2005 (8) TMI 326 - AT - Income Tax

Summary

Issues Involved:
1. Appealability of an order under section 206C of the Income-tax Act, 1961.
2. Applicability of section 206C to amounts payable by buyers where assessments have become final.
3. Applicability of section 206C to the excise duty component included in sale bills.
4. Charging of interest under section 201(1A) in cases where buyers' assessments have been finalized.

Detailed Analysis:

1. Appealability of an Order under Section 206C:
The primary issue raised by the revenue was whether an order passed under section 206C is appealable under section 246 of the Income-tax Act before the first appellate authority. The revenue argued that section 246 does not prescribe an appeal before CIT(A) for orders under section 206C, suggesting that the only recourse available to a taxpayer is under section 264. However, the assessee contended that section 246(1)(a) allows for an appeal as it covers "denial of liability," which includes liability to tax under specific circumstances. The tribunal examined the provisions and case laws cited, including CIT v. Prakash Cotton Mills (P.) Ltd., CIT v. Kanpur Coal Syndicate, and Mandal Ginning & Processing Co. Ltd. v. CIT, concluding that the expression "denial of liability" is comprehensive and includes orders under section 206C. Therefore, an order under section 206C is indeed appealable under section 246, and the tribunal affirmed the CIT(A)'s findings, dismissing the revenue's grounds.

2. Applicability of Section 206C to Amounts Payable by Buyers with Final Assessments:
The revenue challenged the CIT(A)'s decision that section 206C cannot be invoked for amounts payable by buyers whose assessments have become final. The tribunal noted that the assessee, a distillery unit, did not collect tax on the excise duty component paid directly by buyers to the State Government. The CIT(A) had concluded that since the excise duty was paid directly by the buyers and did not appear in the sale register or bill book, it was not subject to collection under section 206C. The tribunal upheld this view, noting that the excise duty did not form part of the amount debited in the appellant's books and thus was not subject to tax collection under section 206C. The tribunal dismissed the revenue's grounds, agreeing with the CIT(A)'s findings.

3. Applicability of Section 206C to the Excise Duty Component:
The revenue contended that the CIT(A) erred in holding that section 206C does not apply to the excise duty component included in the sale bills. The tribunal examined the facts and found that the excise duty was paid directly by the buyers to the State Government and did not appear in the sales bills. The tribunal noted that section 206C requires tax collection at the time of debiting the amount payable by the buyer or at the time of receipt of such amount, and since the excise duty was not included in the debited amount, it was not subject to collection under section 206C. The tribunal also referred to various case laws and CBDT instructions supporting this interpretation. Consequently, the tribunal upheld the CIT(A)'s decision, dismissing the revenue's grounds.

4. Charging of Interest under Section 201(1A):
The revenue challenged the CIT(A)'s direction to restrict the charging of interest under section 201(1A) to the date of buyers' assessments becoming final. The CIT(A) had directed that interest should be calculated from the date the deduction should have been made to the date the buyers discharged their liabilities. The tribunal found no infirmity in the CIT(A)'s directions and noted that the ITO(TDS) had already given effect to the CIT(A)'s order, reducing the non-collection of tax and interest to 'Nil.' The tribunal dismissed the revenue's grounds, affirming the CIT(A)'s directions.

Conclusion:
The tribunal dismissed all the revenue's appeals and concluded that the CIT(A) had correctly adjudicated the issues. The cross-objections filed by the assessee, supporting the CIT(A)'s findings, were rendered redundant.