Tribunal rules assessee not liable for Tax Collected at Source under Income Tax Act

The Tribunal upheld the CIT(A)'s decision, ruling that the assessee was not liable to collect Tax Collected at Source (TCS) under section 206C(1C) of the Income Tax Act. It was determined that there was no transfer of the right to collect toll, as the collecting entity's role was limited to collecting toll on behalf of the assessee. The Tribunal dismissed the Revenue's appeals for all assessment years, confirming that the assessee was not an assessee-in-default for not collecting TCS.

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Issues Involved:
1. Whether the assessee was liable to collect Tax Collected at Source (TCS) under section 206C(1C) of the Income Tax Act, 1961.
2. Whether the assessee transferred the right to collect toll to the collecting agency.
3. Whether the assessee should be treated as an assessee-in-default for not collecting TCS.

Detailed Analysis:

Issue 1: Liability to Collect TCS under Section 206C(1C)
The Revenue's primary grievance was that the CIT(A) erred in deleting the demand raised by the AO under section 206C(6A)/206C(7) of the Income Tax Act, 1961. The AO had issued a show cause notice to the assessee for not collecting TCS on toll collected by A.B. Infrastructure. The assessee contended that it was not liable to collect TCS before 29.12.2010 as the right to collect toll was not transferred to the agency but was collected on behalf of the assessee. The CIT(A) agreed with the assessee, stating that the provisions of section 206C(1C) were not applicable as the right to collect toll was not transferred.

Issue 2: Transfer of Right to Collect Toll
The AO argued that the right to collect toll was granted to A.B. Infrastructure, citing the contract agreement titled "Contract for department collection of fee." The AO referred to specific clauses indicating the transfer of the right to collect toll. However, the assessee maintained that the collecting entity was merely collecting toll on behalf of the assessee and depositing the collected amount into the assessee’s bank account. The CIT(A) found that the role of the collecting entity was restricted to toll collection and depositing the same into the bank, without any transfer of right or interest in the toll collection.

Issue 3: Assessee-in-Default for Not Collecting TCS
The AO treated the assessee as an assessee-in-default for not collecting TCS from the collecting entity. The CIT(A), however, concluded that the activities of the collecting entity did not constitute a contract within the meaning of section 206C and were merely outsourcing of toll collection services. The CIT(A) relied on the ITAT, Cuttack Bench decision in the case of Project Director Vs. Department of Income Tax, which held that similar arrangements did not attract the provisions of section 206C(1C).

Conclusion:
The Tribunal upheld the CIT(A)'s decision, agreeing that the assessee was not liable to collect TCS under section 206C(1C) as there was no transfer of the right to collect toll. The Tribunal noted that the collecting entity’s role was limited to collecting toll on behalf of the assessee and depositing it into the assessee’s bank account. The Tribunal dismissed the Revenue's appeals for all assessment years, confirming that the assessee was not an assessee-in-default for not collecting TCS.

Order:
The appeals of the Revenue for all assessment years were dismissed. The Tribunal confirmed the CIT(A)'s order, stating that the assessee was not liable to collect TCS under section 206C(1C) and should not be treated as an assessee-in-default. The order was pronounced on 9th January 2019 at Ahmedabad.

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