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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri M. Balaganesh, AM & Shri K. Narasimha Chary, JM]
ORDER Per Shri K. Narasimha Chary, JM:
This appeal by revenue is arising out of order of CIT(A)-I, Kolkata vide appeal No. 175/CIT(A)-I/Ward-58(2)/2011-12 dated 29.08.2013. Assessment was framed by ITO, Ward-58(2), Kolkata u/s. 206(C)/206(7) & 201(1)/201(1A) of the Income tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2004-05 vide his order dated 31.03.2011.
Brief facts of the case are that the assessee deals in trading of IMFL, Wine and Beer and primarily a distributor of Mcdowell & Co. On 25.03.2008 there was a survey operation in the business premises of the assessee in which the AO found certain discrepancies. One of the discrepancies relevant for the purpose of this appeal is that the assessee company started collecting TCS from 08.09.2003 whereas it was expected to collect the TCS from 01.06.2003 to 07.09.2003 under the provisions of the Finance Act, 2003. According to AO, the total sales made by the assessee during the period 01.06.2003 to 07.09.2003 were to a tune of Rs.6,54,77,461/- on which TCS of Rs.72,02,521/- was to be collected. AO also calculated the interest on such amount at Rs.66,97,021/- and thereby made an addition of Rs.1,38,99,542/- for non collection of tax for the period between 01.06.2003 and 07.09.2003. The assessee carried the matter in appeal before the Ld. CIT(A) , who by way of an order dated 29.08.2013 allowed the same and deleted the addition of Rs.1,38,99,542/- on the ground that the amendment to section 206(C) of the Act came into force from 08.09.2003.
2 K.L. Kapoor & Co. (Wines) Ltd., AY 2004-05 3. Challenging the impugned order the revenue preferred this appeal before us on the following grounds: “
1.That on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.1,38,99,542/- for non-collection of TCS on sales of Indian made Foreign Liquor (IMFL) and Beer during the period 1/06/2003 to 7/9/2003 ignoring the fact that before the Taxation Laws (Amendment) Act, 2003 introduced w.e.f. 8/9/2003 in the Income Tax Act, another amendment in section 206C(1) of the Income Tax Act was already in place in the Income Tax Act, which was introduced w.e.f. 1/6/2003 by the Finance Act, 2003, and which provided for TCS on sales of all Alcoholic Liquor for human consumption including Indian Made Foreign Liquor (IMFL) and Beer @10%.
2. That on the facts and circumstances of the case, the Ld. CIT(A) has failed to appreciate the fact that the Income Tax Act mandates for collection of tax (TCS/TDS) at the time of sales, transactions, payment by cash, cheque or draft, debit/credit on the books, whichever is earlier. The Ld. CIT (A) further failed to appreciate the fact that from 1/6/2003 to 7/9/2003, the amendment to the section 206C(1) of the Income Tax Act brought in by the Finance Act, 2003 w.e.f. 1/6/2003 was already in place and TDS/TCS on such transactions are to be mandatorily made as per the provisions existing on that date .
3. That the Ld. CIT(A) failed to appreciate that though the provision to section 206C(1) of the Income Tax Act provided for TCS on sale of liquor for the period from 1/6/2003 to 7/9/2003 as per earlier provision, which excludes TCS on sale of Indian Made Foreign Liquor (IMFL) and beer but the same has brought into statute only on 8/9/2003, which makes it ample clear that all transactions on sale of liquor from 1/6/2003 to 7/9/2003 were covered only by amended provisions existing in the Income Tax Act during that period.
4. That the Ld. CIT(A) failed to appreciate the facts that the TDS/TCS provisions which makes TCS collection not only on the date of transactions but also makes it mandatory to deposit the same to the government account by the 7th of the following month. Thus all TCS from sales from 1/6/2003 to 7/9/2003 has not only to be made @10% in the existing provisions of the Income Tax Act on the date, but also TCS so collected should have been deposited to the government account within the stipulated time limit.”
4. It is the argument of the Ld. AR that the addition of Rs.1,38,99,542/- was made by the AO on the premise that the amendment to section 206(C) has come into force on 01.06.2003 whereas such amendment has come into force only on 08.09.2003, as such the non-collection of TCS by the assessee is justified. On this ground he prayed to set aside the order of AO and confirm the order of CIT(A). On the other side, it is the argument of the Ld. DR that before the Taxation Laws Amendment Act, 2003 introduced w.e.f. 08.09.2003 in the I. T. Act another amendment of section 206(C)(1) of the Income Tax act was already in place which was introduced w.e.f. 01.06.2003 by the Finance Act, 2003 and such amendment provides for TCS on sales and all alcoholic liquor for human consumption including India Made Foreign Liquor (IMFL) and Beer at 10% and such provision was mandatory. He prayed to dismiss the appeal of assessee and restore the order of the AO.
3 K.L. Kapoor & Co. (Wines) Ltd., AY 2004-05 5. Basing on the above arguments the point that arises for our consideration is whether the AO is justified in making the addition of Rs.1,38,99,542/- in respect of the non- collection of TCS for the period between 01.06.2003 and 07.09.2003?
As could be seen from the order of the CIT(A), there is a reference in the press release dated 08.09.2003 issued by the GOI, Ministry of Finance and it clarifies that the amendment in section 206(C) in the matter of collection of tax at source on sales of liquor, IMFL etc. are postponed and will take effect from 08.09.2003. Basing on this postponement, the Ld. CIT(A) deleted the addition of this amount of Rs.1,38,99,542/- made by the AO. Before us the Ld. AR produced two Press Notes i.e. dated 04.06.2003 and 08.09.2003 issued by GOI. It is further stated in this note that Finance Act, 2003 explained the scheme of collection of tax at source u/s. 206(C) of the Act to dealers in Indian made foreign liquor (wholesaler as well as retailer). Under the scheme the seller whether it is government, corporation, manufacturer, distributor of wholesaler is required to collect from the buyer tax @ 10% of the amount payable by the buyer at the time of sale of goods and deposit the same to the credit of Central Government. Similar provisions existed for country liquor since 1988. In the Press Note dated 04.06.2003 it is clearly mentioned that the Ministry of finance has decided to postpone to 01.09.2003, the date of implementation of new provisions extending the scheme of collection of tax at source from dealers of Indian Made Foreign Liquor. This also further speaks that the scheme was to become effective from 01.06.2003. Perhaps the AO is referring to this note while adding Rs.1,38,99,542/- and this is the provisions of law that has been referred to in the grounds of appeal.
However, another note dated 08.09.2003 i.e. produced before us reads that The Taxation Laws (Amendment) Ordinance, 2003 has been promulgated today (i.e. 08.09.2003) to amend certain provisions of the Income –tax Act, the Wealth Tax Act and the Expenditure Tax Act. The said Ordinance has, inter alia, amended the provisions of section 206(C) of the Act also. The said note reads as follows:
“The Taxation Laws (Amendment) Ordinance, 2003 has been promulgated today to amend certain provisions of the Income-tax Act, the Wealth-tax and the Expenditure-tax Act. The said Ordinance has, inter alia, amended the provisions of section 206C also. The amendments to the said section will take effect from today. Section 206C of the Income-tax Act provides for collection of tax at source by sellers of certain specified goods. Finance Act, 2003 made certain amendments to the said section. Subsequent to these amendments, representations were received from various quarters, 4 K.L. Kapoor & Co. (Wines) Ltd., AY 2004-05 including State Government authorities, in the matter of various consequences flowing from the above amendments. It had been decided to postpone the coming into effect of the amendments made to section206C in the matter of collection of tax at source by sellers of country liquor, Indian made foreign liquor, scrap and timber till a final decision was taken in the matter by the Government.”
Therefore, it is clear from the reading of both the two notes that initially The Taxation Laws (Amendment) Ordinance, 2003 was to take effect from 01/06/2003, but it was postponed to 01.09.2003 by way of note dated 04.06.2003 and ultimately it was brought to force from 08.09.2003. No other material is placed before us by the revenue to show that another provision in the place of section 206(c) of the Act as amended by The Taxation Laws (Amendment) Ordinance, 2003 was in place and it reads otherwise.
In these circumstances, it is reasonable to state that the amended provisions of section 206© of the Act which was to take effect from 01.06.2003 was notified to come into force from 08.09.2003 as such the amended provision of section 206(C) of the Act have no application to the period between 01.06.2003 and 07.09.2003. We are, therefore, inclined to agree with the ld. CIT(A) that the AO’s observation to the contrary are factually incorrect and the Finance Bill, 2003 was not only brought in force on 08.09.2003 but it also prescribed the rate not at 10% but at 1%. We, therefore, find that the AO is not justified in making the addition of Rs.1,38,99,542/- and the findings of the Ld. CIT(A) do not suffer any illegality or irregularity warrenting any interference by this Tribunal. In this background, we find that the appeal of the revenue is devoid of any merit and is liable to be dismissed. We order accordingly.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 03.08.2016