2017 (8) TMI 1287 - AT - Income Tax

Tribunal directs AO to verify TCS credit claim, appeal allowed for statistical purposes.

The Tribunal directed the AO to verify if any other individual claimed the TCS credit; if not, the assessee's claim should be allowed. The appeal was ... Credit for tax collected at source (TCS) - construction of section 206C(1C) - allowance of TCS only against corresponding income - remand for verification of competing claims to TCS creditConstruction of section 206C(1C) - allowance of TCS only against corresponding income - Whether the assessee, a toll/royalty-collection contractor, is entitled to claim credit for TCS deposited with the State Government in respect of excess royalty - HELD THAT: - Section 206C(1C) requires collection of tax at source from the lessee/licensee who actually pays for the use of the mine or quarry; a toll contractor who merely collects excess royalty does not fall within the class of persons from whom the statute contemplates collection in the sense of being the corresponding taxable recipient. The Tribunal noted the reasoning of the appellate authority that TCS is allowable only against the corresponding income and that credit follows assessment of the income to which the TCS relates. However, having considered the factual matrix that the assessee deposited TCS at the instance of the Mining Department and that the Department issued a certificate in the assessee's name, the Tribunal found that there was no clear legal bar to grant credit if no other person (the lessee) has claimed the corresponding credit. The Tribunal accepted that the statutory scheme ordinarily places the entitlement to credit on the lessee whose income is the subject of TCS, but observed that where TCS has been deposited by a wrong person and no other party has claimed the credit, the Revenue cannot retain that tax; equitable considerations of avoiding unjust enrichment apply. [Paras 7]The question of entitlement to TCS credit is not finally adjudicated on merits; the tribunal directed verification of factual entitlement consistent with the statutory scheme and equitable considerations.Remand for verification of competing claims to TCS credit - credit for tax collected at source (TCS) - Whether the assessee's claim for TCS credit should be restored to the AO for verification and appropriate action - HELD THAT: - The Tribunal observed that the single-member ruling in S.M.C. in identical facts was not binding and that the statutory provision is clear in favour of the lessee; nevertheless, because the assessee says the Mining Department required it to deposit TCS and issued certificates in its favour, the Tribunal concluded that factual verification is necessary to determine if any other individual (the lessee) has claimed the credit. If no such competing claim exists, the Tribunal directed the Assessing Officer to allow the claim in the interest of justice, since the Revenue is not legally entitled to withhold tax deposited by a wrong person. The Revenue, however, remains free to recover any tax liability from the appropriate person if warranted. [Paras 7, 8]The matter is remanded to the AO to verify whether any other person claimed the corresponding TCS credit; if none has, the AO may allow the assessee's claim, subject to Revenue's right to pursue appropriate persons for any tax due.Final Conclusion: Appeal allowed for statistical purposes and matter remanded to the Assessing Officer for verification whether any other person has claimed the TCS credit; if no competing claim is found, the AO may permit the assessee to be credited with the TCS deposited, subject to Revenue's right to pursue the correct taxpayer. Issues Involved:1. Validity of the order passed by the Ld. CIT(A).2. Denial of credit for TDS and TCS amounts.3. Duty of the assessee to rectify the mismatch of TDS.Issue-wise Detailed Analysis:1. Validity of the Order Passed by Ld. CIT(A):The appellant contended that the order passed by the Ld. CIT(A) is void-ab-initio. However, this issue was not pressed during the hearing, and thus, no further analysis was provided on this ground.2. Denial of Credit for TDS and TCS Amounts:The primary contention was regarding the denial of credit for TDS amounting to Rs. 53,877 and TCS amounting to Rs. 6,99,667. The assessee argued that the Ld. CIT(A) and AO rejected the claim on technical grounds, which should not obstruct substantive justice. The assessee relied on the decision in Maruti Civil Works vs. ITO, asserting that the TCS was collected and deposited by the State Government, and thus, the credit should be granted to the assessee. The Ld. Departmental Representative opposed this, stating that the claim was contrary to legal provisions.The Tribunal referred to a similar case decided by the S.M.C., which supported the assessee’s claim for TCS credit. It was noted that the State Government had collected TCS and issued the certificate in the assessee's name. The Tribunal found merit in the argument that denying credit would result in unjust enrichment for the government. However, the Ld. CIT(A) had held that TCS credit should be claimed by the lessee of the mine, not the toll contractor (the appellant), as per Section 206C(1C).The Tribunal concluded that the assessee, being neither a licensee nor a lessee, did not fall under the category specified in Section 206C(1C). However, considering that the TCS was deposited at the instance of the mining department and the certificate was issued in the assessee’s name, the Tribunal restored the issue to the AO to verify if any other individual claimed the TCS credit. If not, the assessee’s claim should be allowed to ensure substantive justice, preventing the revenue from withholding tax deposited by a wrong person.3. Duty of the Assessee to Rectify the Mismatch of TDS:This ground was not pressed by the assessee during the hearing and thus was not analyzed further.Conclusion:The Tribunal directed the AO to verify whether any other individual claimed the TCS credit. If no other claim exists, the assessee’s claim should be allowed. The appeal was allowed for statistical purposes, ensuring that the revenue does not unjustly withhold tax deposited by a wrong person. The order was pronounced on June 16, 2017.