Income Tax Appellate Tribunal - Rajkot
Shyam Timber Pvt. Ltd.,, Gandhidham vs Department Of Income Tax on 26 May, 2006
IN THE INCOME TAX APPELLATE TRIBUNAL
RAJKOT BENCH, RAJKOT
Before Shri A.L. Gehlot (AM) and Shri D.T. Garasia (JM)
I.T.A. No. 354 to 357/Rjt/2006
(Assessment years 2001-02 to 2004-05)
ITO, TDS-4 vs Shyam Timber Pvt Ltd
Rajkot (Gandhidham) Survey No.232/1, New Nagori Plot
Galpadar Road Corner
Gandhidham-kutch
PAN : AAECS3626B
TAN : RKTS0036A
(Appellant) (Respondent)
Revenue by : Shri SL Meena
Assessee by : Shri MP Sarda
ORDER
A.L. Gehlot : These are appeals filed by the revenue and are directed against the common order of the CIT(A)-II, Rajkot dated 26-05-2006 for the assessment years 2001-02 to 2004-05.
2. A common ground is raised in these appeals based on identical set of facts, therefore, for the sake of convenience all four appeals are decided by this common order.
3. The facts lead in ITA No.354/Rjt/2006 assessment year 2001-02. The effective common ground raised in that appeal reads as under:
"1. The learned CIT(A) has erred in law & on facts in deleting the order passed u/s 206C r.w.s. 201(1A) of the I.T. Act, nullifying the demand raised to the tune of Rs.1,32,39,944/-."
4. The brief facts of the case are that the assessee is a private limited company engaged in the business of wholesale import and sale of timbers. The department carried out TDS spot verification on 21st and 22nd September, 2005 2 ITA No.354 to 357/Rjt/2006 to verify assessee's records relating to TCS and TDS from A.Y. 2001-02 to 2005-
06. It was noticed that the assessee had not collected tax at source on its sales as required by section 206C till 8-9-03. The ITO based on the aforesaid observation worked out the amount recoverable as TCS along with interest u/s 201(1A) as under:
A.Y. Sales TCS Surcharge Interest u/s Total
201(1A)
2001-02 153952882 769764 769764 4772536 13239944
2002-03 369541527 18477076 369542 8730417 27577035
2003-04 287889581 14394480 719724 4534259 19648463
2004-05 297623545 3834666 95867 1207916 5138449
5. The CIT(A) allowed assessee's appeals by following findings:
"6.2 In the appellant's case it has purchased timber and is further sold to a buyer. Thus, the buyer in the case of the appellant is a buyer in further sale and such buyer is not covered by the provisions of Section 206C till 08.09.2003. Such buyer after 08.09.2003 will be excluded only if he is buyer in the retail sale of the goods for personal consumption. Prior to 08.09.2003 no TCS was required to be made as long as the buyer was buyer in further sale of such goods. This being the position of law the appellant cannot be said to have defaulted in collection of tax at source and no recovery can be ordered against it. In view of the correct legal position emerging from the bare reading of Section 206C the recovery ordered by the ITO deserves to be cancelled and the three grounds of appeal raising common issue in this regard are allowed."
6.3 In the A.Y. 01-02, the appellant has taken 5th ground of appeal against demand of Rs.38,092 in respect of failure to deduct tax at source from payment of brokerage. The appellant has simply stated that the payees are assessed to tax and have paid tax on their income and therefore the question of department again recovering the tax from it should not arise. The appellant has not submitted proof of payees having been assessed to tax and their having paid tax. The appellant has also not made any other specific submission on this ground therefore the same is dismissed."
3 ITA No.354 to 357/Rjt/20066. The case of the assessing officer is that according to the definition given in section 206C, the assessee imports and further sells timber, therefore, he is liable to deduct tax at source. The contentions of ld.DR on the basis of CBDT circular No.620 dated 06-12-1991 that the assessee imported and further sold the timber at the point of first sale and therefore the assessing officer rightly held that assessee is liable to deduct tax at source u/s 206C of the Act. The contentions on behalf of the assessee are that as per the provisions applicable before 08-09-2003 a buyer in the retail sale of such goods obtained in pursuance of such trade is not included in the meaning of buyer, the assessee falls under exceptional circumstances therefore he is not liable to make TDS u/s 206C of the Act upto 07-09-2003. After the amendment in section 206C with effect from 08- 09-2003, the buyer is excluded only if he is a buyer in the retail sale of goods purchased by him for personal consumption. There is no dispute that the assessee discharge its liability from 08-09-2003. The alternate contention of the ld.AR that tax has already been paid by the recipient therefore the assessee is not liable u/s 206C of the Act. He relied upon a judgment of Apex Court in the case of Hindustan Coca Cola Beverage (P) Ltd vs CIT 293 ITR 226 (SC).
7. We have heard the learned representatives of the parties and record perused. The limited issue to be decided in these appeals is whether under the facts and circumstances the assessee is liable to deduct tax at source u/s 206C of the Act for assessment years 2001-02 to 2005-06 (upto 07-09-2003). To examine this issue we would like to refer relevant provisions of the Act.
8. Part BB - Collection at source of Chapter XVII of the Act has been inserted by the Finance Act, 1988 with effect from 01-06-1988. There are no material changes in main section 206(1) which is reproduced from Income-tax as amended by Finance Act, 2010 as under:
"206C. (1) 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 4 ITA No.354 to 357/Rjt/2006 by the issu3e 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 income-tax:"
9. Explanation to section 206C has been inserted by the Finance Act, 1992 with effect from 01-04-1992 which reads as under:
"Explanation.- For the purposes of this section, -
(a) "buyer" means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table in sub-section (1) or the right to receive any such goods but does not include,-
(i) a public sector company,
(ii) a buyer in the further sale of such goods obtained in
pursuance of such sale, or
(iii) a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixe4d by or under any State Act;
(b) "seller" means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society."
10. Clauses (a)(i) & a(ii) have been substituted by the Finance Act 2003 with effect from 01-06-1993, which read as follow:
"(i) a public sector company, or
(ii) a buyer in the retail sale of such goods obtained in
pursuance of such sale."
11. The said clauses further substituted by the Taxation Laws (Amendment) Act, 2003 with effect from 08-09-2003 which read as below:
"Explanation.- For the purposes of this section,-
(a) "buyer" means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature 5 ITA No.354 to 357/Rjt/2006 specified in the Table in sub-section (1) or the right to receive an6y such goods but does not include,-
(i) a public sector company, the central Government, a State government, and an embassy, a high commission, legation, commission, consulate and the trade representation, of a foreign State and a club; or
(ii) a buyer in the retail sale of such goods purchased by him for personal consumption;"
12. The CBDT issued a circular No.620 dated 06-12-1991 in respect of sections 206C explaining the meaning of "seller" and "buyer". The relevant paragraph 4 of the circular reproduced below:
"4. It may be clarified that "seller" for the aforesaid purpose means the Central Government or a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co- operative society. It is also clarified that the provisions of s.44AC, and, consequently, those of s.206C will apply only to an assessee being a person (as defined in the Act) other than a public sector company, referred to as "buyer" of any goods, in the preceding paragraph, at the point of first sale, and not in the case of second or subsequent sale of such goods."
13. The controversy in the case under consideration revolves around meaning of "buyer". Originally while explaining this word "buyer", an explanation has been inserted by the Finance Act, 1992 with effect from 01-04-1992. The relevant clause applicable in the case of assessee is clause (a)(ii) where it is stated that "buyer" means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the table in sub section (1) or the right to receive any such goods. Exceptions to this meaning of "buyer" are provided in clauses (i), (ii) and (iii).
14. Sub clause (ii) applicable for the period 01-04-1992 to 30-05-2003. According to clause (ii) a buyer in the further sale of such goods obtained in pursuance of such sale will not be called as "buyer".
6 ITA No.354 to 357/Rjt/200615. Sub clause (ii) applicable for the period 01-06-2003 to 07-09-2003. The above sub clause (ii) has been substituted with effect from 01-06-2003 wherein it is stated that a buyer in the retail sale of such goods obtained in pursuance of such sale is not a "buyer".
16. Sub clause (ii) applicable for the period 08-09-2003 and onwards A buyer in the retail sale of such goods purchased by him for personal consumption.
17. According to above clause (ii) if assessee sold the goods to the buyers who purchased the goods from assessees for further sale in between the period 01-04-1992 to 30-05-2003, the assessee is not liable to deduct tax at source u/s 206C of the Act as in that case amount was not to be received from buyers as per section 206C of the Act. For the period 01`-06-2003 to 07-09-2003, if the assessee sold the goods to retailer, the assessee is not liable to deduct tax at source u/s 206C of the Act. However, with effect from 08-09-2003 the exemption in deduction of tax is allowable only in case where the assessee satisfied the condition that goods sold to those buyers who purchased the goods for their personal consumption. There is no dispute that with effect from 08-09-2003 the assessee started to discharge its duty u/s 206C and making deduction of tax at source. As admitted by both parties that the sale made by the assessee upto 07- 09-2003 either to such buyers who purchased the goods for further sale or they are retailers. On the basis of this admitted facts and in the light of above discussion we are of the considered view that the assessee is not liable to deduct tax at source u/s 206C of the Act upto 07-09-2003 as the sale was made to those buyers, who either purchased the goods for further sale or buyers, who were retailers. As regards the contention of revenue that according to CBDT circular the assessee is liable to deduct tax at source u/s 206C of the Act as being the first seller but we find that such interpretation cannot be drawn from the clear provisions of section 206C as discussed above. We are also aware that the CBDT circular cannot be prevailed over statutory provisions of the Act [ITO vs. 7 ITA No.354 to 357/Rjt/2006 Manoharlal Kothari 236 ITR 357 (Mad) and Grindlays Bank vs CIT 2301 ITR 148 (Cal)].
18. As regards alternate contentions of the learned AR that recipients have already been paid tax and therefore the assessee is not liable to deduct tax at source. We find that CIT(A) did not adjudicate this alternative ground as no specific submission were made. We also do not adjudicate this alternative contention since the issue is decided in favour of the assessee.
19. Ina the result, all the appeals filed by the revenue are dismissed.
Order pronounced in the open court on 10-12-2010.
Sd/- sd/-
(D.T. Garasia) (A.L. Gehlot)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Rajkot, Dt : 10th December, 2010
Pk/-
copy to:
1. the appellant
2. the respondent
3. the CIT(A)-II, Rajkot
4. the CIT-I, Rajkot
5. the DR
(True copy) By order
Asstt.Registrar, ITAT, Rajkot