in the context of Section 206C. Consequently, the assessee was not liable to collect tax at source on the sale of molasses and bagasse. Since Section 206C(1) was not applicable, Section 206C(1A) also had no applicability. The demand for 1% of the sale price was unjustified. The substantial questions of law were answered in favour of the assessee.

What were the issues?

1. Whether on the facts and circumstances of the case, the ITAT is correct in law in holding that the sale of bagasse is not covered under the definition of scrap as per explanation (b) to Section 206C of the Income Tax Act, 1961? 2. Whether on the facts and circumstances of the case, the ITAT is right in law in holding that the assessee is not liable to collect tax at source under Section 206C(1) of the Income Tax Act, 1961 in absence of declaration/certificate in Form No.27C in view of sub section (1A) to Section 206C of the Act? Assessee's Contentions: The assessee argued that molasses and bagasse are byproducts, not scrap, and therefore, Section 206C is not applicable. They relied on the Sugarcane (Control) Order, 1966, to support their claim that these are byproducts. The assessee supported the ITAT's order. Revenue's Contentions: The revenue contended that molasses and bagasse are scrap from the perspective of the sugar mill (seller). They also submitted that Section 206C(1A) of the Act was not complied with.

Which sections of the Income-tax Act were involved?

Section 206C,Section 206C(1),Section 206C(1A),Section 206C(6),Section 206C(7),Section 133A

AI-generated summary — verify with the full judgment below

ITA No.144 of 2013 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.144 of 2013(O&M) Date of decision: 12.8.2014 The Commissioner of Income Tax (TDS) Chandigarh ……Appellant Vs. M/s Nawanshahar Coop. Sugar Mills Limited, Nawanshahar …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE FATEH DEEP SINGH Present: Mr. Yogesh Putney, Advocate for the appellant. Mr. S.K.Mukhi, Advocate for the respondent.

Ajay Kumar Mittal,J.

1.

This order shall dispose of ITA Nos.144 to 147, 274, 275, 300 and 301 of 2013 as according to the learned counsel for the parties, the facts involved in all the appeals for the assessment years 2007-08, 2008-09, 2009-10 and 2010-11 are similar and can be disposed of by one common order. However, the facts are being extracted from ITA No.144 of 2013. 2. ITA No.144 of 2013 has been preferred by the appellant under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the consolidated order dated 19.11.2012, Annexure A.3 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “the Tribunal') GURBAX SINGH 2014.11.19 12:18 I attest to the accuracy

The order continues below.

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