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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 22ND DAY OF APRIL 2016
PRESENT
THE HON’BLE MR.JUSTICE JAYANT PATEL AND THE HON’BLE MRS.JUSTICE B.V.NAGARATHNA ITA NOS.587/2015 & 212/2016, ITA NOS.588/2015 & 232/2016 C/W ITA NOS.589/2015 & 233/2016
IN ITA NOS.587/2015 & 212/2016:
BETWEEN:
THE COMMISSIONER OF INCOME-TAX
PARK VIEW BUILDING,
NO. 284/1, 4TH MAIN,
P J EXTENSION
DAVANGERE-577002
THE INCOME-TAX OFFICER TDS WARD, PARK VIEW BUILDING, NO.284/1, 4TH MAIN, P J EXTENSION, DAVANGERE-577002.
...APPELLANTS (BY SRI.K.V.ARAVIND, ADVOCATE)
2 AND:
M/S.KARNATAKA FOREST DEVELOPMENT CORPORATION LTD., NEAR RTO OFFICE, SHIVAMOGGA, PAN: BLREO 1277D
...RESPONDENT
THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:17/04/2015 PASSED IN ITA NO.1146/BANG/2014 & S.P.NO. 29/BANG/2015 , FOR THE ASSESSMENT YEAR 2011-2012 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BENGALURU IN ITA NO. 1146/BANG/2014 & S.P.NO. 29/BANG/2015 DATED: 17/04/2015 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE INCOME TAX OFFICER, TDS WARD, DAVANAGERE.
IN ITA NOS. 588/2015 & 232/2016: BETWEEN:
THE COMMISSIONER OF INCOME-TAX
PARK VIEW BUILDING,
NO. 284/1, 4TH MAIN,
P J EXTENSION
DAVANGERE-577002
THE INCOME-TAX OFFICER TDS WARD,
3 PARK VIEW BUILDING, NO.284/1, 4TH MAIN, P J EXTENSION, DAVANGERE-577002.
...APPELLANTS (BY SRI.K.V.ARAVIND, ADVOCATE)
AND:
M/S.KARNATAKA FOREST DEVELOPMENT CORPORATION LTD., NEAR RTO OFFICE, SHIVAMOGGA, PAN: BLREO 1277D
...RESPONDENT
THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:17/04/2015 PASSED IN ITA NO.1145/BANG/2014 & S.P.NO. 28/BANG/2015 , FOR THE ASSESSMENT YEAR 2010-2011 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BENGALURU IN ITA NO. 1145/BANG/2014 & S.P.NO. 28/BANG/2015 DATED: 17/04/2015 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE INCOME TAX OFFICER, TDS WARD, DAVANGERE.
IN ITA NOS.589/2015 & 233/2016: BETWEEN:
THE COMMISSIONER OF INCOME-TAX
PARK VIEW BUILDING,
NO. 284/1, 4TH MAIN,
P J EXTENSION
DAVANGERE-577002
THE INCOME-TAX OFFICER TDS WARD, PARK VIEW BUILDING, NO.284/1, 4TH MAIN, P J EXTENSION, DAVANGERE-577002.
...APPELLANTS (BY SRI.K.V.ARAVIND, ADVOCATE)
AND:
M/S.KARNATAKA FOREST DEVELOPMENT CORPORATION LTD., NEAR RTO OFFICE, SHIVAMOGGA, PAN: BLREO 1277D
...RESPONDENT
THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:17/04/2015 PASSED IN ITA NO.1144/BANG/2014 & S.P.NO. 27/BANG/2015 , FOR THE ASSESSMENT YEAR 2009-2010 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BENGALURU IN ITA NO. 1144/BANG/2014 & S.P.NO. 27/BANG/2015 DATED: 17/04/2015 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER
5 CONFIRMING THE ORDER PASSED BY THE INCOME TAX OFFICER, TDS WARD, DAVANGERE.
THESE APPEALS COMING ON FOR ADMISSION THIS DAY, JAYANT PATEL J., DELIVERED THE FOLLOWING:
JUDGMENT
As all the appeals arise from a common order passed by the Tribunal, they are being considered simultaneously.
The appellant-revenue has preferred all the appeals by raising the following substantial questions of law:
“1. Whether the Tribunal was correct in holding that the buyer had not filed declaration in Form 27C at the time of purchase is only a technical default in nature?
Whether the Tribunal was correct in holding that the revenue had ample time to verify whether the buyers were indeed using wood pulp for manufacturing, processing or producing article or thing and not for trading?
Whether the Tribunal was correct in treating only the delay in filing the declaration before CIT, which is not at all the issue in the order passed by ITO (TDS), thus giving decision which is beyond jurisdiction and the issue what Tribunal has not considered whether the lapse which the seller has committed by not obliging to collect tax in the absence of declaration by the buyer is condonable or not?
We have heard Mr.Aravind, learned counsel appearing for appellant-revenue.
The relevant discussion by the Tribunal on the aforesaid questions are at paragraph Nos.8 & 9 of the impugned order which read as under: “8. We have perused the orders and heard the rival contentions. It is not disputed that assessee had filed the declaration from the buyer, as mandated in section 206C(1A) only when show cause notices were issued by the AO, pointing out failure to collect tax at source. However, it remains a fact that assessee had produced Form No.27C obtained from both the parties. Copies of these Forms have been placed on record at paper book pages 1 to 66. Both Part I and Part II of the Forms have been filled up. At this juncture, it is necessary to have a reading of section 206C(1A), 206(1B) and rule 37C which prescribed Form 27C.
“206C. Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc.-(1)Every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from
8 the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax:
TABLE
Provided that every person, being a seller shall at the time, during the period beginning on the 1st day of June, 2003 and ending on the day immediately preceding the date on which the Taxation Laws (Amendment) Act, 2003 comes into force, of debiting of the amount payable by the buyer to the account of the buyer or of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from Sl.No. Nature of goods Percentage i) Alcoholic Liquor for human Consumption One per cent
ii) Tendu leaves Five per cent iii)
Timber obtained under a forest lease
Two and one - half per cent iv)
Timber obtained by any mode other than under a forest lease Two and one - half per cent v)
Any other forest produce not being timber or tendu leaves Two and one - half per cent vi) Scrap One per cent:
9 the buyer of any goods of the nature specified in column (2) of the Table as it stood immediately before the 1st day of June, 2003, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax in accordance with the provisions of this section as they stood immediately before the 1st day of June, 2003.
(1A) Notwithstanding anything contained in sub-section (1), no collection of tax shall be made in the case of a buyer, who is resident in India, if such buyer furnishes to the person responsible for collecting tax, a declaration in writing in duplicate in the prescribed form2 and verified in the prescribed manner to the effect that the goods referred to in column (2) of the aforesaid Table are to be utilised for the purposes of manufacturing, processing or producing articles or things and not for trading purposes.
(1B) The person responsible for collecting tax under this section shall deliver or cause to be delivered to the Chief Commissioner or Commissioner one copy of the declaration referred to in sub-section (1A) on or before the seventh day of the month next following the month in which the declaration is furnished to him.”
10 “Declaration by a buyer for no collection of tax at source under section 206C(1A). 37C.(1) A declaration under sub-section (1A) of section 206C to the effect that any of the goods referred to in the Table in sub-section
(1) of that section are to be utilised for the purposes of manufacturing, processing or producing articles or things and not for trading purposes shall be in Form No. 27C and shall be verified in the manner indicated therein.
(2) The declaration referred to in sub-rule (1) shall be furnished in duplicate to the person responsible for collecting tax.
(3) The person referred to in sub-rule (2) shall deliver or cause to be delivered to the Chief Commissioner or Commissioner, one copy of the declaration referred to in sub- rule (1) on or before the seventh day of the month next following the month in which the declaration is furnished to him.
Explanation.—For the purposes of sub-rule (3), the Chief Commissioner or Commissioner means the Chief Commissioner or Commissioner to whom the Assessing Officer, having jurisdiction to assess the person referred to in sub-rule (2), is subordinate.”
Section 206C(1A) mandates that any person responsible for collecting tax under
11 section 206C(1) need not do so if he obtains a declaration from the buyer that he is purchasing the goods for use in manufacturing, processing or producing articles or things. It does not say that such declaration has to be obtained at the very same moment when a sale is affected. A reading of sub section (1B) clearly brings out this since obligation of the assessee to file a copy of the declaration arises only when the declaration is furnished to him by the buyer. The point of reference is furnishing of declaration by the buyer and not the month or date on which sale is affected by the assessee. Even if we consider that there is a breach on the part of the assessee in not obtaining the declaration from the buyer the moment a sale was affected, and in filing it before the CCIT or CIT, as the case may be, a similar breach was considered to be only technical and one that could be condoned by Hon’ble Madras High Court in the case of Adisankar Spinning Mills (P) Ltd.,(supra). In the said case, assessee had filed Form 27C subsequent to the proceedings, through a rectification petition under section 154, but still considered to be sufficient compliance, which view of the Tribunal was confirmed by Hon’ble Madras High Court. Proceedings on the assessee for the alleged default here were initiated on 10/10/2011 and assessee had before 31/10/2012 filed the Forms. Assessment years involved were assessment year 2009-10 to 2011-12 and there was much time left with the Revenue to verify
12 whether the buyers were indeed using the wood pulp for manufacturing, processing or producing article or thing and not for trading and to proceed against them if they had furnished false declaration. We are therefore of the opinion assessee could not have been deemed as one in default under section 206C(6D) of the Act or liable for interest under section 206(7). Orders of the lower authorities were set aside.”
The aforesaid shows that the Tribunal has interpreted the provisions of Section 206-C(1a) of the Income Tax Act by observing that, the assessee can furnish the declaration only when it is so furnished to him by the buyer. As such, the liability of the assessee to supply the declaration to the assessing officer as provided under sub-Section 1-B of Section 206 of the Act is considered. Therefore, if the declaration is not furnished by the buyer, naturally the assessee will not be in a position to supply or furnish the declaration to the assessing officer or the competent authority. It further appears that the Tribunal thereafter
13 has considered that even if there is a breach on the part of the assessee in not obtaining the declaration from the buyer in the month when the sale was effected, it was only a technical breach and could be condoned as per the earlier decision of the Tribunal which has been interfered with by the Madras High Court in the case of CIT vs. Adishankar Spinning Mills(P) Ltd., (2014)362 ITR 233 (Mad).
It appears that thereafter, as in the present case, declaration of the buyer was furnished in response to the show-cause notice and as it was not the case of the revenue that the declaration was false, the Tribunal set aside the order of the lower authorities.
Learned counsel for appellant-revenue contended that the Tribunal erroneously did not consider the aspect that as per Section 206-C(1) of the Act such declaration has to be furnished when the
14 payment is made by issuance of the cheque or by debiting the entries in the books of accounts which ever is earlier. Therefore, finding of the Tribunal regarding furnishing of the declaration by the buyer to the assessee run counter to Section 206-C(1) of the Act. Therefore, the question of law may arise for consideration.
We are unable to accept the contention of the revenue for the simple reason that effecting sale cannot be equated/correlated with the payment made pursuant to sale or by debit entries in the books of accounts and therefore, the finding of the Tribunal cannot be considered to be in contravention to the provision of Section 206-C(1) of the Act. In any case, the Tribunal has found that even if there is a technical breach, sufficient compliance is made by the assessee more
15 particularly, when it was not the case of the appellant- revenue that any false declaration was filed.
Under the circumstances, we do not find that any substantial question of law would arise for consideration. However, it is clarified that non- interference by this Court in the present appeal would not be considered to mean that the question of submission of the declaration by the buyer to assessee as required under Section 206-C(1) of the Act is concluded.
Subject to the aforesaid observation, all the appeals are dismissed.
Sd/- JUDGE
Sd/- JUDGE Sk/-