CHENNAI: The Madras High Court has ruled against the Income Tax department’s imposition of tax on empty liquor bottles that are piled up in the bars attached to Tasmac outlets, saying such bottles cannot be considered scrap.
Allowing the appeals filed by Tasmac against the I-T department order, Justice C Saravanan recently passed the orders disapproving of the department’s contention that the empty bottles are considered scrap because opening and uncorking the bottle involve external force- mechanical working of material, thereby generating scrap.
The I-T department had, on May 30, 2023, issued orders to Tasmac by invoking sections 206 C, 206 CC and 206 CCA of the Income Tax Act, 1961 imposing tax by treating it as ‘an assessee in default’ for failure to ‘collect tax at sources’ on empty liquor bottles. As per a state government order, the bar licencees have to pay 1% of licence fee to Tasmac as agency commission and 99% to the government for the tender to sell eatables and collect empty bottles.
However, the judge held Tasmac is not the manufacturer of the bottles and the activity of opening and uncorking of the bottle is not done by the Tasmac but by consumers at the bar. “There is neither a manufacture nor a generation of scrap from the mechanical working of materials, and so, the liability under sections 206 C is not attracted,” the judge ruled, and noted Tasmac is neither the owner of the bottle nor generates scrap.
“Therefore, invocation of section 206 C, 206 CC and 206 CCA of I-T Act was wholly misplaced and unwarranted under the circumstances against the petitioner for alleged failure to collect tax at 1% on 99% of licence fee payable to the government and 1% retained at agency commission,” he said in the order.