CMA Final · Direct Tax Laws and International Taxation · Collection, Recovery and Refund of Tax
A resident buyer, Kaveri Castings Ltd, purchases scrap from a seller and gives a written declaration in duplicate that the scrap will be used for manufacturing and not for trading. What is the consequence under the Income-tax Act, 2025?
No tax is collected on the scrap sale because the resident buyer has given the manufacturing-use declaration. However, the seller must deliver one copy of the declaration to the specified Commissioner on or before the seventh day of the month following the month of receipt.
- AThe seller must still collect tax at 2%
- BThe seller does not collect tax and must deliver one copy of the declaration to the Commissioner by the seventh day of the following monthCorrect
- CThe seller collects tax at half the normal rate
- DThe seller does not collect tax and need not forward the declaration to any authority
Explanation
Under section 394(2), no tax is collected on Sl. Nos. 1 to 5 (including scrap) from a resident buyer who furnishes the declaration of use for manufacturing, not trading. Under section 394(3), the seller delivers one copy to the Commissioner by the seventh day of the month following receipt of the declaration. The last option wrongly drops this duty.
Did you get it right without looking?
One question tells you little. A timed set on Collection, Recovery and Refund of Tax shows your real accuracy, how long you take and where you lose marks.
More Collection, Recovery and Refund of Tax questions
- Under the Income-tax Act, 2025, a Tax Recovery Officer who has drawn up a recovery certificate finds that he cannot recover the full amount …
- A Tax Recovery Officer drawing up a recovery certificate cannot recover the whole amount from property within his own jurisdiction, though t…
- Under the provisions on recovery of tax through Tax Recovery Officers, a TRO has drawn up a certificate against an assessee who has property…
- Under the Income-tax Act, 2025, a seller of scrap receives Rs 8,00,000 from a resident buyer who is a trader. No declaration of the kind in …
- Under the Income-tax Act, 2025, a seller of scrap receives Rs 8,00,000 from a resident buyer who is a manufacturer and who gives no declarat…
- A certificate for recovery of tax is drawn up by a Tax Recovery Officer under the Income-tax Act, 2025. The assessee's property lies in the …