Income Tax Appellate Tribunal - Agra
District Magistrate, Jhansi vs Assessee on 21 February, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL,
AGRA BENCH, AGRA
BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA No. 137, 138, 139 & 140/Agra/2011
Asstt. Year : 2005-06, 2006-07, 2007-08 & 2008-09
District Magistrate, vs. Income-tax Officer (TDS),
Mining Office, Range-6, Jhansi.
Collectorate Court Complex,
Jhansi(TAN:AGRD11071E)
(Appellant) (Respondent)
Appellant by : S/Sri R.K. Agarwal & Rahul Agarwal, Adv.
Respondent by : Shri Waseem Arshad, Sr. D.R.
Date of hearing : 21.02.2013
Date of pronouncement of order : 28.02.2013
ORDER
Per Bhavnesh Saini, J.M.:
All the appeals by the assessee are directed against the order of the ld. CIT(A)-II, Agra dated 30.03.2011 for the assessment years 2005-06 to 2008-09.
2. The ld. counsel for the assessee did not press ground No. 1 in all the appeals of the assessee. The same is, therefore, dismissed as not pressed in all the appeals.
3. The effective grounds of appeals raised in all the appeals are common on ground No. 2 to 5 and the same are taken from one of the appeals and are reproduced as under :
2 ITA No. 137 to 140/Agra/2011
"2. Because on the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals)-II, Agra, grossly erred in holding the appellant as responsible for collection of tax from the "Dead Rent/Royalty" within the meaning of sec. 206C.
3. Because on the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals)-II, Agra, erred both in law and facts while holding the appellant statutorily required to collect tax at source from the amount received from private lessee/licensee appreciating the facts, circumstances and the provisions of Statute in this regard.
4. Because the Ld. Commissioner of Income Tax (Appeals)-II, Agra, grossly erred both in law and facts in erroneously adjudicating ground no. 3 of the appeal. Ld. CIT(A) failed to appreciate that Section 206C(6A) was brought on the statute w.e.f. 01.04.2007, and that there were no circumstances or facts available on record for holding the appellant as "assessee in default". The Ld. Commissioner of the Income Tax (Appeals)-II, Agra further erred in applying the provisions of section 206C(1) which relates to the seller and not to the appellant.
5. Because the Ld. Commissioner of Income Tax (Appeals)-II, Agra, grossly erred both in law and facts in erroneously adjudicating ground no. 4 of the appeal. Ld. CIT(A) failed to appreciate that the provisions of section 206C(7) or 201(1A) are not at all applicable in the case of the appellant.
4. Briefly, the facts of the case are that the District Magistrate, Jhansi on behalf of the State Government has granted license and lease for mines and quarries in his territorial jurisdiction and collected the amount as royalty etc. from the licensees and lessees against use of such mines and quarries for the purpose of business like extracting Gitti, ballast / Khanda, boulders etc. The AO was of the view that as per section 206C(1C) of the IT Act, every person, who grants a lease or a license or 3 ITA No. 137 to 140/Agra/2011 enters into a contract or otherwise transfers any right or interest either in whole or in part in any mine or quarry, to another person, other than a public sector company (licensee or lessee) for the use of such mine or quarry for the purpose of business shall, at the time of debiting of the amount payable by the licensee or lessee to the account of the licensee or lessee or at the time of receipt of such amount from the licensee or lessee in cash or by the issue of cheques or draft or by any other mode, whichever is earlier, collect from the licensee or lessee of any such license, contract or lease of the mining and quarrying a sum equal to 2%, of such amount as income-tax along with surcharge and education cess as applicable. Since the District Magistrate of Jhansi has granted licenses and leases for mining and quarry and failed to collect TCS, therefore, the District Magistrate was liable to be proceeded u/s. 206C of the IT Act. In response to the show cause notice, the District Mining Officer attended the proceedings before the AO and stated that lease and license are granted by the District Magistrate but no TCS has been done. The AO on consideration of the details of the receipts of amounts from the persons to whom mines / quarries are given, found that the total amount received was Rs.56,41,86,236/- in all the assessment years under appeal, on which no TCS has been made by the District Magistrate. The District Magistrate in his reply submitted that the tax is not collectable on royalty received from licensees / lessees of mines / quarries. It was further submitted that all the licensees / lessees are paying tax. The AO, however, did not accept the contention of the assessee 4 ITA No. 137 to 140/Agra/2011 because the provisions of section 206C(1C) of the IT Act is applicable in the case of the assessee on the amount payable or paid by the licensees or lessees for use of mines and quarries. Therefore, the word 'royalty' is not relevant. Accordingly, the assessee was held to be in default of not collecting TCS and payment to Government Department. The assessee was held liable to interest as well. The common order of the AO for all the assessment years under appeals was challenged before the ld. CIT(A) and the ld. CIT(A) confirmed the order of the AO on the above grounds of appeal and held that the assessee is liable to collect TCS and it is immaterial whether the licensees or lessees have filed their return of income or not. The provisions of section 206C(6A) enacted w.e.f. 01.04.2007 was considered for the purpose of levy of penalty and has no effect on the liability to collect tax u/s. 206C(6) of the IT Act. The ld. CIT(A) also held that the assessee is also liable for interest u/s. 206C(7) of the IT Act. The assessee is in appeals on the above grounds of appeals in all the appeals filed for separate assessment years. The points raised by the ld. counsel for the assessee are taken up for the purpose of disposal separately as under :
[I]. The ld. counsel for the assessee submitted that the District Magistrate is not the Head of the Department of Mining and TAN Number is issued in the name of District Mining Officer, Jhansi. Therefore, District Magistrate is not liable for TCS and relied upon the decision of Hon'ble Supreme Court in the case of ITO 5 ITA No. 137 to 140/Agra/2011 vs. Ch. Atchaiah, 84 Taxman 639 (218 ITR 239), in which it was held that the AO is not precluded from taxing right person with respect to that income. On the other hand, the ld. DR relied upon the orders of the authorities below.
[I(i)]. We have considered the rival submissions and do not find any substance in the arguments of the ld. counsel for the assessee. The AO specifically noted in the impugned order that the District Magistrate, Jhansi on behalf of the Government have granted license and lease for mining or quarries in his territorial jurisdiction and collected amounts as royalties etc. from the licensees and lessees against use of such mines / quarries for the purpose of business like extracting of Gitti, ballast / Khanda, boulders etc. The District Mining Officer appeared before the AO and also stated that the leases and licenses are granted by the District Magistrate. The District Magistrate in his reply never disputed before the AO that he has not granted licenses or leases for mining and quarrying as noted by the AO. What the District Magistrate has stated was that the tax is not collectable on royalties received from the licensees / lessees of mines / quarries and that the licensees are paying Income-tax and filing their returns of income. The ld. counsel for the assessee also filed one of the specimen copy of the agreement at page 1 of the paper book, which supports the finding of the AO that the leases / licenses have been granted to the lessees/licensees for extracting gitti, ballast /Khanda, Boulders in District Jhansi for a particular period against consideration of the amount and 6 ITA No. 137 to 140/Agra/2011 the same agreement is signed by the District Magistrate on behalf of the State of Uttar Pradesh as well as In-charge Mining / Minerals, Jhansi. The District Magistrate is the head of the District to deal with all the matters and only he is the authority to grant licenses /leases for use of the mines or quarries. The In-charge of Mining Department is subordinate to him and cannot act of his own without giving authority by the District Magistrate. Thus, it was admitted fact that lease/license was granted by the District Magistrate on behalf of the State Government for mines and quarries against consideration. May be the TAN is issued in the name of District Mining Officer, is not relevant to avoid liability to collect TCS by the District Magistrate. Considering the above facts, noted by the assessing officer and confirmed by the District Mining Officer that leases/licenses have been granted by the District Magistrate, would clearly prove that the District Magistrate, Jhansi is liable to collect TCS in the facts and circumstances of the case. This point is accordingly decided against the assessee.
[II]. The ld. counsel for the assessee submitted with regard to TCS liability for dead rent / royalty that there is no provision u/s. 206C for collection of TCS and these provisions are not applicable against the assessee. Dead rent was on account of grant of lease/license for mining and dead rent is dependent on extraction. The royalty depends on collection on the extraction. The dead rent is fixed to be paid in advance and it has no connection with the start of business and 7 ITA No. 137 to 140/Agra/2011 when the business is started the royalty is payable. Therefore, on the dead rent and royalty, it is not mentioned in the above provision that the assessee is liable for collection of TCS in the matter.
[II] (i). On the other hand, the ld. DR relied upon the orders of the authorities below and submitted that any name may be given to anything in the agreement, but the provisions of section 206C are applicable on the amount received and collected for grant of license and lease for mining and quarry against consideration. The dead rent or royalty is the same term in the mining business and license granted. Therefore, there is no merit in the contention of the ld. counsel for the assessee.
[II] (iii). We have considered the rival submissions. Section 206C(1C) (6), (6A) & (7) of the IT Act reads as under :
"(1C). Every person, who grants a lease or a licence or enters into a contract or otherwise transfers any right or interest either in whole or in part in any parking lot or toll plaza or mine or quarry, to another person, other than a public sector company (hereafter in this section referred to as "licensee or lessee") for the use of such parking lot or toll plaza or mine or quarry for the purpose of business shall, at the time of debiting of the amount payable by the licensee or lessee to the account of the licensee or lessee or at the time of receipt of such amount from the licensee or lessee in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the licensee or lessee of any such licence, contract or lease of the nature specified in column (2) of the Table below, a sum equal to the 8 ITA No. 137 to 140/Agra/2011 percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax:
TABLE Sl. Nature of contract or licence or lease, etc. Percentage No. (1) (2) (3)
(i) Parking lot Two per cent
(ii) Toll plaza Two per cent
(iii) Mining and quarrying Two per cent.] Explanation 1.--For the purposes of this sub-section, "mining and quarrying" shall not include mining and quarrying of mineral oil.
Explanation 2.--For the purposes of Explanation 1, "mineral oil"
includes petroleum and natural gas.] (6) Any person responsible for collecting the tax who fails to collect the tax in accordance with the provisions of this section, shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-
section (3).
[(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:
Provided that no penalty shall be charged under section 221 from such person unless the Assessing Officer is satisfied that the person has without good and sufficient reasons failed to collect and pay the tax.
(7) Without prejudice to the provisions of sub-section (6), if the person responsible for collecting tax] does not collect the tax or after collecting the tax fails to pay it as required under this section, he shall be liable to pay simple interest at the rate of one per cent per month 9 ITA No. 137 to 140/Agra/2011 or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which the tax was actually paid and such interest shall be paid before furnishing the quarterly statement for each quarter in accordance with the provisions of sub-section (3).
The above provisions provided that every person who grants a lease or license or enters into a contract or otherwise transfers any right or interest either in whole or in part in any parking lot or toll plaza or mine or quarry, to another person, other than a public sector company (licensee or lessee) for the use of such parking lot or toll plaza or mine or quarry for the purpose of business shall, at the time of debiting of the amount payable by the licensee or lessee to the account of the licensee or lessee or at the time of debiting of the amount payable by the licensee or lessee to their account in cash or by way of cheques or draft or by any such mode, collect from the licensee or lessee the amount of tax mention in the above schedule. Sub-section (6) provides the responsibility of person for collecting the tax who fails to collect the tax in accordance with the above provisions and according to sub-clause (7), such person shall be liable for interest at the specified rate. It is not in dispute that District Magistrate, Jhansi has granted lease or license to the lessee/licensee and transferred the right or interest in mines or quarries to the licensee/lessee for use of mines or quarries for the purpose of business. The other requirement for collection of the TCS had been that at the time of debiting of the amount payable by the licensee or lessee in this regard, the person who has granted lease or license shall collect from the licensee or lessee the amount as per schedule 10 ITA No. 137 to 140/Agra/2011 as tax collection at source. Therefore, the important requirement is the "amount payable" or "receipt of amount". Therefore, the amount payable or the amounts received are the important factors which shall have to be taken into consideration at the time of collection of TCS. The above provision, therefore, would not be restricted to the amounts paid or payable on account of specified terms. It may be anything and as such it would also apply against the amount payable or paid on account of dead rent / royalty. Whatever name is given in the agreement of mining, the same is payable by the licensee to the District Magistrate and upon that the District Magistrate is required to collect TCS as per above provisions. Whether dead rent was to be paid in advance or royalty was to be paid after start of business are not relevant criteria to deal with the provisions of section 206C(1C) of the IT Act. Further, on ground No. 4, it is stated that section 206(6A) has been brought on the statute w.e.f. 01.04.2007 and therefore, the assessee cannot be treated as assessee in default. Since the assessee was responsible for collecting tax and failed to do so in accordance with the provisions of law, therefore, for the failure of assessee to collect the tax, the assessee would be liable to pay tax to the credit of the Central Government in accordance with law. Therefore, quoting a wrong provision would not be relevant for the purpose of deciding the issue. Same view is taken by ITAT, Agra Bench in the case of Agra Development Authority vs. ACIT, 138 ITD 127. The assessee has since failed to comply with the provisions of law 11 ITA No. 137 to 140/Agra/2011 and was therefore, liable to pay interest also. Accordingly, ground No. 2 to 5 of appeal of the assessee are dismissed.
[III]. The ld. counsel for the assessee further submitted that all the licensees/lessees are assessees of Income Tax Department and paid Income-tax, therefore, there should not be a double deduction of TCS from the assessee and submitted that no proper opportunity was given at the time of considering the issue and the ld. CIT(A) has wrongly noted in the appellate order that it is immaterial whether the licensees/lessees have filed their return of income or not because the assessee is required to collect TCS in accordance with the above provisions. He has submitted that since all the licensees/lessees have paid due taxes, therefore, there should not be further recovery from the assessee. In support of this contention, he relied upon the decision of Hon'ble Karnataka High Court in the case of Sree Manjunatha Wines vs. CIT, 15 Taxman. Com 6, in which it was held :
"From the provisions of section 206C, it is clear that though assessee collects the tax and remit the money to the government, the said amount remitted will be to the account of the buyer. In other words, the said amount will be given deductions towards the tax payable by the buyer. If in a given case the assessee has not collected the tax from the buyer and if the buyer has paid tax to the revenue, the revenue is not deprived of the tax which is legitimately due to them. It is in that context, before proceeding against the assessee, it is necessary to find out whether the buyer has paid tax in accordance with the provisions of the Act and only in the event the buyer has not paid the tax, then the authorities can proceed against the assessee who was under the obligation to collect tax and remit to the Government. It is well-settled law that there cannot be any double 12 ITA No. 137 to 140/Agra/2011 payment of tax. It is in that context as the material on record did not disclose all these particulars, the Tribunal has set aside the order passed by the authorities and remitted the matter back to the original authority to undertake this exercise. It is in that context, it is stated that the directions issued in the aforesaid case by the Court should be borne in mind. Under these circumstances, there is no irregularity committed by the Tribunal in passing the impugned order, calling for interference."
[III] (i). On the other hand, the ld. DR submitted that the assessee has not produced any sufficient evidence before the AO. Therefore, the matter may not be remanded to the AO for reconsideration.
[III] (ii). On consideration of the submissions of the parties, we are of the view that the matter requires reconsideration for limited purpose on this issue at the level of the AO. The assessee submitted before the AO that all the licensees are assessed to Income-tax, but no evidences have been filed before the AO for payment of taxes. The ld. CIT(A) instead of verifying the payment of tax by the licensees/lessees, wrongly noted that it is immaterial whether licensees or lessees have filed return of income or not. It therefore, appears that at the stage of AO, no proper opportunity was given to the assessee in this regard and the ld. CIT(A) has failed to appreciate this issue in accordance with law and the decision of Hon'ble Karnataka High Court referred to above. Therefore, in the interest of justice, one more opportunity should be given to the assessee to support such contention before the AO. We, therefore, set aside the orders of the ld. authorities below to this 13 ITA No. 137 to 140/Agra/2011 extent and restore the issue to the file of AO with direction to assessee to substantiate that all the payments of taxes have been made by the licensees /lessees referred in all the assessment years under appeals with proper evidence of payments by the licensees or lessees in question and the AO on verification of the same shall decide the issue in accordance with law by giving reasonable and sufficient opportunity of being heard to the assessee. This point is decided in favour of the assessee for statistical purposes.
No other point is argued or pressed by both the parties.
5. In the result, all the appeals of the assessee are partly allowed for statistical purposes, as noted above.
Order pronounced in the open court.
Sd/- Sd/-
(A.L. GEHLOT) (BHAVNESH SAINI)
Accountant Member Judicial Member
*aks/-
Copy of the order forwarded to :
1. Appellant
2. Respondent
3. CIT(A), concerned By order
4. CIT, concerned
5. DR, ITAT, Agra
6. Guard file Sr. Private Secretary
True copy