Tax collection at source liability is conditional on prior tax payment by toll lessees, but interest for delayed collection remains payable.

Tax collection at source liability is conditional where toll lessees have already discharged tax on the relevant income or turnover: the appellant is not to be taxed again if the Assessing Officer verifies prior payment, but may be proceeded against if no such payment is found. Interest remains recoverable for the period of default in not collecting tax at source, even where the principal demand is excluded because the lessee has already paid tax. The operative effect is that double taxation is avoided, while statutory interest for delayed collection continues to apply.

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Issues: (i) Whether the appellant could be fastened with liability to pay tax collection at source in respect of toll lessees only if it is found that the lessees had not already discharged tax on the relevant income. (ii) Whether interest was payable for the period of default in not collecting tax at source.

Issue (i): Whether the appellant could be fastened with liability to pay tax collection at source in respect of toll lessees only if it is found that the lessees had not already discharged tax on the relevant income.

Analysis: The liability under the tax collection at source mechanism was treated as dependent on the tax position of the toll lessees. The appellant was directed to furnish the details of the lessees, including PAN particulars, so that the Assessing Officer could verify whether the lessees had already paid tax on the income or turnover arising from toll collection. If such tax had already been paid, no further tax was to be levied on the appellant. If not, the appellant could be proceeded against for the relevant tax amount.

Conclusion: The appellant was not to be taxed again if the toll lessees had already paid tax, but liability would arise if they had not done so.

Issue (ii): Whether interest was payable for the period of default in not collecting tax at source.

Analysis: The Court held that even where the principal tax demand may not survive if the lessee had already discharged tax, the statutory consequence for delay in collection remained. Interest was held recoverable for the period between the default in collection and the date on which the lessee actually paid the tax on the relevant amount.

Conclusion: Interest under the relevant provision was payable by the appellant for the period of default.

Final Conclusion: The tax demand was made conditional upon verification of tax payment by the toll lessees, while the appellant's liability for statutory interest was affirmed.

Ratio Decidendi: In tax collection at source cases, the principal demand cannot be enforced again if the recipient has already paid tax on the same income, but statutory interest for the period of default remains recoverable.

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