Mining Officer Vs DCIT (TDS) (ITAT Raipur)
Conclusion: Compounding fees collected from illegal mining, transportation, and storage of minerals constituted a ‘transfer of rights’ and consequently attracted Tax Collection at Source (TCS) under Section 206C(1C) as it involved parting with an interest in the mine.
Held: Assessee, District Mining Officer (DMO), was subjected to proceedings under Section 206C(1C) for failure to collect tax at source (TCS) on: compounding fees received from illegal miners, transporters, and storage operators, and contributions towards the District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET). AO treated the assessee as an assessee-in-default under Section 206C(6) and raised a demand of ₹5.20 crore (including interest). On appeal, CIT(A) upheld the AO’s order by following the jurisdictional ITAT Raipur decision in District Mining Officer, Bemetara v. DCIT (TDS) [152 taxmann.com 583 (Raipur)], and dismissed the appeal. Assessee further appealed before the Tribunal. Assessee contended that compounding fees received from illegal miners/transporters was in the nature of penalty or fine, not royalty under Section 206C(1C) therefore, no liability arose to collect TCS. Further, contended that contributions towards DMF/NMET were paid directly by leaseholders to the respective trusts, and hence, no TCS liability arose on assessee. On appeal before Tribunal. It was held that CIT(A) had correctly relied upon the binding precedent of the coordinate bench in District Mining Officer, Bemetara v. DCIT (TDS), which held compounding fees collected from illegal miners/transporters constituted transfer of interest or right in the mine, thereby attracting Section 206C(1C). Failure to collect such tax made the assessee liable as assessee-in-default under Section 206C(6) and (7). However, in respect of DMF/NMET contributions, the AO must verify whether payments were received by the assessee or paid directly by leaseholders. In cases where payments were made directly to the funds, no liability to collect tax at source would arise. However, if the Mining Officer received such contributions, tax collection at source was mandatory. Following the above reasoning, the Tribunal found no infirmity in the order of the CIT(A) and upheld the findings in full.
