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2015 (7) TMI 908 - AT - Income TaxDefault under section 206C(6A) - short collection of tax at source (TCS) - goods for use in manufacturing, processing or producing articles or things. - Held that - Section 206C(1A) mandates that any person responsible for collecting tax under section 206C(1) need not do so if he obtains a declaration from the buyer that he is purchasing the goods for use in manufacturing, processing or producing articles or things. It does not say that such declaration has to be obtained at the very same moment when a sale is affected. A reading of sub section (1B) clearly brings out this since obligation of the assessee to file a copy of the declaration arises only when the declaration is furnished to him by the buyer. The point of reference is furnishing of declaration by the buyer and not the month or date on which sale is affected by the assessee. Even if we consider that there is a breach on the part of the assessee in not obtaining the declaration from the buyer the moment a sale was affected, and in filing it before the CCIT or CIT, as the case may be, a similar breach was considered to be only technical and one that could be condoned by Hon ble Madras High Court in the case of Adisankar Spinning Mills (P) Ltd., (2010 (12) TMI 1084 - MADRAS HIGH COURT ). In the said case, assessee had filed Form 27C subsequent to the proceedings, through a rectification petition under section 154, but still considered to be sufficient compliance, which view of the Tribunal was confirmed by Hon ble Madras High Court. Proceedings on the assessee for the alleged default here were initiated on 10/10/2011 and assessee had before 31/10/2012 filed the Forms. Assessment years involved were assessment year 2009-10 to 2011-12 and there was much time left with the Revenue to verify whether the buyers were indeed using the wood pulp for manufacturing, processing or producing article or thing and not for trading and to proceed against them if they had furnished false declaration. We are therefore of the opinion assessee could not have been deemed as one in default under section 206C (6D) of the Act or liable for interest under section 206(7). - Decided in favour of assessee.
Issues involved:
Assessee treated as one in default under section 206C(6A) of the Income tax Act, 1961 for not collecting tax at source on sale of wood pulp. Analysis: 1. Assessee's Obligation under Section 206C(1): The Assessing Officer (AO) held that the assessee, a State Government undertaking, was obligated to collect tax at source under section 206C on the sale of wood pulp to specific concerns. The AO contended that wood pulp fell under the category of forest produce as per the provisions of section 206C(1). Despite the assessee's arguments regarding the nature of the buyers and the source of the wood, the AO concluded that the assessee was in default for not collecting tax. 2. Declaration in Form 27C: The AO pointed out that the declaration in Form 27C filed by the assessee was incomplete and not submitted to the Chief Commissioner or Commissioner as required by section 206(1B). The AO calculated the tax amount and interest due from the assessee for the relevant assessment years. The AO exempted one buyer, a Government company, from the default but held the assessee liable for the remaining transactions. 3. Appellate Proceedings: The assessee appealed to the CIT(A) challenging the AO's decision. The CIT(A) upheld the AO's order, rejecting the assessee's arguments regarding the nature of wood pulp and the filing of Form 27C. The assessee then approached the Appellate Tribunal, emphasizing that the delay in filing Form 27C was a technical breach and did not warrant default status. 4. Tribunal's Decision: The Tribunal examined the provisions of section 206C(1A) and 206(1B) along with Rule 37C governing Form 27C. It noted that the assessee had obtained and submitted Form 27C from both buyers, albeit after the initiation of proceedings. The Tribunal highlighted that the obligation to file a copy of the declaration arose upon its receipt from the buyer, not necessarily at the time of sale. Citing a precedent from the Madras High Court, the Tribunal deemed the delay in filing Form 27C as a technical breach that could be condoned. 5. Conclusion: The Tribunal ruled in favor of the assessee, setting aside the lower authorities' orders. It held that the delay in filing Form 27C did not warrant default status under section 206C(6A) or liability for interest under section 206(7). The Tribunal emphasized that the Revenue had ample time to verify the buyers' declarations and take appropriate action if necessary. Consequently, the appeals of the assessee were allowed, and the stay petitions were dismissed. This detailed analysis showcases the progression of the case, the legal arguments presented by both parties, and the Tribunal's thorough examination of the relevant provisions leading to the final judgment in favor of the assessee.
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