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Facts
The assessee, a Mining Officer, collected penalties for illegal mining during AYs 2010-11 to 2012-13. The tax authorities treated these penalties as royalty income, requiring the assessee to collect Tax Collected at Source (TCS) under Section 206C(6A) of the Income-tax Act, 1961, and issued a demand. The assessee appealed this treatment, arguing that these were penalties and not royalty.
Held
The Tribunal held that amounts collected as penalties for illegal mining, where no license or contract was granted, do not fall under the definition of royalty under Section 206C. Consequently, there was no obligation on the assessee to comply with TCS provisions for such amounts. Therefore, the assessee could not be treated as an assessee in default, and the demand raised by the tax authorities was directed to be deleted.
Key Issues
Whether penalty collected by the assessee for illegal mining constitutes royalty income under Section 206C, thereby obligating the assessee to collect TCS and making them an assessee in default for non-compliance.
Sections Cited
206C(6A), 206(7), 206C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI M. BALAGANESH
O R D E R PER M. BALAGANESH, A. M.: 1. These appeals in to 5738/Del/2019 for AYs 2010-11 to 2012-13, arise out of the order of the ld. Commissioner of Income Tax (Appeals), Karnal [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. IT/05/TDS/2016-17 dated 16.08.2018 against the order of assessment passed u/s 206C(6A) and 206(7) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 08.03.207 by the Assessing Officer, ITO (TDS), Karnal (hereinafter referred to as ‘ld. AO’).
At the outset, the appeal for AY 2010-11 is delayed by 240 days; appeal for AY 2011-12 is delayed by 304 days and appeal for AY 2012-13 is delayed by 304 days. The assessee has filed the delay condonation petition. Considering the reasons adduced in the delay condonation to 5738/Del/2019 M/s. Mining Officer, Department of Mines & Geology petition, we are of the considered opinion that the assessee was preventing from reasonable and sufficient cause by not able to prefer appeals in time. Hence, in the interest of justice, we are inclined to admit the appeals of the assessee by condoning the delay thereon.
Identical issues are involved in all these appeals and hence, they are taken up together and disposed of by this common order for the sake of convenience. Appeal of the assessee for AY 2010-11 is taken up as lead case.
The ground No. 1 raised by the assessee is challenging the action of the ld CIT(A) in confirming the action of the ld CIT(A) by treating the amount of penalty of Rs. 36,85,167/- collected by the assessee on illegal mining as royalty income of the assessee in terms of section 206C(6A) of the Act.
We have heard the rival submissions and perused the material available on record. The assessee organization collected royalty from the persons/ parties on account of mining/ quarrying earth on the basis of licenses granted for digging earth. Tax collected at source (TCS) collected on the amount of royalty so collected by the assessee is deposited to the account of the Central Government as per the provisions of Section 206C of the Act. However, whenever, the assessee find any illegal mining/ quarrying by any person, penalty is imposed on such person by assessee and the amount imposed on such persons as penalty is collected from such persons and is accounted for as royalty income on account of illegal mining. But the same does not fall directly under the category of royalty in terms of Section 206C of the Act, since no license or contract is granted by the assessee to those illegal miners. The amount received though categorized as royalty income of the assessee is actually penalty collected by the assessee only , for illegal mining. Hence, the same would not fall Page | 2 to 5738/Del/2019 M/s. Mining Officer, Department of Mines & Geology under the ambit of provisions of Section 206C of the Act as no license or contract is allotted/ granted to the illegal parties. Accordingly, we hold that there could be no obligation on the part of the assessee to comply with TCS provisions as contemplated in Section 206C of the Act. Consequentially, the assessee cannot be treated as assessee in default for the same. Hence, the demand raised on the assessee for the same is hereby directed to be deleted and ground No. 1 is hereby allowed.
Ground No. 2 raised by the assessee is consequential to ground no. 1 and hence, allowed.
Ground Nos. 3 to 5 were stated to be not pressed by the ld AR at the time of hearing. Accordingly, they are dismissed as not pressed.
Ground No. 6 raised by the assessee is general in nature and does not require any specific adjudication.
In the result, the appeal of the assessee for AY 2010-11 partly allowed.
Grounds raised for AY 2011-12 and 2012-13 are exactly identical with AY 2010-11 except with minor variations with ground nos and figures. Hence, the decision rendered by us for AY 2010-11 shall apply mutatis mutandis for AYs 2011-12 and 2012-13 also.
In the result, the appeals of the assessee are partly allowed.
Order pronounced in the open court on 10/12/2024.
-Sd/- -Sd/- (SATBEER SINGH GODARA) (M BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 10/12/2024 A K Keot