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1 Issues in Practice of TDS/TCS Law P.M.Veeramani FCA.

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1 1 Issues in Practice of TDS/TCS Law P.M.Veeramani FCA

2 Chapter XVII Collection & Recovery of Taxes A. Chapter XVII contains machinery provisions in the aid of the substantive provisions of sections 4, 5, 28, 145 laying down the charge of income tax. B. 4(1) Income Tax shall be charged in respect of the total income of the previous year. 4(2) In respect of Income chargeable u/s 4(1), income tax shall be deducted at source. C. Credit for tax deducted u/s 199 TDS shall be treated as payment of tax on behalf of the person from whose income the deduction was made/owner of security/depositor/property/unit holder/shareholder. D. Credit shall be given to him for the Assessment Year for which such income is assessable 2

3 E. Section Where no provision for TDS or where TDS has not been deducted, then obligation to pay directly by the assessee. Section Where TDS applicable and deducted then assessee can not be called upon to pay tax himself. 3

4 Chapter XVII B – Transactions attracting TDS 1. Sec Salary 2. Sec Interest on securities 3. Sec Dividend 4. Sec.194 A - Interest other than interest on securities 5. Sec.194 B - Winnings from lottery or cross word puzzles; (6) 194 BB – Winning from horse races 7. Sec.194 C - Payment to Contractors 8. Sec.194 D Insurance Commission 9. Sec.194 E - Payment to non-resident sportsmen or sports association 10. Sec.194 EE - Payment of deposits / interest under NSS -87; (11) 194F - Mutual funds under 80CCB 12. Sec.194 G - Commission on sale of lottery tickets 4

5 Chapter XVII B – Transactions attracting TDS 13. Sec. 194 H - Commission or Brokerage 14. Sec.194 I - Rent 15. Sec.194 IA - Transfer of immovable property ( new from ) 16. Sec.194 J - Payment for professional or technical services 17. Sec.194 K - Payment in respect of Units 18. Sec.194 LA Compensation on acquisition of capital asset 19. Sec.194 LB - Payment to non-resident from Infrastructure debt fund 20. Sec.194 LC - Payment of interest by Indian company to non-resident 21. Sec.194 LD - Payment to FII or QFI as interest on bonds or securities 22. Sec Payment of other sums to non-resident 23 – 26 Sec.196 A, B, C, D - Specified payments to non-residents 5

6 TDS – Provisions in Brief Section Salary 6 (a) Any person responsible for paying SALARIES is required to deduct tax at source on the amount payable to employees. Tax is required to be deducted at the time of actual payment of salary. (b) Where an employee is in employment of more than one employer, tax will be deducted at source by the employer, which the employee chooses or the present employer. (192(2)) (c) The employee may furnish to the employer details of income chargeable to tax under other heads of income (not being loss except loss under the head Income from House Property). In such a case employer shall deduct tax due on total income. However, total amount of tax deducted should not be less than the amount of tax deductible from salary except where the loss under the head Income from House Property has been taken into account.(192(2B))

7 TDS – Provisions in Brief Section Salary 7 (a) TDS on amount payable at the average rate of income tax for financial year on the estimated income for that year (sec.192 (1)) (b) Increase / reduce the TDS for adjusting excess/ short deduction or failure to deduct during the financial year (192(3)) (c) Where salary is payable in Foreign Currency, TDS shall be made on the rupee equivalent calculated at the prescribed rate (192(6)) (d) TDS on perquisite provided by way of non monetary payment, employer may, at his option, pay the tax without recovering from the employee (192 (1A))

8 8 Section 194A – Interest other than “Interest on Securities” (a) Any person (except on individual or a HUF) responsible for paying interest other than interest on securities to a resident is required to deduct tax at source (194A (1)). Tax is required to be deducted either at the time of credit of such income to the payees account or at the time of payment, whichever is earlier. (b) An Individual or a HUF whose total sales, gross receipts or turnover from business or profession exceeds Rs. 100 lakhs or Rs.25 lakhs respectively, during the financial year immediately preceding the financial year in which such interest is credited or paid shall be liable to deduct tax at source (proviso to 194A(1)) (d) No tax is required to be deducted where the aggregate amount of interest does not exceed Rs.5,000/-. In case of term deposits with banks or Cooperative Society and Housing Finance Companies, no tax is required to be deducted upto an aggregate interest of Rs.10,000/-. No tax is required to be deducted in case of interest paid/credited to any banking company/financial corporation, LIC, UTI, etc.(194A(3))

9 9 Section 194A – Interest other than “Interest on Securities”  Points for consideration:  Interest vs Discounting Charges:  Interest definition Sec.2(28A) - for monies borrowed or debt incurred  Discounting charges of bills – not interest - ACIT vs Cargill Global Trading India Private Ltd - 9 ITR Trib ITAT Delhi  Interest for Delayed payment  Interest for delay in completion of construction of flats - Is Compensatory in nature and hence not interest - CIT vs H.P.Housing Board 304 ITR 388 HP  Interest for delay in payment of purchase price – Is compensatory in nature and hence not interest – ITO vs Parag Mahasukhlal Shah 46 SOT 302 ITAT Ahmedabad

10 10 Section 194B – Winning from Lottery or Crossword Puzzles (a) Any person responsible for paying income by way of winning from Lottery/crossword puzzle or card game or any other game is required to deduct tax at source. (b)No tax is deductible if the amount of payment is Rs.10,000/- or less. Section 194C – Payment to Contractor/Sub-contractors (a) Any person (other than individual and HUF) paying any sum to any resident contractors for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the resident contractor and specified person is required to deduct tax at source. The same rule is applicable in case payment is made by a resident contractor to a resident sub-contractor for carrying out the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour, which the contractor has undertaken to supply.

11 11 (b) However, an individual or a HUF whose total sales or gross receipts or turnover from business exceeds Rs.100 lakhs or whose gross receipts from profession exceeds Rs. 25 lakhs during the financial year immediately preceding the financial year which such sum is credited or paid to the account of sub-contractor shall be liable to deduct tax at source. (c) Tax is required to be deducted either the time of credit of the sum paid to the account of the payee or at the time of payment in cash or by cheque or by any other mode, whichever is earlier. (d) Tax is required to be deducted at source under this section where the amount credited or paid to the contractor or a sub-contractor exceeds Rs.30,000 in a single payment or Rs.75,000 in aggregate during the financial year. (e) No individual or HUF shall be liable to deduct tax in case such sum is credited or paid exclusively for personal purposes of such individual or any member of HUF. Section 194C – Payment to Contractor/Sub-contractors (contd….)

12 12 (f) In the case of payments made to contractors carrying on business of plying, hiring or leasing goods carriage, no TDS is required u/s 194C if PAN is furnished by such contractor (g) Work shall not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than the customer Section 194C – Payment to Contractor/Sub-contractors (contd….)

13 13 Supply of packing material for which raw material was not supplied by the assessee was a contract of sale and outside the purview of 194C. Packing material carrying printed work can only be regarded as incidental to the sale. CIT vs Deputy Chief Accounts Officer, MARKFED – 304 ITR 17 P&H Agreements with manufacturers for manufacture of footwear, apparel accessories and sports goods for the assessee according to the specifications, designs and drawings provided by the assessee is a contract of sale and section 194 C not applicable to such cases. CIT vs Reebok India 306 ITR 124 P&H Manufacture of product using raw material, technical know how of supplier and brand name is a contract for work and TDS is attracted. CIT vs Nova Nordisk Pharma India Ltd 341 ITR 451 Kar Mere hiring of trucks with out the services of personnel is not a contract for work and not hit by section 194 C - Mythri Transport Corpn vs ACIT 28 DTR Trib Vizag 129; Services rendered by hotels to its customers by making available certain facilities / amenities is not a contract for work and section 194 C is not applicable The East India Hotels Ltd vs CBDT 320 ITR 526 Mumbai Section 194C – Contract for work vs Contract for sale

14 194 C vs 194 I :Assessee an advertising agent acquiring right of displaying advertisement at hoarding site and making payment to hoarding site owners— There was no lease, sub-lease, tenancy etc.—Sec. 194-I is not applicable as the payment cannot be termed as rent—Assessee was justified in deducting tax at source at 1 per cent under s. 194C. ITO vs Roshan Publicity Private Ltd 4 SOT 105 Mumbai ITAT Sharing of income : Payment to distributors of film by exhibitors as share under standard film renting contract is not covered under the definition of ‘any work’ as envisaged under s. 194C, hence not amenable to tax deduction at source under that section—Same was also not rent for use of machinery or land or building within the meaning of 194-I hence not eligible to tax deduction at source under that section also ITO vs Shringar Cinemas Pvt Ltd 20 SOT 480 Mumbai ITAT 14

15 15 Section 194H – Commission or Brokerage a) Any person other than an individual or HUF who is responsible for paying to a resident, any income by way of commission (other than insurance commission referred to in section 194D), or brokerage, is required to deduct tax. (b) No deduction is required to be made where the amount of such income or the aggregate of the amounts of such income credited/paid during the financial year does not exceed Rs.5,000/-. Explanation to Section 194H For the purpose of this section, “commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional service) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities

16 16 Section 194H – Commission or Brokerage Sub brokerage : The definition of commission or brokerage in explanation (i) to section 194 H does not include transactions in securities. Sub brokerage was paid in relation to units of mutual funds and was connected with services rendered in the course of buying and selling of units of mutual funds. These were not covered by TDS provisions. DCIT vs S.J.Investment Agencies Private Ltd 21 ITR Trib 258 ITAT Mumbai (Not applicable for transactions in commodity exchange) Commission paid to the credit card companies cannot be considered as falling within the purview of S.194H. In the case of commission retained by the credit card companies, it cannot be said that the bank acts on behalf of the merchant establishment or that even the merchant establishment conducts the transaction for the bank. The commission retained by the credit card company is therefore in the nature of normal bank charges and not in the nature of commission/brokerage for acting on behalf of the merchant establishment. Payments to banks on account of utilization of credit card facilities would be in the nature of bank charge and not in the nature of commission within the meaning of sec.194H of the Act. Tata Tele Services Ltd vs DCIT 140 ITD 451 Bangalore Trade discount : Discount allowed to customer does not constitute commission and hence not liable for deduction of tax under 194 H - S.D.Pharmacy (P) Ltd vs DCIT 31 SOT 386 Cochin

17 17 Section 194 I – Rent Section 194 I – Rent (a) Any person other than an individual or HUF responsible for paying any income by way of rent to a resident is required to deduct tax. (b) ‘Rent’ means any payment by whatever nature called, under any lease, sub- lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any: (i) land, or (i) land, or (ii) building (including factory building), or (ii) building (including factory building), or (iii) land appurtenant to a building (including a factory building), or (iii) land appurtenant to a building (including a factory building), or (iv) machinery, or (iv) machinery, or (v) plant, or (v) plant, or (vi) equipment, or (vi) equipment, or (vii) furniture, or (vii) furniture, or (viii) fittings (viii) fittings

18 194 I Rent ……contd 18 c) An individual or a Hindu Undivided Family whose total sales or gross receipts or turnover from business exceeds Rs.100 lacs or whose gross receipts from profession exceeds Rs.25 lacs during the financial year immediately preceding the financial year in which such sum is credited or paid shall be liable to deduct tax at source. c) An individual or a Hindu Undivided Family whose total sales or gross receipts or turnover from business exceeds Rs.100 lacs or whose gross receipts from profession exceeds Rs.25 lacs during the financial year immediately preceding the financial year in which such sum is credited or paid shall be liable to deduct tax at source. d) No deduction shall be made where the amount of such income or the aggregate of amounts of such income credited/paid during the financial year does not exceed Rs.1,80,000/-.

19 194 I Rent ……contd Rental income from co-owned property. No TDS if share of each co-owner was less than Rs.1,20,000. CIT vs Manager, SBI 13 DTR 294 Rajasthan Security deposit given to landlord adjustable against rent liable for TDS under 194 I. CIT vs Reebok India 291 ITR 455 Delhi; Rent paid to co-owners ; Rate of TDS to be that of individual. CIT vs Laly Motors 311 ITR 29 P & H Sharing of premises by Holding and Subsidiary company. Subsidiary not deducting TDS for payment to Holding company; but holding company doing so on payments to Landlord. No violation ACIT vs Result Services Private Ltd 52 SOT 598 Del Where the assessee film producer incurred payments to utilise the land and building exclusively for film shooting, expenditure falls within the definition of rent to attract provisions of s.194-I V.R.Entertainers (P) Ltd vs ITO 47 SOT

20 20 Section 194 IA - Transfer of immovable property Section 194 IA - Transfer of immovable property (a) Any person responsible (includes individual and HUF ) for paying any resident transferor as consideration for transfer of immovable property (other than agricultural land) (b) Tax to be where consideration exceeds Rs.50 lakhs (c ) Consideration not defined (d) No requirement of TAN: payment to be made electronically

21 21 a) Any person other than individual or HUF responsible for paying to a resident fee for professional services or fee for technical services or royalty is required to deduct tax on the income comprised therein. b) An individual or a Hindu Undivided Family whose total sales or gross receipts or turnover from business exceeds Rs.100 lacs or whose gross receipts from profession exceeds Rs.25 lacs during the financial year immediately preceding the financial year in which such sum is credited or paid shall be liable to deduct tax at source. c) “Professional services” means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purpose of section 44AA or of this section. Section 194 J – Fees for Professional or Technical Services Section 194 J – Fees for Professional or Technical Services

22 22 d) Profession notified by CBDT : Film Artist, Authorised Representative, Company Secretary, Information Technology – Rule 6 F Company Secretary, Information Technology – Rule 6 F e) “Fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9 – For the purpose of this clause “Fees for technical services” means: any consideration (including any lumpsum consideration) for the rendering of any managerial, technical or consultancy services (including the provisions of services of technical or other personnel), but does not include consideration for any construction, assembly, mining or like product undertaken by the recipient or consideration which would be income of the recipient chargeable under the head ‘salaries’. For the purpose of this clause “Fees for technical services” means: any consideration (including any lumpsum consideration) for the rendering of any managerial, technical or consultancy services (including the provisions of services of technical or other personnel), but does not include consideration for any construction, assembly, mining or like product undertaken by the recipient or consideration which would be income of the recipient chargeable under the head ‘salaries’. Section 194 J – Fees for Professional or Technical Services Section 194 J – Fees for Professional or Technical Services

23 23 e) Royalty shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of Section 9 f) The tax is required to be deducted at the time of credit of such income to the account of the payee or at the time of payment in cash or by issue of cheques or drafts or by any other mode whichever is earlier. No tax is required to be deducted in case amount of such sum or aggregate of amount of such sums credited or paid during the financial year under each category does not exceed Rs.30,000/-. g)With effect from 1 st June, 2003 no individual or HUF shall be liable to deduct tax on fees for professional services in case such sum is credited or paid exclusively for personal purposes of such individual or any member of HUF.

24 24 h) Section 194J(1)(ba) – (with effect from ) TDS made applicable on remuneration or fees or commission other than those on which tax is deductible under the head Income from Salaries paid to a director of a company. However, the limit of Rs. 30,000 is not applicable to payments made to directors. However, the limit of Rs. 30,000 is not applicable to payments made to directors.

25 25 Disallowance of depreciation : Assessee purchased software, capitalized it to the computers as software came along with hardware and claimed depreciation. On the ground that purchase of software is essentially purchase of copyright which attracts TDS, AO disallowed depreciation claimed. Mere purchase of software, a copy righted article, for utilization of computers cannot be considered as purchase of copyright and royalty. Assessee did not acquire any rights for making copies, selling or acquiring which generally could be considered to be falling within “royalty”. Explanation 2 to section 9(1)(vi) cannot be applied to purchase of a copy righted software which does not involve any commercial exploitation. Sonic Bio Chem Extractions Pvt Ltd vs ITO 23 ITR Trib 447 ITAT Mumbai Royalty : Assessee in the business of purchase and sale of satellite broadcasting rights for movies and programs claimed amount paid for purchase of rights as expenditure. AO disallowed the same since no TDS was made and payment amounted to royalty. Since assessee did not purchase cinematographic films as such rather it had only received right for satellite broadcasting, hence, the amount paid for acquiring said right would fall within the definition of royalty in view of explanation 2 to section 9(1)(vi) and TDS was attracted. ACIT vs Sree Balaji Communications 140 ITD 687 Chennai

26 26  Modelling : Payments were made for services of modeling which were unconnected with the production of cinematographic films. While modeling was aimed at display of merchandise, the acting was defined to portray a role authored by a story writer with different purposes and objects and certainly not to displace merchandise to boost the sale of manufacturer or trader of product or services. Therefore, payments made by assessee to Ms.Kartina Kaif did not attract the provisions of section 194J. Kodak India Pvt Ltd vs DCIT 22 ITR Trib 721 Mumbai  Fee for Technical services : When any technology or machinery is developed by human and put to operation automatically wherein it operates without much of human interface or intervention, then usage of such technology cannot per se be held as rendering of technical service as contemplated in Explanation 2 to section 9(1)(vii). Siemens Ltd vs ACIT 142 ITD 1 Mumbai

27 Rate at which TDS to be made Rates specified in the Act : Sec.194 C - 1% where payee in individual ; 2% in other cases Sec.194 C - 1% where payee in individual ; 2% in other cases Sec.194 H - 10% Sec.194 H - 10% Sec.194 I - 10% relating to land / building/furniture ; 2% in other cases Sec.194 I - 10% relating to land / building/furniture ; 2% in other cases Sec.194 J - 10% Sec.194 J - 10% No surcharge or cess No surcharge or cess Rates in Force: This refers to the rates of TDS mentioned in Part II of First Schedule of every Finance Act : TDS for Section 194A, 194B; No surcharge or cess This refers to the rates of TDS mentioned in Part II of First Schedule of every Finance Act : TDS for Section 194A, 194B; No surcharge or cess Where payee does not have PAN: Highest of Rate specified ; Rate in Force or 20%; No surcharge or cess Highest of Rate specified ; Rate in Force or 20%; No surcharge or cess 27

28 Amount on which TDS is to be made CBDT Circular dated 4/2008 dated : TDS on rent to be effected only on the net amount without considering the service tax as service tax paid by the landlord is not income of the landlord. TDS on rent to be effected only on the net amount without considering the service tax as service tax paid by the landlord is not income of the landlord. tax deduction u/s 194J would be required to be made on the sums payable by the deductor inclusive of any tax including service tax ”- May apply to payments under 194C, 194H and also for reimbursement of expenses F.NO275/1/2006-IT(B) Dt : ………..tax deduction u/s 194J would be required to be made on the sums payable by the deductor inclusive of any tax including service tax ”- May apply to payments under 194C, 194H and also for reimbursement of expenses 28

29 29 a) Applicable for tax-deductible u/s 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA or 195. a) Applicable for tax-deductible u/s 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA or 195. b) The recipient can apply in Form No.13 to the Assessing Officer to get a certificate authorizing the payer to deduct tax at lower or deduct no tax as may be appropriate. b) The recipient can apply in Form No.13 to the Assessing Officer to get a certificate authorizing the payer to deduct tax at lower or deduct no tax as may be appropriate. c) The certificate of lower rate shall be issued on plain paper directly to the person responsible for paying income, under an advice to the applicant. c) The certificate of lower rate shall be issued on plain paper directly to the person responsible for paying income, under an advice to the applicant. Section 197 – Obtaining a Certificate of Lower Rate Section 197 – Obtaining a Certificate of Lower Rate

30 Consequences of default The expenditure shall be disallowed u/s 40a(i) or 40a(ia) while computing Income from Business or Profession, if :- The expenditure shall be disallowed u/s 40a(i) or 40a(ia) while computing Income from Business or Profession, if :- a) Tax deductible is not deducted, or b) Tax deducted has not been remitted to the credit of the Government The tax deducted as per provisions of Chapter XVII B shall be paid to the credit of the Government within 7 days from the end of the month in which such deduction is made. In the case of payments for the month of March, within 30 days from the end of the month. The tax deducted as per provisions of Chapter XVII B shall be paid to the credit of the Government within 7 days from the end of the month in which such deduction is made. In the case of payments for the month of March, within 30 days from the end of the month. In the case of TCS, the tax shall be paid within 7 days from the end of the month in which such deduction is made. In the case of TCS, the tax shall be paid within 7 days from the end of the month in which such deduction is made. However, the expenditure so disallowed u/s 40a(i) or 40a(ia) in a previous year shall be allowed in the year in which such tax is paid to the credit of the government. However, the expenditure so disallowed u/s 40a(i) or 40a(ia) in a previous year shall be allowed in the year in which such tax is paid to the credit of the government. 30

31 Consequences of default In addition to disallowance of expenditure, interest and penalty may be levied for non compliance of provisions of Chapter XVII B In addition to disallowance of expenditure, interest and penalty may be levied for non compliance of provisions of Chapter XVII B Interest is chargeable Interest is chargeable – At the rate of 1% for every month or part of the month from date on which tax is deductible to the date upto which tax is deducted – At the rate of 1.5% for every month or part of the month from the date on which tax was deducted to the date on which tax is actually paid Penalty is leviable u/s 271C on the amount of tax failed to deduct or pay. Penalty is leviable u/s 271C on the amount of tax failed to deduct or pay. Penalty u/s 271 H for failure to TDS returns ranging between 10,000 – 100,000 Penalty u/s 271 H for failure to TDS returns ranging between 10,000 – 100,000 The assessee in default shall also be punishable u/s 276B (for non compliance of TDS provisions) and 276BB (for non compliance of TCS provisions) with rigorous imprisonment for a term not less than 3 months but which may extend upto 7 years and with fine. The assessee in default shall also be punishable u/s 276B (for non compliance of TDS provisions) and 276BB (for non compliance of TCS provisions) with rigorous imprisonment for a term not less than 3 months but which may extend upto 7 years and with fine. 31

32 Tax Collection at Source (TCS) – Sec. 206C Applicable to sellers of :- Applicable to sellers of :- Alcoholic liquor for human consumption – 1% Alcoholic liquor for human consumption – 1% Tendu leaves – 5% Tendu leaves – 5% Timber obtained under a forest lease – 2.5% Timber obtained under a forest lease – 2.5% Timber obtained by any mode other than forest lease- 2.5% Timber obtained by any mode other than forest lease- 2.5% Any other forest produce other than timber and tendu leaves – 2.5% Any other forest produce other than timber and tendu leaves – 2.5% Scrap – 1% Scrap – 1% Minerals being coal or lignite or iron ore – 1% Minerals being coal or lignite or iron ore – 1% Parking lot / toll plaza / mining and quarrying - 2% Parking lot / toll plaza / mining and quarrying - 2% Bullion in cash in excess of Rs. 2,00,000 – 1% Bullion in cash in excess of Rs. 2,00,000 – 1% Jewellery in cash in excess of Rs. 5,00,000 – 1% Jewellery in cash in excess of Rs. 5,00,000 – 1% Rates of TCS as prescribed in Section 206C Rates of TCS as prescribed in Section 206C 32

33 Tax Collection at Source (TCS) – Sec. 206C All items except sales of bullion and jewellery exempt if the purchase is for own consumption All items except sales of bullion and jewellery exempt if the purchase is for own consumption Jewellery includes ornaments made of gold, silver, platinum or any other precious metal; alloy containing one or more of such precious metals; whether or not worked or sewn into any wearing apparel Jewellery includes ornaments made of gold, silver, platinum or any other precious metal; alloy containing one or more of such precious metals; whether or not worked or sewn into any wearing apparel Scrap - waste and scrap from manufacture or mechanical working of materials which is not usable as such because of breakage, cutting up, wear and other reasons Scrap - waste and scrap from manufacture or mechanical working of materials which is not usable as such because of breakage, cutting up, wear and other reasons 33

34 Tax Collection at Source (TCS) – Sec. 206C Waste and Scrap to be read together : In the Expln. (b) to s. 206C, word "waste and scrap" are one item and thereafter, the words used are "from the manufacture or mechanical working of material" which would mean that the waste and scrap being one item should arise from the manufacture or mechanical working of material; since assessee is engaged in manufacturing of fluorine and other refrigerant gases the scrap items sold viz. drums, plastic drums, plastic bags, used oil wooden scrap, scrap electrical cables, empty bromine crates etc. cannot be used for manufacturing or mechanical working of material of fluorine and other refrigerant gases and hence such items would not form part of the definition of the scrap and consequently, assessee was not required to deduct tax under s. 206C(6). Navine Flourine International Ltd vs ACIT 45 SOT 86 ITAT Ahd Dealer of scrap not liable : An importer and dealer in recycled ferrous and non- ferrous metals, mainly brass and copper, sold the said recycled metals to manufacturers as well as to certain other traders. Assessee sold scrap but the scrap sold was neither generated from the manufacture or mechanical working of materials nor was the scrap sold not usable as such. Nathulal P Lavti vs ITO 65 DTR 133 ITAT Rajkot 34

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