CIT (TDS) Vs Commissioner, Akola Municipal Corporation (Bombay High Court – Nagpur Bench)
Section 206C(1C) of the Act only obliges a person to collect tax from its agents/licensee who collects a toll on its behalf. The obligation to collect tax under Section 206C(1C) of the Act cannot be extended to collection of octroi. The legislature when it brought in section 206C(1C) of the Act has not authorised the collection of tax at source in respect of octroi. It specifically restricted its obligation to only three categories namely parking, toll plaza, mining and quarrying. It is not open to the Revenue to extend the ambit and scope of section to also include contracts, license or lease for collection of items other then toll, parking fees and for mining and quarrying. Therefore, there is no legislative mandate to collect tax at source or the octroi collected under Section 206C(1C) of the Act.
FULL TEXT OF THE HIGH COURT JUDGMENT / ORDER IS AS FOLLOWS:-
These three appeals under Section 260-A of the Income Tax Act, 1961 (the Act) challenges the common order dated 21-5-2008 passed by the Income Tax Appellate Tribunal, Nagpur (Tribunal). The impugned common order relates to the assessment years 2005-2006, 2006-2007 & 2007- 2008.
2. All the three appeals were admitted on 20-3-2009 on the following identical substantial questions of law :
‘(i) Whether the Tribunal is correct in law in holding that there is no liability to collect tax at source under Section 206C(1C) of the Income Tax Act, 1961 in respect of octroi collected by the agent appointed by the assessee?
(ii) Whether on the facts and in the circumstances of the case, the Tribunal is justified in holding that “octroi” collectible by the assessee is different than “toll” leviable by the assessee and thus is not within the ambit of 206C(1C) of the Income Tax Act, 1961?’
3. The respondent/assessee is the Municipal Corporation for the town Akola. For the subject assessment years the respondent/assessee had entered into a contract called Agency Agreement, by virtue of which respondent/assessee appointed agent to provide services of collecting octroi on its behalf. This octroi was collected at the rates fixed by the respondent/assessee, for which the necessary receipts are also issued in the name of respondent/assessee. The entire amount collected by the agent is remitted to the respondent/assessee and the agent is entitled to a commission depending upon the quantum of octroi collected during the year.
4. The appellant/Revenue issued notices to the respondent/assessee for the subject assessment years asking it to show cause why it should not be held liable to pay the tax collected at source (TCS) under Section 206C(1C) of the Act. The basis of the notices was that the amount collected by the agent as ‘octroi’ and handed over to the respondent/assessee were subject to tax collection at source (TCS) in terms of Section 206C(1C) of the Act. This collection of tax is to be from its agent/licensee collecting the octroi on its behalf.
5. Thereafter, the Income Tax Officer by an order dated 20-4-2007 held that for the subject assessment years 2005- 2006, 2006-2007 and 2007-2008 the respondent/assessee was under obligation to collect tax from its agent/licensee during three years at the rate prescribed in Section 206C(1C) of the Act on the amount received from its agent/licensee along with interests thereon. Thus, the order dated 20-4-2007 demanded an amount in the aggregate of Rs.1.09 Crores being the tax collectible at source by the respondent/assessee along with interest thereon of Rs.15.96 Lakhs for the subject three assessing years.
6. Being aggrieved, the respondent/assessee carried the issue in appeal in respect of the all three assessment years to the Commissioner (Appeals). By a common order dated 31-10-2007, the Commissioner (Appeals) confirmed the view of the assessing officer and held that the amount collected by the agent/licensee of the respondent as octroi would be covered by Section 206C(1C) of the Act. This on the ground that the octroi collected is similar/identical to a toll. Thus, the appeals of the respondent/assessee were dismissed.
7. On further appeals for the three subject assessment years, the Tribunal by the impugned order allowed respondent/assessee’s appeal. The impugned order hold that Section 206C (1C) of the Act obliges a person who grants an agency/license, or in any other manner transfers his right in respect of parking lot, toll plaza or a mine and quarry to another person, then while receiving the amount so collected from such other person i.e. agent/licensee (the transferee of its right), the respondent/assessee should also collect tax at source. However, the above obligation is only restricted to parking lots, toll plazas and mine or quarry. This obligation does not extend to octroi. The impugned order further draws a distinction between ‘toll plaza’ and ‘octroi’ as popularly understood. Therefore, it concludes that a collection of toll to which Section 201C(1C) applies can not be extended to a transfer of right to collect octroi through an agency/licensee. Therefore, the impugned order allowed the respondent/assessee’s appeal.
8. Being aggrieved, the Revenue is in appeal before us.
9. Before we consider the rival submissions, it would be useful to reproduce Section 206C(1C) of the Act which arises for consideration in the present appeals and reads as under :
(1C) Every person, who grants a lease or a licence or enters into a contract or otherwise transfers any right or interest either in whole or in part in any parking lot or toll plaza or mine or quarry, to another person, other than a public sector company (hereafter in this section referred to as “licensee or lesse”) for the use of such parking lot or toll plaza or mine or quarry for the purpose of business shall, at the time of debiting of the amount payable by the licensee or lessee to the account of the licensee or lessee or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the licenseee or lessee of any such licence, contract or lease of the nature specified in column (2) of the Table blow, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income tax:
|Sl.No.||Nature of contract or licence or lease etc.||Percentage|
|(i)||Parking lot||Two per cent|
|(ii)||Toll Plaza||Two per cent|
|(iii)||Mining and quarrying||Two per cent”|
10. Mr. Parchure, learned counsel appearing for the appellant/Revenue in support of appeal submits that there is no difference between “octroi” and “toll”. In fact, ‘toll’ is a generic term, while ‘octroi’ is a species thereof. Consequently, the fact that Section 206C(1C) of the Act obliges a person to collect tax in respect of toll collected by an agent/licensee is to be equally applied to collection of octroi by an agent. This is so, as in substance, both “toll” and “octroi” are the same.
11. As against the above, Mr. Bhattad, the learned counsel appearing for assessee placed reliance upon the impugned order and submits that legally and commercially toll is considered to be distinct and differ from an octroi. Thus, it is submitted that there is no occasion to interfere with the impugned order of the Tribunal.
12. We find that the impugned order of the Tribunal is a detailed order and it has examined in depth the difference between the meaning of the word ‘toll’ and ‘octroi’ and pointed out how differently the two words are legally and popularly understood. The Seventh Schedule of the Constitution of India empowers the State to levy octroi as found in Entry 52 of List II thereof. While Entry 59 of List II of the Seventh Schedule of the Constitution of India empowers the State to collect tolls. Thus, the basic constitutional difference between that two levies. Further, Section 127 of the Maharashtra Municipal Corporation Act, 1949 lists out the power of the Corporation to impose tax as listed therein and it separately enumerates ‘octroi’ and ‘toll’. This again is indicative of the fact that legally ‘octroi’ as a tax is distinct from a ‘toll’ as a tax. Further, we note the impugned order also placed reliance upon various dictionary meanings which again show that a ‘toll’ is normally collected on account of use of the roads by animals and humans. As against which, ‘octroi’ is normally collected on account of goods entering the corporation limits (area) for use, consumption or sale. Keeping in view the aforesaid distinction between the two, the impugned order of the Tribunal holds that Section 206C(1C) of the Act obliges every person who grants a contract/lease transferring his right to collect toll to also collect tax at source as specified at serial No.2 of the Table to Section 206C(1C) of the Act. However, Section 206C(1C) of the Act cannot be extended to oblige the Corporation to collect tax at source from its agent in respect of octroi collected.
13. It is a settled position of law that fiscal statues are strictly construed. Long years ago, in the case of Cape Brandy Syndicate v. IRC (1921) 1 Kings Bench 64, Justice Rowlatt explained the principles of strict construction of a taxing statues, as follows :
“In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”
Further, Apex Court in the case of Sales Tax Commissioner v. Modi Sugar Mills AIR 1961 SC 1047 has observed that–
“In interpreting a taxing statue, equitable consideration are entirely out of place. Nor can taxing statues be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statue and interpret them. It must interpret a taxing statue in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statues so as to supply any assumed deficiency.”
14. Recently the Supreme Court inCIT v. Calcutta Knitwears (2014) 362 ITR 673 : 223 Taxman 115 (Mag.) has held that while interpreting fiscal statues, the Court must not add or substitute the word in the provision. Court observed as under :
’31. This Court in Tata Consultancy Services v. State of Andhra Pradesh has ascribed plain meaning to the terms computer and computer programme in a fiscal statute and reiterating the proposition laid down in Inland Revenue Commissioner case (supra), observed that a court should not be over zealous in searching ambiguities or obscurities in words which are plain.
32. InPrakash Nath Khanna v. CIT, 2004 (9) SCC 686, this Court has explained that the language employed in a statute is the determinative factor of the legislative intent. The legislature is presumed to have made no mistake. The presumption is that it intended to say what it has said. Assuming there is a defect or an omission in the words used by the legislature, the Court cannot correct or make up the deficiency. Where the legislative intent is clear from the language, the Court should give effect to it (Delhi Financial Corporation v. Rajiv Anand, 2004 (11) SCC 625; Government of Andhra Pradesh v. Road Rollers Owners Welfare Association, 2004(6) SCC 210.
33. InB. Premanand v. Mohan Koikal (2011) 4 SCC 266this Court has observed as follows:
“The literal rule of interpretation really means that there should be no interpretation. In other words, we should read the statute as it is, without distorting or twisting its language. We may mention here that the literal rule of interpretation is not only followed by Judges and lawyers, but it is also followed by the lay man in his ordinary life. To give an illustration, if a person says “this is a pencil”, then he means that it is a pencil; and it is not that when he says that the object is a pencil, he means that it is a horse, donkey or an elephant. In other words, the literal rule of interpretation simply means that we mean what we say and we say what we mean. If we do not follow the literal rule of interpretation, social life will become impossible, and we will not understand each other. If we say that a certain object is a book, then we mean it is a book. If we say it is a book, but we mean it is a horse, table or an elephant, then we will not be able to communicate with each other. Life will become impossible. Hence, the meaning of the literal rule of interpretation is simply that we mean what we say and we say what we mean.”
34. Thus, the language of a taxing statute should ordinarily be read understood in the sense in which it is harmonious with the object of the statute to effectuate the legislative animation. A taxing statute should be strictly construed; common sense approach, equity, logic, ethics and morality have no role to play. Nothing is to be read in, nothing is to be implied; one can only look fairly at the language used and nothing more and nothing less. (J. Srinivasa Rao v. Govt. of A.P. and Anr. 2006(13) SCALE 27, Raja Jagadambika Pratap Narain Singh v. C.B.D.T., (1975) 100 ITR 698 (SC)).’
15. Further, the Supreme Court inCIT v. Vatika Township (P) Ltd. (2014) 367 ITR 466 : 226 Taxman 121 has quoted with approval Lord Cairns in Partington V. Attorney General,
“As I understand the principle of all fiscal legislation it is this: If the person sought to be taxed comes within the letter of the law he must be taxed, however, great the hardship may appear to the Judicial Mind to be. On the other hand, if the Crown, seeking to recover the tax cannot bring the subject within the letter of the law, the subject is free, however, apparently within the spirit of the law the case might otherwise appear to be.”
16. Applying aforesaid test to the case at hand the inescapable conclusion is that Section 206C(1C) of the Act only obliges a person to collect tax from its agents/licensee who collects a toll on its behalf. The obligation to collect tax under Section 206C(1C) of the Act cannot be extended to collection of octroi. The legislature when it brought in section 206C(1C) of the Act has not authorised the collection of tax at source in respect of octroi. It specifically restricted its obligation to only three categories namely parking, toll plaza, mining and quarrying. It is not open to the Revenue to extend the ambit and scope of section to also include contracts, license or lease for collection of items other then toll, parking fees and for mining and quarrying. Therefore, there is no legislative mandate to collect tax at source or the octroi collected under Section 206C(1C) of the Act.
17. In the above view, no fault can be found with the impugned order of the Tribunal. Accordingly, the substantial questions of law are answered in the affirmative i.e. in favour of the respondent-assessee and against appellant-Revenue.
16. Appeal dismissed. No order as to costs.