MAHARASTRA STATE CO-OPREATIVE TRIBAL DEVELOPMENT CORPORATION LTD.,BHANDARA Vs. COMMISSIONER OF INCOMTAX, NAGPUR AND ANOTHER

JUDGEMENT

(1.) By this petition, the petitioner Maharashtra State Tribal Development Corporation has challenged the common orders seeking recovery of the tax, interest and penalty under the provisions of Sec. 206C of the Income Tax Act, 1961.

(2.) Demand notices were served on the petitioner Corporation demanding interest and penalty for short payment of the tax collection at source under the provisions of Sec. 206C of the Income Tax Act. For the relevant assessment years, the tax collection at source returns were filed by the petitioner Corporation and it was noticed by the Assistant Commissioner of Income Tax, (Tax Deduction at Source Circle), Nagpur that the petitioner had not collected the tax at source at the rate prescribed under Sec. 206C of the Income Tax Act. It was noticed by the Assistant Commissioner of Income Tax that the tax was collected by the petitioner Corporation at the rate of 5% instead of 15%. In view of the short collection of tax at source, the petitioner was made liable to pay interest and penalty. The petitioner challenged the action on the part of the Assistant Commissioner of Income Tax in a revision before the Commissioner of Income Tax under Sec. 264 of the Income Tax Act. By the impugned order, the Commissioner of Income Tax dismissed the revision filed by the petitioner and upheld the action of the Assistant Commissioner of Income Tax. The order of the Commissioner of Income Tax, Nagpur is challenged by the petitioner in the instant petition.

(3.) Shri M.V. Samarth, the learned Counsel for the petitioner Corporation submitted that the provisions of Sec. 206C of the Income Tax Act could not have been applied to the case of the petitioner as the petitioner Corporation is not a "seller " as defined by the provisions of the explanation to Sec. 206C of the Act. It is submitted that the petitioner Corporation is required to purchase certain forest produce and goods from the tribals and the individual tribal is the first seller and the petitioner Corporation that had sold the said produce by auction to third parties is the second seller. It is submitted that the provisions of Sec. 206C of the Income Tax Act could not have been applied to a second seller. It is submitted that in view of clause (ii) of Explanation (a), a buyer in the further sale of goods obtained in pursuance of a sale would not be included within the term "buyer ", as defined in Explanation (a). It is submitted that since the petitioner Corporation as a second seller was not liable to collect the tax at source, from the buyer to whom the forest produce was sold by auction, the provisions of Sec. 206C of the Income Tax Act, could not have been applied to the petitioner by the Assistant Commissioner of Income Tax. It is submitted that a similar issue came up for consideration before the Punjab and Haryana High Court and the said High Court in the case of Commissioner of Income-tax Vs. Virsa Singh and Co. reported in (2008) 307 ITR 30 , has held that the assessee therein was not liable to collect tax at source under Sec. 206C of the Income Tax Act.