Substance over form in toll concession receipts: TCS liability applies where the board acts as grantor and retains funds for itself.

Tax collection at source under section 206C(1C) applies where, despite the form of a concession agreement, the recipient entity in substance acts as the grantor and collects toll or concession receipts on its own account. The arrangement was read with the Punjab Infrastructure (Development & Regulation) Act, 2002, and the board's actual conduct-retaining the receipts in its own funds and using them for its own purposes-supported principal-to-principal treatment. The fact that the concessionaire may have filed returns and paid tax did not displace the board's statutory TCS obligation. Consequential interest under section 206C(7) and penalty under section 271CA were also sustained.

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Issues: Whether the assessee board was liable to collect tax at source under section 206C(1C) of the Income-tax Act, 1961 in respect of toll/concession fee received from the concessionaire, and whether consequential interest under section 206C(7) and penalty under section 271CA were exigible.

Analysis: The arrangement and the surrounding circumstances were examined along with the Punjab Infrastructure (Development & Regulation) Act, 2002. Though the concession agreement described the State Government as the granting authority and the board as a confirming party, the actual conduct showed that the board collected the toll/concession fee in its own capacity, retained the amounts in its own funds, and applied them for its own purposes. The statutory scheme, though not free from ambiguity, was found to indicate that the board performed the practical functions of a grantor on a principal-to-principal basis and fell within the ambit of a person responsible for collection of tax at source on licence or lease-related consideration. The alternative plea based on the concessionaire having filed returns and paid tax was not accepted as a ground to displace the board's statutory liability under section 206C(1C).

Conclusion: The board was held liable to collect tax at source under section 206C(1C), and the liability to interest under section 206C(7) and penalty under section 271CA was upheld, against the assessee and in favour of the Revenue.

Final Conclusion: The restored issue was answered adversely to the assessee, with the collection obligation and consequential tax consequences sustained.

Ratio Decidendi: Where the recipient of concession or toll consideration, in substance, acts as the grantor and retains the receipts for its own account, the statutory obligation to collect tax at source cannot be avoided by the form of the agreement or by describing the entity as a mere confirming or nodal party.

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