2023 (12) TMI 768 - AT - Income Tax

Default for Non-collecting of TCS u/s 206C - assessee claimed that the assessee is not dealing with tendu leaf as per provision of section 206C (1) - applicability of TCS on the forest product - assessee has claimed that the assessee is the dealer of minor forest product - HELD THAT - The categorically the minor forest product and forest product has difference in their nature. Such as, Minor Forest products (MFPs) are all the products obtainable from the forests other than wood and timber. They comprise products of vegetable and animal origin, such as grasses, bamboos, canes, tans, dyes, oils, gums, resins, fibres, flosses, leaves, drugs, spices, poisons, edible products, and animal products. On the other hand, forest products include both timber and non-timber products. The major forest products comprise pulpwood, sandalwood, social forestry that includes fuel and timber. The minor forest products include items such as tamarind, curry leaf, tendu patta, gallnut, cane, soapnut, tree moss, and now bamboo as well. AO had relied on the State Notification on 27.10.2014. But there is no ambiguity that the seller of forest product is required to collect tax on forest produce. But the Minor Forest Product are the product are not covered under the Income Tax Act u/s 206C (1), sl no-(v)which is not liable to collect tax at source. We find that there is no ambiguity in the Minor Forest Product which are not at all liable to collect tax u/s 206C. In our considered view, we set aside the appeal order and the addition made by the ld.AO is quashed. Appeal of the assessee is allowed.

Summary

Issues Involved:
The judgment involves appeals against the order of the Commissioner of Income Tax (Appeals) related to the applicability of Tax Collected at Source (TCS) on forest products for multiple assessment years.

ITA No. 163/Jodh/2023:
The appellant challenged the order passed under Section 206C(6A) as beyond the time limit, the TCS amount on forest produce, and the levy of interest under Section 206C(7).

The assessee, a dealer of forest products, disputed the imposition of TCS by the Income Tax Officer. The appellant claimed to deal with minor forest products not covered under Section 206C(1) of the Act. The AO imposed tax despite the appellant's contentions. The CIT(A) upheld the assessment order, leading to the appeal.

The Appellate Tribunal considered the nature of the products and applicable provisions. It was established that "Minor Forest Products" are distinct from products covered under Section 206C(1). The Tribunal ruled in favor of the appellant, quashing the addition made by the AO.

ITA Nos. 160 to 161/Jodh/2023:
These appeals, being quantum in nature, were allowed based on the factual grounds favoring the assessee. The legal issue regarding the limitation for assessment completion was deemed unnecessary for adjudication.

As the quantum appeal was successful, the penalty order under Section 271CA was considered infructuous. Consequently, the appeals under ITA No. 160 & 161/Jodh/2023 were allowed.

Conclusion:
The appeals challenging the imposition of TCS on forest products were allowed in favor of the assessee. The Tribunal held that "Minor Forest Products" were not subject to TCS under Section 206C(1) of the Income Tax Act. The orders passed by the lower authorities were set aside, and the appeals were allowed.