Case Law Details

Case Name : Commissioner of Income Tax Vs M/s. Adisankara Spinning Mills (P) Ltd. (Madras High Court)
Appeal Number : Tax Case (A) No. 1194 of 2010 and M. P. No. 1 of 2010
Date of Judgement/Order : 21/12/2010
Related Assessment Year :
Courts : All High Courts (4243) Madras High Court (322)

The Tribunal has specifically found that in the process of manufacture of cotton yarn, cotton waste came to be generated and the use of the said waste by another manufacturer shows that it was used as raw material by purchaser. Even the learned Departmental representative stated before the Tribunal that the cotton waste disposed of by the respondent-assessee, was re-used as raw material for manufacture of lower count of cotton yarn and it does not come under definition of scrap as defined in Explanation (b) of Section 206C of the Act. As the said conclusion of the Tribunal having been reached as a finding of fact, we do not find any question of law much less substantial question of law to be considered in this appeal. The Tax Case Appeal is therefore dismissed. No costs. Consequently, M. P. No. 1 of 2010 is also dismissed.

MADRAS HIGH COURT

DATED : 21-12-2010

Tax Case (A) No. 1194 of 2010

and M. P. No. 1 of 2010

Commissioner of Income Tax

Vs.

M/s. Adisankara Spinning Mills (P) Ltd.

            Tax Case Appeal preferred against the order of the Income Tax Appellate Tribunal ‘C’ Bench, Chennai dated 31.05.2010 passed in ITA No. 301/Mds/2010 filed against the PAN/TXN No. AABCA5798B, dated 08.12.09, on the file of the Commissioner of Income Tax Appeal II, Coimbatore, for the Assessment Year 2007-2008.

O R D E R

(Order of the Court was made by F. M. IBRAHIM KALIFULLA)

The Revenue has come forward with this appeal seeking to raise the following substantial questions of law :

1.         Whether on the facts and circumstances of the case, the Tribunal was right in deciding that cotton waste cannot be considered as ‘scrap’ within the meaning of explanation to Section 206 of the IT Act ?

2.         Whether on the facts and circumstances of the case, the Tribunal was right in not considering that the assessee neither collected  TCS nor obtained  Form 27C as per Rule 37C from the buyers and forwarded it CCIT/CIT in time for non-collection of tax at source u/s. 206C(1A) of the I. T. Act ?

2.         As far as the second question is concerned, the Tribunal has noted in Paragraph 3 that the assessee had obtained form 27C from the buyers of the cotton waste. In the course of appellate proceedings, the same was also filed before the assessing authority by applying the provisions of Section 154 of the Act. The Tribunal held that the assessee having filed the statutory form viz., Form No. 27C, the technical breach was liable to be condoned by following the decision of this Court in the case of CIT Vs. A. N. Arunachalam reported in 208 ITR 481. Therefore, we do not find any scope to entertain the said question.

3.         As far as the first question is concerned, it related to sale of cotton waste. According to the Revenue, the said sale should be construed as sale of scrap within the meaning of Explanation (b) to Section 206C of the Income Tax Act,.

 Explanation (b) of Section 206C reads as follows :

“  ‘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”.

 4.  When we examined the said issue, we have noted the findings of the Tribunal in Paragraph 5 of the order impugned in this appeal. The Tribunal has specifically found that in the process of manufacture of cotton yarn, cotton waste came to be generated and the use of the said waste by another manufacturer shows that it was used as raw material by purchaser. Even the learned   Departmental representative stated before the Tribunal that the cotton waste disposed of by the respondent-assessee, was re-used as raw material for manufacture of lower count of cotton yarn and it does not come under definition of scrap as defined in Explanation (b) of Section 206C of the Act. As the said conclusion of the Tribunal having been reached as a finding of fact, we do not find any question of law much less substantial question of law to be considered in this appeal. The Tax Case Appeal is therefore dismissed. No costs. Consequently, M. P. No. 1 of 2010 is also dismissed.

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Case Law Submitted by – CA Dev Kumar Kothari

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