DCIT Vs Deputy Director (Mineral And Administration) (Supreme Court of India)
The dispute concerned whether Tax Collected at Source (TCS) under Section 206C(1C) of the Income Tax Act, 1961 applies to compounding fees or fines collected from persons involved in illegal mining or illegal transportation of minerals. The matter arose after a TDS survey under Section 133A(2A) was conducted on 24 September 2018 at the office of the District Mining Officer, Bemetara, Chhattisgarh. During the survey, the Income Tax Department observed that the mining department had collected compounding fees or fines from persons involved in illegal mining or transportation of minerals but had not collected TCS on those amounts.
Read HC Judgment in this case: Compounding Fee Not Royalty: HC Quashes TCS Demand on Illegal Mining Fines
Read SC Judgment dated 27.01.2026 in this case: SC Upholds No TCS under Section 206C(1C) on Illegal Mining Compounding Fees
Subsequently, an order dated 1 July 2019 was passed under Sections 206C(1C), 206C(6), and 206C(7) treating the department as an assessee in default for failing to collect TCS on such compounding amounts. The department challenged the order before the Commissioner of Income Tax (Appeals), arguing that the compounding fees collected from illegal miners were not covered under Section 206C(1C) and therefore TCS was not applicable. However, the appeal was dismissed on 17 November 2022. The matter was then taken to the Income Tax Appellate Tribunal (ITAT), Raipur, which upheld the demand for TCS, interest, and penalty.
