2016 (5) TMI 871 - AT - Income Tax

Non collection of TCS from Toll Plaza - TCS u/s 206C(1C) - determination of amount payable - whether TCS was to be deducted on amount payable by the concessionaire was only Re. 1/- per year - Held that - On plain reading of section 206C, it leaves no room for doubt, that the quantum of the amount on which the tax is to be collected at source by the seller has to be only that amount which is to be paid to the seller as price at the time of sale and cannot by any stretch of reasoning be held to include that amount which has not been recovered or paid directly to the seller. Later on by an insertion of sub-section (1C) the toll plaza has also been included. Therefore, by the insertion of toll plaza, isco facto the term seller is to be read in that context also. In the light of the discussion made herein in a situation when the concessionaire has retained the toll fees collected and the said concessionaire was under obligation to make the payment of Re.1/- annually to NHAI then on this very very minimal as well as insignificant amount the provisions of section 206C(1C) cannot be applied because it is not practicable. As far as the doubts raised by the Revenue Department that the deposits made in the escrow account would have been used by NHAI to remit to the consolidated fund of India , this fact can easily be verified from the said escrow account. If no amount of toll fees is recovered by NHAI to be remitted to the consolidated fund of India or otherwise then naturally the impugned deposits of toll fees by OPPL is out of the ambits of the provisions of section 206C(1C) of I.T. Act. Otherwise on the payment of Re.1/- we have already held that it is not practicable to invoke the provisions of section 206C(1C). - Decided against revenue

Summary

Issues Involved:
1. Applicability of TCS under Section 206C(1C) of the Income Tax Act.
2. Amount on which TCS is to be collected.
3. Compliance with the concession agreement and escrow account provisions.

Detailed Analysis:

1. Applicability of TCS under Section 206C(1C) of the Income Tax Act:
The primary issue raised by the Revenue Department was the non-collection of TCS from the toll plaza. The assessee, National Highways Authority of India (NHAI), had not collected the tax from the concessionaire, M/s Oriental Pathways (Nagpur) Pvt. Ltd., who was granted the right to collect toll fees. The Assessing Officer (AO) argued that under Section 206C(1C) of the Income Tax Act, every person who grants a lease or license for a toll plaza must collect TCS from the licensee. The AO found that NHAI had defaulted in collecting TCS and issued a show cause notice to the assessee.

2. Amount on which TCS is to be collected:
The AO concluded that the concessionaire was entitled to collect toll fees and that NHAI should have collected TCS on these toll fees. However, the CIT(Appeals) held that the amount payable by the concessionaire to NHAI was only Re. 1/- per year, which had been paid. Therefore, there was no infringement of the provisions of Section 206C. The Revenue Department contended that the agreements did not safeguard the interest of the Revenue Department and that the toll fees collected should have been subject to TCS.

3. Compliance with the concession agreement and escrow account provisions:
The concession agreement between NHAI and the concessionaire included provisions for an escrow account where toll fees were deposited. The agreement specified that the concessionaire was granted the right to collect toll fees and deposit them in the escrow account. The AO argued that since NHAI was a signatory to the escrow account, TCS should have been collected. However, the CIT(Appeals) and the tribunal found that the toll fees collected were meant to compensate the concessionaire for the project costs and maintenance expenses, and NHAI was only entitled to Re. 1/- per year. Thus, the minimal amount of Re. 1/- was not practical for TCS collection.

Conclusion:
The tribunal upheld the decision of the CIT(Appeals) that the provisions of Section 206C(1C) were applicable but only on the amount payable by the concessionaire, which was Re. 1/- per year. The tribunal found that it was not practicable to collect TCS on this minimal amount. The appeals filed by the Revenue were dismissed, and the order pronounced that there was no infringement of the provisions of Section 206C of the Income Tax Act. The judgment emphasized the intent of the legislation and the practical aspects of TCS collection in the context of the concession agreement and escrow account provisions.