2016 (6) TMI 646 - HC - Income Tax

Tax Collection at Source (TCS) - Liability of the assessee to supply the declaration u/s 206C - whether Tribunal erroneously did not consider the aspect that as per Section 206-C(1) of the Act such declaration has to be furnished when the payment is made by issuance of the cheque or by debiting the entries in the books of accounts whichever is earlier? - Held that - Tribunal has interpreted the provisions of Section 206-C(1a) observing that, the assessee can furnish the declaration only when it is so furnished to him by the buyer. As such, the liability of the assessee to supply the declaration to the assessing officer as provided under sub-Section 1-B of Section 206 of the Act is considered. It further appears that the Tribunal thereafter has considered that even if there is a breach on the part of the assessee in not obtaining the declaration from the buyer in the month when the sale was effected, it was only a technical breach and could be condoned as per the earlier decision of the Tribunal which has been interfered with by the Madras High Court in the case of CIT vs. Adishankar Spinning Mills(P) Ltd., (2010 (12) TMI 1084 - MADRAS HIGH COURT ). It appears that thereafter, as in the present case, declaration of the buyer was furnished in response to the show-cause notice and as it was not the case of the revenue that the declaration was false, the Tribunal set aside the order of the lower authorities.. We are unable to accept the contention of the revenue for the simple reason that effecting sale cannot be equated/correlated with the payment made pursuant to sale or by debit entries in the books of account s and therefore, the finding of the Tribunal cannot be considered to be in contravention to the provision of Section 206-C(1) of the Act. In any case, the Tribunal has found that even if there is a technical breach, sufficient compliance is made by the assessee more particularly, when it was not the case of the appellant- revenue that any false declaration was filed. No substantial question of law - Decided against revenue

Summary

Issues:
Interpretation of Section 206C(1A) of the Income Tax Act regarding the requirement of buyer's declaration in Form 27C for tax collection and liability of the assessee to furnish the declaration. Consideration of technical default in obtaining the declaration and condonable breaches. Verification of buyer's intended use of goods for manufacturing, processing, or trading. Compliance with Section 206-C(1) in relation to the timing of declaration submission.

Analysis:
The Tribunal considered the appeals arising from a common order passed by the Tribunal, addressing substantial questions of law raised by the appellant-revenue. The key issues revolved around the correctness of the Tribunal's interpretation of Section 206C(1A) of the Income Tax Act regarding the necessity of the buyer's declaration in Form 27C and the liability of the assessee to provide such declaration. The Tribunal emphasized that the obligation to file the declaration arises when furnished by the buyer, not necessarily at the time of sale, as per sub-sections 1A and 1B of Section 206C. The Tribunal viewed breaches in obtaining the declaration as technical, citing a precedent from the Madras High Court, where delayed submission of Form 27C was deemed sufficient compliance. The Tribunal highlighted that the revenue had ample time to verify the buyer's actual use of goods and concluded that the assessee was not in default or liable for interest under the Act.

The Tribunal's interpretation of Section 206C(1A) was further scrutinized, with the appellant-revenue contending that the Tribunal overlooked the timing requirement for declaration submission as per Section 206-C(1) of the Act. However, the Court rejected this argument, stating that the sale event should not be equated with the payment method, and the Tribunal's finding did not contravene the Act. Notably, the Tribunal's decision was supported by the absence of any false declarations by the buyer. The Court ultimately dismissed the appeals, clarifying that while no substantial question of law arose, the issue of buyer's declaration submission remained open for future consideration under Section 206-C(1) of the Act.