Tcs on scrap sale

This query is : Resolved

Prajot P. Volvoikar (Querist)
Follow

18 May 2013 Dear sir

I am doing audit of a shipyard situated in goa. It also manufactures the propellors of ships. For this it has a separate machinig shop. All the required material is purchased in india. During the manufacture of these propellors, ‘Powder like iron’ emerges along with the main product. This along with waste steel sheets (used for ship construction) is sold as scrap to local ‘bhangarwallas’. As per the Income Tax Act, TCS has to be collected at source in case of scrap sale but, in this case it is not possible as these local bhangarwallas are not big parties and no sale invoice is issued to them. Further when I took this query to the proprietor of the yard he told me that these local bhangarwallas do not have PAN therefore it is not possible to collect the tax at source. The total amount realised from such sale during the year is Rs. 19,33,004. I am giving amounts as appearing in the the ledger of scrap sale below.All these entries are on different dates.
Please have a look on the ledger and let me know wether this is violating the Income Tax Act. If yes, please suggest me a solution for this problem

Regards

Prajot

11200.00

10800.00

19200.00

17800.00

12700.00

13200.00

18350.00

14500.00

15500.00

16750.00

28200.00

40700.00

14500.00

12800.00

18300.00

32900.00

19100.00

24100.00

15400.00

24800.00

12800.00

15600.00

19300.00

23400.00

32500.00

28600.00

18800.00

25700.00

30100.00

41800.00

28800.00

15100.00

29900.00

39900.00

21900.00

22800.00

40100.00

14900.00

15500.00

15700.00

23600.00

35400.00

47986.00

44991.00

42987.00

34993.00

40983.00

35790.00

37988.00

46996.00

38978.00

33979.00

20769.00

31999.00

45692.00

27990.00

45644.00

25985.00

43977.00

30984.00

27990.00

12558.00

27000.00

40524.00

28908.00

45909.00

23909.00

27700.00

38592.00

28400.00

19803.00

Anand

Anand (Expert)
Follow

20 May 2013 Prajot, TCS is required to be collected. A simple solution is for the shipyard to do a massdrive and educate the bhangarwallas or even arrange for their PAN applications.

It is understandable that they are not aware, however, ignorance of the law is not an excuse.

Practicality and law may not always go hand in hand.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
Follow

06 July 2013 Try to understand why these provisions were brought in. In fact the scrap dealers collect scarp from very small persons who collect the same from streets or houses or by steeling the same and then they sale it to the bigger scrap dealers who in turn sale it to the manufacturers and in this process none of them use to pay any tax so this system of TCS was brought and it is working in this system the purchaser has to pay the tax and to deduct from the seller.

Upgrade to CAclubindia Pro. Subscribe Now!