2013 (9) TMI 268 - AT - Income Tax

Tax Collection at Source (TCS) u/s 206 C on Dead Rent/Royalty - assessee in default - Held 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. - Decided against the assessee. 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. - Decided against the assessee. The assessee is also liable to pay interest u/s 206(6A) of the Income Tax Act, which has been brought on the statute w.e.f. 01.04.2007 - 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 v. ACIT 2012 (10) TMI 887 - ITAT AGRA Decided against the Assessee. Double deduction of TCS from the assessee, when the leasee/lincencee has already paid tax - Held that - Reliance has been placed upon the Hon ble Karnatka High Court judgment in the case of Sree Manjunatha Wines v. CIT 2011 (9) TMI 254 - KARNATAKA HIGH COURT , wherein it has been held that 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. - 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 - Restored 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 - Decided partly in favor of assessee.

Summary

Issues Involved:
1. Liability of the District Magistrate for TCS collection.
2. Applicability of TCS provisions on dead rent/royalty.
3. Double deduction of TCS and payment of taxes by licensees/lessees.

Issue-wise Detailed Analysis:

[I]. Liability of the District Magistrate for TCS collection:
The assessee argued that the District Magistrate is not responsible for TCS as the TAN Number is issued in the name of the District Mining Officer. The Tribunal rejected this argument, stating that the District Magistrate, on behalf of the State Government, granted licenses and leases for mining and quarries and collected royalties from licensees and lessees. The District Mining Officer confirmed that these licenses and leases were granted by the District Magistrate. Therefore, the District Magistrate is liable for TCS collection, irrespective of the TAN being issued in the name of the District Mining Officer. This point was decided against the assessee.

[II]. Applicability of TCS provisions on dead rent/royalty:
The assessee contended that there is no provision under Section 206C for the collection of TCS on dead rent/royalty, arguing that dead rent is fixed in advance and royalty is dependent on extraction. The Tribunal, however, referred to Section 206C(1C), which mandates TCS collection on amounts payable or paid for granting leases or licenses for mining and quarrying. The Tribunal emphasized that the terminology used in the agreement (dead rent or royalty) is irrelevant; what matters is the amount payable or paid. Thus, the Tribunal held that TCS provisions apply to both dead rent and royalty, dismissing the assessee's contention on this ground.

[III]. Double deduction of TCS and payment of taxes by licensees/lessees:
The assessee claimed that all licensees/lessees are Income Tax assessees who have paid taxes, and thus, there should not be a double deduction of TCS. The Tribunal acknowledged the Karnataka High Court's decision in Sree Manjunatha Wines v. CIT, which stated that if the buyer has paid the tax, the authorities should not proceed against the assessee for TCS collection. The Tribunal noted that the assessee did not provide sufficient evidence of tax payments by the licensees/lessees before the AO. Therefore, the Tribunal remanded the matter back to the AO to verify the tax payments made by the licensees/lessees and decide the issue accordingly, giving the assessee an opportunity to present evidence. This point was decided in favor of the assessee for statistical purposes.

Conclusion:
The appeals were partly allowed for statistical purposes. The Tribunal upheld the District Magistrate's liability for TCS collection and the applicability of TCS provisions on dead rent/royalty. However, it remanded the issue of double deduction of TCS and tax payments by licensees/lessees back to the AO for verification.