No TCS on sale of empty liquor bottles- Opening and uncorking liquor bottles doesn’t amount to generation of scrap: Madras HC
|
Case Details: |
Tamilnadu State Marketing Corporation Ltd. (Tasmac) Vs. DCIT, TDS Circle 3(1) |
|
Order pronounced by: |
Madras High Court |
|
In favour of: |
Petitioner (Assessee) |
|
Date of order: |
22-12-2023 |
|
Appeal No.: |
W.P. No. 19287 of 2023 |
Issue: Whether the petitioner was required to collect “Tax at Source” from the bar licensees, who have been licensed to run bars under the license issued to them under Tamil Nadu Liquor Vending (in Shops and Bars) Rules, 2003, under Section 206C of the Income Tax Act, 1961.
Observations of Hon’ble HC:
- Only such “Scrap” generated from such “mechanical working of material” which are not “manufacturing activity” but are akin to “manufacturing activity” can be said to be in contemplation of section 206C of the Income Tax Act, 1961.
- Mere opening, breaking or uncorking of a liquor bottle by mere twisting the seal in a liquor bottle will not amount to generation of “scrap” from “mechanical working of material” for the purpose of explanation to Section 206C of the Act.
- That apart, the activity of opening or uncorking of the bottle is also not by the petitioner. These are independent and autonomous acts of individual consumer who decides to consume liquor purchased from the Tasmac Shops of the petitioner which have a license premises (Bar) adjacent to them under the provisions of the Tamil Nadu Liquor Retail Vending (in Shops and Bars) Rules, 2003.
- To be a “seller” of used bottle, the petitioner should be the owner of the bottle. Left over bottles after consumption are not owned by the petitioner. Neither the petitioner nor the licensee is the owner of the waste bottles.
Ruling of Hon’ble HC:
There is neither a “manufacture” nor a generation of “scrap” from “mechanical working of materials”, the liability under section 206C of the Income Tax Act, 1961 is not attracted. Suffice to state that the petitioner is neither the owner of the bottle nor generates scrap as is contemplated under the Income Tax Act, 1961. The activity of opening and uncorking is not a “mechanical working of material”. Therefore, invocation of section 206C, 206CC and 206CCA of the Income Tax Act, 1961 was wholly misplaced and unwarranted against the petitioner.
Disclaimer: The above article is based upon the ruling of Hon’ble Madras High Court and is meant for educational purposes only. Readers are requested to act diligently and under consultation of any professional before applying the information contained in this article. Taxwink shall not be responsible for any loss or damage caused to any person from the use of information contained in this article. For user support mail at: support@taxwink.com
