Whether tcs is applicable or not

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prasanna krishna (Querist)
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19 March 2014 X gave its machinery for repair to Y company , After completion of repair Y company took one of the part(which no longer use full to that machine) , so X company while payment Adjusted that amount for repair and paid the balance , does adjusted amount must treat as scrap sale or not and tcs have to collect or not

CA Manish Sharma

CA Manish Sharma (Expert)
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19 March 2014 Please complete your query

prasanna krishna

prasanna krishna (Querist)
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20 March 2014 i completed my doubt , please resolve it manish ji

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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03 August 2025 Let's break down your query about TCS (Tax Collected at Source) applicability on the transaction:

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### Scenario:

* **X** sends machinery to **Y** for repair.
* After repair, **Y** takes one part (which is no longer useful to X).
* The value of that part is adjusted against the repair charges.
* X pays the balance amount after adjustment.

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### Key Questions:

1. **Is the adjusted amount considered a sale of scrap?**
2. **Is TCS applicable on this transaction?**

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### Analysis:

**1. Is this adjustment considered sale of scrap?**

* When Y takes a part which is no longer useful to X, it is effectively a **transfer of goods** (the scrap part) from X to Y.
* This can be treated as a **sale or transfer of scrap** by X to Y.
* So, yes, it can be considered as **sale of scrap** by X.

**2. Is TCS applicable?**

* Under Section 206C of the Income Tax Act (as applicable in 2014), TCS is collected on the **sale of scrap** by a dealer whose total sales, turnover or gross receipts exceed the prescribed limit.
* TCS is applicable if the sale of scrap exceeds Rs. 50,000 per transaction (as per older laws).
* Since the scrap is taken by Y and the value adjusted against repair charges, it amounts to a **sale transaction**.
* Therefore, **X is liable to collect TCS from Y on the value of scrap** if the value exceeds the threshold and other conditions are met.

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### Summary:

| Point | Conclusion |
| ---------------------------------------- | ---------------------------------------------------------- |
| Is the adjustment treated as scrap sale? | Yes, it is a sale of scrap. |
| Is TCS applicable on scrap sale? | Yes, if sale value exceeds threshold and conditions apply. |
| Who collects TCS? | X (seller of scrap) collects TCS from Y. |

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If you want, I can help you draft a TCS invoice or explain the exact TCS rate and threshold applicable as per that year’s law!

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