Income Tax Appellate Tribunal - Delhi
Divisional Forest Officer, Bageshwar vs Assessee on 13 April, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : B : NEW DELHI
BEFORE SHRI R.S. SYAL, AM AND SHRI C.M. GARG, JM
ITA No.6023/Del/2013
Assessment Year : 2008-09
Divisional Forest Officer, Vs. ITO (TDS),
Bageshwar Forest Division, Haldwani.
Bageshwar.
PAN: MRTD01065B
(Respondent)
(Appellant)
Assessee By : Shri V.P. Gupta, Advocate
Department By : Smt. Parwinder Kaur, Sr. DR
Date of Hearing : 10.04.2015
Date of Pronouncement : 13 .04.2015
ORDER
PER R.S. SYAL, AM:
This appeal by the assessee is directed against the order passed by the CIT(A) on 12.08.2013 in relation to the assessment year 2008-09. The solitary issue raised in this appeal through various grounds is ITA No.6023/Del/2013 against the sustenance of demand against the assessee u/ss 206C(6) and 206C(7) of the Income-tax Act, 1961 (hereinafter also called `the Act').
2. Briefly stated, the facts of the case are that the assessee, a Government undertaking, sold Lisa during the financial year 2007-08 to buyers u/s 206C(1) of the Act amounting to Rs.7,66,82,453/-. The Income-tax Officer (TDS) observed that a sum of Rs.19,17,061/- was required to be collected at source, which the assessee did not collect. On being called upon to explain as to why it be not deemed to be an assessee in default for such non-collection of tax at source in terms of section 206C(6A), the assessee stated that all the Lisa purchasers were manufacturers and Form no. 27Cs were obtained from them. The assessee furnished such forms, which were admittedly not collected by the assessee from the buyers at the time of receipt of sale consideration or debiting their accounts, whichever is earlier. The ITO (TDS) held that in view of the assessee not collecting tax at source, in the absence of receipt of such forms from the respective buyers, at the time of sale of the goods, it committed default as per section 206C, for which it was 2 ITA No.6023/Del/2013 liable to be treated as assessee in default. The amount of short collection of tax at source was determined at Rs.19,17,061/- and the consequential interest at Rs.11,50,236/-, thereby raising total demand of Rs.30,67,297/- for the year under consideration. The ld. CIT(A) upheld the order passed by the ITO (TDS).
3. We have heard the rival submissions and perused the relevant material on record. It is an admitted position that the assessee sold forest produce, not being timber or tendu leaves, in the terms as described in clause (v) of the Table given in section 206C(1) of the Act without collecting tax at source. Sub-section (1) of section 206C provides that : ` Every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as 3 ITA No.6023/Del/2013 income-tax..'. Going by the mandate of sub-section (1), any seller of the forest produce is required to collect tax at source from the buyers at the time of debiting the amount payable to their accounts or at the time of receipt of such amount, whichever is earlier. Then there is sub-section (1A) of section 206C which provides that : ` Notwithstanding anything contained in sub-section (1), no collection of tax shall be made in the case of a buyer, who is resident in India, if such buyer furnishes to the person responsible for collecting tax, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the goods referred to in column (2) of the aforesaid Table are to be utilised for the purposes of manufacturing, processing or producing articles or things or for the purposes of generation of power and not for trading purposes'. The prescribed form of the said declaration is Form no. 27C. When we read sub-section (1) in conjunction with sub-section (1A), the position which becomes evident is that there is a requirement on the seller to collect tax at source at the prescribed rates on the prescribed goods sold by him to the buyer. Such collection is to be made at the time of debiting of the amount to the 4 ITA No.6023/Del/2013 account of the buyer or at the time of receipt of such amount from the buyer, whichever is earlier. However, if the buyer of the specified goods furnishes to the seller a declaration in Form no. 27C in duplicate, that the goods purchased by him are to be utilized for the purpose of manufacturing, processing or producing articles or things, etc., and not for trading, then, such requirement of collection of tax at source is dispensed with. Sub-section (1B) of section 206C further provides that the person responsible for collecting tax at source shall deliver to the Commissioner one copy of such Form no. 27C on or before the seventh day of the month next following the month in which the declaration is furnished to him.
4. Thus, sub-section (1A) of section 206C saves the seller from collecting tax at source at the time of receiving the amount or debiting the account of the buyer, whichever is earlier, on the latter furnishing a declaration in Form No. 27C in duplicate, before or at the time when the liability for collection of tax at source has arisen. It, therefore, transpires that the liability of the seller to collect tax at source is waived 5 ITA No.6023/Del/2013 only on the buyer submitting Form no. 27C to him at the time of debiting the account of buyer or the receipt of payment, whichever is earlier. This shows that, firstly, there should be submission of Form No. 27C by the buyer and secondly, such Form should be submitted at the earliest of the occasion of the debiting of his account by the seller or the receipt of payment. Unless these conditions are cumulatively fulfilled, the seller is obliged to collect tax at source at the rates prescribed and deposit the same into the exchequer at the material time. These conditions must be fulfilled in letter and spirit without any sort of distortion or dilution or their substitution with other alike conditions as per the convenience of the parties.
5. Adverting to the facts of the extant case, we find that the buyers did not submit Form no. 27Cs at the time of debit to their accounts by the assessee or on their making payment to the assessee, whichever is earlier. The simple fact of non-receipt of Form no. 27Cs by the assessee before the above time frame made it liable for default in not collecting tax at source. The contention of the ld. AR that all the buyers were registered as manufacturers of the resin products under the relevant Act 6 ITA No.6023/Del/2013 and their furnishing of such Registration certificates to the assessee at the time of purchase of the goods should be construed as fulfillment of the requirement of submission of Form no. 27Cs, is devoid of merit. When the Act clearly stipulates for furnishing of Form no. 27C, there can be no question of substituting such requirement with the furnishing of any other document or Registration certificate issued under any other Act. The obligation of law can be said to have been properly complied with only on a buyer tendering Form no. 27C in duplicate to the seller at the relevant time.
6.1. The next argument of the ld. AR was that since Form no. 27Cs were duly filed with the ITO (TDS) during the course of proceedings before him, the requirement of the law in furnishing such declarations should be deemed to be complied with. He harped on the factum of the buyers tendering such declarations, albeit belatedly. A view was put forth for acceptance that the time limit for the filing of Form no. 27C is only directory and not mandatory.
7 ITA No.6023/Del/2013 6.2. It is an undisputed fact that the buyers did not tender Form No. 27Cs at the material time. The assessee collected the same from the buyers and submitted when the ITO (TDS) took up the instant proceedings for treating it as assessee in default. We are unable to concur with the view canvassed by the ld. AR about the requirement of receiving Form No. 27C as declaratory. It is axiomatic from the language of sub-section (1A) that no collection of tax at source shall be made if the buyer furnishes to the seller a prescribed declaration in writing. When we advert to the stage of collection of tax at source as per sub-section (1), it becomes palpable that the same is the earliest of the debiting the account of buyer or receipt of payment. The liability of the person responsible to collect or not to collect tax at source is wholly and solely dependent on the availability or otherwise of Form no. 27C at the time when collection of tax at source is mandated. If such declaration is not available at the earliest of the receipt of payment or debiting the account of buyer, the relevant part of the provisions of sub-section (1) of section 206C becomes operative, making it obligatory for the person responsible to collect tax at source so as to avoid it from being treated as 8 ITA No.6023/Del/2013 an assessee in default. It is vivid that once the dictate of sub-section (1) has operated and tax is collected at source due to the non-availability of Form no. 27C at the time as aforesaid, the late furnishing of such declaration by the buyer will not bring the arms of the clock back, so as to entitle the buyer to claim that no tax ought to have been collected earlier and resultantly, the amount so collected be now refunded on his furnishing the declaration to the seller after the relevant time. Thus, it is evident that by no stretch of imagination, the furnishing of Form no. 27C by the buyer at the time when collection of tax at source is contemplated under the Act, can be construed as anything other than mandatory. The argument of the ld. AR to interpret the requirement of submission of such declaration at the aforesaid time as declaratory, so as to avoid collection of tax at source on its late furnishing, evidently does not hold water. The same is, therefore, repelled.
7. One needs to appreciate the vital difference between submitting the declaration in Form No. 27C before or at the time of the arising of the liability to collect tax at source on one hand and not submitting at all or 9 ITA No.6023/Del/2013 late submitting such declaration after the liability has already arisen. When we read sub-section (1) in juxtaposition to sub-section (1A) of section 206C, it follows that the liability to collect tax at source gets crystallized at the time of debiting the account of buyer or the receipt of payment, whichever is earlier, save and except where the buyer furnishes a declaration in Form no. 27C to the seller at that point of time. Receipt of such declaration at the material time immunes the seller from collecting tax at source. What is relevant is the stage of the crystallization of liability for collecting tax at source. Once that stage crosses without collection of tax at source, the consequences of non- collection follow notwithstanding the receipt of declaration after the relevant time. In fact, there is no material difference in the consequences of two situations, viz., in which either Form no. 27C is not at all received or is received belatedly after the passing of the time of debiting the account of buyer or receipt of payment, whichever is earlier. Both these situations make the seller liable for default of non-collection of tax at source. Instantly, we are confronted with a case of late submission of Form no. 27Cs, which for all practical purposes, is akin to non- 10 ITA No.6023/Del/2013 submission of such declaration for this purpose, thereby inviting consequences of non-collection of tax at source.
8. One more fact needs to be highlighted. The requirement under the provision is to furnish Form no. 27C by the buyer to the seller in duplicate and, then, the seller is obliged to deliver one copy of such declaration to the Commissioner on or before the seventh day of the month next following the month in which the declaration is furnished to him. This requirement of furnishing a copy of the declaration to the Commissioner by the seller cannot be satisfied by merely giving it to the ITO (TDS). The assessee in the instant case submitted copies of Form No. 27Cs only to the ITO (TDS) and, that too, during the course of current proceedings before him without submitting the same to the Commissioner.
9. Since the assessee failed to collect tax at source from the buyers without receipt of Form no. 27Cs at the time of debiting their accounts or receiving the amounts, whichever is earlier, there can be no escape from the consequences flowing from such default.
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10. The next line of the argument of ld. AR was that all the buyers were assessed to tax and the income from the purchase of Lisa and the sale of the manufactured goods with the use of such material was properly offered for taxation. In the backdrop of this fact, it was put forth that the collection of tax at source at this stage from the assessee would amount to double collection of tax on the same amount of income, which is impermissible. On the other hand, the ld. DR opposed the said contention.
11. Section 206C is not a charging provision but a provision for collection of tax. Any tax collected under this provision is allowed credit against the tax liability of the person on whose behalf such tax at source was collected. In other words, the amount of tax collected at source has to be adjusted against the tax liability of the buyer. Sub-section (4) of section 206C recognizes this position, inasmuch as it states that : ` Any amount collected in accordance with the provisions of this section and paid to the credit of the Central Government shall be deemed to be a payment of tax on behalf of the person from whom the amount has been 12 ITA No.6023/Del/2013 collected and credit shall be given to such person for the amount so collected in a particular assessment year in accordance with the rules as may be prescribed by the Board from time to time.' If due to one reason or the other, the buyer has no liability to pay tax or his tax liability is less than the amount so collected, then such amount of tax collected at source or the excess, as the case may be, is refunded to the buyer after his assessment. If however, the buyer has paid the tax on his total income including the income from the transaction which necessitated the collection of tax at source and the seller failed to collect tax at source, the amount of tax collected later on by treating the seller as assessee in default, will not get adjustment anywhere because of the discharge of total tax liability by the buyer. It is axiomatic that the amount of tax collected at source cannot remain in limbo. In such circumstances, there can be no rationale in collection of tax at source from the seller by treating him as an assessee in default, knowing fully well that the amount of tax so collected will not get adjustment either in the hands of the buyer or the seller.
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12. The Hon'ble Supreme Court in the case Hindustan Coca Cola Beverage (P) Ltd. Vs. CIT (2007) 293 ITR 226 (SC) has held that where the payee has already paid tax on the income on which there was a short deduction of tax at source, then no recovery of tax should be made once again from the tax deductor. The Hon'ble jurisdictional High Court in CIT vs. Majestic Hotel Ltd. (2007) 293 ITR 18 has also laid down to the same effect. The essence of these judgments is that when the deductee has included the transaction requiring the deductor to deduct/collect tax at source, in his total income and has paid the tax thereon, then, there is no logic in once again collecting tax at source from the deductor inasmuch as said amount, if now collected, would remain unadjusted because the deductee would not be able to avail the benefit of such tax against his income, which has already been assessed to tax. A person responsible becomes assessee in default in case of TDS provisions, when he makes the payment without deduction of tax at source at the point of making payment or crediting the account of the payee, as the case may be under the relevant provision; and in case of TCS provisions, when he receives the payment without collecting tax at source at the point of 14 ITA No.6023/Del/2013 receiving the payment or debiting the account of the payer, whichever is earlier. Ergo, the provisions for treating the assessee in default in view of the non-deduction of tax at source are analogous on this aspect to the provisions of non-collection of tax at source. The above decisions rendered in the context of TDS provisions apply with full force to the TCS provisions as well.
13. At this juncture, it is relevant to mention that considering the ratio decidendi of the judgment of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd. (supra) and other judgments rendered by various Hon'ble High Courts uniformly in not treating the person responsible as assessee in default when the other person has paid due tax on his total income by including income from such transactions, the legislature has stepped in by inserting first proviso to section 206C (6A) by the Finance Act, 2012 w.e.f. 1.7.2012, reading as under :-
`(6A) If any person responsible for collecting tax in accordance with the provisions of this section does not collect the whole or any part of the tax or after collecting, fails to pay the tax as required by or under this Act, he shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of the tax:15 ITA No.6023/Del/2013
Provided that any person, other than a person referred to in sub-section (1D), responsible for collecting tax in accordance with the provisions of this section, who fails to collect the whole or any part of the tax on the amount received from a buyer or licensee or lessee or on the amount debited to the account of the buyer or licensee or lessee shall not be deemed to be an assessee in default in respect of such tax if such buyer or licensee or lessee--
(i) has furnished his return of income under section 139;
(ii) has taken into account such amount for computing income in such return of income; and
(iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed:'
14. A circumspect perusal of sub-section (6) transpires that if any person responsible for collecting tax in accordance with the provisions of this section fails to collect the whole or any part of the tax or after collecting, fails to pay the tax as required by or under this Act, he shall, be deemed to be an assessee in default in respect of the tax. However, the first proviso in case of failure to collect tax at source at the material time, erases the tag of 'assessee in default', if the buyer has furnished his return of income u/s 139(1) by taking into account the transaction covered under this provision and paying the tax due on the income 16 ITA No.6023/Del/2013 declared and necessary certificate in the prescribed form is issued. Though this proviso has been inserted by the Finance Act, 2012 from 1.7.2012, but, it is nothing, but reiteration of the law laid down by the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd. (supra). There is hardly any need to accentuate that the Hon'ble Courts do not legislate, but declare the law, which declaration is considered to be effective from the date on which the relevant provision was brought on the statute. Since the proviso to section 206C(6A) is an echo of the law propounded by the Hon'ble Supreme Court and the other Hon'ble High Courts as discussed above, it has to be considered as retrospective.
15. Adverting to the facts of the instant case, the ld. Counsel for the assessee contended that all the buyers had taken into account the purchases made from the assessee for computing income in their respective returns filed u/s 139 of the Act after paying tax due thereon. However, he was unable to adduce necessary material before us in this regard. The assertion so made cannot be inferred in the absence of any 17 ITA No.6023/Del/2013 positive material to prove it. There can be no presumption about the buyers having paid tax on the income by including the transactions of purchases covered u/s 206C. This position needs to be specifically demonstrated by the assessee. Under such circumstances, we are of the considered opinion that the ends of justice would meet adequately if the impugned order is set aside and the matter is restored to the file of ITO (TDS) for considering the details, which the assessee seeks to file for divulging that the buyers had included the income from the instant purchase transactions in their total income and filed returns u/s 139 of the Act after paying tax due thereon. We want to make it clear that if the assessee fails to specifically prove this position, then, the Officer would be fully entitled to treat it as assessee in default in terms of section 206C. Further, the liability of interest u/s 206C(7) would be fastened on the assessee from the date on which the assessee was required to collect tax at source up to the date on which the amount of tax was paid by the buyers. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such proceedings.
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16. In the result, the appeal is allowed for statistical purposes.
The order pronounced in the open court on 13.04.2015.
Sd/- Sd/-
[C.M. GARG] [R.S. SYAL]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated, 13th April, 2015.
dk
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.
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