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2024 (2) TMI 1167 - AT - Income TaxTCS u/s 206C - Sale of tendu leaves at the second stage whereas in the first stage the tendu leaves were sold on the Govt Undertaking - Treating the assessee in default for non-collection of tax at source u/s 206C(6)/206C(7) - CIT(A) dismissed the appeal of the assessee by holding that the assessee is involved in the trades in Tendu leaves and the provisions of section 206C were applicable as the tendu leaves were purchased from Government Undertaking i.e. Orissa Forest Development Corporation Ltd. HELD THAT - CIT(A) has wrongly observed that the provisions of Section 206C of the Act were applicable to the assessee even though the assessee has made sale at second stage and the entity involved in the first stage was public sector undertaking. In the present case we also find that the assessee has collected Form no. 27BA as per Rule 37J and form 27C as per rule 37C from all the six parties copies of which are placed stating that they were engaged in business of manufacturing of Bidies and the tendu leaves were to be used for the purpose of manufacturing units and not for the purpose of trading. In the case of Karnataka Forest Development vs. ITO 2015 (7) TMI 908 - ITAT BANGALORE the coordinate bench has held that where the assessee has obtained the form 27 to the effect that the buyer would use the tendu leaves in manufacturing process , then the assessee cannot be treated as assessee in default u/s 206C of the Act or liable for interest. Where the declaration is made in terms of section 206C(1A) of the Act , then the liability to collect at source under section 206C(1 ) would not apply We direct the AO to delete the demand by holding that the provision of TCS u/s 206C of the Act are not applicable to the assessee. The appeal of the assessee is allowed.
Issues Involved:
The common issue raised by the assessee is against the order confirming the imposition of tax for non-collection of tax at source u/s 206C(6)/206C(7) of the Act. A.Y. 2006-07: The assessee, a partnership concern trading tendu leaves, was found not to have collected tax on sales to six parties. The AO imposed a tax demand, which the Ld. CIT(A) upheld. However, the ITAT found that the assessee's case was covered by Circular No. 660 dated 15.09.1993, and set aside the order, directing the AO to delete the demand. The appeals for AYs 2007-08 & 2008-09 were also allowed based on the same issue decided for AY 2006-07. The ITAT held that the provisions of Section 206C of the Act were not applicable to the assessee as the sales were made at the second stage, covered by Circular No. 660 dated 15.09.1993. The ITAT referred to various decisions supporting their conclusion, including Karnataka Forest Development vs. ITO, CIT vs. Siyaram Metal Udyog Pvt. Ltd., Satya Pal Amrik Singh & Co. vs. Union of India, M/s G. K. Traders vs. ITO, and KPG Entreprise vs. ITO. The ITAT emphasized that the purchasers had furnished declarations, and therefore, set aside the Ld. CIT(A)'s order and directed the deletion of the demand. Separate Judgment by Judges: No separate judgment was delivered by the judges in this case.
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