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2015 (1) TMI 707 - HC - Income TaxApplicability of Section 206C r.w.s. 44AC of the Income Tax Act - dealers like the petitioners, who are importing timber from abroad, to effect 'Tax Collection at Source' (TCS); and would the failure, if any, make them an 'assessee-in-default', to be saddled with the liability to pay tax and also interest as envisaged therein? - Held that:- The provision does not draw any distinction between 'Timber grown in India' (whether in forest or elsewhere) and the 'Timber imported' from abroad. The object of the Statute is important to be noted, to ascertain the scope of the provision. Procurement of revenue is of paramount importance and the Statute, to the best possible extent takes care of the different situations, where there is a chance to evade payment of tax suppressing such income. It is in the said circumstance, that 'evasion-prone' items have been identified and appropriate extent of collection of tax has been stipulated to be finalized in the due course, after verification of accounts of the buyers/traders concerned. It is known to everybody that 'Timber' is not such an item, transportation of which could be easily concealed. But the Department has come across several ways and means carved out by the traders in the field, to effect deals and evade tax through such dubious means. In such situation, commodity-wise preference has been made, identifying such items and the trade set up, considering the market conditions and such other circumstances. This includes trade in Liquor, Timber, Tendu leaves, Scrap, other Forest produces, Minerals being coal, lignite or iron ore. Depending upon the nature and extent of trade and the commodities concerned, different extent of deduction/percentage has also been specified, as given in the 'Table'. This is on the basis of the conscience and wisdom of the law makers and it is not for the Court to question or substitute the same. Whether 'Timber' is imported from outside the country or whether it comes to the hands of the petitioners by forest lease or any other mode, chance to evade tax 'by the buyer' weighed more with mind of the law makers, to have stipulated that, seller shall effect collection of tax at the prescribed rate, at the time of sale. Considering the factual position involved, though the 'Timber' was imported from abroad, after clearance from the Customs department paying the Customs duty, when sale is effected by the petitioners (sellers) to the concerned registered dealers or others (buyers), income can be said to have been accrued at the time of purchase to attract imposition of tax on the 'buyer'. For clarity and convenience, rate of tax to be collected is also specified under Section 206C, in respect of the concerned commodities, to be adjusted against the actual tax payable by the buyer under the regular assessment. This being the position, the source from which 'Timber' came to the hands of the petitioners does not have any relevance at all, and it very much satisfies the term "obtained by another mode", as envisaged under the relevant provisions of law. The version of the petitioners is that it has to be read and understood giving restrictive meaning referring to the circumstances under which section 44AC was introduced w.e.f 01.04.1988, does not hold any water at all. There is a feeble attempt to contend that the petitioners have to be treated as 'second sellers', as the first sale has already taken place on purchasing the goods from abroad. Since it is the second sale, no tax liability could be mulcted upon the shoulders of the petitioners. This proposition is cent per cent contrary to the case projected by the petitioners right from the beginning, that the transaction has to be considered in the 'Indian context', to ascertain whether Section 206C could be invoked in the case of the petitioners (who are importing Timber from abroad), contending that the said provision was intended to tackle the situation of tax evasion by "fly by night operators", who procured the specified commodities from soil of Indian origin. If the transaction has to be reckoned with reference to the Indian context as above, the 'first sale' to be effected is also to be considered in the Indian context and admittedly, the first sale effected in India has been performed by the petitioners in their capacity as sellers. - Decided against assessee.
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