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Section 206C in The Income- Tax Act, 1995
Section 206C(7) in The Income- Tax Act, 1995
The Income- Tax Act, 1995
The Finance Act, 1996
Section 114 in The Income- Tax Act, 1995

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Income Tax Appellate Tribunal - Agra
Nagar Nigam, Agra vs Assessee on 25 May, 2010

IN THE INCOME TAX APPELLATE TRIBUNAL

AGRA BENCH, AGRA

BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND

SHRI P.K. BANSAL, ACCOUNTANT MEMBER

ITA Nos.14, 15, 16 & 17/Agr/2009

Asst. Years: 2008-09, 2007-08, 2006-07, & 2005-06 respectively Nagar Nigam, Vs. Asstt. C.I.T.(TDS), Up Nagar Ayukt, Agra. Nagar Nigam,

M.G. Road,

Agra.

(PAN : AGRN 10261 G

(Appellant) (Respondent) Appellant by : Shri G.P. Agarwal, C.A.

Respondent by : Shri R.C. Sharma, Jr. D.R.

ORDER

PER P.K. BANSAL, A.M.:

These appeals have been filed by the assessee against the common order of the CIT(A) dated 19.11.2008 for Asst. Years 2008-09, 2007-08, 2006-07, & 2005-06. Since all these four appeals involve common grounds except change in the figures, all these appeals, for the sake of convenience, are disposed of by this common order.

2. The common grounds except change in the figures reads as under :- Grounds of A.Y. 2005-06 :-

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"(1) That Ld. CIT (Appeals) has erred on facts and in law in sustaining the liability to collect Income Tax u/s 206C(6A) and imposing interest u/s 206C(7) of Income Tax Act, 1961, without properly considering the facts, circumstances and submission of the appellant.

(2) That the appellant denies the imposition of the liability of Rs.64830/- u/s 206C(6A) and Rs.22230/- u/s 206C(7) of the Income Tax Act, 1961 as the Nagar Nigam is granting the parking contracts to facilitate and safeguard the vehicles of tourists and public not for business purposes."

3. In the A.Y. 2006-07 the figures in ground no.2 be read as Rs.1,36,303/- and Rs.37,057/- respectively. In the A.Y. 2007-08 the figures in ground no.2 be read as Rs.1,65,131/- and Rs.23,049/- respectively. In the A.Y. 2008-09, the figures in ground no.2 be read as Rs.92,808/- and Rs.6,002/- respectively.

4. The brief facts of the case are that the A.O. sought information from the assessee under section 206C for the contracts awarded for parking lots whether the assessee has collected common TDS on these contracts. The assessee submitted before the A.O. that the relevant provisions in section 206C(1C) was inserted by the Finance (No.2) Act, 2004 w.e.f. 01.10.2004 and was under bonafide belief that provisions of section 206C(1C) is applicable to contract of parking lots, Toll Plaza, Mining & Quarrying for the business purposes whereas the assessee being the Nagar Nigam is granting parking contracts to facilitate and safeguard the vehicles of public and tourists and not for business purposes. The rates of parking are fixed by the assessee and the contractors do not have any discretion in charging the parking fees. The A.O. rejected the explanation of the assessee and held that the assessee is in default under section 206C(6A) of the Income-tax Act, 1961 ("the Act" hereinafter) and accordingly liable to pay tax under section 206C(1C) and interest under section 206C(7). The assessee went in appeal before the CIT(A). The CIT(A) upheld the order of the A.O.

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5. Before us the ld. A.R. contended that the provisions of section 206C(1C) is applicable only on the contract of parking lots, Toll Plaza, Mining & Quarrying for business purposes while the assessee being Nagar Nigam and accordingly granting parking contracts to facilitate and safeguard the vehicles of tourists and public and not for business purposes. Arrangement of the traffic control and traffic signal is obligatory on the part of the Nigam as per clause 31 of section 114 of the U.P. Nagar Nigam Act, 1959. The A.C.I.T. (TDS) initiated proceedings and assumed jurisdiction under section 201 while order was passed under section 206C(6A) and 206C(7) of the Act. The assessee was treated in default under section 206C(6A) while the sub-section 6A was introduced by the Finance Act, 2006 w.e.f. 01.04.2007. Therefore, demand and interest imposed for the A.Ys. 2005-06 & 2006-07 is not sustainable.

6. Ld. D.R., on the other hand, relied on the orders of the authorities below.

7. We have carefully considered the rival submissions and perused the material on record alongwith orders of the authorities below. We have gone through the provisions of section 206C(1C). We do not agree with the ld. D.R. that the provisions of section 206C(1C) is applicable where the collector is carrying on business under section 206C(1C). The tax is liable to be re-collected at source without exception by every person granting contract, lease or licence for parking lots etc. The clause 'for the purpose of business' is related to 'another person' i.e. the lessee/licensee and not of the subject every person i.e. the tax collector. The condition of business purpose applies to the licensee/lessee and not to the person awarding the contract i.e. the person liable for collecting TCS. Hence we are of the view that the provisions of section 206C(1C) were clearly applicable to the assessee.

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8. Now the question arises whether the assessee can be regarded to be an assessee in default in accordance with the provisions of section 206C(6A). The provisions of section 206C(6A) has been inserted by the Finance Act, 2006 w.e.f. 01.04.2007. This provision states as under :- "If any person responsible for collecting tax in accordance with the provisions of this section does not collect the whole or any part of the tax or after collecting, fails to pay the tax as required by or under this Act, he shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of the tax:

Provided that no penalty shall be charged under section 221 from such person unless the Assessing Officer is satisfied that the person has without good and sufficient reasons failed to collect and pay the tax".

9. Prior to this, the provisions of section 206C(6A) were not in existence and the assessee cannot be regarded to be an assessee in default even though under section 206C(6) a person responsible for collecting the tax was liable to pay the tax to the credit of the Central Government even if he fails to collect tax in accordance with the provisions of this section. Unless and until, there can be legally enforceable demand on the assessee, the assessee cannot be made liable for the recovery of the amount. The provisions of section 206C(6A) were inserted for making the person responsible for collecting the tax to be an assessee in default. Section 206C(6A) has been inserted w.e.f. 01.04.2007 and is applicable for the A.Ys. 2007-08 & 2008-

09. The A.O. has created the demand under section 206C(6A). Since the section was not in existence in the A.Y. prior to A.Y. 2007-08, therefore, we quash the demand for the A.Ys. 2005- 06 & 2006-07 i.e. for the F.Ys. 2004-05 & 2005-06 as the assessee cannot be regarded to be in default. So far as the levy of interest under section 206C(7) are concerned, we noted that the section 206C(7) was amended w.e.f. 01.04.2007 and after the amendment, person responsible for collecting the tax has also been made liable to pay simple interest. Prior to that, it is only seller 5

who was responsible to pay the interest. Person responsible for collecting the tax since was not responsible to pay the interest, therefore, in our opinion the assessee was not liable to pay interest for the assessment prior to A.Y. 2007-08 i.e. for the A.Y. 2005-06 & 2006-07 (i.e. F.Ys. 2004-05 & 2005-06). We, accordingly, quash the order demanding the interest from the assessee for the period 2004-05 & 2005-06 (A.Ys. 2005-06 & 2006-07). Thus, we quash the order passed by the A.O. imposing the liability under section 206C(6A) and 206C(7) for the A.Ys. 2005-06 & 2006- 07 while the orders for imposing liability under section 206C(6A) and 206C(7) for the A.Ys. 2007-08 & 2008-09 are upheld.

10. In the result, appeals filed by the assessee for the A.Ys. 2005-06 & 2006-07 are allowed while appeals for the A.Ys. 2007-08 & 2008-09 are dismissed. (Order pronounced in the open Court on 25.05.2010).

Sd/- Sd/- (R.K. GUPTA) (P.K. BANSAL) Judicial Member Accountant Member Place: Agra

Date: 25th May, 2010.

PBN/*

Copy of the order forwarded to:

1. Appellant

2. Respondent By Order

3. CIT concerned

4. CIT (Appeals) concerned

5. DR, ITAT, Agra Bench, Agra

6. Guard File Assistant Registrar Income-tax Appellate Tribunal, Agra

True Copy