Madras HC quashes penalty imposed by IT Dept on Tasmac
"Mere opening, breaking or uncorking of a liquor bottle by merely twisting the seal in a liquor bottle will not amount to the generation of 'scrap'", wrote the judge.
Madras High Court (File)
CHENNAI: The Madras High Court has quashed the penalty and tax with interest imposed on Tasmac by the Income Tax (IT) department for alleging failure of collecting tax collected at source (TCS) from the bar contractors for selling the empty bottles.
TASMAC moved the MHC seeking to quash the impugned order by the IT for noncollection of TCS from the bar licensee, treating empty bottles as scrap between 2016-2017 and 2023-2024 under the IT Act 1961.
The case was listed before Justice C Saravanan.
R. Vijayaraghavan appeared for TASMAC and contended that IT's conclusion of treating empty bottles left over by the consumers in the bar clearly qualify as scrap arising from the mechanical working of materials is incorrect and is as such erroneous.
It was also submitted that TASMAC is merely selling liquor in its retail shops, the empty liquor bottles left by the consumers are in the bar and not the property of the Corporation, hence it would not come under the purview of the definition of "scrap".
Hence, the IT's interpretation in the impugned order stating that TASMAC has to collect TCS is erroneous. The IT also issued notice to furnish the details of the bar licensees, including their PAN numbers, which were not fully furnished.
Senior standing counsel B.Ramaswamy appeared for IT and contended that the tenders floated in the public domain by TASMAC itself described that the tender is for disposal of empty bottles used by TASMAC customers and that the category of product is categorized as "Scrap/Disposables''. Hence, the liability to collect TCS on the entire license rests on Tasmac, submitted to the senior counsel.
Tasmac has failed to collect tax and remit the same, he added.
"Mere opening, breaking or uncorking of a liquor bottle by merely twisting the seal in a liquor bottle will not amount to the generation of 'scrap'", wrote the judge.
The impugned order of IT is wholly misplaced and unwarranted under the circumstances against the petitioner for the alleged failure to collect tax. Hence, invoking Section 206 CCA of IT Act, 1961 cannot be countenanced with, read the judgment. Further, the judge also upheld that, the question of imposing liability on the TASMAC to furnish the PAN Number of the bar owners is not acceptable, wrote the judge while allowing the petition.
