The ITO, TDS-4, Gandhidham V. Shyam Timber Pvt. Ltd., Gandhidham

ITA 354/RJT/2006

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2990 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2001-2002
• Appeal Filed On: 03-08-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L MEENA
• Assessee Lawyers: M P SARDA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI D.T. GARASIA (JM) I.T.A. NO. 354 TO 357/RJT/2006 (ASSESSMENT YEARS 2001-02 TO 2004-05) ITO, TDS-4 VS SHYAM TIMBER PVT LTD RAJKOT (GANDHIDHAM) SURVEY NO.232/1, NEW NAGORI P LOT GALPADAR ROAD CORNER GANDHIDHAM-KUTCH PAN : AAECS3626B TAN : RKTS0036A (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SL MEENA ASSESSEE BY : SHRI MP SARDA O R D E R A.L. GEHLOT : THESE ARE APPEALS FILED BY THE REVENU E AND ARE DIRECTED AGAINST THE COMMON ORDER OF THE CIT(A)-II, RAJKOT DATED 26-05-2 006 FOR THE ASSESSMENT YEARS 2001-02 TO 2004-05. 2. A COMMON GROUND IS RAISED IN THESE APPEALS BASED ON IDENTICAL SET OF FACTS, THEREFORE, FOR THE SAKE OF CONVENIENCE ALL F OUR APPEALS ARE DECIDED BY THIS COMMON ORDER. 3. THE FACTS LEAD IN ITA NO.354/RJT/2006 ASSESSMENT YEAR 2001-02. THE EFFECTIVE COMMON GROUND RAISED IN THAT APPEAL READS AS UNDER: 1. THE LEARNED CIT(A) HAS ERRED IN LAW & ON FACTS IN DELETING THE ORDER PASSED U/S 206C R.W.S. 201(1A) OF THE I.T . ACT, NULLIFYING THE DEMAND RAISED TO THE TUNE OF RS.1,32,39,944/-. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF WHOLESALE IMPORT AND SALE OF TIMBERS. THE DEPARTMENT CARRIED OUT TDS SPOT VERIFICATION ON 21 ST AND 22 ND SEPTEMBER, 2005 ITA NO.354 TO 357/RJT/2006 2 TO VERIFY ASSESSEES RECORDS RELATING TO TCS AND TD S FROM A.Y. 2001-02 TO 2005- 06. IT WAS NOTICED THAT THE ASSESSEE HAD NOT COLLE CTED TAX AT SOURCE ON ITS SALES AS REQUIRED BY SECTION 206C TILL 8-9-03. THE ITO B ASED ON THE AFORESAID OBSERVATION WORKED OUT THE AMOUNT RECOVERABLE AS TC S ALONG WITH INTEREST U/S 201(1A) AS UNDER: A.Y. SALES TCS SURCHARGE INTEREST U/S 201(1A) TOTAL 2001-02 153952882 769764 769764 4772536 13239944 2002-03 369541527 18477076 369542 8730417 27577035 2003-04 287889581 14394480 719724 4534259 19648463 2004-05 297623545 3834666 95867 1207916 5138449 5. THE CIT(A) ALLOWED ASSESSEES APPEALS BY FOLLOWI NG FINDINGS: 6.2 IN THE APPELLANTS CASE IT HAS PURCHASED TIMBE R AND IS FURTHER SOLD TO A BUYER. THUS, THE BUYER IN THE CASE OF TH E APPELLANT IS A BUYER IN FURTHER SALE AND SUCH BUYER IS NOT COVERED BY THE PROVISIONS OF SECTION 206C TILL 08.09.2003. SUCH B UYER AFTER 08.09.2003 WILL BE EXCLUDED ONLY IF HE IS BUYER IN THE RETAIL SALE OF THE GOODS FOR PERSONAL CONSUMPTION. PRIOR TO 08.09 .2003 NO TCS WAS REQUIRED TO BE MADE AS LONG AS THE BUYER WAS BU YER IN FURTHER SALE OF SUCH GOODS. THIS BEING THE POSITION OF LAW THE APPELLANT CANNOT BE SAID TO HAVE DEFAULTED IN COLLECTION OF T AX AT SOURCE AND NO RECOVERY CAN BE ORDERED AGAINST IT. IN VIEW OF THE CORRECT LEGAL POSITION EMERGING FROM THE BARE READING OF SECTION 206C THE RECOVERY ORDERED BY THE ITO DESERVES TO BE CANCELLE D AND THE THREE GROUNDS OF APPEAL RAISING COMMON ISSUE IN THI S REGARD ARE ALLOWED. 6.3 IN THE A.Y. 01-02, THE APPELLANT HAS TAKEN 5 TH GROUND OF APPEAL AGAINST DEMAND OF RS.38,092 IN RESPECT OF FA ILURE TO DEDUCT TAX AT SOURCE FROM PAYMENT OF BROKERAGE. THE APPEL LANT HAS SIMPLY STATED THAT THE PAYEES ARE ASSESSED TO TAX AND HAVE PAID TAX ON THEIR INCOME AND THEREFORE THE QUESTION OF DEPARTME NT AGAIN RECOVERING THE TAX FROM IT SHOULD NOT ARISE. THE A PPELLANT HAS NOT SUBMITTED PROOF OF PAYEES HAVING BEEN ASSESSED TO T AX AND THEIR HAVING PAID TAX. THE APPELLANT HAS ALSO NOT MADE A NY OTHER SPECIFIC SUBMISSION ON THIS GROUND THEREFORE THE SA ME IS DISMISSED. ITA NO.354 TO 357/RJT/2006 3 6. THE CASE OF THE ASSESSING OFFICER IS THAT ACCORD ING TO THE DEFINITION GIVEN IN SECTION 206C, THE ASSESSEE IMPORTS AND FURTHER SELL S TIMBER, THEREFORE, HE IS LIABLE TO DEDUCT TAX AT SOURCE. THE CONTENTIONS OF LD.DR ON THE BASIS OF CBDT CIRCULAR NO.620 DATED 06-12-1991 THAT THE ASSESSEE IMPORTED AND FURTHER SOLD THE TIMBER AT THE POINT OF FIRST SALE AND THEREFORE THE ASSESSING OFFICER RIGHTLY HELD THAT ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE U/S 206C OF THE ACT. THE CONTENTIONS ON BEHALF OF THE ASSESSEE ARE THAT AS P ER THE PROVISIONS APPLICABLE BEFORE 08-09-2003 A BUYER IN THE RETAIL SALE OF SUC H GOODS OBTAINED IN PURSUANCE OF SUCH TRADE IS NOT INCLUDED IN THE MEANING OF BUY ER, THE ASSESSEE FALLS UNDER EXCEPTIONAL CIRCUMSTANCES THEREFORE HE IS NOT LIABL E TO MAKE TDS U/S 206C OF THE ACT UPTO 07-09-2003. AFTER THE AMENDMENT IN SECTIO N 206C WITH EFFECT FROM 08- 09-2003, THE BUYER IS EXCLUDED ONLY IF HE IS A BUYE R IN THE RETAIL SALE OF GOODS PURCHASED BY HIM FOR PERSONAL CONSUMPTION. THERE I S NO DISPUTE THAT THE ASSESSEE DISCHARGE ITS LIABILITY FROM 08-09-2003. THE ALTERNATE CONTENTION OF THE LD.AR THAT TAX HAS ALREADY BEEN PAID BY THE RECIPIE NT THEREFORE THE ASSESSEE IS NOT LIABLE U/S 206C OF THE ACT. HE RELIED UPON A J UDGMENT OF APEX COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P) LTD VS CIT 293 ITR 226 (SC). 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND RECORD PERUSED. THE LIMITED ISSUE TO BE DECIDED IN THESE APPEALS IS WHETHER UNDER THE FACTS AND CIRCUMSTANCES THE ASSESSEE IS LIABLE TO D EDUCT TAX AT SOURCE U/S 206C OF THE ACT FOR ASSESSMENT YEARS 2001-02 TO 2005-06 (UPTO 07-09-2003). TO EXAMINE THIS ISSUE WE WOULD LIKE TO REFER RELEVANT PROVISIONS OF THE ACT. 8. PART BB COLLECTION AT SOURCE OF CHAPTER XVII O F THE ACT HAS BEEN INSERTED BY THE FINANCE ACT, 1988 WITH EFFECT FROM 01-06-1988. THERE ARE NO MATERIAL CHANGES IN MAIN SECTION 206(1) WHICH IS RE PRODUCED FROM INCOME-TAX AS AMENDED BY FINANCE ACT, 2010 AS UNDER: 206C. (1) EVERY PERSON, BEING A SELLER SHALL, AT T HE TIME OF DEBITING OF THE AMOUNT PAYABLE BY THE BUYER TO THE ACCOUNT OF THE BUYER OR AT THE TIME OF RECEIPT OF SUCH AMOUNT FROM THE SAID BUYER IN CASH OR ITA NO.354 TO 357/RJT/2006 4 BY THE ISSU3E OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, COLLECT FROM THE BUYER OF ANY GOODS OF THE NATURE SPECIFIED IN COLUMN (2) OF THE TABLE BELOW, A SUM E QUAL TO THE PERCENTAGE, SPECIFIED IN THE CORRESPONDING ENTRY IN COLUMN (3) OF THE SAID TABLE, OF SUCH AMOUNT AS INCOME-TAX: 9. EXPLANATION TO SECTION 206C HAS BEEN INSERTED BY THE FINANCE ACT, 1992 WITH EFFECT FROM 01-04-1992 WHICH READS AS UNDER: EXPLANATION.- FOR THE PURPOSES OF THIS SECTION, - (A) BUYER MEANS A PERSON WHO OBTAINS IN ANY SALE, BY WAY OF AUCTION, TENDER OR ANY OTHER MODE, GOODS OF THE NAT URE SPECIFIED IN THE TABLE IN SUB-SECTION (1) OR THE RIGHT TO RECEIV E ANY SUCH GOODS BUT DOES NOT INCLUDE,- (I) A PUBLIC SECTOR COMPANY, (II) A BUYER IN THE FURTHER SALE OF SUCH GOODS OBTA INED IN PURSUANCE OF SUCH SALE, OR (III) A BUYER WHERE THE GOODS ARE NOT OBTAINED BY H IM BY WAY OF AUCTION AND WHERE THE SALE PRICE OF SUCH GOODS TO B E SOLD BY THE BUYER IS FIXE4D BY OR UNDER ANY STATE ACT; (B) SELLER MEANS THE CENTRAL GOVERNMENT, A STATE GOVERNMENT OR ANY LOCAL AUTHORITY OR CORPORATION OR AUTHORITY ESTABLISHED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT, OR ANY COMPANY OR FIRM OR CO-OPERATIVE SOCIETY. 10. CLAUSES (A)(I) & A(II) HAVE BEEN SUBSTITUTED BY THE FINANCE ACT 2003 WITH EFFECT FROM 01-06-1993, WHICH READ AS FOLLOW: (I) A PUBLIC SECTOR COMPANY, OR (II) A BUYER IN THE RETAIL SALE OF SUCH GOODS OBTAI NED IN PURSUANCE OF SUCH SALE. 11. THE SAID CLAUSES FURTHER SUBSTITUTED BY THE TAX ATION LAWS (AMENDMENT) ACT, 2003 WITH EFFECT FROM 08-09-2003 WHICH READ AS BELOW: EXPLANATION.- FOR THE PURPOSES OF THIS SECTION,- (A) BUYER MEANS A PERSON WHO OBTAINS IN ANY SALE, BY WAY OF AUCTION, TENDER OR ANY OTHER MODE, GOODS OF THE NAT URE ITA NO.354 TO 357/RJT/2006 5 SPECIFIED IN THE TABLE IN SUB-SECTION (1) OR THE RI GHT TO RECEIVE AN6Y SUCH GOODS BUT DOES NOT INCLUDE,- (I) A PUBLIC SECTOR COMPANY, THE CENTRAL GOVERNMENT , A STATE GOVERNMENT, AND AN EMBASSY, A HIGH COMMISSION, LEGATION, COMMISSION, CONSULATE AND THE TRADE REPRESENTATION, OF A FOREIGN STATE AND A CLUB ; OR (II) A BUYER IN THE RETAIL SALE OF SUCH GOODS PURCH ASED BY HIM FOR PERSONAL CONSUMPTION; 12. THE CBDT ISSUED A CIRCULAR NO.620 DATED 06-12-1 991 IN RESPECT OF SECTIONS 206C EXPLAINING THE MEANING OF SELLER AN D BUYER. THE RELEVANT PARAGRAPH 4 OF THE CIRCULAR REPRODUCED BELOW: 4. IT MAY BE CLARIFIED THAT SELLER FOR THE AFORE SAID PURPOSE MEANS THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR ANY LOCAL AUTHORITY OR CORPORATION OR AUTHORITY ESTABLISHED B Y OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT, OR ANY COMPANY OR FIRM OR CO- OPERATIVE SOCIETY. IT IS ALSO CLARIFIED THAT THE P ROVISIONS OF S.44AC, AND, CONSEQUENTLY, THOSE OF S.206C WILL APPLY ONLY TO AN ASSESSEE BEING A PERSON (AS DEFINED IN THE ACT) OTHER THAN A PUBLIC SECTOR COMPANY, REFERRED TO AS BUYER OF ANY GOODS, IN TH E PRECEDING PARAGRAPH, AT THE POINT OF FIRST SALE, AND NOT IN T HE CASE OF SECOND OR SUBSEQUENT SALE OF SUCH GOODS. 13. THE CONTROVERSY IN THE CASE UNDER CONSIDERATION REVOLVES AROUND MEANING OF BUYER. ORIGINALLY WHILE EXPLAINING THIS WORD BUYER, AN EXPLANATION HAS BEEN INSERTED BY THE FINANCE ACT, 1992 WITH EFFECT FROM 01-04-1992. THE RELEVANT CLAUSE APPLICABLE IN THE CASE OF ASSESSEE IS CLAUSE (A)(II) WHERE IT IS STATED THAT BUYER MEANS A PERSON WHO OBTAINS IN ANY SALE, BY WAY OF AUCTION, TENDER OR ANY OTHER MODE, GOODS OF THE NATURE SPECIFIED IN TH E TABLE IN SUB SECTION (1) OR THE RIGHT TO RECEIVE ANY SUCH GOODS. EXCEPTIONS TO THIS MEANING OF BUYER ARE PROVIDED IN CLAUSES (I), (II) AND (III). 14. SUB CLAUSE (II) APPLICABLE FOR THE PERIOD 01-04 -1992 TO 30-05-2003. ACCORDING TO CLAUSE (II) A BUYER IN THE FURTHER SAL E OF SUCH GOODS OBTAINED IN PURSUANCE OF SUCH SALE WILL NOT BE CALLED AS BUYER . ITA NO.354 TO 357/RJT/2006 6 15. SUB CLAUSE (II) APPLICABLE FOR THE PERIOD 01-06 -2003 TO 07-09-2003. THE ABOVE SUB CLAUSE (II) HAS BEEN SUBSTITUTED WITH EFFECT FROM 01-06-2003 WHEREIN IT IS STATED THAT A BUYER IN THE RETAIL SAL E OF SUCH GOODS OBTAINED IN PURSUANCE OF SUCH SALE IS NOT A BUYER. 16. SUB CLAUSE (II) APPLICABLE FOR THE PERIOD 08-09 -2003 AND ONWARDS A BUYER IN THE RETAIL SALE OF SUCH GOODS PURCHASED BY HIM FOR PERSONAL CONSUMPTION. 17. ACCORDING TO ABOVE CLAUSE (II) IF ASSESSEE SOLD THE GOODS TO THE BUYERS WHO PURCHASED THE GOODS FROM ASSESSEES FOR FURTHER SALE IN BETWEEN THE PERIOD 01-04-1992 TO 30-05-2003, THE ASSESSEE IS NOT LIABL E TO DEDUCT TAX AT SOURCE U/S 206C OF THE ACT AS IN THAT CASE AMOUNT WAS NOT TO B E RECEIVED FROM BUYERS AS PER SECTION 206C OF THE ACT. FOR THE PERIOD 01`-06 -2003 TO 07-09-2003, IF THE ASSESSEE SOLD THE GOODS TO RETAILER, THE ASSESSEE I S NOT LIABLE TO DEDUCT TAX AT SOURCE U/S 206C OF THE ACT. HOWEVER, WITH EFFECT F ROM 08-09-2003 THE EXEMPTION IN DEDUCTION OF TAX IS ALLOWABLE ONLY IN CASE WHERE THE ASSESSEE SATISFIED THE CONDITION THAT GOODS SOLD TO THOSE BUYERS WHO PURCH ASED THE GOODS FOR THEIR PERSONAL CONSUMPTION. THERE IS NO DISPUTE THAT WIT H EFFECT FROM 08-09-2003 THE ASSESSEE STARTED TO DISCHARGE ITS DUTY U/S 206C AND MAKING DEDUCTION OF TAX AT SOURCE. AS ADMITTED BY BOTH PARTIES THAT THE SALE MADE BY THE ASSESSEE UPTO 07- 09-2003 EITHER TO SUCH BUYERS WHO PURCHASED THE GOO DS FOR FURTHER SALE OR THEY ARE RETAILERS. ON THE BASIS OF THIS ADMITTED FACTS AND IN THE LIGHT OF ABOVE DISCUSSION WE ARE OF THE CONSIDERED VIEW THAT THE A SSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE U/S 206C OF THE ACT UPTO 07-09-2003 A S THE SALE WAS MADE TO THOSE BUYERS, WHO EITHER PURCHASED THE GOODS FOR FURTHER SALE OR BUYERS, WHO WERE RETAILERS. AS REGARDS THE CONTENTION OF REVENUE TH AT ACCORDING TO CBDT CIRCULAR THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE U/S 206C OF THE ACT AS BEING THE FIRST SELLER BUT WE FIND THAT SUCH INTERPRETATION C ANNOT BE DRAWN FROM THE CLEAR PROVISIONS OF SECTION 206C AS DISCUSSED ABOVE. WE ARE ALSO AWARE THAT THE CBDT CIRCULAR CANNOT BE PREVAILED OVER STATUTORY PR OVISIONS OF THE ACT [ITO VS. ITA NO.354 TO 357/RJT/2006 7 MANOHARLAL KOTHARI 236 ITR 357 (MAD) AND GRINDLAYS BANK VS CIT 2301 ITR 148 (CAL)]. 18. AS REGARDS ALTERNATE CONTENTIONS OF THE LEARNED AR THAT RECIPIENTS HAVE ALREADY BEEN PAID TAX AND THEREFORE THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE. WE FIND THAT CIT(A) DID NOT ADJUDICATE THI S ALTERNATIVE GROUND AS NO SPECIFIC SUBMISSION WERE MADE. WE ALSO DO NOT ADJU DICATE THIS ALTERNATIVE CONTENTION SINCE THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 19. INA THE RESULT, ALL THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10-12-2010. SD/- SD/- (D.T. GARASIA) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DT : 10 TH DECEMBER, 2010 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-II, RAJKOT 4. THE CIT-I, RAJKOT 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT