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 :
“206C(1);(1A);(1B); …………………………..
(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:
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